May 22, 2018 / 5:52 AM / 4 months ago

UPDATE 2-Sonova cautious on sales, profit targets for current year

* Sees U.S. disposal weighing on growth

* Rivals’ merger boosts competition

* To add features to hearing aids late in year (Recasts to focus on targets, adds CEO, analyst comment)

ZURICH, May 22 (Reuters) - Sonova’s sales growth for this fiscal year may be less than half its mid-term target, the world’s biggest hearing aid maker said on Tuesday, partly because of the impact of U.S. disposals and restructuring.

Sonova, facing heightened competition from smaller rivals Widex and Sivantos following their merger this month, expects 2018/2019 sales to increase 2 to 4 percent, with earnings before interest, taxes and amortisation increasing 6 to 9 percent, both in local currencies.

That is behind its mid-term goal of 5-7 percent sales growth and an EBITA increase of 7-11 percent.

Sonova is in the process of selling its EPIC hearing managed care provider in the United States, which has nearly $50 million in sales, giving up revenue in the short term for a long-term supply agreement. Sonova did not name the buyer.

A continuing shake up of its U.S. store network will also to weigh on top-line growth, the company said.

Sonova is adding new functions to its hearing aids that fit with its new Sword microchip, which allows hearing aids to connect to devices such as mobile phones. But this will only happen towards the end of the calendar year.

“It will then contribute to a quarter worth of growth, but not more,” Chief Executive Arnd Kaldowski said in an interview after the company released its full-year 2017/18 results.

Kaldowski, who recently took over from Lukas Braunschweiler, is having to navigate a changing landscape where rivals are not standing still.

With their merger to create the third biggest hearing aid company behind Sonova and Denmark’s William Demant, Widex and Sivantos said last week they planned to invest more in digital devices that the industry hopes will appeal to tech-savvy consumers who are reaching the age when they might need hearing aids.

Sonova has bulked up in Europe with its nearly $1 billion acquisition of Netherlands-based hearing aid retailer AudioNova in 2016, while rebuilding in the United States, its second-biggest market.

“The company’s outlook for sales is pretty modest, so there could be some corrections to the downward side,” Bank Vontobel analyst Carla Baenziger said in a note to investors. “With regards to profitability, however, we don’t really expect there to be big changes.”

Sonova’s shares were 1.5 percent lower by 0740 GMT.

Earnings before income, taxes and amortisation not including acquisition-related amortisation (EBITA) rose to 532.4 million Swiss francs ($534.2 million), compared to an average estimate of 521 million in a Reuters poll of analysts.

Sales rose 10.4 percent to 2.65 billion francs, compared to the poll average of 2.67 million francs, as U.S. revenue slipped 1.8 percent.

Sonova plans to increase its dividend 13 percent to 2.60 francs per share.

$1 = 0.9967 Swiss francs Reporting by John Miller; Editing by Michael Shields and Jane Merriman

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