MENU

Cochlear doubles profit

The world’s largest producer of hearing implants, Cochlear (ASX: COH), released its 2012-13 profit results on Tuesday, reporting sharply higher profit as forecast in early June.

The company generated net profit after tax (NPAT) of $132.6 million, up 133% from the previous financial year and within guidance of $130 to $135 million. Unit sales were up 16%, however revenue from sales was up only 2%, indicating a reduction in margins. Cochlear reported weaker sales in Europe and the Americas but sharply stronger sales in Asia Pacific, largely due to a sizable Chinese tender sale.

In June, Cochlear warned shareholders that weaker sales in the second half of the financial year were expected ahead of the launch of its new Nucleus 6 sound processor. The new processor has recently received regulatory approval in Europe and approval in other major markets is expected later in 2013.

The company did not give a forecast for 2014, instead noting that the “timing of regulatory approvals and effectiveness of the Nucleus 6 launch execution will be important for the 2014 financial year result”.

In more upbeat news for investors, Cochlear announced a final dividend of $1.27 per share, franked at 30%. This equates to a yield of around 4.3%, franked at 35%.

The current share price represents a buying opportunity for long term investors, with the stock dropping around 5% last week due to the release of a cheaper Chinese product which spooked investors. The Chinese product is largely targeting a different market to Cochlear, who operate a premium product at a premium price point, and Cochlear are not expecting to be adversely affected by the release.

Foolish takeaway

Cochlear holds a dominant position in the global hearing aid market, controlling around two-thirds of the market. The imminent release of a new processor is expected to boost revenue and profit for Cochlear in the next financial year, however much depends on regulatory approval in the Americas and Asia Pacific. Long-term investors may view the current price weakness as an opportunity to buy a quality company at a reasonable price.

Looking for a bigger dividend yield? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading


Motley Fool contributor Andrew Mudie owns shares in Cochlear.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.