Cochlear profit slumps 70pc after recall
Cochlear profit slumps 70pc after recall

Cochlear's profit has plunged 68 per cent after the costly recall of a bionic ear implant, with the company pinning its recovery on the demands of an ageing population.

The hearing device maker's net profit dropped to $56.8 million in the year to June 30 from $180.1 million in 2010/11, following the mass recall of Nucleus CI500 devices last September.

The results spooked investors, with Cochlear shares diving 5.12 per cent, or $3.40, to $63 today.

CMC Markets chief market strategist Michael McCarthy said analysts were disappointed with Cochlear's operating profit coming in at $158.1 million, before the recall costs of $101.3 million were stripped out.

Analysts had been expecting between $160 million and $170 million.

"To see the result come in at that level was very disappointing," Mr McCarthy told AAP.

"Income from medical businesses is generally considered to be fairly recession-proof.

"The disappointing operating profit here shows that's not always the case."

As of July 31, 4.2 per cent of registered Nucleus CI500 devices had been reported as faulty, and newly reported failures had continued to fall each month, Cochlear said.

Sales of the implants were down six per cent on the previous year to 23,087, after initial supply issues following the recall.

However, sales were 15 per cent higher in the second half of the financial year than the first, chief executive Chris Roberts said.

He said future growth in use of the company's devices was expected to come from the ageing population and an increasing awareness about the importance of hearing on overall health.

"There's an increasing set of data linking hearing loss with cognitive decline," Dr Roberts told AAP.

"Healthy ageing isn't just about nutritional status and physical fitness and sleep quality.

"It's also about maintaining your mental health.

"It gives another reason why people need to take their hearing very seriously."

Bilateral implants - people having devices for both ears rather than one to improve overall hearing - is also expected to drive growth, Dr Roberts said.

He said the company had learnt from the recall and continued to strive to make each new generation of devices better than the last.

While the company had lost about five per cent market share because of the recall, Cochlear was still the market leader, Dr Roberts said.

Cochlear's full year revenue of $779 million was down four per cent on the previous year.

Cochlear declared a final dividend of $1.25 per share, franked to 35 per cent, up from $1.20.

The West Australian

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