For once, CooperVision is growing more slowly than the market. While global sales of soft contact lenses rose by 5 percent in constant currencies in the first three months of 2011, according to the Contact Lens Institute, those of CVI increased by only 4 percent in its second quarter, ended on April 30. On a trailing 12-month basis, CVI's growth was still 3 percentage points better than the market.
According to CVI officials, its global market share has risen from 16 to 17 percent in the past year, while that of Bausch + Lomb has fallen from 14 to 13 percent. Johnson & Johnson and Ciba Vision are holding their own at 44 percent and 22 percent, respectively. CVI is a strong No. 2 after Ciba in the U.S. and a strong No. 2 after J&J in Europe, but it still has a lot of room to grow in Asia, a market dominated by J&J where CVI is No. 3.
There was a drop of 6 percent in CVI's sales of multi-focal lenses in the quarter, although the market for this product rose by an estimated 5 percent. Also, still in local currencies, CVI's sales of single-use spherical lenses went up by 2 percent, while the market progressed by 5 percent. On the other hand, CVI scored better than the market with its toric lenses, improving by 11 percent against market growth of 4 percent.
CVI performed definitely better than the market with its new lines of silicone hydrogel lenses, sold under the Biofinity and Avaira brand names and as private label. Sales of silicone hydrogel lenses grew by 45 percent in local currencies and by 49 percent in dollars at CVI, reaching a level of $80.5 million and overtaking those of its Proclear lenses, which increased by 7 percent in dollars to $74.3 million.
In contrast, the global market for silicone hydrogel lenses moved up by only 14 percent during the quarter. Biofinity toric lenses are driving CVI's growth in this increasingly important category. The company was expected to release its first silicone hydrogel multi-focal lenses in the U.S. this June. The market for silicone hydrogel multi-focals is estimated to have grown by 36 percent in the last quarter to a total of $150 million, or half the total multi-focal market.
CVI had been planning to introduce Biofinity torics and spheres in the Japanese market in June, too. The build-up of inventories for the new product launches in the U.S. and Japan caused CVI's temporary loss of market shares, the management said in a conference call with financial analysts.
Overall, CVI's total sales increased by 8 percent on a currency-neutral basis. In terms of U.S. dollars, CVI's sales went up by 14 percent to $275.3 million during the period, which corresponds to the second quarter of the current financial year for its parent, Cooper Companies. Toric lenses represented 31 percent of CVI's revenues, single-use spheres 21 percent, and multi-focals 7 percent.
By region, CVI's sales rose on a constant-currency basis by 5 percent in Europe, the Middle East and Africa (EMEA); by 6 percent in the Americas; and by 19 percent in the Asia-Pacific region. Its sales of soft contact lenses rose by 2 percent in the Americas, by 5 percent in EMEA and by 6 percent in Asia-Pacific, but the market grew by 3 percent, 7 percent and 6 percent in the three regions, respectively.
Despite the loss of market share during the quarter, the management has upgraded its sales forecast for the full financial year, predicting revenues of between $1,080 million and $1,095 million for CVI, or $10 million more than in its previous forecast. Earnings per share are expected to improve to a range of $3.90 to $4.05 on a GAAP basis, 25-30 cents better than previously budgeted. That would equate to a net profit of $188.1 million to $195.4 million for the year.
In addressing financial analysts, company managers were elated about the progress in CVI's profitability, which resulted mainly from improved manufacturing efficiencies and changes in the product mix for CVI, whose quarterly gross profit margin jumped to 61 percent from 55 percent in the year-ago period.
The main factor was the completion in the first quarter of the closure of CVI's factory in Norfolk, Virginia, with the associated charges. The company's annual production of around 1 billion lenses is now about evenly split between its facilities in Puerto Rico and U.K., and capacities will be raised at the end of the current financial year.
In spite of increased expenditures in R&D and marketing, the operating margin went up to 19 percent from 13 percent on a GAAP accounting basis. Including Cooper Surgical, the Cooper Companies group posted a net income of $35.4 million in the quarter, sharply up from $4.4 million in the same period a year ago, on a 12 percent rise in total revenues to $325.3 million.
With its debt-equity ratio down to a more comfortable level of 23 percent, Cooper said its strategic objective for this is still to look for new strategic acquisitions and to find ways to develop its presence in under-penetrated regions such as the large and fast-growing BRIC countries (Brazil, Russia, India and China).