Company Announcement No 2008-08 7 May 2008
Interim information - first quarter 2008 8:00 am CEST
The Group maintains its expectations for 2008 in local currencies
In the past part of 2008, the Group's hearing aid business has developed
satisfactorily, how¬ever slightly on the small side of the plans made.
This development is for instance a reflection of increased competition in the
industry with ex¬ten¬sive launch activities at the beginning of 2008 in the
segment for cosmetically attractive mini-hearing aids.
In autumn 2008, Oticon plans to improve and expand its product portfolio in
the Delta seg-ment, which is expected to result in a significant strengthening
of Oticon's position in the fastest growing segment in the hearing aid market.
The sale of Oticon Epoq is developing satisfactorily and in accordance with
the plans made. In our dialogue with the customers, our focus on Epoq's
audiological benefits has been fruitful.
The Group's expectation of 7-10% revenue growth in local currencies in 2008
remains un-changed. However, we now expect an adverse exchange effect of 5-6%
against previously 3%.
For 2008, the Group thus expects revenues amounting to DKK 5,550-5,700
million and an operat¬ing profit (EBIT) of DKK 1,340-1,440 million. The
adjustment compared to previous announce¬ments is solely attributable to
exchange rate fluctuations.
It is estimated that in the past part of 2008, the global hearing aid market
has seen growth in the lower part of the Group's long-term expectations of 2-4%
unit growth. The Company still believes that in the longer term prices and
product mix will contribute to market growth by 1-2 percentage points. The
Company thus expects to see value growth rates in the hearing aid market of
3-5% in the long term.
The Group's hearing aid business has in the past part of 2008 developed
satisfactorily, but slightly on the small side of the plans made. In the design
segment, in partIcular, which covers the cosme¬tically attractive mini-hearing
aids, this trend is a reflection of increased competition due to a great number
of product launches since the year-end. Since its launch in spring 2006, Oticon
Delta has to a wide extent dominated this segment, where it is still the
reference pro-duct. The increased com¬petition that Oticon Delta is facing
today from almost all other manufacturers is evidence of growing acceptance of
this product concept.
Oticon plans to significantly improve and extend its product offering in the
Delta segment in au-tumn 2008 by introducing a number of strong new products.
In addition to their state-of-the-art functiona¬lities, which have not
previously been available in the design segment, the new products will ap¬peal
to a wider target group than the other design instruments offered on the
market. The planned strengthening of the Delta concept will for instance be
enabled by Oticon's RISE architec¬ture, which already constitutes the
technological engine in the product families Epoq and Vigo. The product
launches in autumn 2008 are expected to result in a significant strengthening
of Oticon's position in the fastest growing segment of the hearing aid market.
The sale of Oticon Epoq has in the past part of 2008 developed satisfactorily
and in accordance with the plans made. In our marketing effort and our dialogue
with the customers, we placed to-wards the end of 2007 more emphasis on Epoq's
underlying au¬diological functionalities, which pro¬bably makes the product the
market's best hearing aid solution. This effort has been fruitful, and today
Epoq's positioning fully complies with the audiological qualities and high user
satis-faction of this product concept.
As described in Company Announcement no. 2008-03 published on 6 March 2008, the
Group launched a wide range of products at the US hearing aid convention,
AudiologyNOW! (AAA), which took place at the beginning of April 2008. Most of
these products have already been released for sale, and a few will be released
within the next few months:
In the Premium segment, the market potential for Oticon Epoq was increased by
the introduc¬tion of a new, very small Power BTE solution based on RITE. The
new instrument is a cosmeti¬cally attractive hearing aid for people with severe
hearing loss, for whom it has not previously been possible to experience the
rather unique audiological user benefits enabled by Epoq's wi¬reless ear-to-ear
communication. The BTE variant of the Power RITE will be available for sale in
summer 2008.
Oticon also introduced Epoq V, which is characterised by excellent sound and
a number of state-of-the-art functionalities. Epoq V is offered at a price at
the lower end of the Premium segment and thus expands the price spectrum,
within which the entire Epoq family is offered.
Finally, the entire Epoq product range was expanded by new functionalities,
including a new, advanced anti-feedback system and the possibility of using an
FM receiver together with the micro-BTE, which will open up new possibilities
in the paediatric segment.
The Group's strong position in the mid-priced segment was strengthened
further by the in-tro¬duction of Vigo and Vigo Pro - two complete families of
quality hearing aids addressing peop¬le with mild to severe hearing loss. Vigo
and Vigo Pro are offered at prices that make it pos¬sible for more
price-conscious end-users to benefit from Oticon's fast RISE architecture.
Vigo, Vigo Pro and Epoq V all present superb possibilities for paediatric
fitting with their quite unique small BTE shell set and for integration with
the also new Amigo R12 (small ear-level FM receiver). Thus, Oticon offers a new
strong programme for the fitting of children - from infants to teenagers.
Bernafon introduced MOVE, a brand new hearing aid family in the upper end of
the mid-priced segment. By means of a special program, it has with MOVE been
made possible to adjust the instrument to the user's lifestyle. With all the
BTE versions, there is the possibility of open fitting by means of the
thin-tube system Spiraflex. MOVE will be released for sale before summer.
The work with the many product launches is in full swing and is progressing
according to plan. Vigo and Vigo Pro have been very well received by the
market, which promises well for sales in the mid-priced segment in the coming
quarters.
Overall, the Group's other activities - Retail, Diagnostic Instruments and
Personal Communication - have in the past part of 2008 seen development in
revenues in accordance with the plans made.
Other matters
As part of the last 12 months' restructuring of the Group's production
capacity, it has just been decided to transfer our Krakow production to the
recently estab¬lished production facilities at Mierzyn, Poland. After the
transfer, the Mierzyn site will have approx. 300 employees. We have started
negotiations with the affected trade groups in Krakow, and the consoli¬da¬tion
at Mierzyn is expected to be carried through during summer 2008. Going forward,
the Group will thus command two major production sites at Mierzyn and Thisted,
respectively. The Mierzyn site will mainly un¬der¬take volume production,
whereas Thisted will be responsible for the start-up of new product lines and
the manufacture of minor series. Expected non-recurring costs and savings in
connec¬tion with the transfer to Mierzyn are reflected both in the Group's
current and in its previously an¬nounced expectations.
The Company has in the first quarter repurchased a total of 623,900 shares at a
total value of DKK 230 million. At the Company's general meeting on 31 March
2008, it was decided to reduce the share capital to DKK 58,956,257 through the
cancellation of the holding of treasury shares as at the general meeting date.
The share capital will officially be reduced at the beginning of July after
expiry of the mandatory three-month statutory notice. After the general
meeting, the Compa¬ny acquired an additional 111,500 treasury shares,
corresponding to 0.2% of the share capital. These shares were acquired at an
average share price of DKK 383.
Expectations
For the underlying business, the Group maintains its expectations for 2008 as
stated in the Annual Report 2007. Thus, the Group expects to see continued
growth in revenues of 7-10% computed in local currencies.
However, the continued weakening of several of the Group's invoicing currencies
means that the negative exchange impact on revenues in 2008 is now expected at
5-6%. For the remainder of 2008, the exchange impact has been calculated based
on average exchange rates in April 2008. As stated in the Annual Report 2007,
the Group previously expected a negative exchange impact of 3%.
The impact of the exchange rate fluctuations on the operating profit (EBIT) is
only partly counter¬balanced by signed forward exchange contracts. The negative
exchange effect on the operating profit (EBIT) in 2008 is now expected to total
DKK 120 million against previous¬ly DKK 60 million.
For 2008, the Group expects revenues of DKK 5,550-5,700 million and an
operating profit (EBIT) of DKK 1,340-1,440 million.
• • • • • • •
Further information:
Phone +45 3917 7100
Contact:
Niels Jacobsen, President & CEO
www.demant.com
Other contacts:
Stefan Ingildsen, VP Finance and IR
Søren B. Andersson, IR Officer
