Shareholders are beginning to see the light at the end of the tunnel for their investment in Cooper Companies, parent company of CooperVision. However its recent performance seems to have scared off at least one big potential investor, Essilor International, which gave a flat ?no? earlier this month to rumors that it was considering a bid for the contact lens company.
Coopers' executives were in jovial spirits during the conference call where they commented on the financial results for the 1st quarter ended Jan. 31, which showed a 7 percent sales increase in dollars to $219.4 million, up by 4 percent in constant currencies, thanks largely to an acquisition in the surgical segment.
Sales stopped falling at CooperVision, the group's contact lens division. CVI reported for the period a sales increase of 5 percent to $183.6 million, as compared to a year ago, with a 1 percent increase in local currencies ? considered by the management to have a good mark based on seasonality factors. However the division's gross margin declined from 64 to 59 percent due to higher costs related to a share-based compensation expense, charges related to the consolidation of manufacturing locations and start-up expenses for new silicone hydrogel products. The division's operating income dropped by 35 percent to $24.0 million, leading to an EBIT margin of only 13 percent, compared with 21 percent in the year-ago period.
Despite the decline in profitability, which may have only been temporary, the management assured investors that they can expect more consistent sales growth in the future as capacity has been brought up to date and consolidation in Europe is moving on schedule, allowing the group to better respond to the demand for new products. The production apparatus is now up to four manufacturing lines for silicone hydrogel lenses, and they should increase to 10 by the time the current fiscal year ends in October. As previously reported, in Europe the company plans to fold 18 distribution centers into four.
Meanwhile, the ongoing consolidation and integration process at CVI led Cooper Companies to post a net profit of only $5,871,000 in the latest quarter, down sharply as compared to $17,954,000 in the year-ago period. On an adjusted basis, eliminating extraordinary items, earnings before interest, taxes amortization and depreciation (EBITDA) were $57.9 million, as compared to $54.4 million in the year-ago quarter.
The management has more confidence now in its silicone hydrogel products, although they are not expected to contribute much to revenues until the back half of this year. It is also more assured of its strategy for single-use contact lenses. In January CVI introduced a marketing program to practicioners in the USA for its single-use products.
New products continue to be rolled out, including a Proclear single-use contact lens being marketed in Europe this year. In 2008, the company will release an improved two-week silicone hydrogel spheric lens and a Biofinity toric in Europe and in the USA. A single-use soft lens is scheduled to hit Japan in 2008 or early 2009.
Information supplied to the company by an independent organization shows that the worldwide soft lens market grew by 3 percent in constant currencies during the past calendar year, wheareas CVI's global contact lens sales slid by 1 percent. In Europe the market grew by 2 percent, and CVI did 3 percent better in the region, but in other parts of the world the company lost market share. The Americas region was up by 10 percent, but CVI fell by 4 percent. The Asia-Pacific region slipped by 2 percent and CVI fell there by 3 percent.
By product, global sales of silicone hydrogel lenses climbed by 50 percent in 2006, but CVI will not enter this category until later this year. Cosmetic lenses fell by 3 percent for the overall market and by 7 percent for CVI. Multifocal lenses were up by 7 percent overall and up by 12 percent for CVI. The toric lens market rose by 10 percent, while CVI's sales of this product were up by 4 percent. Single-use spherical lenses increased by 7 percent globally, and they were up by 11 percent for CVI. The market for other types of spherical lenses was down by 3 percent, and CVI's sales of this type of product fell by 9 percent.
CVI estimates its own shares of the soft contact lens market to have been 18 percent in the Americas, 21 percent in Europe and 8 percent in the Asia-Pacific area.
Meanwhile, the group's Cooper Surgical division's revenues grew by 19 percent to $21.3 million. They were up by 10 percent on an organic basis. Cooper has announced the acquisition of Wallach Surgical Devices, a manufacturer of gynecological devices with annual revenues of $10 million.