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Highlights
- Q3 revenue rose 4% YoY to $1,412 million, with strong growth outside China.
- Orthopaedics, Sports Medicine, and Advanced Wound Management segments all showed gains.
- 2024 full-year revenue growth outlook revised to 4.5% due to China headwinds, with a 2025 profit margin target of 19-20%.
Smith+Nephew (LSE:SE) has released its trading update for the third quarter of 2024, reporting $1,412 million in revenue, a 4% increase from Q3 2023. This growth was supported by steady advancements across major segments, including Orthopaedics, Sports Medicine & ENT, and Advanced Wound Management. However, the performance was somewhat dampened by significant headwinds in China, impacting the surgical business there.
Excluding China, Smith+Nephew’s revenue growth for Q3 reached 5.9%, reflecting robust gains in its core markets. The company also noted that its 12-Point Plan, aimed at driving operational and financial improvements, continues to progress as planned, contributing positively to overall business performance.
Segment Breakdown:
- Orthopaedics: Revenue in the Orthopaedics division grew by 2.3% year-over-year (2.4% reported), with the US market for Hip and Knee Implants showing steady growth.
- Sports Medicine & ENT: The Sports Medicine & ENT segment reported a 3.9% rise in revenue (3.7% reported), bolstered by demand in established markets. However, growth was offset by the China market, where the value-based procurement (VBP) model created pricing pressures.
- Advanced Wound Management: The Advanced Wound Management segment saw a notable 6.5% growth in revenue, accelerating over the first half of the year. This segment continued to be a strong contributor to Smith+Nephew’s overall financial health.
Outlook: Smith+Nephew adjusted its full-year 2024 outlook in response to continued challenges in the China market. The company now anticipates an underlying revenue growth of around 4.5%, down from its previous forecast of 5.0-6.0%. The trading profit margin for 2024 is also expected to grow by up to 50 basis points over the prior year's 17.5%, a slight reduction from the earlier estimate of at least 18.0%. This reflects reduced operating leverage stemming from moderated revenue growth.
Looking forward to 2025, Smith+Nephew remains optimistic despite the continued uncertainties in China. The company expects to achieve a substantial trading profit margin of between 19.0% and 20.0% for the year. This target will be driven by ongoing execution of the 12-Point Plan, which is focused on enhancing operational and commercial efficiency across its businesses.
CEO commentary highlighted the progress made in key operational initiatives and reiterated confidence in the company’s strategic direction, noting that improvements stemming from the 12-Point Plan are already yielding financial benefits. Smith+Nephew is poised to sustain this momentum while adapting to market dynamics, particularly in China.
