Q3 2024 Smith & Nephew PLC Trading Statement Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jack Reynolds-Clark - RBC Capital Markets - Analyst : Three for me, please. First on China Orthopaedics. Can you just kind of talk about what the drivers were, that lower end market demand was this unexpected? And do you expect to rebound or are they kind of lost volumes? And then on the China Sports VBP, kind of what gives you confidence that the volumes kind of will expand? And can you give a rough estimate of what your expectations are around timing to that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 8:30AM, SN.L - Q3 2024 Smith & Nephew PLC Trading Statement Call And then just on the margin downgrade for next year, and I guess, to a degree for this year. You said this is mostly the results of China. I guess how much of the downgrade is from other sources? And how much is from China?

Question: David Adlington - JPMorgan Chase & Co - Analyst : Thanks for the updated margin targets for 2025. Just wondered if you could help us -- how you're thinking about revenue growth for '25? And then more broadly, just in terms of the margins, the more than 20% that you've walked away from for '25, is that still a valid target? And do you expect still to be able to generate some operating leverage beyond 2025 to see further margin progression?

Question: David Adlington - JPMorgan Chase & Co - Analyst : Perfect. And then maybe just a follow-up on VBP in China. The lack of volume growth coming through. Is that a market phenomenon? Or do you think you're losing share?

Question: Hassan Al-Wakeel - Barclays - Analyst : Three for me, please. So firstly, just following up on the '25 revenue point that you talked to Deepak, and your comment of around 5% in line with your term outlook. Could China continue to have an impact? And how do you think about US backlogs coming down in utilization given hip and knee growth is considerably higher than pre-COVID levels. Secondly, even after adjusting for China, you look to be losing considerable share, OUS, in knees based on peer reporting. If you could talk to this and what you're seeing on the ground? And then finally, if you can talk to the trauma franchise and the strength here and what you're seeing from a competitive standpoint given some launches and whether you expect any impact here going forward?

Question: Hassan Al-Wakeel - Barclays - Analyst : That's very helpful. If I can just follow up on that competitor. That competitor is also talking about record installations on robotics. So very interested to hear how CORI installations are trending through the quarter, both in hospitals and ASCs, please?

Question: Robert Davies - Morgan Stanley - Analyst : My first one was just circling back on that OUS knee performance. You mentioned, I think, sort of ex China, you were in the same ballpark territory as you were in the first half of the year. But just looking at the sort of performance relative to your peers globally. Everyone else seems to be in sort

Question: Robert Davies - Morgan Stanley - Analyst : And then my second question was just around --

Question: Robert Davies - Morgan Stanley - Analyst : Yes. My follow-up question was just in terms of the elements of the 12-Point Plan and where we are on the kind of medium-term outlook. What are the biggest elements in terms of moving the numbers, I guess, over the next one to two years that -- did you still feel like you're not making as much progress on as you maybe thought before? Is there anything above and beyond China that you still feel there is kind of options to sort of move the needle really.

Question: Robert Davies - Morgan Stanley - Analyst : Sorry, just to finish up. The OUS knees business, are you still expecting that to be negative now for the next sort of year or so because I mean you have some pretty difficult comps there for certainly the next three or four quarters?

Question: Richard Felton - Goldman Sachs Group, Inc. - Analyst : Just one question for me, and it's following on the destocking impact in China. My question is how much visibility do you have on the inventory that's being held by your distributors? Is there more adjustment of that inventory to come? And if so, how many more quarters can we expect that destocking impact to affect your performance?

Question: Graham Doyle - UBS Investment Bank - Analyst : It's just one, but it's a slightly more bigger picture one on the strategy, which is, ultimately, this 12-Point Plan has been in place now for two years and a lot of money has gone through the P&L to execute it. And there's a lot of slides showing progress on supply meeting demand and things like that, but margins are flat and revenue as we can see now, is slowing. So I suppose from your perspective, when do you assess this plan and decide it doesn't work if it continues to not work. And if it continues to not work and deliver the financial results, would you look at doing things like releasing value through asset sales, shutting down business that don't generate cash. I mean just because we're at a point now where at some point, there needs to be a pivot unless we see results from the financial markets pretty soon, I would have thought.

Question: Graham Doyle - UBS Investment Bank - Analyst : Okay. Maybe just a follow-up. And John, this will be -- I suppose you've had a hand in this guidance in a way maybe you didn't in the previous guide. Would you have put the volume expansion in VBP? Because that seems to me like a risk that was -- it was a pretty firm risk. We see other companies where they have the advantage of winning VBP tenders, and they don't stick it in the guide. So having -- you haven't had a price cut, I'm surprised you put the volume in. I mean when we think about next year, how cautious do you stack this guide up versus the last three years guidance? Just to give people on this call a little bit more comfort that you can really do somewhere between 19% and 20% next year.

Question: Julien Dormois - Jefferies - Analyst : I have three. The first one is just making sure that I got you right in terms of the knee business going back to market growth in the back half of '25. Just wondering whether that's a global assumption or whether that's specifically for the US? So that would be the first question. Second question is that the hip business has been growing at a pretty consistent pace of around 4% in the past seven quarters now. So anything that could derail the story in 2025. And the last question is just for some sense of an early feedback on the rollout of RENASYS EDGE and the potential contribution that we could see next year for wound device.