Diagnostic gear costs knock profits at Siemens Healthineers

By Ludwig Burger

FRANKFURT (Reuters) – Siemens Healthineers’ <SHLG.DE> operating income slipped 11% in the first quarter of its financial year, despite higher revenue, as the German company sold less profitable imaging machines and incurred ramp-up costs for its new blood-testing machines.

The German maker of x-ray, ultrasound and MRI scanners said on Monday its adjusted earnings before interest and tax declined to 484 million euros ($536 million) in October-December.

That was below analysts’ average estimate of 568 million euros, according to a consensus posted on the company’s website.

First-quarter revenue rose 8.7% to 3.59 billion euros, slightly above expectations, the Siemens subsidiary said, adding it was maintaining its outlook for 2020 fiscal year through September, predicting growth in adjusted earnings per share of 6% to 12%.

“Profitability was negatively impacted by a temporary dip in Imaging and the guided weak margin performance in diagnostics,” the group said in a statement.

Ramp-up costs for a new line of blood- and urine-testing gear branded Atellica were inflated by the shipment of more than 600 analyzers from July to September last year, the company added.

Siemens Healthineers’ shares were down 4.6% 1057 GMT to a three-month low, with Credit Suisse analysts saying that while the Atellica challenges had been known, weak imaging margins posed a new concern.

“The slow start to the year will leave an overhang of a guidance reduction later on in the year given the implied catch up on margins / EPS growth for the remaining quarters,” they said in a research note.

The health tech firm is pinning its hopes on Atellica automated testing machines to turn around its diagnostics division, which lags market leader Roche <ROG.S>, but installation has proven more costly and time-consuming than initially hoped.

Faster growth is on the cards as Healthineers announced its largest Atellica order ever on Monday with U.S. lab operator Quest Diagnostics <DGX.N> agreeing to purchase up to 120 Atellica analyzers.

The deal would translate into additional annual sales of 40 to 50 million euros over 10 years, Chief Executive Bernd Montag said in a media call

(Reporting by Ludwig Burger, Editing by Sherry Jacob-Phillips and Mark Potter)