February 15, 2018 / 7:39 AM / 10 months ago

ConvaTec beats low full-year expectations, shares rise

(Reuters) - British medical devices maker ConvaTec (CTEC.L) posted better than expected 2017 profit and revenue on Thursday after supply chain problems that it said have now been resolved, lifting its share price by nearly 7 percent.

ConvaTec, which makes catheters and colostomy bags, said adjusted operating profit fell 3.3 percent to $456.8 million(324.62 million pounds), beating analyst expectations of $347.1 million, according to data compiled by Thomson Reuters.

Shares in the company rose 6.9 percent to 211 pence by 0905 GMT.

The company had been hit by logistics problems, including hurricanes disrupting shipping lanes in the Caribbean and the shifting of its Ostomy Care manufacturing operation from the United States to the Dominican Republic.

The supply delays prompted the company to lower its 2017 revenue growth forecast in October to 1-2 percent from more than 4 percent.

Chief Executive Paul Moraviec told Reuters that the results were not what he wanted to be presenting on Thursday because of the setbacks last year but added that 2018 would be a year of stabilisation.

    “We have fully bottomed out all the issues we experienced last year and we are very clear on the underlying reasons. We are getting on now with everything we need to do to get back on track,” he said.

However, the company said it expected the impact from back orders and lost orders at its Ostomy Care division to persist in the first half of 2018.

“Performance in the fourth quarter was well ahead of re-set expectations, suggesting the supply disruption issues have not been as bad as feared,” Bernstein analysts said.

ConvaTec said it was targeting medium-term revenue growth in line with the market, with momentum returning through 2018.

“Expectation that they will only reach market revenue growth in the medium-term is a disappointment,” the Bernstein analysts added, while Peel Hunt analysts described the 2018 outlook as a “modest miss” but said there could be some “relief rally” for the stock.

The company’s closest rival Coloplast (COLOb.CO) this month posted weaker than expected quarterly revenue for the fourth time in a row.

ConvaTec’s Organic revenue rose 2.3 percent to $1.76 billion, slightly above its lowered guidance and compared with analyst expectations of $1.74 billion.

Reporting by Justin George Varghese in Bengaluru and Paul Sandle in London; Editing by Gopakumar Warrier and David Goodman

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