Shares of Coloplast are down more than 11 percent this morning after the company presented a new long-term financial guidance that includes a decision to give up on improving its EBIT annually.
Shares of Danish healthcare product maker Coloplast are down more than 11 percent this morning after the company presented a new long-term financial guidance that includes a decision to give up on improving its EBIT (earnings before interest and taxes) annually.
In its full-year financial report, Coloplast said it changed its EBIT margin guidance from a “50-100 basis point improvement” to an EBIT margin of “more than 30 percent in constant currencies.” The change is part of its Lead20 strategy program. Once Coloplast made its announcement, shares of the company dropped 65 kronor to 496 kronor. The stock is traded on the Copenhagen exchange.
Analyst Michael Friis Jorgensen from Alm. Brand Bank told Reuters that target change is a “very bad thing to pull out. Jorgensen said that idea means the company will be using more funds to “grow aggressively.” News of that financial plan is why investors are reacting negatively, Jorgensen added.
Coloplast includes aggressive deal making as part of its growth strategy. The company’s Lead20 strategy is aimed at driving revenue and earnings growth by the year 2020. Coloplast aims to invest up to 2 billion Danish kronor in new investments to spur that growth. One key area is in wound care. Coloplast has aims of doubling its market share from 7 to 8 percent now to 15 to 20 percent in the wound care space by 2020. If successful, the company has predicted it will have added more than 3,000 positions to its ranks by that time.
Despite the investor reaction today, Coloplast reported organic revenue growth rates of 8 percent in the fourth quarter and 7 percent for the full year. The company said there were several major product launches that contributed to the growth, including those of SenSura Mio Convex, SpeediCath Flex and Brava Protective Seal.
Coloplast Chief Executive Officer Lars Rasmussen said the revenue growth is helping the company reach its growth goals for the year 2020. Coloplast predicts revenue growth of about 7 percent for the next year as well.
“We’re delivering a strong fourth quarter and satisfactory full-year results driven by solid growth in Europe and accelerated momentum in Emerging Markets and Other Developed Markets,” Rasmussen said in a statement. “Our full-year growth rate was well above the global market growth, and we continued to gain market share across all business areas.”
The company said it was pushing a new global strategy that includes a consolidation of all pilot activities at Coloplast’s innovation site in Mørdrup, Denmark. Additionally the company said it will phase out the Thisted factory over a two-year period.
