Smith & Nephew, a major medical technology company, has adjusted its revenue targets for the full year due to a slowdown in demand in China. The company originally expected revenue growth between 5% and 6%, but has now revised it to 4.5%. This change is a result of challenges faced in China, leading to a 13.33% decrease in the company’s share price.
The medical goods market in China has been impacted by the country’s efforts to introduce more competitive tenders for pharmaceuticals and devices through the value-based procurement program. This has led to lower prices for products and posed a challenge for Smith & Nephew. Despite this setback, the company reported a 4% increase in third-quarter revenues, reaching $1.41 billion.
Based in Watford, Hertfordshire, Smith & Nephew operates globally and specializes in various medical divisions such as orthopaedics, sports medicine, ear, nose, and throat, and wound management. The company’s CEO, Deepak Nath, acknowledged the difficulties faced in China but highlighted strong performance in the sports medicine division. He emphasized the company’s focus on long-term growth drivers, including robotics adoption and product innovation.
Cevian Capital, a Swedish activist investor, disclosed its stake in Smith & Nephew in July, noting the company’s attractive businesses in growing markets. However, Cevian Capital also highlighted the need for operational improvements and cost savings across different business areas. The company’s orthopaedics division, in particular, was identified as an area requiring attention.
Analysts at Stifel raised concerns about the company’s internal financial modeling following the revenue target adjustment. This development has sparked discussions about perceived weaknesses in Smith & Nephew’s financial position. Despite these challenges, the company remains committed to its transformation towards becoming a higher-growth organization with a focus on driving operating leverage to improve overall performance.
