UPDATE 1-Smith & Nephew positive after strong finish to 2013

Thu Feb 6, 2014 7:04am EST

* Q4 trading profit up 8 pct, beating expectations

* Says expects to make further progress in 2014

* Shares up 2.2 pct

By Paul Sandle

LONDON, Feb 6 (Reuters) - Smith & Nephew, Europe's largest maker of artificial hips and knees, posted a 8 percent rise in fourth-quarter underlying trading profit, beating market expectations, as demand improved in its orthopaedics business.

The company posted trading profit of $292 million on revenue of $1.18 billion, up 6 percent on an underlying basis, resulting in adjusted earnings per share of 23.4 cents.

Chief Executive Olivier Bohuon has been increasing S&N's focus on faster-growing markets and therapy areas, and bought $1.7 billion U.S. sports medicine firm ArthroCare Corp on Monday, in his biggest step yet to reposition the group.

He said on Thursday that S&N, which also has a wound care business, finished the year strongly.

"Our orthopaedic reconstruction business confirmed its improved dynamic, in particular delivering 11 percent growth in U.S. knees," said Bohuon, who has been in the job for nearly three years.

"We built momentum across the group through 2013 and expect to make further progress in the year ahead," he said.

Orthopaedic reconstruction would continue its recent improved performance this year and he expected it to grow at approaching the sector's rate, he said.

The group has trailed competitors, which include Johnson & Johnson, Zimmer Holdings and Stryker Corp , in that segment, especially in hips.

In the fourth quarter, knee implant sales rose 5 percent, S&N said, still lagging 7 percent growth in the market, while hip implants rose 2 percent, half the rate of market growth.

Shares in the company were trading up 2.2 percent at 893-1/2 pence by 1155 GMT.

Analyst Nicholas Keher at Investec said the company had delivered a "solid" set of results.

"Within the detail of the results, we can see the management's strategy for delivering growth is continuing to bear fruit and that Smith & Nephew may be on the cusp of strong growth," he said.

Analysts had expected the group to post trading profit of $287 million on revenue of $1.163 billion.

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