Medtronic beats global profits estimates but warns about inflation
Leo Varadkar at an event last July marking 40 years of Medtronic in Ireland.
Medtronic, the multinational that employs around 4,000 people in Ireland, has said it expects inflation in various markets to hit its profit in the next financial year.
The medical device maker beat earnings estimate for the third quarter on strong demand for its heart and diabetes devices.
While inflation in many countries has eased in recent months, the management expects a delayed improvement in its earnings as its costs remain high.
Medtronic is one of the largest multinationals in Ireland, operating sites in Galway, Dublin, and Athlone.
Its medical equipment exports, which also include respiratory equipment, are highly valuable and the fortunes of the company are therefore closely watched here.
Shares of Medtronic which trade in the US were marginally higher in the latest session as the company also expects 80% of its portfolio to come under the Chinese government's volume-based procurement, or VBP, by the end of the 2024 financial year, under which the country will buy medical devices in bulk at a sharp discount.
About half of its portfolio has already been affected by bulk buying at sharp discounts in China, executives said on a conference call with analysts.
"VBP has affected us more than many of our competitors, given the size and breadth of our business in China. However, we do expect that we are now through the majority of the impact," chief financial officer Karen Parkhill said.
Growth in cardiovascular, neuroscience and diabetes devices helped soften a blow to sales in China in the third quarter from a resurgence in Covid-19 cases, which have hit rivals such as Abbott Laboratories and Johnson & Johnson.
Sales at Medtronic's heart devices unit, its biggest revenue driver, were $2.77bn (€2.59bn), above analysts' estimates of $2.71bn.
Excluding items, the Dublin-based company reported a profit of $1.30 per share, above the average analyst estimate of $1.27 per share.
Following the beat, the company, whose financial year ends in April, also raised the low end of its 2023 profit outlook to $5.28 per share, from $5.25 it forecast in November. The top end of its forecast remains at $5.30.
Last month, weight loss device maker Allurion Technologies was reportedly nearing a deal to go public through a merger with a company backed by former Medtronic chairman and CEO Omar Ishrak, according to people familiar with the matter.
The merger with Compute Health Acquisition is expected to value the combined company at about $500m including debt, Bloomberg reported.
Allurion sells a gastric balloon that can be swallowed to help people lose weight. The company generated revenue of $64m last year.
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