Medtronic posts downbeat results on supply chain issues, China hit

May 26 (Reuters) – Medtronic Plc (MDT.N) quarterly revenue and profit missed market estimates on Thursday as supply-chain challenges and COVID-19 restrictions in China weighed on sales of some medical devices, sending its shares down 3% in premarket trade.

Medtronic said the challenges primarily impacted its surgical instruments (SI) unit, which sells stapling and vessel sealing devices.

Medical device makers have also been facing higher raw material, labour and transportation costs, with peers Boston Scientific (BSX.N) and Stryker (SYK.N) offering cautious profit forecasts during their latest results, citing uncertainties stemming from inflationary and supply-chain challenges.

Revenue at Medtronic’s SI unit fell 5%, with sales of surgical instruments in China declining in the mid-teens.

Factories and businesses in China have been bruised by disruptions caused by lockdowns as the Chinese government refuses to loosen its zero-COVID policy.

Revenue from China, which accounts for over 40% of the company’s emerging markets revenue, declined 10%, Medtronic said.

The company said it expects adjusted earnings for financial year 2023 of $5.53 per share to $5.65 per share, below analysts’ estimates of $5.82 per share.

“Supply chain, inflation, and foreign exchange are expected to create near-term pressure,” Medtronic Chief Financial Officer Karen Parkhill said.

Separately, Medtronic intends to form a new, independent kidney care-focused medical device company along with DaVita Inc (DVA.N), the companies said.

The new entity would include Medtronic’s entire kidney products business and would focus on developing a range of new products to treat kidney ailments.

The company reported revenue of $8.09 billion in the fourth quarter, missing estimates of $8.43 billion, according to Refinitiv IBES data.

Medtronic posted an adjusted profit of $1.52 per share in the quarter. Analysts had expected a profit of $1.56 per share.

Reporting by Amruta Khandekar and Leroy Leo in Bengaluru; Editing by Vinay Dwivedi

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