Nobel profit slumps 42 pct as slowdown caps demand

Mon Aug 11, 2008 4:15am EDT

(Adds share price, analyst comment)

By Sven Egenter

ZURICH, Aug 11 (Reuters) - Nobel Biocare, the world's largest dental implant maker, reported a surprisingly big drop in second-quarter profit, as economic weakness curbed demand for its costly treatments and a weak dollar ate into its U.S. sales.

Nobel's shares dropped, even though the group confirmed its forecast for 2008, saying it expected revenue to grow at a low single-digit percentage rate at constant exchange rates and said it was working to regain the trust of clients.

Nobel Biocare shocked investors with a string of forecast cuts over the last year as U.S. consumers spent less on its treatments and the company struggled with management problems in several key markets in Europe.

Chief Executive Domenico Scala said he expected changes in its marketing approach and new management in Germany, Switzerland and Britain to pay off in the coming quarters. "We are not over the hump (in Europe)," he told journalists on a conference call.

Nobel Biocare shares fell as much as 6 percent in early trading before regaining ground to stand 0.98 percent lower at 36.44 Swiss francs by 0802 GMT.

The shares, which have already lost 40 percent this year, underperformed a 0.41 percent drop in the European healthcare sector index .

"Buying in the stock at best remains something for investors with strong nerves, who have a knack for turnaround candidates," analysts at bank Wegelin said.

Nobel Biocare's profit fell to 24.3 million euros ($36.5 million), missing the 40 million euros forecast on average by analysts, as the company booked one-off losses from writedowns on its investment portfolio.

Sales fell 6 percent to 168 million euros, also missing expectations. Sales rose in the United States by 3.7 percent when adjusted for currency effects but demand fell by 5 percent in Europe.

DAMAGED REPUTATION

Scala said the U.S. economic slowdown was hitting Nobel harder than rivals due to its more expensive products.

"We had a reputational issue," Scala said, in reference to its former, more aggressive marketing strategy which put off many dentists.

Nobel's main rival -- Switzerland's Straumann -- reported a nearly 20 percent sales rise in the second quarter in the United States, where it has long lagged Nobel, and a surprise profit jump in the first half.

Nobel Biocare's shares have fallen far more than Straumann's this year and it now trades at 15.3 times 2009 earnings, a discount of some 25 percent to Straumann. (Additional reporting by Rupert Pretterklieber; Editing by Jason Neely and Quentin Webb)