Smith & Nephew expects stronger margins as demand for orthopedics boosts profits to £764m

  • The company said it expects trading profit margins to be at least 18% this year.
  • This figure is higher than the 17.5% it achieved last year

Smith & Nephew expects profit margins to continue improving this year after beating market expectations for 2023 profits.

The British medical equipment maker posted a trading profit of $970 million (£764 million) for the year ended December 31, slightly ahead of forecasts of $966 million, thanks to strong sales in its orthopedics and wound care divisions.

The FTSE 100-listed company reported that trading profit margins for the year were expected to be ‘at least 18 per cent’, up from the 17.5 per cent it achieved last year.

The good results of the British medical equipment manufacturer were mainly due to strong sales in the orthopedics and wound treatment divisions

The company expects sales to grow 5 to 6 percent on an underlying basis in 2024, compared to 7.2 percent growth the year before.

Deepak Nath, CEO of Smith & Nephew, said: “We delivered sales growth that exceeded full-year expectations and made significant improvements to our trading profit margin in a challenging macro environment.

‘Our 12-point plan is on track. While more needs to be done to improve our rebuilding performance in the U.S., our orthopedic department is progressing on a clear path of improvement.”

Smith & Nephew shares rose 2.80 percent to 1,157.00p in Tuesday morning trading.

Mark Crouch, analyst at investment platform eToro, said: ‘Shareholders have witnessed a 25 percent increase since November and while persistent inflation is hampering the company’s progress, these results can reassure investors that Smith & Nephew is on the road to recovery.”

S&N is a medical device company that develops, manufactures and markets medical devices for use in orthopedic reconstruction, trauma and clinical therapies, sports medicine and advanced wound management.

Before the outbreak of Covis-19, S&N consistently achieved operating margins of more than 20 percent. Recent years have been less impressive, with margins shrinking to 11 percent in 2020 and only recovering to 16.8 percent in 2022 – the result of global supply chain challenges and inflation.

This deterioration in performance led to the hiring of a new CEO, Dr. Deepak Nath, from Siemens Healthineers AG in April 2022.

After just 18 months in charge, much has changed under his leadership, with the group focused on returning margins to above 20 percent by 2025.