GN Store Nord Q2 profit misses forecast

COPENHAGEN: Danish hearing aid and headset maker GN Store Nord on Thursday missed market expectations for second-quarter profits due to weak earnings in its Otometrics unit, but reiterated its full-year guidance.

Shares in GN Store Nord were down 6.7 percent at 1102 GMT, underperforming a 3.0 percent drop in the Copenhagen bourse bluechip index, even though the company stood by its full-year 2011 guidance.

GN said it still expected full-year earnings before interest, tax and amortisation (EBITA) of 675-775 million crowns ($127.7-146.6 million) and organic revenue growth of more than 7 percent.

It narrowed its full-year EBITA outlook downwards for its hearing aid division GN Resound, but upwards for headset division GN Netcom.

Sales in the GN ReSound division, which account for more than half of total group sales, rose 4.8 percent on the same quarter a year ago to 827 million, above a 820 million average forecast by analysts. But ReSound missed GN's own and analysts' forecast for EBITA.

"I think only one thing did not go as planned in the second quarter and that's Otometrics the top line was nice but the bottom line was disappointing," Chief Financial Officer Anders Boyer said in a conference call.

"Even though (Otometrics) is 10-15 percent of revenue in ReSound, it is still something that is actually visible on the bottom line, meaning that the results were quite disappointing in the second quarter of 2011," Boyer said.

Otometrics makes computer-based audiological, diagnosis, assessment and other equipment. The division's weak EBITA was due to higher expenses in connection with the launch of new diagnostics equipment, the company said.

Analysts had expected ReSound's EBITA to land at 104 million crowns and GN itself had expected 102 million, but ended at 74 million for the quarter due to weak development in Otometrics.

"ReSound's Otometrics had a poor second quarter," Boyer said. But he added that Otometrics would meet the company's plans on a full-year basis, and not end up reporting a loss.

GN said the ReSound division would likely land at the low end of its 425-475 million crowns EBITA guidance this year, while Netcom would likely end at the high end of its 275-325 million EBITA guidance.

Sales in GN Netcom rose a modest 1.6 percent to 503 million crowns, against analysts' average 507 million forecast.

Second-quarter earnings before interest, tax and amortisation (EBITA) rose 20 percent to 136 million Danish crowns ($262 million), missing an average forecast of 167 million in a Reuters poll.

"Overall, the second quarter results are below consensus," Nordea said in a note to clients. "We would expect consensus downgrades given the soft GN ReSound earnings."

GN, which counts Swiss group Sonova, German company Siemens and domestic competitor William Demant as its main rivals in hearing aids, said it continued to pursue all legal means in a long-running case against Polish telecoms group TPSA

It could however take years before it was paid the money it has claimed from TPSA, Boyer said.

In March, GN said it planned to step up its legal action against Polish telecom group TPSA, aiming to force it to hand over the $540 million awarded to its GN's DPTG unit last year by a Vienna arbitration court.

GN has moved to put a freeze on assets and inflows to France Telecom controlled TPSA from data traffic in several European countries to try to secure payment from TPSA which continues to reject the Vienna tribunal order from September.

GN said 2.9 billion Danish crowns were still outstanding from a total award of 5.3 billion Danish crowns from two claims in the nine-year-old dispute over traffic volumes over a fibre-optic network that DPTG built in Poland.

Copyright Reuters, 2011