WDH suffers squeeze on profit margins in H1

Danish hearing aid maker William Demant Holding (WDH) suffered a surprise squeeze on profit margins in the first half, sending its shares down 10 per cent to their lowest in nearly two years. “They are seeing significant growth, but earnings do not follow,” said Sydbank analyst Morten Imsgaard.“Their profit margin in the first half is 22.1 per cent when discounting the Otix acquisition and they have earlier delivered profit margins of 25.5 per cent,” Imsgaard said, referring to the purchase of Otix Global Inc for $50 million. “If they could not deliver that level of profit margin in a first half with growth that strong, how will they be able to deliver in the future?” Imsgaard said. “When earnings can’t follow, that can disappoint.”The company’s shares were down 10.1 per cent at 358.8 crowns by 0833 GMT, underperforming a 2.2 per cent fall in the European healthcare index. The stock dropped as low as 351.5 crowns, its lowest since December 2009. Last week, Danish rival GN Store Nord missed market expectations for second-quarter profits due to weak earnings in one of its divisions. The group reiterated its overall full-year guidance, but narrowed its full-year EBITA outlook downwards for its hearing aid division GN Resound.William Demant said pretax profit rose to 768 million Danish crowns ($147.6 million) from 597 million in the first half of 2010, in line with the average 768 million seen in a Reuters poll of analysts.However a rise in earnings before interest and tax (EBIT) to 806 million crowns lagged the 828 million average forecast. Revenue grew 17 per cent to 3.90 billion crowns, roughly in line with the 3.86 billion forecast. Sales in the main hearing aid business, which accounts for 88 per cent of group sales, rose 17 per cent to 3.46 billion crowns, also in line with the 3.45 billion forecast. “We are pleased that in the first six months of the year, we have succeeded in maintaining the impressive momentum from 2010, resulting in unit growth that is four times higher than market growth,” Chief Executive Niels Jacobsen said in the statement.For 2011, the group said it saw its organic growth in wholesale hearing aid sales to exceed market growth by 6 to 8 per centage points, against a previous forecast of 4 to 8 per centage points. From / Gulf Today