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TMCNet:  Sorin Group Announces Preliminary Results for 2013

[February 06, 2014]

Sorin Group Announces Preliminary Results for 2013

MILAN --(Business Wire)--

At a meeting held today and chaired by Rosario Bifulco, the Sorin S.p.A. Board of Directors analyzed the results for the fourth quarter 2013 and the preliminary unaudited consolidated results for the year of 2013. The final draft of the financial statements for the year of 2013 will be approved by the Board of Directors at a meeting to be held on March 14, 2014.

"In 2013 Sorin Group (News - Alert) (MIL:SRN) successfully recovered from the consequences of the earthquakes, reported results in line with guidance and generated a robust cash flow. During the year, the Company launched new breakthrough products, such as the new InspireTM- HeartlinkTM- ConnectTM System and KORATM, the only pacemaker with MRI automatic mode feature, and continued the successful roll-out of SonRTM and PercevalTM. In 2013, the Company also closed several important deals, including the acquisition of Brazilian manufacturer Alcard, the joint-venture with MicroPort for the Chinese CRM market and the greenfield project for cardiopulmonary products in China, thus executing on its medium-long term growth objectives," said André-Michel Ballester, Sorin Group's Chief Executive Officer. "Notwithstanding the anticipated adverse foreign-exchange impact, the Company is well positioned to drive top-line growth in 2014 across a variety of new products and geographies as well as to continue sustaining its longer-term growth strategy with further geographic expansion initiatives and investments in innovation," he added.

CONSOLIDATED RESULTS FOR THE FOURTH QUARTER 2013

In the fourth quarter of 2013, Sorin Group posted revenues of €191.8 million, a 5.3%* increase over the fourth quarter of 2012.

  • The Cardiac Surgery Business Unit (cardiopulmonary products for open heart surgery and heart valve repair or replacement products) reported revenues of €128.0 million. The heart-lung machine segment delivered a strong performance in every major market in the quarter. The oxygenator and ATS system segments also reported a positive performance, confirming Sorin's full recovery from the earthquakes of 2012. Strong performance of PercevalTM more than compensated weak sales of traditional tissue valves in Europe. Mechanical valves' volume growth in Emerging markets was offset by the continued shift toward tissue valves in Europe and the US.

In October 2013, Sorin Group officially launched its new InspireTM family of adult oxygenators and the HeartlinkTM system at the EACTS (European Association for Cardio-Thoracic Surgery) Annual Meeting, in Vienna, Austria. During the quarter, Sorin received CE (Conformité Européenne) mark approvals for the Solo SmartTM stentless aortic valve, which provides heart valve performance similar to a native valve with the ease of implantation of stented prostheses, and for the XL version of PercevalTM, thus expanding the number of patients that can benefit from a sutureless aortic valve replacement. Sorin Group also received a dedicated reimbursement for PercevalTM in Belgium and Germany effective, respectively, 1st November 1st, 2013 and January 1st, 2014.




(Euro million)        
    Q4 13 Revenues   Underlying growth %*
Heart-lung machines   31.3   20.4%
Oxygenators 49.2 16.9%
Autotransfusion machines and devices 15.6 8.5%
Mechanical Heart Valves 12.7 -0.2%
Tissue Heart Valves 16.0 1.1%
Other   3.2   4.8%
Total Cardiac Surgery   128.0   12.2%

(*) For details, see attached table "Consolidated revenues by Business Unit"

  • The Cardiac Rhythm Management Business Unit (implantable devices to manage cardiac rhythm disorders) reported revenues of €63.0 million, a 6.5%* decrease compared to the fourth quarter of 2012. Low voltage revenues continue to be affected by a challenging pricing environment in Europe and lower volumes in Japan due to the penetration of Magnetic Resonance Imaging (MRI) compatible pacemakers. The high voltage segment also reported a slightly negative performance, notwithstanding the continued success of SonRTM in Europe.

During the quarter, Sorin obtained CE mark approvals for the KORATM 100 MRI compatible pacing system and the INTENSIATM family of implantable defibrillators and CRT-D devices. KORATM pacemakers feature Sorin's proprietary SafeR algorithm, Sleep Apnea monitoring and the patented Automatic MRI mode, again demonstrating Sorin's commitment to advance the state-of-the-art in pacing technology today. INTENSIATM family of implantable defibrillators and CRT-D devices features the DF-4 high voltage connector, the new industry-standard which reduces the number of connections between the implanted device and the lead, thus facilitating the implant procedure.

(Euro million)        
    Q4 13 Revenues   Underlying growth %*
High Voltage (defibrillators and CRT-D)   23.6   -0.9%
Low Voltage (pacemakers) 36.3 -10.7%
Other   3.1   6.9%
Total Cardiac Rhythm Management   63.0   -6.5%

(*) For details, see attached table "Consolidated revenues by Business Unit"

PRELIMINARY CONSOLIDATED RESULTS FOR 2013

In 2013, Sorin Group reported revenues of €738.5 million, a 4.8%* increase compared to 2012.

  • The Cardiac Surgery Business Unit (cardiopulmonary products for open heart surgery and heart valve repair or replacement products) reported revenues of €481.8 million, up 12.1%* compared to 2012.
(Euro million)        
    2013 Revenues   Underlying growth %*
Heart-lung machines   96.3   16.6%
Oxygenators 196.7 18.6%
Autotransfusion machines and devices 60.1 11.5%
Mechanical Heart Valves 52.6 -4.9%
Tissue Heart Valves 63.9 6.2%
Other   12.1   1.7%
Total Cardiac Surgery   481.8   12.1%

(*) For details, see attached table "Consolidated revenues by Business Unit"

The heart-lung machine segment posted record revenues for the fifth consecutive year, further reinforcing the Company's leadership position in every major market. The oxygenator and autotransfusion segments also performed positively, confirming Sorin's full recovery from the earthquakes of 2012. The oxygenator segment benefited from ongoing penetration in emerging markets and from the significant contribution of the cannulae business. The autotransfusion segment also reported a significant growth in emerging markets as well as a continued penetration of XtraTM in Europe and the US. In 2013 the Company launched the new InspireTM- HeartlinkTM-ConnectTM System, the first and only perfusion system that integrates hardware, disposables and data management.

The mechanical valves segment witnessed a decrease in revenues in line with the continued shift of the market toward biological valves and lower volumes in emerging markets during the first part of the year. Growth in the tissue valves segment was driven by the ongoing penetration of MitroflowTM, particularly in emerging markets and Japan, and the positive performance of PercevalTM, whose annual revenues amounted to €12.1 million. During 2013, Sorin Group obtained approval from the FDA for the Investigational Device Exemption (IDE) for PercevalTM, CE mark for the XL version of PercevalTM as well as dedicated reimbursement for PercevalTM in Belgium and Germany.

In February 2013, Sorin Group acquired Alcard Industria Mecanica Ltda, the leading manufacturer of heart-lung machines in Brazil. This acquisition is strategic for Sorin Group since it represents a gateway to the Brazilian market and to the entire Latin American region.

In July 2013, Sorin Group signed a supply agreement for the manufacturing of certain components of the LotusTM Aortic Valve System, Boston Scientific Corporation's second-generation TAVR (Transcatheter Aortic Valve Replacement) technology.

During 2013, Sorin Group also initiated a greenfield project for the local manufacturing of cardiopulmonary disposable products in Suzhou Industrial Park in China.

In 2013, Sorin Group confirmed its continued commitment to build a new growth platform in percutaneous mitral valve therapies. In October 2013, the Company invested a further US$5.5 million in Caisson, a company focused in the development of an innovative mitral replacement system, and continued to support the development of Cardiosolutions and HighLife.

  • The Cardiac Rhythm Management Business Unit (implantable devices to manage cardiac rhythm disorders) posted revenues of €253.9 million in 2013, a 6.8%* decline compared to 2012.
(Euro million)        
    2013 Revenues   Underlying growth %*
High Voltage (defibrillators and CRT-D)   92.0   -2.3%
Low Voltage (pacemakers) 150.9 -10.0%
Other   11.0   3.0%
Total Cardiac Rhythm Management   253.9   -6.8%

(*) For details, see attached table "Consolidated revenues by Business Unit"

High voltage revenues were affected by a challenging pricing environment in the implantable defibrillator segment, however the continued penetration of SonRTM allowed the CRT-D segment to grow by approximately 5%* in Europe in 2013.

Decline in low voltage revenues was driven by pricing pressure in Europe and lower volumes in Europe and Japan due to the penetration of MRI compatible pacemakers. Sorin's new pacemaker KORATM 100, featuring the only automatic MRI mode, was launched in Europe at the end of November 2013 only, thus minimally impacting 2013 results.

In 2013, Sorin Group obtained several important regulatory approvals: i) FDA approval for the Investigational Device Exemption (IDE) of the RESPOND CRT clinical study and the first SonRTM implants in the United States; ii) FDA approval and US launch of the SMARTVIEW™ remote monitoring solution for patients with implanted cardiac defibrillators; iii) CE mark and the European commercial launch of the REPLY™ 200 family of pacemakers featuring Sleep Apnea Monitoring (SAM); iv) CE mark and European commercial launch of the KORATM MRI compatible pacing system; and v) CE mark and European launch of INTENSIATM family of implantable defibrillators and CRT-D devices featuring DF-4 high voltage connector.

During the year, Sorin also presented the results of the OPTION and DREAM studies aimed at demonstrating, respectively, a lower rate of inappropriate shocks in patients with Sorin dual chamber ICD devices and the innovative capacity of the REPLYTM 200 pacemaker to provide reliable screening for the risk of severe Sleep Apnea.

During 2013, Sorin Group confirmed its continued commitment to build the new growth platform in neuromodulation therapies to treat heart failure. In February 2013, the Company executed a further US$5 million investment, with option-to-buy, in Enopace Biomedical and continued to support its "Equilia" internal project as well as the "Intense" collaborative R&D project.

Finally, after the closing of fiscal year 2013, in January 2014, Sorin Group signed a joint venture agreement with MicroPort Scientific Corporation to market and develop CRM devices in China. This agreement represents a key milestone in Sorin's strategy, enabling the Company to accelerate its penetration of the fast growing Cardiac Rhythm Management in China and build a local presence.

Gross profit in 2013 was €436.8 million, or 59.1% of revenues, compared to 60.6% of revenues in 2012. The decrease in Gross margin is mainly due to the effect of foreign exchange rates and to a normalized product mix after the full recovery from the earthquakes, partially offset by ongoing manufacturing efficiencies.

Selling, general and administrative (SG&A) expenses were €280.3 million compared to €309.6 million in 2012. At constant foreign exchange rates, SG&A were substantially flat, notwithstanding the €2.7 million impact of the US medical device excise tax.

Research and development (R&D) expenses were €73.7 million (10.0% of revenues) compared to €75.4 million (10.3% of revenues) in 2012. R&D activity was primarily focused on the new product releases of InspireTM, HeartlinkTM, ConnectTM, the clinical studies for the PercevalTM and Freedom SoloTM valves, the development of REPLYTM 200 and KORATM 100 and the internal neuromodulation projects.

EBITDA was €131.1 million, or 17.8% of revenues, up 28.8% compared to €101.8 million, or 13.9% of revenues in 2012.

EBIT was €70.1 million compared to €36.9 million in 2012. EBIT before special items was €82.8 million in 2013 compared to €58.0 million in 2012. Special items, negative for €12.7 million in 2013, included restructuring charges for €7.2 million, non-recurring charges related to the earthquakes for €3.5 million, partly balanced by a further installment of the insurance indemnification for the earthquakes of €3.75 million received in the second quarter of 2013. The remaining non-recurring charges refer to business development activities and litigation costs.

Financial charges amounted to €10.3 million compared to €14.3 million in 2012. The figure incorporates, respectively, a financial charge of €4.8 million in 2012 and a financial income of €0.3 million in 2013 related to the unwinding of over-hedging positions. On a run-rate basis, the financial charges in 2013 were lower by €0.6 million over the same period of 2012.

Net profit was €49.9 million compared to €23.0 million in 2012.

Adjusted net profito was €59.1 million, up 41.2% compared to €41.9 million in 2012.

Net financial debt as of December 31, 2013 was €68.7 million, compared to €87.8 million as of December 31, 2012 (€91.3 million as of September 30, 2013). Special items for the period were negative for €31.4 million, including €20.5 million for business development initiatives (see details in the attached table).

In 2013, the Company's free cash flow+ amounted to €50.5 million.

Guidance for the current fiscal year and for the first quarter of 2014

For 2014, the Company expects revenues to grow by 3-5%* over 2013 and Adjusted net profito of approximately €55-60 million, equivalent to Adjusted EPS (Earnings per share) of 11.5-12.5 euro cents.

2014 Adjusted net profit guidance includes the unfavorable impact of foreign exchange for approximately €10 million and the investments in New Ventures which will have a temporary dilutive effect of around €6-7 million. These factors will be offset by manufacturing efficiencies and cost containment initiatives as well as by top-line growth across a variety of new products and geographies.

In 2014 the Company will focus on accelerating long-term growth through the roll-out of the InspireTM-HeartlinkTM-ConnectTM system, the continued growth of SonRTM and PercevalTM, the commercial launch of KORATM and the geographic expansion in emerging markets, primarily China, Brazil and Russia as well as through the continued investments in the New Ventures platform.

Finally, the Company's 2014 Adjusted net profito guidance does not include the income related to further installments of the insurance indemnification for the earthquakes, for which the final assessment and closing is expected in 2014.

For the first quarter of 2013, Sorin Group expects revenues to grow 0-2%* over the same period of 2013.

* * *

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 Interim Report on Operations at June 30, 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 (News - Alert) 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
o 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


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