CooperVision, which is about to merge with Ocular Sciences to form the third-largest contact lens group in the world, raised its total sales by 18 percent to $388.7 million in the financial year ended last Oct. 31, with increases in terms of dollars of 12 percent in the USA, 25 percent in Europe and 27 percent in the Asia-Pacific region. The weakening dollar exchange rate contributed 6 percentage points to CVI's overall sales increase.

At any rate, CVI scored better than its competitors in world market that grew by about 13 percent in dollars during the first nine calendar months of 2004, based on the sales revenues reported by CVI and four other contact lens manufacturers representing about 95 percent of the global volume. In local currencies, the total contact lens market rose by 9 percent.

Independently of OSC, CVI is already the third-largest player in the US market, which grew by an estimated 8 percent so far this year. The company claims that its share of the world market for soft contact lenses, which is estimated at $3.9 billion, has increased to 10 percent from 6 percent three years ago. It claims a 36 percent market share in toric lenses, which are growing less fast in the USA than in the rest of the world.

CVI's sales of specialty lenses, which now represent over 62 percent of its total business and 70 percent of its revenues outside the USA, grew by 23 percent during its financial year. That includes toric lenses, which rose by 22 percent for the year. Disposable torics were up 45 percent and they now represent 72 percent of CVI's total sales of toric lenses, which in turn constitute 40 percent of its total turnover.

CVI's sales of disposable spherical lenses, which are moving from a 2-week to a monthly replacement scheme, grew by 20 percent for the year. Sales of multi-focal lenses grew to $12 million and they are expected to generate sales of $25 million in the current financial year. Color lenses were the only dark spot, with sales declines in the USA of 15 percent in the latest quarter and 10 percent for the full year.

With the majority of its contact lenses produced in the UK, the soft dollar had little effect on CVI's profitability. The gross profit increased by 18 percent to 67 percent of sales during the fiscal year, but it would have risen to 68 percent without the weaker dollar. The operating margin remained stable at 27 percent of sales, but it was off slightly to 28 percent in the 4th quarter, as compared to 29 percent in the year-ago period.

In fact, CVI's sales increased by only 14 percent in dollars during the quarter, reaching $103.8 million, or by 10 percent in local currencies. The difference was in the USA, where CVI's sales growth fell to 6 percent in the quarter because of the hurricanes in the southeastern part of the country.

CVI is a fully owned subsidiary of The Cooper Companies, which raised its net earnings to $94,920,000 for the year from $69,496,000 in the previous one. The group's total revenues grew by 19 percent to $490.2 million.

The management knows exactly what it wants to do with OSC since mid-November, but it's still waiting for the go-ahead from US regulatory authorities to implement new measures. CVI has already shown how it can integrate a new acquisition quickly with the February 2002 of Biocompatibles in the UK, whose Proclear business has since grown from $30 million to about $80 million a year. It grew by 33 percent in the USA alone last year.

Assuming that the merger with OSC is going to close on Dec. 31 instead of the previously planned date of Nov. 1, CVI's revenues for the current fiscal year should grow to $755-765 million, contributing to total sales of $870-883 million for Cooper Companies. They should subsequently rise to $915-920 million in 2005/06 and to $1,025-1,035 million in 2006/07.

As reported, Cooper will pay about $600 million in cash and issue 10.7 million shares of its common stock to OSC's shareholders, making the deal worth a total of about $1,350 million based on yesterday's closing price. Cooper will use in part its strong cash flow, which reached $101 million last year.