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TheStreet Open House

Smith & Nephew Management Discusses Q2 2012 Results - Earnings Call Transcript

We have consistently delivered revenue and earnings growth and strong cash generation in a challenging market for the last few years. This financial strength and our confidence in delivering against our strategic priorities has enabled us to announce a 50% increase in our dividend and a progressive policy for the future. Our focus on pursuing and evaluating acquisitions of a range of size to generate shareholder value and our ability to fund them is unchanged. Of course, the board will continues to keep under review the appropriate capital structure for the group, including the potential for capital returns to shareholders.

This slide captures our underlying growth in the quarter. On the left-hand side, geographically; and on the right, by-product franchise. Geographically, our revenue growth rate in Q2 were very similar to those we achieved in Q1. In the U.S., we again grew at 2%. And the rest of our Established Markets, growth was slightly slower, reflecting the volatility of the macroenvironment in Europe. The growth in our emerging industrial market was again double digit with a very strong growth in China, India and in the Middle East. On the right, across our product franchises, hip implant sales reflect the ongoing metal-on-metal headwinds. But on a more positive note, sports medicine joint repair returned to double-digit growth and trauma had a much better quarter. I will now turn to look at each of these in more detail.

First, looking at knee and hip implants. So our global knee implant growth was plus 3% tracking the overall market growth rate. This was in line with our guidance in the context of a very strong growth we achieved in the comparable period last year. As we said at our joint reconstitution seminar last month, we have now launched our LEGION hinge product. Not only that this filled a need in our portfolio, it's redefined the implication of what an inch knee should deliver for a patient. In the same seminar, we also announced the limited market release for our new next generation, the JOURNEY knee. Early feedback from both surgeon and patients have been very positive. In hips, the negative commentary on stem metal-on-metal total hips intensified, partly ahead of the hearing in June. Hence, sales of our BHR system were down globally 3%.

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