November 20, 2018 / 6:50 AM / 24 days ago

UPDATE 2-Switzerland's Sonova plays down threat from OTC hearing aids

* Company mulling whether to join OTC market

* H1 income after tax up 6.5 percent

* Keeps full-year targets, sees better H2 (Adds company comments, background)

By John Miller

ZURICH, Nov 20 (Reuters) - The rise of over-the-counter (OTC) hearing aids will be good for Sonova whether the Swiss manufacturer decides to enter the market or not, its CEO said on Tuesday, as the company reported a 6.5 percent rise in first-half income after taxes.

Arnd Kaldowski said OTC hearing aids would potentially bring customers with mild hearing loss into stores earlier than might otherwise have been the case, and they would later need more sophisticated devices as their hearing deteriorated with age.

Last month, the U.S. Food and Drug Administration (FDA) approved a self-fitting hearing aid from audio products maker Bose Corp, sending stocks of Sonova and other global hearing-aid makers sliding at the prospect of new competition from a well-known company.

Kaldowski said Sonova, the world’s biggest maker of hearing aids, still had time to decide whether to compete in the OTC market as U.S. regulators are not likely to enact rules for such sales until 2020.

Without such rules, companies like Bose will have to sell through licensed dealers, just like Sonova does now, he said.

“You’ll see people adopting earlier and with that, getting into the purchasing cycle,” Kaldowski told Reuters, referring to the rise of OTC devices.

“That’s independent of our decision, ‘Do we play in OTC or not,’ which we haven’t taken yet. Technologically we could, but we really want to see how the regulation pans out and what the right go-to-market channels are,” he said in an interview.

Getting customers into hearing aids sooner is an ambition of manufacturers, which want to reduce the stigma that such devices are synonymous with aging in order to expand their customer base.

Sonova’s first-half income rose to 193.4 million Swiss francs ($194.7 million), on a 4 percent increase in sales to 1.3 billion francs. Underlying sales rose 2.6 percent.

Sales growth in Europe offset a decline in the United States where the Swiss company has cut stores by about a third to 200, to concentrate on cities and retiree-heavy Sun-belt markets.

Sonova is counting on new products including its recently introduced Marvel hearing aid platform to drive future growth, amid fierce competition from rivals including industry No. 2 William Demant.

Kaldowski said the introduction of Marvel, which includes features such rechargeable batteries and binaural direct streaming of music or phone calls, was a couple of weeks ahead of schedule, with good orders from dealers.

First-half growth in earnings before interest, taxes and amortisation (EBITDA) stagnated, concerning some analysts.

“The question is whether Sonova can generally accelerate growth again as it was underperforming its main peers,” Bank Vontobel analysts said in a note.

Sonova shares were down 1 percent in early trading.

The company kept its full-year targets, with Kaldowski saying sales and profitability would accelerate in the second half of the year.

He expects 2018/19 underlying sales growth of 3-5 percent, or 2-4 percent after net divestments, and sees EBITA up 6-9 percent, all in local currencies. ($1 = 0.9931 Swiss francs) (Reporting by John Miller, Editing by Sherry Jacob-Phillips and Mark Potter)

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