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- Hearing specialist Cochlear (COH) has slashed its 2020 earnings guidance completely as Covid-19 continues to impact business operations
- As the pandemic spreads, hospitals around the globe are postponing non-essential surgeries to relieve the load on the healthcare sector
- Two of Cochlear’s key markets, the U.S. and Western Europe, are among the countries delaying surgeries
- As such, the company said it cannot provide an earnings guidance anymore as it cocoons business operations against the economic onslaught
- Shares in the company closed 19.25 per cent lower today at $174.51 each
Meditech giant Cochlear (COH) is the latest in a string of companies to withdraw its earnings guidance as Covid-19 ravages through company operations.
The hearing aid developer initially downgraded its guidance on February 11 as the coronavirus was starting to solidify its grip on global economies.
At the time, Cochlear said it expected between $270 million and $290 million in profits over 2020 compared to the originally forecast $290 – $300 million.
Still, the company was able to outperform a struggling market and hit its all-time-high share price of $251.55 on February 19. Since then, however, the spread of Covid-19 has seen Cochlear shares lose almost a third of their value.
Today, the company made the call to slash its earnings guidance entirely as hospitals delay non-essential surgeries to prioritise the treatment of the coronavirus.
Over the weekend, the U.S. Surgeon General suggested hospitals across the States suspend elective surgical procedures to relieve the strain on the healthcare system until the virus’ rate of infection is under control.
Cochlear CEO and President Dig Howitt said the company expects these actions to impact surgeries in the company’s major markets — especially in the U.S. and Western Europe.
“The business has been on track to deliver its earnings guidance driven by strong growth in cochlear implant system sales across the developed markets. However, we expect to experience a significant decline in sales in the immediate future,” Dig explained.
He said there is currently a high level of uncertainty regarding the impact of Covid-19 and exactly how seriously company operations will be affected.
“As a result, we are not in a position to provide an earnings outlook to the market at this time and withdraw our earnings guidance for FY20. An update on trading conditions will be provided when appropriate,” Dig said.
The company did its best to keep investors from panicking, however, saying it has a “conservatively geared” balance sheet and enough headroom in existing debt facilities to meet the current financial challenges.
Further, China has started recommencing surgeries over the past few weeks after a delay in February, according to Cochlear.
Nevertheless, the company is cutting all non-essential spending and has put a freeze on hiring until things ease up. At this stage, the spending cut is in place until the end of the current financial year.
In a brutal day on the ASX, Cochlear shares slumped 19.25 per cent on today’s news. Since their February peak, shares in the company have declined roughly $77 and are currently trading for $174.51 each.
