July 30, 2018 / 7:09 AM / 16 days ago

Healthineers counts currency, diagnostics machine rollout costs

BERLIN (Reuters) - Siemens Healthineers’ (SHLG.DE) profit was hit by currency moves and the cost of rolling out a new diagnostics machine in the third quarter, disappointing investors in the world’s largest maker of medical imaging equipment.

Although the German firm reaffirmed it would meet full-year targets, its shares, which have risen by more than a third since their debut on the Frankfurt stock exchange in mid-March, were trading down 1.2 percent at 38.69 euros by 0907 GMT on Monday.

Healthineers is banking on its Atellica blood and urine diagnostics machine to turn around its underperforming In-Vitro diagnostics business, where it lags market leader Roche (ROG.S).

Operating profit in its fiscal third quarter slumped 10 percent to 503 million euros, while sales were flat at 3.3 billion euros ($3.85 billion, Healthineers said.

Negative currency effects and the installation of its new diagnostics machines pushed its adjusted profit margin down to 16.0 percent in the third quarter from 17.1 percent a year ago.

Chief Executive Bernd Montag said he was confident Healthineers could meet it guidance for an adjusted operating profit margin of 17 to 18 percent for 2018, pointing to the traditionally strong fourth quarter.

The company also reaffirmed it expects comparable revenue growth of 3 to 4 percent.

Adjusted for currency effects, sales were up 5 percent, buoyed by its imaging business which makes X-ray and MRI machines.

Dutch rival Philips (PHG.AS) reported a 4 percent increase in comparable second quarter sales and strong growth in orders for hospital equipment, especially in China and the United States.

ATELLICA SHIPMENTS ON TRACK

Healthineers said it had shipped more than 560 of the Atellica machines in its third quarter and it remained on track to meet its target of 800 to 1,000 this fiscal year.

Around 35 percent had gone to new customers, Healthineers said, while Chief Financial Officer Jochen Schmitz said the rollout had weighed on profitability as the time taken to deliver and install the machines had led to a delay in revenues from the consumables used in the analysers.

“As the FX headwinds moderate and the new Atellica systems start to generate consumable revenues (...) we would expect profitability to improve into Q4 and beyond,” Berenberg analysts said in a note.

The company said the impact of U.S. tariffs on China so far were manageable and that it would use its global supply chain to limit any further impact, for example by re-routing deliveries from China to the United States via factories in Europe.

“This won’t happen without leaving some trace on our results but if it remains at this extent it won’t be a catastrophe,” Schmitz told journalists.

He said he only expected a low single digit million euro impact this year which could rise to double digits next year.

Reporting by Caroline Copley; editing by Edward Taylor, Jason Neely and Alexander Smith

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