Smith & Nephew(US:SNN)2020-10-29 19:10Financial Data and Key Metrics Changes - Q3 revenue was $1.2 billion, a decline of 4.2% on an underlying basis and 3.7% on a reported basis [6][12] - The U.S. market returned to growth at 0.9% on an underlying basis, with revenue of $630 million [7][8] - Other Established Markets declined by 6.2% and Emerging Markets by 14.5% [7] Business Line Data and Key Metrics Changes - Orthopedics declined by 2.8% globally, with stronger performance in hips compared to knees [16] - Sports Medicine and ENT declined by 4.5% and Advanced Wound Management (AWM) by 6.1% [16] - Specific growth in Orthopedics was driven by emergency cases and the rollout of the OR3O Dual Mobility Hip System [17] Market Data and Key Metrics Changes - Established Markets showed mixed recovery, with Germany and France returning to growth, while the UK lagged [9][10] - In Asia Pacific, Australia and Japan saw procedure volumes recover to approximately 90% of normal levels [10] - Emerging Markets experienced varied performance, with China recovering strongly while other markets like India and South Africa remained under restrictions [11] Company Strategy and Development Direction - The company remains focused on long-term growth, continuing investments in R&D and M&A despite short-term challenges [14][24] - A conditional agreement to acquire Integra's orthopedics extremities business was announced, viewed as a high-growth category [24][25] - The company is enhancing its mid-term growth profile through product launches and digital technology capabilities [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the healthcare system's preparedness for COVID-19 impacts, although visibility remains limited [12][33] - The expectation is that the impact of COVID will continue into the first half of 2021, with full-year guidance withdrawn due to uncertainty [13] - The company aims to consistently outgrow its markets while improving trading profit margins [33] Other Important Information - The company has maintained its sales force without layoffs during the COVID-19 crisis, ensuring stability [93] - There is a focus on operational efficiency plans, particularly in manufacturing and supply chain [15] Q&A Session Summary Question: Differential between hip and knee growth - Management noted that both market factors and specific company factors contribute to the differential, with hips seeing more emergency cases [36] Question: Integra acquisition and expected returns - The acquisition is seen as a mix of technology and commercial capabilities, with a new shoulder system expected in 2022 [38] Question: Bond issue strategy - The company took advantage of low interest rates to diversify funding sources, moving away from reliance on bank loans [40] Question: Integra acquisition rationale - The acquisition complements the reconstruction business and provides access to the shoulder market, enhancing commercial capabilities [45] Question: U.S. Wound Care market trends - Management expects a good fourth quarter in Advanced Wound Management, driven by improvements in bioactives [47] Question: Wound Care market share and geographic mix - The company has a strong business in Europe, which has been more affected by COVID, but does not believe it has lost market share [51] Question: Margin outlook and foreign exchange impact - Transactional FX impact is expected to be around 50 basis points for both 2020 and 2021 [56] Question: Return to positive organic revenue growth - Management is optimistic about returning to growth that exceeds 2019 levels, depending on the management of COVID impacts [62] Question: Competitive dynamics in negative pressure market - The company believes it is well-positioned with strong products like PICO and is regaining market share in hospitals [68][71]