Reporting Season

Cochlear raises dividend on strong sales growth, reaffirms full year outlook

Tue 22 Feb 22, 10:43am (AEST)
Cochlear Ear Implant
Source: iStock

Key Points

  • Cochlear reports double-digit earnings growth, bumps up interim dividend
  • Business reported margin expansion despite broader inflationary concerns
  • FY22 guidance maintained, though covid remains a material risk

Cochlear (ASX: COH) has continued to hike its dividend as the business returns to pre-covid form. The company's stock opened 4.2% higher as the market opened.

Half-year financials at a glance: 

  • Revenue of $815.3m, up 10% 

  • Underlying net profit of $157.5m, up 26% 

  • Net profit after tax (NPAT) of $169.3m, down -28%

  • Interim dividend per share of $1.55, up 35% 

The profit result was ahead of Bloomberg estimates of $126.6m and beat Bell Potter expectations of $140.9m. 

Volumes rise, margins intact

Cochlear recorded a 7% increase in implant units to 18,598 in the first-half. The decline in developed markets was offset by strong growth in emerging markets. 

Unit volumes declined 2% for developed markets, but remain well ahead of pre-covid levels. Volume declines were most notable in the US due to hospital staffing shortages in the second quarter. 

For the emerging markets, unit volumes jumped around 30% with a strong recovery from covid-related deferrals experienced across most countries. 

For perspective, developed markets contribute roughly 80% of global sales with the remaining 20% from emerging markets.

Its encouraging to see Cochlear's gross margins improve 2 percentage points to 19%, ahead of the company's 18% longer-term target.

Underlying versus net profit after tax

The improvement in underlying profits was driven by strong top-line growth, improved margins and the benefit of lower-than-expected operating expenses. 

Net profit after tax (NPAT) in the first-half of FY21 were bolstered by one-off gains including a $59m patent litigation tax and $17.2m in covid government assistance.

Guidance maintained 

Cochlear expects FY22 net profit to be between $265m and $285m, a 13-22% increase compared to FY21. 

Cochlear flagged that hospital staffing shortages may impact implant capacity in the second half. As a result, the company expects a lower rate of growth for Cochlear impacts for the full year.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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