Services drive Cochlear profits in competitive implant market

Services are increasingly driving profit growth for bionic ear manufacturer Cochlear (ASX: COH) in an increasingly competitive medical device market.

The Sydney company sold 34,083 hearing implants in the year, down three per cent, as competitor new product launches in the United States and Germany hit sales.

However sales are growing again with the launch during the year of the company’s Nucleus Profile Plus series of implants (pictured), as reported in @AuManufacturing news.

During the year Cochlear’s EBIT rose six per cent to $370 million on sales revenue up seven per cent to $1.4 billion.

Services revenue including speech processor software upgrades rose 20 per cent.

CEO Dig Howitt said: “The services business continues to grow in importance as our recipient base grows, now representing 30 per cent of sales.

“In FY19 services benefited from the continued strong uptake of the Nucleus 7 Sound Processor.”

While device sales were down, revenue was up two per cent in the sector.

Globally the Japanese market was strong, but 700 fewer devices were sold in China, a number regulated by the central government.

Sales in Argentina and Turkey declined due to national recessions.

While the new Nucleus device was well-received by the market, Cochlear sales now sea-saw with new product launches by the various players in the market.

Cochlear remains the world number one in the field, a position it has held for 40 years.

Howitt said: “Cochlear continues to target the delivery of consistent revenue and earnings growth over time.”

Cochlear invests 12 per cent of revenues in R&D, and recently announced innovations included suitability for a wide range of magnetic resonance imagers, direct audio streaming from Android devices, and in-home device reviewing.

This year Cochlear expects a reported net profit in the region of $290-300 million.

Picture: Cochlear

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