Sonova Holding AG, a provider of hearing solutions, announced an interim business update. The partial recovery of the global hearing care market from the COVID-19 pandemic impacts has been faster than anticipated in recent weeks. Sonova reports its business activities have picked up from the low point of 35% in April 2020, reaching 59% of prior year levels for the first three months of FY 2020/21 at constant exchange rates. Sonova expects sales for the first half of FY 2020/21 to reach 65-75% of the prior year level and to achieve a positive adjusted EBITA margin in the single-digits for the same period, both at constant exchange rates. In line with measures taken in the prior years, Sonova reports it is accelerating structural optimization initiatives to preserve the ability to invest into growth and to protect profitability. The measures are expected to result in restructuring costs of CHF 40-60 million (USD $42.4-$64 million) in FY 2020/21 and to lead to annual cost savings of CHF 50-70 million (USD $53.3-$74.6 million) once fully implemented.
Arnd Kaldowski, CEO of Sonova, says: “We are pleased with the current speed of the market recovery and our ability to manage our cost base. This clearly demonstrates that Sonova is in a good position to successfully navigate the COVID-19 crisis. At the same time, we have decided to accelerate our efforts to optimize our organizational structure to be able to continue to drive our growth initiatives as the attractive fundamentals of the hearing care market remain very much intact.”
Sonova reports that this “extraordinary interim business update” is provided outside of the regular reporting schedule in light of the rapidly changing business environment related to the COVID-19 pandemic. A faster-than-expected partial market recovery in recent weeks has positively impacted Sonova’s business activities. Momentum improved sequentially each month, resulting in Group sales at 59% of prior year levels for the first three months of FY 2020/21 at constant exchange rates. The APAC region led the recovery with sales reaching around 75% of prior year levels, followed by the EMEA region at close to 60%, the United States at about 55%, and Americas (excl. USA) near 50%, according to the company. Sonova reports it made “good progress” on cost containment, which will allow for a solid result relative to the reduced sales level. Spending for new products has continued as planned. Sonova has further strengthened its financial position by issuing bonds totaling CHF 830 million (USD $884 million) in FY 2020/21 and by paying a stock dividend.
In light of the recent developments and reflecting the year-to-date performance, Sonova currently expects Group sales in the first half of FY 2020/21 to reach around 65-75% of prior year levels and to achieve a positive adjusted EBITA margin in the single-digits, both assuming constant exchange rates. The outlook assumes a continued gradual market recovery absent any significant re-tightening of lockdown restrictions for the remainder of the period. The speed of the recovery has been encouraging year-to- date, Sonova says; however, the current rise in infections in several markets illustrates the risk to the expected upward trend. Sonova thus remains cautious about the extent of the further recovery in the second half of FY 2020/21 and the potential impact on demand including from the general economic environment.
In line with the Group’s overall strategy, Sonova is accelerating its structural optimization initiatives, which aim to optimize non-customer facing functions such as general and administration, manufacturing, logistics, and back office. Furthermore, the plan includes the streamlining of the Group’s Audiological Care store network by combining certain store locations to improve efficiency while protecting sales. Whenever possible, respective headcount reductions will be carried out through natural attrition. R&D activities will continue as planned, ensuring that the cadence of product launches can be fully sustained.