ConvaTec battles overseas ‘supply constraints’ to grow revenue to $1.76bn
ConvaTec Group, the Deeside company which specialises in medical products and technologies across the globe, has overcome significant obstacles overseas to report increases in revenue and its operating profit.
Turnover rose to $1.76bn while operating profit climbed 60% to $247.8m in the year to December 31.
Adjusted operating profit, however, fell 3.3% to $456.8m as a result of increased investment in growth and the inclusion of Plc costs.
Performance was affected by supply constraints in both Advanced Wound Care (AWC) and Ostomy Care and a lower than anticipated revenue contribution from new products.
This reduced the company’s full year organic revenue growth.
Following the relocation of production lines from its US manufacturing plant to Haina in the Dominican Republic, ConvaTec experienced significant delays with the ramp-up of production volumes on the final Convex and Moldable Ostomy lines.
The company encountered unexpected mechanical failures, and delays with optimising operation of the lines in Haina, the impact of which took effect at the end of the third quarter.
It also suffered delays in the ramp-up of production and in obtaining regulatory certification on AWC lines transferred.
The delays meant it used up its reserves of safety stock, and backorders quickly developed.
“We also lost orders, leading to an immediate impact on revenue growth, which we reported in our third quarter update in October,” a company statement said.
“Regulatory certification for AWC production lines was received late in the third quarter, and backorders in AWC have returned to a normal level.
“Lines manufacturing Convex products have now returned to normal production levels and backorders have been addressed.”
It added: “We have implemented an external review of manufacturing and supply chain and are strengthening our operating mechanisms and project management. In 2018 we will continue with the stabilisation of our manufacturing and supply chain.”
