Healthineers forecasts growth on demand for hospital equipment

AMSTERDAM (Reuters) - Siemens Healthineers SHLG.DE said it expected strong growth to continue next year, as the German maker of medical imaging machines and diagnostic equipment reported better than expected fourth-quarter sales on Monday.

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Healthineers’ shares jumped 8% in early morning trade to its highest level on record.

The health technology company said net profit increased 36% in the July-September period, to 507 million euros ($566.1 million), as comparable sales rose 8%.

This easily beat analysts’ expectations of a net profit of 483 million euros and 5.5% sales growth, expressed in a company-compiled poll.

“Thanks to a strong year-end finish, we clearly exceeded our growth outlook in fiscal year 2019,” Chief Executive Bernd Montag said.

Healthineers and its Dutch rival Philips PHG.AS are hoping to cash in on an ageing, increasingly health-conscious population by selling pricey medical equipment, such as MRI scanners and diagnostics machines, to hospitals and clinics.

Philips last week also reported strong growth over the past quarter on increasing global sales of its medical machines, but had to lower its 2019 profit margin target due to trade tariffs and poor results at its Connected Care division.

Healthineers’ strong fourth quarter pushed full-year sales growth up to 6%, above the company’s earlier indications for 6% to 5%. It now expects comparable sales to grow 5% to 6% next year, while adjusted earnings per share are seen rising 6% to 12%.

Growth was driven last year by strong sales at its imaging division, which sells hospital equipment such as scanners, but its diagnostics business continued to lag.

The health tech firm is pinning its hopes on new blood and urine testing kit to turn around the division, which lags market leader Roche ROG.S, but lengthy installation times at large and complex laboratories have dragged down profit.

Higher costs for its Atellica blood-testing machines weighed on the division, leaving the group’s 2019 profit margin just below the lower end of its target range, at 17.3%.

“Atellica is the right product, but clearly the roll-out did not work out as planned”, said Montag, who took personally took responsibility for the diagnostics business in July.

“We have learned our lessons and took the right conclusions. We see diagnostics as a key value driver [but] to harvest, you have to place the instrument first.”

Shipments of 1,820 Atellica machines in the past year were in line with the company’s forecast, which it lowered from a previous 2,200-2,500 target in July.

Reporting by Bart Meijer; Editing by Clarence Fernandez and Louise Heavens