Smith & Nephew(US:SNN)2023-11-05 16:11Financial Data and Key Metrics Changes - The company reported third-quarter revenue of $1.4 billion, representing 7.7% underlying growth, with all business units and regions contributing positively [25][76]. - The full-year revenue growth guidance has been refined to the higher end of the 6% to 7% range, reflecting good momentum and improving execution [6][32]. - Trading margin guidance is now around 17.5%, reflecting additional headwinds, particularly from China [6][77]. Business Line Data and Key Metrics Changes - Orthopedics growth has accelerated, with underlying growth of 8.3% in the third quarter, following 3.9% in Q1 and 5.8% in Q2 [100]. - Advanced Wound Management grew 3.6% underlying, with a notable decline in bioactives by 4.8% due to production transition issues [71][72]. - Sports Medicine experienced growth of 11.1%, driven by internal and external innovations, although it faced headwinds from a slowing market in China [66][68]. Market Data and Key Metrics Changes - Growth was broad-based across regions, with 7.2% growth in the US, 7.8% in other established markets, and 9.2% in emerging markets [7]. - In China, sales were down 1.4%, impacted by a slowdown in Sports Medicine and destocking in anticipation of the VBP process [7][68]. - The ENT segment grew 40.2%, driven by the core tonsil and adenoid business, although demand growth is expected to moderate [70]. Company Strategy and Development Direction - The company is advancing a 12-point plan aimed at operational improvements and cost reductions, which is expected to drive key metrics toward their targets [24][78]. - There is a focus on enhancing product availability and commercial execution, particularly in orthopedics, to sustain growth [100][104]. - The company is also investing in innovation, with a pipeline that includes new applications for existing products and expansion into new markets [79][66]. Management's Comments on Operating Environment and Future Outlook - Management noted that the healthcare market is experiencing a slowdown, impacting overall performance, particularly in orthopedics and sports [10][46]. - Despite challenges, management remains optimistic about achieving midterm guidance, citing operational improvements and revenue leverage as key factors [55][56]. - The company expects to see a normalization in growth rates as it moves into 2024, with ongoing productivity gains and improved pricing strategies [54][55]. Other Important Information - The company announced the closure of two smaller factories, representing a 20% reduction in manufacturing footprint, which is expected to contribute to gross margin improvement [14][24]. - There are ongoing challenges related to product supply, particularly in the US knee business, which has impacted growth [19][44]. - The impact of the anticorruption campaign in China remains uncertain, but management does not expect it to persist indefinitely [46][130]. Q&A Session Summary Question: What are the underlying trends in the orthopedic side? - Management highlighted that growth in orthopedics was driven by the other reconstruction segment, with regional variations noted [82]. Question: Can you provide insights on pricing contributions to growth? - Management indicated that pricing has shown low single-digit positive growth, contributing to overall performance [83]. Question: What is the current status of CORI placements? - Management confirmed progress towards the placement target for CORI, with a focus on both placements and utilization [111]. Question: How is the company addressing the impact of VBP? - Management explained that the expanded scope of VBP is expected to impact 1.5% to 2% of group sales, with ongoing adjustments being made [126]. Question: What are the expectations for the 2025 margin target? - Management remains confident in achieving the 20% margin target, despite new headwinds, citing operational improvements and cost reduction initiatives [121][125].