StockMarketWire.com - ConvaTec Group has lowered its full-year revenues forecasts due to ongoing supply disruptions.

The group said third quarter revenue was $445.5 million, reflecting 6.8% reported growth on the corresponding period in 2016, 5.1% at constant exchange rates and 3.3% organic growth.

The group said it also continued to expand its product portfolio across products and geographies.

But it said performance during the third quarter was severely impacted by supply issues in both Advanced Wound and Ostomy Care, and a lower than anticipated revenue contribution from new products.

It added: 'Consequently, the group now anticipate full year organic revenue growth will be between 1% and 2%, with the outcome in this range being dependent on the degree of success in resolving remaining supply issues, fulfilment of backorders and recovery of orders in both Advanced Wound and Ostomy Care in the fourth quarter.

It said the supply issues principally related to the movement of Advanced Wound Care manufacturing lines from Greensboro in the US to Haina in the Dominican Republic, including delays in obtaining regulatory certification, as well as the movement of the final two Ostomy manufacturing lines.

It said the costs associated with these supply issues were expected to result in the loss of the 40 bps of margin benefit achieved as a result of the margin improvement programme in the first half of this year, and the majority of the 90 bps delivered in 2016.

It added: 'As expected and reflected in our previous guidance, Advanced Wound Care was impacted in the third quarter by the ongoing supply disruptions to manufacturing in Haina, which also affected the first half.

'However, less progress than anticipated was made in reducing backorders, with a consequent loss of some orders. The Group expects the Advanced Wound Care supply issues in Haina to be resolved by the end of the fourth quarter.

'Ostomy Care also experienced supply constraints related to the movement of the final two manufacturing lines to Haina, leading to a build-up of backorders and some loss of orders in the quarter.

'Progress is being made in reducing backorders on Convex products, which we expect will be resolved by the end of the fourth quarter. Lines producing our Mouldable range of products continue to run below full volume due to capacity constraints, with resolution anticipated during the first half of 2018.

'Once the supply issues in Haina are resolved the Group expects to be able to achieve progress on margin improvement.

'Despite the decline in revenue expectations, the Group is working towards adjusted operating costs of around 35% of full year revenue, compared to 37% in the first half.'




At 8:28am: [LON:CTEC] ConvaTec Group Plc share price was -37.25p at 242.05p



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