Mindray Medical Q2 Profit Declines, Trims 2014 Outlook

(RTTNews) - Chinese medical device maker Mindray Medical International Ltd. (MR) reported Monday a profit for the second quarter that declined four percent from last year, despite revenue growth, reflecting lower operating margins amid higher expenses. The company also trimmed its net income and revenue growth guidance for the full-year 2014.

"In the second quarter, the Chinese healthcare market remained sluggish for our business while unfavorable foreign exchange and political issues affected our sales in some key emerging markets," President and Co-CEO Li Xiting said in a statement.

The Shenzhen, China-based company reported net income of $59.6 million or $0.50 per share for the second quarter, lower than $62.1 million or $0.51 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $66.2 million or $0.56 per share, compared to $68.2 million or $0.56 per share in the year-ago quarter. Excluding tax benefits related to the nationwide key software enterprise status, adjusted earnings were $0.54 per share, compared to $0.56 per share last year.

On average, three analysts polled by Thomson Reuters expected the company to report earnings of $0.54 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues for the quarter increased 8.9 percent to $334.5 million from $307.2 million in the same quarter last year. Analysts expected revenues of $348.30 million for the quarter.

China revenues grew 3.4 percent to $152.5 million, and international revenues increased 13.9 percent to $182.0 million from the prior-year quarter.

Reagent sales contributed 41.2% to the IVD segment, up from 36.6% in the same period last year. The biochemistry analyzers BS-800 and BS-2000 also performed well in China.

Operating margin for the quarter contracted 240 basis points to 19.3 percent from last year, primarily as gross margin declined 90 basis points and selling expenses as a percentage of total revenues also increased 120 basis points.

"In light of the weakness in China and some key emerging markets in the first half of the year, we are revising our financial guidance for 2014. Nevertheless, we believe the long-term fundamentals of these healthcare markets remain solid," commented Cheng Minghe, Co-CEO and chief strategic officer.

Looking ahead to fiscal 2014, the company now expects adjusted net income to decrease by a mid-single-digit percentage from fiscal 2013, on projected net revenue growth of at least 10 percent over fiscal 2013. Street is currently looking for full-year 2014 earnings of $1.89 per share on revenue growth of 13.5 percent to $1.38 billion.

Previously, the company projected adjusted net income at a similar level to fiscal 2013 and net revenue growth of at least 15 percent over fiscal 2013.

The company also slashed its capital expenditure forecast for the full-year 2014 to around $130 million from the prior projection of around $160 million.

Additionally, the company said Chen Qingtai has resigned for personal reasons as an independent director of Mindray's board of directors and a member of audit committee, effective July 31, 2014.

MR closed Monday's regular trading session at $29.97, up $0.86 or 2.95% on a volume of 0.91 million shares.