Cochlear issues another coronavirus downgrade

Cochlear has issued its second coronavirus-related profit downgrade in a month, withdrawing its previous guidance on the back of the virus disrupting its markets in the US and Europe.

Cochlear shares dived as much as 20 per cent to a low of $169.37 on Monday morning after the hearing device manufacturer said the spread of coronavirus is leading to delays for non-essential surgery, including its implants.

The company said this is expected to have a substantial short term impact on surgeries, particularly in the US and Europe, two of its most important markets.

"We are now seeing a growing number of health authorities either recommend or enforce surgery deferrals," said Cochlear chief executive Dig Howitt.

The coronavirus is leading to delays in non-essential surgery like Cochlear implants, according to the company’s chief executive Dig Howitt. Credit:Dominic Lorrimer

"There is a high level of uncertainty surrounding the impact of COVID-19 in terms of the extent and duration of the reduction in surgeries and the ability of recipients to access sound processor upgrades," he said.

"As a result we are not in a position to provide an earnings outlook to the market at this time … an update on trading conditions will be provided when appropriate."

Last month, Cochlear warned of a $30 million profit hit as surgeries were delayed across China due to the virus, reducing its guidance to $270 million to $290 million for the current financial year.

On Monday, Cochlear reported that a "small but growing number of surgeries recommenced over the past few weeks" in China, which is in line with reports that the country where the outbreak originated is already returning to normal.

Cochlear said it has a conservatively geared balance sheet and has enough debt facilities to meet future cash requirements. The company is not expected to cut staff and added that is expects the downturn to be temporary.

However, Cochlear will reduce all non-essential spending and capital expenditure for the rest of the financial year and is implementing a hiring freeze.

"Our view to the long-term opportunity to grow our markets remains unchanged and we have a strong balance sheet that enables the business to weather the expected short-term decline in demand caused by COVID-19," said Mr Howitt.

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