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UPDATE 1-Emerging markets growth puts Smith & Nephew on track for year
May 5, 2017 / 9:41 AM / in 7 months

UPDATE 1-Emerging markets growth puts Smith & Nephew on track for year

* Q1 underlying revenue grows 3 pct, in line with forecasts

* Emerging markets and knee implants both strong

* Shares rise to nine-month highs (Adds CEO comments, analyst reaction, shares)

By Paul Sandle

LONDON, May 5 (Reuters) - Shares in Smith & Nephew rose to a nine-month high on Friday after the artificial hip and knee maker said a strong first quarter, led by growth in emerging markets, put it on track to meet it targets for the year.

The company reported underlying revenue growth of 3 percent, within the 3-4 percent range it has forecast for the year, in what analysts said was likely to be its weakest quarter.

Chief Executive Olivier Bohuon said the company had made a good start to the year, highlighting emerging markets, where growth returned to double-digits, with China up by an underlying 14 percent.

Revenues from knee implants, a Smith & Nephew strength, were also buoyant, with underlying growth of 5 percent. Group sales totalled $1.14 billion.

“We continue to focus on execution and expect to see progress through the year,” Bohuon said.

The company’s shares were up 3.6 percent at 1,316 pence at 0843 GMT.

Analysts at Bank of America Merrill Lynch said the highlight in their view was the recovery in emerging markets.

“We expect this to be taken positively by the market given China de-stocking has been a headwind for a long time,” they said.

The company has focused on emerging markets in the past few years to make up for sluggish demand from the United States and Europe.

In the quarter, emerging markets accounted for 15 percent of S&N’s revenues, and these increased by an underlying 12 percent. Revenues in developed markets, such as the United States, grew by 1 percent in the quarter.

Bohuon said execution of his organic growth plan was his top priority in the short term, rather than acquisitions.

Media reports have said S&N could target Wright Medical , a U.S. company that specialises in surgical implants for extremities like feet and ankles, for a takeover.

Bohuon said M&A was “always on the agenda”, adding that he had previously pointed to extremities as one of a number of areas of interest.

“But for the moment, this quarter, I am interested in developing my commercial excellence,” he said.

“(M&A) is still high on the agenda, but it’s not a top priority for the time being.”

Editing by James Davey and Jane Merriman

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