Sorin Group Announces Results for the First Quarter of 2014

Consolidated results for the first quarter of 2014:

  • Revenues were €176.3 million, up 1.8%* compared to the first quarter of 2013;
  • Adjusted net profit° was €10.8 million, up 18.3% compared to the first quarter of 2013.

For the second quarter of 2014, Sorin Group expects revenues to grow 3% to 5% at comparable exchange rates compared to the same period of 2013.

MILAN--()--At a meeting held today and chaired by Rosario Bifulco, the Sorin S.p.A. Board of Directors approved the results for the first quarter of 2014.

“We are satisfied with the first quarter performance, with revenues in the high-end of the guidance. The Cardiac Surgery business continued its positive performance, driven by strong momentum in the cardiopulmonary product segments and by the penetration of PercevalTM. The Cardiac Rhythm Management business confirmed an improving underlying sales performance," said André-Michel Ballester, Sorin Group's Chief Executive Officer. "During the quarter, we announced several important deals, including the joint-venture with MicroPort for the Chinese CRM market and the acquisition of Oscor’s CRM leads business. In addition, we continued our investment program in New Ventures at the expected pace," he added.

In the first quarter of 2014, Sorin Group (MIL:SRN) posted revenues of €176.3 million, up 1.8% at comparable foreign exchange over the first quarter of 2013.

  • The Cardiac Surgery Business Unit (cardiopulmonary products for open heart surgery and heart valve repair or replacement products) reported revenues of €115.4 million, up 4.3%* compared to the first quarter of 2013. Heart-lung machines achieved another quarter of strong revenue growth, primarily thanks to the US, Japan and emerging markets. The oxygenators segment benefited from the roll-out of InspireTM in Europe and from the significant contribution of the cannulae business. The autotransfusion systems segments also recorded strong momentum in every major market. The tissue valves business was negatively impacted by a weak performance in the US, partially balanced by the strong performance of PercevalTM. In the quarter the mechanical valves segment reported lower volumes in emerging markets, in addition to the continued shift toward tissue valves in developed countries.

During the quarter, Sorin Group received expanded CE mark approval for adult age indication for PercevalTM, allowing treatment of a wider spectrum of patients with aortic stenosis and/or steno-insufficiency. In addition, as of January 1st, 2014 a dedicated reimbursement for PercevalTM is now effective in Germany. These two factors further reinforce the Company’s confidence for the long-term success of PercevalTM.

During the first quarter of 2014, Sorin Group also announced the acquisition of the cardiac surgery cannulae activities from its supplier Bioengineering Laboratories S.p.A. (“BEL”) and a further investment in Cardiosolutions, start-up company focused in the development of an innovative percutaneous mitral repair system and one of Sorin’s New Ventures investments.

Finally, Sorin Group announced yesterday it has received FDA approval for Mitroflow™ Aortic Pericardial Heart Valve with Phospholipid Reduction Treatment (PRT). This patented advanced tissue treatment is designed to prevent potential calcification and further improve durability of the bioprosthetic valve.

(Euro million)        
    Q1 14 Revenues   Underlying growth %*
Heart-lung machines   21.5   16.0%
Oxygenators 48.6 3.2%
Autotransfusion machines and devices 15.0 9.5%
Mechanical Heart Valves 11.9 -7.2%
Tissue Heart Valves 15.1 -4.3%
Other   3.3   20.8%
Totale Cardiac Surgery   115.4   4.3%

(*) For details, see the table entitled “Consolidated revenues by Business Units”

  • The Cardiac Rhythm Management Business Unit (implantable devices to manage cardiac rhythm disorders) reported revenues of €60.3 million, a 2.4%* decrease compared to the first quarter of 2013. Low-voltage revenues continue to be primarily affected by lower volumes in Japan due to the penetration of MRI compatible pacemakers. The Company demonstrated positive momentum during the quarter in Europe, thanks to the initial launch of KORATM 100 and the roll-out of REPLYTM 200. High-voltage revenues were flat, with a soft performance in implantable defibrillators compensated by the continued penetration of SonRTM.

During the quarter, Sorin Group announced a joint-venture with MicroPort Scientific Corporation to market and develop Cardiac Rhythm Management devices in China, thus enabling the Company to accelerate its penetration of the fast growing CRM market in China.

In the first quarter of 2014, Sorin Group acquired the Oscor CRM leads business, including a lead manufacturing facility in the Dominican Republic for an aggregate value of approximately US$20 million. This deal, together with the acquisition of a license of the Imricor Medical Systems technology for CRM applications, will enhance Sorin’s lead portfolio for MRI system development.

(Euro million)        
    Q1 14 Revenues   Underlying growth %*
High Voltage (defibrillators and CRT-D)   22.0   0.0%
Low Voltage (pacemakers) 35.4 -4.7%
Other   2.9   9.2%
Total Cardiac Rhythm Management   60.3   -2.4%

(*) For details, see the table entitled “Consolidated revenues by Business Units”

Gross profit in the first quarter of 2014 was €104.3 million, or 59.2% of revenues, compared to 59.0% of revenues in the first quarter of 2013. This improvement is mainly due to manufacturing efficiencies, offsetting the negative impact of pricing pressure in Cardiac Rhythm Management and of foreign exchange rates.

Selling, General and Administrative (SG&A) expenses were €69.2 million, compared to €72.2 million in the first quarter of 2013. At constant foreign exchange rates, SG&A decreased by 2.5%.

Research and Development (R&D) expenses rose by 3.6% to €19.7 million (11.2% of revenues) compared to €19.0 million (10.6% of revenues) in the first quarter of 2013.

EBITDA in the first quarter of 2014 amounted to €26.8 million, or 15.2% of revenues, compared to €26.3 million, or 14.7% of revenues in the first quarter of 2013.

EBIT was €14.2 million compared to €8.7 million in the first quarter of 2013. EBIT before special items was €15.5 million, up 8.1% compared to €14.3 million in the first quarter of 2013. Special items were negative for €1.2 million in the first quarter of 2014 (see details in attached table).

Net financial charges were €1.8 million compared to €1.7 million in the first quarter of 2013. On a run-rate basis, the financial charges in the first quarter of 2014 were flat over the same period of 2013.

Net profit was €9.9 million compared to €5.0 million in the first quarter of 2013.

Adjusted net profit° was €10.8 million, up 18.3% compared to €9.1 million in the first quarter of 2013, with a negative impact coming from foreign exchange of approximately €2.4 million.

Net financial debt as of March 31, 2014 was €95.6 million compared to €106.9 million as of March 31, 2013 (€68.7 million as of December 31, 2013). Special items for the period were negative for €24.4 million, including €15.0 million for business development initiatives (see details in attached table).

In the first quarter of 2014, the Company’s free cash flow+ was negative for €2.5 million. Sorin’s free cash flow was adversely impacted by a temporary increase in inventory and one-off investments associated with the reconstruction of the Mirandola site.

During the quarter, the European Investment Bank has also approved a new medium-long term financing for Sorin Group of €100 million.

Guidance for the second quarter of 2014

Sorin Group expects revenues to grow by approximately 3% to 5%* in the second quarter of 2014 over the same period of 2013 and confirms 2014 full-year guidance^.

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Unaudited data.

* * *

The corporate officer responsible for the company’s financial reports, Demetrio Mauro, declares, pursuant to Paragraph 2 of Article 154-bis of the Consolidated Law on Finance that the accounting information contained in this press release corresponds to the documented results and the accounting books and records.

* * *

In addition to the conventional indicators recommended by the IFRS, this press release provides alternative performance indicators. These indicators should not be considered as replacements for the conventional indicators recommended by the IFRS, but rather as an additional source of information, representative of the income statement, balance sheet and financial position parameters used internally in the decision-making process. An explanation of the meaning and structure of these alternative performance indicators is provided in the Annual Report as of December 31, 2013.

* * *

This press release contains forward-looking statements. These statements are based on the Group’s current expectations and projections about future events and, by their nature, are subject to inherent risks and uncertainties. They relate to events and depend on circumstances that may or may not occur or exist in the future, and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in such statements as a result of a variety of factors, including: continued volatility and further deterioration of capital and financial markets, changes in commodity prices, changes in general economic conditions, economic growth and other changes in business conditions, changes in laws and regulations (both in Italy and abroad), and many other factors, most of which are outside of the Company’s control.

* * *

About Sorin Group

Sorin Group (Reuters Code: SORN.MI), is a global medical device company and a leader in the treatment of cardiovascular diseases. The Company develops, manufactures and markets medical technologies for cardiac surgery and for the treatment of cardiac rhythm disorders. With 3,750 employees worldwide, the Company focuses on two major therapeutic areas: Cardiac Surgery (cardiopulmonary products for open heart surgery and heart valve repair or replacement products) and Cardiac Rhythm Management (pacemakers, defibrillators, cardiac resynchronization devices). Every year, over one million patients are treated with Sorin Group devices in more than 80 countries.
For more information, please refer to www.sorin.com.

* At comparable exchange rates and perimeter

° Adjusted net profit: net profit before after-tax non-recurring income and expenses (special items)

+ Free cash flow: net profit + depreciation, amortization and writedowns ± ∆ working capital – investments. This account is net of the impact of special items

^ Ref. press release dated February 6, 2014

Contacts

Gabriele Mazzoletti, Tel: +39 02 69969785
Mobile: +39 348 9792201
Director, Corporate Communications
Sorin Group
e-mail: gabriele.mazzoletti@sorin.com
or
Francesca Rambaudi, Tel: +39 02 69969716
Director, Investor Relations
Sorin Group
e-mail: investor.relations@sorin.com

Release Summary

Sorin Group announces consolidated results for the first quarter of 2014.

Contacts

Gabriele Mazzoletti, Tel: +39 02 69969785
Mobile: +39 348 9792201
Director, Corporate Communications
Sorin Group
e-mail: gabriele.mazzoletti@sorin.com
or
Francesca Rambaudi, Tel: +39 02 69969716
Director, Investor Relations
Sorin Group
e-mail: investor.relations@sorin.com