The growth of CooperVision (CVI) softened in its fourth quarter, ended on Oct. 31, but this did not prevent the company from growing nearly twice as fast as the global market for soft contact lenses.
CVI's sales went up by 3 percent to $327.1 million in the fourth quarter, up by 6 percent in constant currencies. In terms of U.S. dollars, the company's sales went up by 12 percent in Europe, the Middle East and Africa (EMEA), but they rose by only 2 percent in the Americas and declined by 7 percent in the Asia-Pacific region. In local currencies, sales were up by 8 percent in the EMEA region and by 11 percent in Asia-Pacific.
The management justified the relative pause in the Americas with the fact that the two major distributors of contact lenses in the U.S.reduced their inventories after their merger. The temporary squeeze affected mainly CVI's Biofinity line of silicon hydrogel lenses, which carries gross margins of more than 70 percent. Revenues increased again by 18 percent year-on-year in November at CVI Americas.
Thanks to savings in the royalties paid to Ciba Vision, CVI's gross margin improved to 64 percent in the quarter from 63.7 percent in the year-ago period in spite of a decision to accelerate the production of MyDay, the company's first silicon hydrogel lens. This and the loss of sales in the U.S. had a negative impact of 1.75 percentage points on the gross margin.
MyDay, which has been introduced only in Europe for the time being, earning a Silmo d'Or award last September, is expected to generate extra revenues of $25 million in the current financial year, but it will require sales of at least $100 million for it to contribute any significant margins. It will be introduced in the U.S. at some time next year. The product's European launch, which was described as “aggressive,” was well received but led to a $5 million increase in operating costs during the quarter.
Regarding the different types of products, CVI's global sales of toric lenses grew in the latest quarter by 7 percent and those of single-use spheres declined by 2 percent, but multi-focals were up by 20 percent. Sales of silicon hydrogel lenses increased by 18 percent, representing 45 percent of its total revenues, while Proclear lenses grew by 2 percent, taking up 25 percent of the turnover.
In terms of local currencies, hydrogel and Proclear were up by 19 percent and 4 percent, respectively. Sales of Biofinity lenses fared well in Europe and doubled in Japan, where the company completed the divestiture of Aime. Sales of Proclear one-day lenses grew by 19 percent in local currencies.
A comparison with the statistics compiled by the Contact Lens Institute, combined with the management's estimates, indicate that CVI's share of the global soft contact lens market improved to 19.1 percent in the latest quarter from 17.8 percent for its financial year ended in October 2012. Johnson & Johnson remains the biggest competitor with 43 percent of the market, followed by Ciba Vision with a share of 25 percent.
The total soft contact lens market showed a 6 percent increase to $1,930 million for the calendar quarter ended last Sept. 30, with increases of 7 percent in the Americas, 4 percent in the EMEA and 6 percent in the Asia-Pacific region. The global market rose by only 5 percent to $7.4 billion over the trailing 12-month period through September.
For the full financial year, CVI reported a 7 percent increase in revenues to $1,268.3 million, with growth of 10 percent in local currencies. The gross margin increased to 64.8 percent from 63.4 percent in the 2011/12 fiscal year, but the operating margin fell to 15.1 percent from 19.9 percent.
The operating margin should go up again in the current financial year, coming up to around 22 percent. The management confirmed its objective of reaching a 25 percent operating margin for CVI by 2018. Besides the elimination of Ciba's royalties and the rollout of higher-margin products, other positive factors will be the expiration of the amortization of Ocular Sciences' acquisition in January 2015 and lower depreciation for the related machinery and equipment.
Including Cooper Surgical, CVI's parent, The Cooper Companies, posted a sales increase of 10 percent to $1,587.7 million for the year. Gross margins increased to 65 percent from 64 percent, but operating margins declined to 19 percent from 20 percent. Net income increased to $298.1 million from $248.3 million in the previous financial year.
The management predicted that CVI's will continue at a rate close to double digits in the current financial year, again outpacing the total contact lens market and reaching a level of between $1,355 million and $1,395 million. For the whole group, sales should go up at a high single-digit rate, while earnings per share should go up by between 13 and 18 percent.