Sonova Holding AG, Stäfa, Switzerland—the parent company of Phonak, Unitron, and Advanced Bionics (AB)—reported today (May 20) in a press release strong results for the financial year 2013/14 across all of its businesses. The Group reports double-digit organic growth, resulting in sales of CHF 1,951.3 million (US$2.19 billion)—an increase of 8.7% in reported Swiss francs, or 11.7% in local currencies.
Group EBITA reached CHF 430.1 million (US$482.0 million), up 11.6% in Swiss francs or 16.7% in local currencies compared to the normalized EBITA for the prior year. The Board of Directors has proposed a dividend of CHF 1.90 (US$2.13) per share, up 19% from the distribution in the prior year.
“We are very pleased to announce another strong result that reflects the dedication of our teams and the benefit of Sonova’s constant pursuit of customer driven-innovation,” said Sonova CEO Lukas Braunschweiler. “Through a high number of successful product introductions, our hearing instruments business achieved a significant organic sales increase, outpacing the estimated market growth. Our cochlear implants business benefited from the strength of the combined Phonak and Advanced Bionics R&D organization, as clearly reflected in the substantial sales and earnings growth. We are confident to achieve our mid-term financial targets by continuing to build on our market-leading positions and maintaining a high pace of innovation.”
Highlights of the annual financial results, according to Sonova, include:
- Hearing instruments segment: Sales of CHF 1,756 million (US$1,968 million)—up 9.5% in local currencies—with EBITA margin expanding by 50 bps to 23.8%;
- Cochlear implants segment: Sales of CHF 195 million (US$218.6 million)—up 36.0% in local currencies—with EBITA margin reaching 6.6%;
- Free cash flow: CHF 289 million (US$324 million), up 10.0% from last year;
- Balance sheet: Net cash position of CHF 311.5 million (US$349.2 million), and
- Outlook for FY 2014/15: Sales are anticipated to grow by 7% to 9%, and EBITA to rise by 11% to 15%, both measured in local currencies.
Double-digit organic sales growth in local currencies. Group sales increased by 8.7% in reported Swiss francs or 11.7% in local currencies. According to Sonova, the main driver of the increase was double-digit organic growth, which reached 11.0% in local currencies. The Swiss franc strengthened against all of the most relevant currencies except the euro during the financial year, reducing reported sales growth by CHF 54.2 million (US$60.7 million) or 3.0%.
The press release states that, in line with the group’s strategy, Sonova made selected acquisitions of retail distribution businesses within its hearing instruments segment, albeit to a smaller extent than in previous years. External growth in sales for 2013/14 stemming from these acquisitions and the full-year effect of acquisitions from the previous year represented CHF 12.5 million (US$14.0 million) or 0.7%.
Broad-based growth across all regions. According to Sonova, all major regions posted a solid sales increase in local currencies.
Sales in the United States, which accounted for 37% of Group sales in fiscal year 2013/14, increased by 11.0% in local currency. Sonova states that growth was driven by solid development of both the commercial market and business with the US Department of Veterans Affairs (VA). Strong acceleration of cochlear implant sales in the second half of the financial year also added to growth. Cochlear implant processor sales rose sharply following US regulatory approval of the new Naída CI Q70 sound processor in late August 2013.
Costco, a recent distributor of Phonak products, was not mentioned in the financial report, probably due to it being a relatively recent development (ie, minimal impact on its 2013/14 financial calendar).
Sales in the EMEA region (Europe, Middle East, and Africa), which accounted for 41% of group sales, rose by 12.4% in local currencies. In the hearing instruments segment, key markets, such as Germany, the United Kingdom, and France, posted a strong increase, while the Netherlands and Denmark showed the continuing adverse impact of reimbursement changes. In all major regions, the cochlear implants segment grew even more strongly than the hearing instruments segment.
Sales in the rest of the Americas (excluding the US) grew by 9.6% in local currencies and accounted for 11% of group sales. Strong growth in Brazil and other Latin American countries was in part offset by a significant currency headwind, which reduced reported sales by around CHF 20 million or nine percentage points. The main driver of the 14.0% sales increase in local currencies in the Asia/Pacific region was strong performance from the hearing instrument business in China, Australia, New Zealand, and Japan. The region contributed 11% to group sales.
Hearing aids segment. Sonova says that, with an organic growth rate of 8.8% in local currencies, its hearing aid business outpaced estimated market growth rates and further extended the group’s leading market position. Acquisitions added CHF 12.5 million (US$14.0 million) or 0.7% to sales growth, including the full-year effect of acquisitions completed during the previous financial year.
The group’s wholesale and retail businesses contributed to growth in the hearing instruments segment. According to Sonova, the key driver of this strong development was the success of the Phonak Quest platform, particularly the highly popular receiver-in-canal (RIC) form factor introduced at the AudiologyNOW! in April 2013. Lyric also supported the sound organic sales increase with a growth rate of approximately 50% in 2013/14. Unitron posted particularly strong growth in Germany, France, the UK, and China. Growth in the retail business continued to be driven by strong performance from the partnership with Boots, the UK’s leading pharmacy-led health and beauty retailer, but it was also supported by solid sales growth in several Asia-Pacific markets, reports the company.
Looking at the different product categories, Premium hearing instruments (which includes Lyric) posted an above average growth rate, achieving a sales increase of 12.8% in local currencies. The Standard category showed the strongest growth, up 15.3% in local currencies, helped in part by strong growth in the German market following a change in the reimbursement system in November 2013. The Advanced category also contributed to growth, albeit to a lesser extent, with a sales increase of 3.6% local currencies. Premium and advanced hearing instruments each accounted for 22% of group sales, while Standard accounted for 29%. Supported by the introduction of Roger, the company’s all-new 2.4 GHz based system, sales of wireless communication systems grew by 9.9% in local currencies. Sales of miscellaneous products and services (including accessories and batteries) grew by 3.1% in local currencies in 2013/14, accounting for 13% of sales.
Cochlear implants segment. The cochlear implants segment achieved a sales increase of 33.1% in Swiss francs and 36.0% in local currencies. Supported in particular by the launch of the Naída CI Q70 sound processor in Summer 2013, sales accelerated over the course of the year, exceeding a year-on-year growth of 50% in the second half of 2013/14. Europe and North America in particular responded very well to the new sound processor that incorporates many industry-first innovations shared with Phonak hearing aids, says the company. As in the previous year, cochlear implants sales included the fulfillment of a central government tender in China.
Outlook for 2014/15 financial year. Sonova reports that it remains committed to achieve profitable growth through continuous innovation and to further expand its strong market positions. “We expect continued solid growth in sales and earnings in 2014/15, both in the hearing instruments and cochlear implants segment,” stated the press release. “Group sales are expected to grow by 7%-9% and EBITA to increase by 11%-15%, both measured in local currencies.”