Cochlear posts $20m loss on recall costs

Cochlear Limited (ASX:COH) swung to a $20.4 million loss for 1H12, after taking a $138.8 million charge on a voluntary recall.

The Sydney-based company, which reported an $87.2 million profit in 1H11, decided in September to recall a range of its hearing aids because of the failure rate of one model in the range.

The recall affected the Nucleus CI500 range, which typically accounts for around half of Cochlear's annual sales.

Cochlear also reported a 9% decrease in implant unit sales, but said this excluded units shipped after the recall but paid for by with credits issued to customers as compensation.

Cochlear CEO Chris Roberts said that while he was disappointed with the $20 million loss, “the recall costs have been quarantined.”

Roberts revealed that weekly implant production schedules have now surpassed pre-recall levels. The overall proportion of CI500 series implants recorded as failed has also fallen every month since October, reaching 2.4% as of January 31.

He added that taking into account the post-recall units, the company estimates that a record number of recipients received its cochlear impacts during the half-year. Replacement units were also only shipped for scheduled surgeries due to the limited supply.

Cochlear's total revenue grew 3% to $387.5 million, but sales of the company's Baha bone conduction hearing products fell 13% to $39.7 million.

The strong Australian dollar also took its toll on Cochlear's earnings. Sales from the Americas fell 8%, revenue from EMEA was up 4% and sales from APAC grew 6%.

But in constant currencies, Americas sales grew 1%, EMEA sales were up 8% and APAC revenue increased 11%.

COH shares rose 7.59% on Tuesday to $62.520 after the announcement was made.

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