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Bloomberg
Shares of Convatec Group Plc, the medical equipment maker whose initial public offering was London’s largest during 2016, slumped as supply shortages caused by the recent hurricanes in the Caribbean weighed on third-quarter performance. The Reading, UK-based company said its advanced wound care division experienced disruptions to manufacturing in Haina, Dominican Republic, having earlier warned of delays to a relocation from Greensboro, North Carolina. On Monday, it said less progress than anticipated had been made in reducing back-orders, with a consequent loss of some sales.
Convatec now expects full-year organic revenue growth to be 1 percent to 2 percent, and warned this estimate would depend on its ability to resolve logistics problems. The stock fell as much as 21 percent, erasing gains since the company’s October 2016 IPO.
The revised 2017 guidance could prove somewhat conservative, especially for revenue, Goldman Sachs analyst Veronika Dubajova wrote in a note to clients. “Poor execution on the company’s flagship margin-improvement program potentially raises questions not just about the near-term, but also the medium-term margin trajectory for Convatec,†Dubajova, who has a buy/neutral rating on the stock, said.
Chief Executive Officer Paul Moraviec said the company understands the operational issues that need addressing, and is determined to deliver margin improvement.
“Despite these setbacks, the business remains well positioned in large, structurally growing chronic care markets, with strong brands, differentiated products and a strong and innovative R&D pipeline,†he said.