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Coloplast net falls 13% on costs from mentor purchase

Coloplast A/S, Europe's largest maker of colostomy products, said Q1 profit fell 13% on costs related to the purchase of Mentor Corp.'s urology unit.

Net income decreased to 142 million kroner ($25 million), or 3 kroner a share, in the quarter ended December 31, from 164 million kroner, or 4 kroner, a year earlier, the Humlebaek, Denmark-based company said in a statement today. Sales climbed by a fourth to 2.05 billion kroner, mostly from acquisitions, and the company said it would buy back shares. Coloplast acquired the Mentor unit for 2.88 billion kroner last year, as part of its strategy to become the biggest worldwide in its four divisions: ostomy, urology and continence, wound and skin care, and breast replacement. The company has moved to cut expenses by centralizing accounting functions, closing a UK plant, and moving production to lower-cost countries China and Hungary from Denmark. „The results were in line with consensus,” Jyske Bank said in a note to investors. It recommends buying the stock. Coloplast stock gained as much as 25 kroner, or 4.9%, to 535 kroner, and was up 3.7% at 529 kroner at 4:19 p.m. in Copenhagen. „The share is rising because Coloplast has started the share buyback program for up to one billion kroner,” Jyske Bank said in the note.

The lower Q1 internal growth of 7%, compared with 19% from acquisitions, is temporary and results partly from moving the company's US distribution business, CEO Sten Scheibye said in a telephone interview. „We will see sales picking up to 9% organic growth for the full year, with 10% growth in the next three quarters.” The general market for Coloplast's products is growing at about half that rate, he said. The full-year outlook for sales growth of 22% in local currencies was maintained, with the Mentor takeover continuing to weigh on profits, the company said. Interest expenses in the Q4 climbed by more than a third because of loans used to fund the purchase. Scheibye declined to say whether Coloplast had made a bid for Moelnlycke Health Care AB, the Swedish wound care company that Investor AB last month agreed to buy for €2.85 billion ($3.71 billion). Investor is holding company of the Swedish billionaire Wallenberg family. The wound care industry will continue to see mergers and acquisitions and Coloplast will be a part of it, Scheibye said. The company has the financial capacity to manage an acquisition the size of Moelnlycke, he said. (Bloomberg)