Sonova consolidated its leading position in the hearing instrument industry in financial year 2010/11. Despite negative currency effects, a new sales record of CHF 1,617 million was achieved. This translated to a growth rate of 13.3% in local currencies and 7.8% in Swiss francs compared to the previous year. All geographic regions contributed to the sales growth. 96% of sales were recorded in Sonova's core business, hearing instruments, in which further market share gains and a growth of 10.1% in local currencies were achieved. The hearing instrument segment reported an EBITA of CHF 372 million or 24.0% of sales. At 61.9%, the equity financing ratio was at a high level and Sonova remained in a solid financial position.
Record sales despite negative currency impact of CHF 84 million
Sonova achieved sales in financial year 2010/11 of CHF 1,617 million, a new record for the company, up from CHF 1,500 million in the previous year. Net sales increased by 13.3% in local currencies. However, a major negative currency impact of CHF 84 million or 5.6% reduced the sales growth rate to 7.8% in Swiss francs. Thereof, CHF 64 million was recorded in the second half of 2010/11 alone. Operating profit (EBITA) was at CHF 327 billion, 22% below the previous year level. The EBITA margin fell to 20.2% (including the effect of one-time costs related to the profit warning in March 2011 and the subsequent events), mainly a result of the strong Swiss franc, the recall and temporary selling freeze of Advanced Bionics' implants and higher operating expenses.
Expansion in all regions
All geographic regions, in local currencies, contributed to the record sales figures in the financial year 2010/11. Group-wide, the EMEA (Europe including Switzerland, Middle East, Africa) region accounted for 39.5% of total sales and reached growth of 11.3%. The USA remained the strongest single sales market for Sonova accounting for 36.8% of total Group sales while achieving a growth rate of 14.3%. The Rest of the Americas region generated 15.3% of sales and grew by 24.3% while Asia/Pacific accounted for 8.4% of total sales and reached a 2.7% growth rate.
Sonova continues to outgrow the global hearing instrument market
Sonova remains the market leader in the hearing instrument industry. Sonova's core business achieved a record sales level and accounted for 95.6% of total turnover. Despite a negative currency effect of 5.3% or CHF 78 million, segment sales surged from CHF 1,475 million in 2009/10 to CHF 1,546 million in 2010/11 thanks to an innovative and comprehensive product portfolio. The segment achieved growth of 10.1% on a currency adjusted basis, whereby organic growth was at 5.8% and growth from acquisitions amounted to 4.3%. The results in local currency exceeded market growth of the hearing instrument industry, estimated at 4-5%. The hearing instrument segment reported a solid EBITA of CHF 372 million or 24.0% of sales.
All product classes contributing to growth in hearing instruments segment
Within the hearing instruments segment, sales in local currencies increased by 11% in first class, by 12% in business class and by 7% in economy class hearing instruments. In particular, first class products increased growth rates in the second half substantially as a result of the successful launch of Phonak Ambra on the Spice platform. Overall, first class products accounted for 25%, business class for 23% and economy class for 30% of Sonova's total hearing segment sales in financial year 2010/11.
Innovation and new products contributed markedly to sales record
Investment in research and development totaled CHF 108 million, the highest nominal amount in the industry, and substantially above last year's level of CHF 87 million. At the same time, the number of employees in R&D increased by 9% to 525. 74% of total hearing instrument sales come from products launched within the past two years, emphasizing once again the technological lead over competitors. The launch of the Spice platform technology was a key milestone in the year under review. This latest chip generation sets new standards in terms of processing power and performance. Phonak, the strongest brand in the industry, launched a comprehensive product portfolio based on the new platform, enabling improved understanding in all sound environments across all segments and degrees of hearing loss. With the introduction of the revolutionary Lyric product concept - the only invisible hearing instrument that can be worn for up to four months at a time - the company has taken a major step forward to better tap new potential in the hearing instrument market. Unitron introduced a new platform called Era, based on Sonova's latest chipset adapted for Unitron's market focus.
Record gross profit
While Sonova increased its gross profit to CHF 1,119 million (2009/10: CHF 1,059 million), the gross profit margin reduced slightly to 69.2 % (2009/10: 70.5%;restated: 70.6%). Economies of scale and increased efficiency in manufacturing and procurement were not able to entirely offset the negative effect of the strong Swiss franc and the temporary shortfall of Advanced Bionics sales, which impacted the gross profit margin by approx. 2%. Spending on sales and marketing and general and administration has increased from CHF 545 million to CHF 684 million or
from 36.3% of total sales in the previous year to 42.3% in 2010/11 respectively. This increase in costs is a result of acquisitions, mainly of Advanced Bionics and InSound Medical, as both these companies had only been consolidated into the figures for financial year 2009/10 for three months. In addition, investments for the roll-out of Lyric in key markets outside the USA, including Germany, France, UK, Canada and Austria were made. Sonova also invested in the sales and distribution structures of subsidiaries around the world, especially in emerging markets. The general and administration expenses have increased partly due to the one-time costs related to the profit warning in March 2011 and the subsequent events. The higher costs for sales and marketing and general and administration are also reflected in the increased number of employees which rose by 997 to 7,840.
Creating a global hearing care company
Sonova will pursue its proven strategy in order to build a global hearing care company, with the aim of helping as many people as possible, to hear better and thus improve their quality of life. There remains significant potential in the market, as market growth is expected to continue due to demographics and rising disposable income. In addition, penetration rates can be enhanced and markets expanded to developing regions such as India, China and other areas with high population density. Sonova is well prepared to exploit these growth opportunities as the Group has a unique position in two complementary business segments, a truly global footprint, a high rate of innovation and sophisticated marketing initiatives.
Outlook 2011/12
Sonova expects to achieve solid growth in the hearing instruments segment in the coming year, driven by attractive market fundamentals, the launch of new products and the ongoing expansion of sales channels. Even though the Advanced Bionics' implants will gradually return to the market following the recent TÜV certification, the forecast for the hearing implants segment is dependent upon the timing of re-entry into the U.S. market. We expect overall sales in 2011/12 to be slower in the first half of the financial year because of reduced sales by Advanced Bionics. Furthermore, the strong Swiss franc will continue to adversely impact the sales and earnings growth of the full year significantly.
The Sonova Annual Report 2010/11 can be downloaded from:
www.sonova.com/en/investors/AnnualReports/Pages/default.aspx
