Sorin first quarter consolidated revenues increase 4.7% to €182.3 million

Sorin GroupApr 30 2011

2011 first quarter results:

“We are satisfied with the solid results obtained for the quarter, showing positive momentum in sales, margin expansion and debt reduction”

• Consolidated revenues at €182.3 million, up 4.7% (5.7% as reported) compared to the first quarter of 2010;
• Gross profit at €108.2 million, 59.3% of revenues (58.1% in the first quarter of 2010);
• EBITDA at €27.5 million (15.1% of revenues versus 14.4% in the first quarter of 2010) and EBIT at €21.0 million (11.5% of revenues, compared to 8.7% in the first quarter of 2010);
• Net profit up by 86.9% to €12.8 million (7.0% of revenues);
• Net financial debt as of March 31, 2011 decreasing to €115.8 million, compared to €128.8 million as of December 31, 2010 (€174.5 million as of March 31, 2010).

For the second quarter of 2011, Sorin Group (MIL:SRN) expects revenues to grow 1 - 2% compared to the same period of 2010 and a net profit of approximately €14 - 16 million.

At a meeting held today and chaired by Rosario Bifulco, the Board of Directors of Sorin S.p.A. approved the results for the first quarter of 2011.

"We are satisfied with the solid results obtained for the quarter, showing positive momentum in sales, margin expansion and debt reduction," said André-Michel Ballester, Sorin's Chief Executive Officer, "We also achieved important business objectives with the CE mark approval and the commercial launch in Europe of Perceval^TM S, our innovative sutureless biological valve."

For the first quarter of 2011, Sorin Group posted revenues of €182.3 million, a year-on-year increase of 4.7% (5.7% as reported) thanks to the strong performance of the Cardiopulmonary Business Unit, the tissue heart valves and the high voltage (CRM) segments.

• The Cardiopulmonary Business Unit (heart-lung machines, oxygenators and autotransfusion devices) showed an excellent performance with revenues of €81.9 million reflecting year-on-year growth of 7.8%. This result is attributable to the performance of the heart-lung machines segment, propelled by a strong penetration in the US as well as in emerging markets. The oxygenators segment performed well across all geographies and benefited from the acquisition of Gish Biomedical. The autotransfusion segment experienced above market growth in all key markets. In Europe the Company benefited from the commercial launch of Xtra^TM, the new generation autotransfusion system. Xtra was also introduced to the US market at the CREF - Cardiothoracic Surgery Symposium in March 2011. The Group's commitment to innovation continues in 2011, with the development of LinOx, the new line of oxygenators, whose CE mark is expected to be obtained by year end.

The Cardiac Rhythm Management Business Unit (implantable devices to manage cardiac rhythm disorders) reported revenues of €69.9 million, up 2.8% compared to the first quarter of 2010. The Business Unit's performance was driven by the high voltage segment, particularly in the Japanese market and in the Group's main markets in Europe, thanks to the increasing penetration of the new Paradym^TM family of products. The positive momentum in those markets was nonetheless partly offset by a slowdown in the US, also as a result of general market conditions. The low voltage revenues remained essentially unchanged. The Group's commitment to innovation continues throughout the year, mainly through the development of Sorin's Remote Monitoring system and SonR technology for optimizing cardiac resynchronization therapy. CE mark for both projects is expected in 2011.

The Heart Valves Business Unit (mechanical, tissue and sutureless heart valves, and valve-repair products) reported revenues of €30.0 million, slightly up by 1.0% compared to the first quarter of 2010. The progressive decline of the mechanical valve segment as a percentage of total valve implant continues in line with market expectations. The tissue valve segment performed well thanks to the ongoing market share gains of Mitroflow^TM in the US and the positive contribution from the innovative sutureless Perceval tissue valve, launched in Europe in March 2011. The Group will continue to focus on the commercial roll-out of Perceval as well as on the development of new products, such as the Mitroflow valve with the new generation anticalcification treatment, for the remainder of 2011.

Gross profit for the first quarter of 2011 grew by 8.0% to €108.2 million, or 59.3% of revenues (compared to 58.1% for the first quarter of 2010). The increase reflects the positive effects of manufacturing cost reduction programs, the favourable sales mix at geographic level and the positive impact of the Endovascular divestiture, along with a positive foreign-exchange effect.

Selling, General and Administrative (SG&A) expenses amounted to €73.8 million, growing slightly to 40.5% of revenues, compared to 40.4% for the first quarter of 2010. These expenses included higher investments in Sales and Marketing for Perceval's commercial launch.

Research and Development (R&D) expenses rose by 10.8% to €17.1 million, or 9.4% of revenues (9.0% in the first quarter of 2010).

The Group's commitment to innovation was further evident during the quarter with the February acquisition of a minority interest in MD Start, the first venture-capital and industry-backed medical technology incubator in Europe.

EBITDA grew significantly by 10.5% to €27.5 million (15.1% of revenues), compared to €24.9 million (14.4% of revenues) for the first quarter of 2010, with the increase mainly driven by gross profit expansion.

EBIT came to €21.0 million (11.5% of revenues), rising by 39.9% compared with the €15.0 million (8.7% of revenues) posted for the first quarter of 2010. EBIT before special items amounted to €17.2 million, or 9.5% of revenues (8.8% of revenues in Q1 2010). The results for the first quarter of 2011 also include a pre-tax gain net of associated costs of €4.0 million in relation to the sale of the company's previous manufacturing facility located in Montrouge (Paris).

Net financial charges decreased to €2.8 million from €3.0 million in the first quarter of 2010, mainly attributable to the continued reduction in average debt.

Net profit amounted to €12.8 million, or 7.0% of revenues (versus €6.9 million, or 4.0% of revenues in the first quarter of 2010).

Net financial debt as of March 31, 2011 decreased to €115.8 million, compared to €174.5 million as of March 31, 2010 (€128.8 million as of December 31, 2010). Net debt thus fell by €58.7 million over a 12-month period due to higher profitability and better working-capital management; special items also made a €14.9 million positive contribution to the reduction of net debt over the 12-month period.

For the second quarter of 2011, Sorin Group expects revenues to grow 1 - 2% compared to the same period of 2010 and a net profit of approximately €14 - 16 million. The Company confirms the full-year guidance for 2011 as sales growth in CRM and Heart Valves can be expected to accelerate in the second half, thanks to the launch of Remote Monitoring system and SonR technology and thanks to Perceval's progressive penetration in Europe. In addition, for the second half of the year, the Cardiopulmonary Business Unit is expected to return to growth rates more in line with its historical performance.