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February 18, 2003

Investors punish Cochlear

From: The Age, Australia - 18 Feb 2003

February 19 2003
By Richard Salmons

Cochlear has forecast a 40 per cent jump in profit this financial year but its shares slumped yesterday as investors complained that the growth wasn't fast enough.

"Long-term sales growth has increased and our global market share has actually increased," Cochlear managing director Jack O'Mahoney said, after unveiling net profit for the six months to December of $27 million, up 57 per cent.

Mr O'Mahoney said the company was on track for 40 per cent profit growth in the year to June, in line with Cochlear's forecasts at the time of its last annual results, and he expected the company to retain its recent market-share gains.

But the stock fell $1.16 to $34.65 after the announcement, as some analysts had hoped profit growth this year could be 50 per cent.

The result was driven by increased sales in the United States, better profit margins and a foreign exchange benefit.

Finance director Neville Mitchell said: "The reason for the higher profit after tax was the strong sales that dropped to the bottom line, and stronger controls on expenditure."

Sales growth was concentrated in the Americas, with revenue up 39 per cent to $78.4 million. The result was 51 per cent better in US dollar terms.

Mr O'Mahoney said sales had been boosted by Cochlear's additional spending of $12 million on marketing during the half.

Sales in Europe and the Asia-Pacific region were up 7 per cent and 6 per cent respectively. Cochlear executives argued the company's activities should be viewed as a portfolio, and that results vindicated a sustainable growth profile of 20 per cent a year worldwide.

Copyright © 2003 The Age Company Ltd