Sonova: lower first-half profits



The world’s largest manufacturer of hearing aids, Sonova, has posted first-half profits that are lower than expected and carried out a lower share buyback.

The Swiss company recently adopted a strategy of offering major discounts in order to boost its market share. The company also signed a bold deal earlier in the year to sell high-end hearing aids in the Phonak Brio range at reduced prices through a partnership with U.S. warehouse chain Costco Wholesale Corp. Costco has approximately 500 hearing aid centers in North America. These moves appear to have increased competition in the already highly competitive hearing healthcare market.

According to Reuters, Sonova also alienated independent stores that were its traditional outlets and angered its competitors because of its deal with Costco. Other suppliers also distribute through Costco but usually reserve their lower-end devices for discount outlets. The company is now trying to win back support from independent shops. Independents were particularly alarmed by the decision announced back in March, since the same devices would be sold for much less by Costco.

Despite Sonova’s attempts to change the tides, some financial analysts are expecting downgrades in expected earnings for the company. Sonova’s net profit increased by 6.1% to CHF 173 million (USD 180 million) in the first half, lower than expectations closer to 183 million (Reuters poll of analysts). The company has stated that it still expects full-year sales to be up by 7-9% and earnings to increase by 11 to 15%.

Source: Reuters