On Friday’s dramatic slide and surge in the ASX, shares in hearing implant maker, Cochlear stood out with a leap of 21%.
On Monday they dived up to 20% after the company issued its second earnings downgrade caused by the coronavirus, COVID-19 and warned that it is cutting all non-essential spending except for CAPEX. But it made clear staff numbers would not be cut.
The shares closed a very rough session down more than 19% at $174.51.
In effect, the company has followed the likes of Air New Zealand, Challenger and Flight Centre in withdrawing its earnings guidance for the year to June.
“… we are not in a position to provide an earnings outlook to the market at this time … an update on trading conditions will be provided when appropriate,” CEO Gig Howitt told the ASX in a statement.
Last month, Cochlear warned of a $30 million profit hit as surgeries were delayed across China due to the virus, reducing its guidance to $270 million to $290 million for the current financial year.
The company said the spread of the virus into the US and Europe is expected to have a substantial short term impact on surgeries, particularly in the US and Europe, two of its most important markets.
“We are now seeing a growing number of health authorities either recommend or enforce surgery deferrals,” said Cochlear chief executive Dig Howitt.
“There is a high level of uncertainty surrounding the impact of COVID-19 in terms of the extent and duration of the reduction in surgeries and the ability of recipients to access sound processor upgrades,” he said.
On Monday, Cochlear reported that a “mall but growing number of surgeries recommenced over the past few weeks” in China, which is in line with reports that the country where the outbreak originated is starting to reawaken.
Cochlear said it has a conservatively geared balance sheet and has enough debt facilities to meet future cash requirements. The company is not expected to cut staff and added that it expects the downturn to be temporary.
However, Cochlear will reduce all non-essential spending and capital expenditure for the rest of the financial year and is implementing a hiring freeze.
“Our view to the long-term opportunity to grow our markets remains unchanged and we have a strong balance sheet that enables the business to weather the expected short-term decline in demand caused by COVID-19,” said Mr. Howitt.
