On Thursday, Smith & Nephew (NYSE: SNN), the British medical equipment maker, cut its annual underlying revenue growth forecast due to weaker-than-expected demand in China, sending its shares more than 12% lower.
The company expects annual underlying revenue growth of 4.5%, down from an earlier forecast of 5%-6% and below analysts’ estimate of 5.2%, according to company-compiled consensus.
Smith & Nephew (NYSE: SNN) shares fell 12.65% in premarket trading.
Weak customer demand for its knee implants in China, and lack of volume uplift from the country’s bulk-buying Volume Based Procurement (VBP) program, resulted in slower revenue growth in the third quarter, the company said.
The VBP program is aimed at cutting prices for medical products in the country.
“The thinking was that on the back of price cuts, more patients would be treated with either our products or competitive products and what we’re seeing is the increased demand for our products hasn’t come through,” CEO Deepak Nath told Reuters in an interview.
He added the headwind from China’s VBP masked a strong performance in the company’s sports medicine business across the rest of the world.
Companies worldwide are starting to cut prices and costs and scale back activity in China, as the world’s second-biggest economy continues to flag despite Beijing’s efforts to turn things around.
Smith & Nephew’s third-quarter total revenue increased by 4%, missing analyst expectations for 5.2%.
The British firm makes products including orthopaedic implants and wound dressings.
(Source: Reuters)
