Smith & Nephew profits surge amid investor pressure for company break-up

In the United Kingdom, Smith & Nephew, a prominent medical technology company, showcased significant financial results as it reported a robust profit surge attributed to improved US sales. This considerable profit increase of 55% led to a total profit of $657 million for the year ending in 2024. The company's total revenue reached $5.8 billion, with underlying growth recorded at 5.3%, surpassing previously downgraded forecasts. This achievement marks a significant turnaround for the company as it works diligently to enhance its operational performance in various regions outside China. Despite facing challenges, including a prior profit warning linked to sluggish sales in China and accumulated unsold products at its distributors, Smith & Nephew's management has remained optimistic about its transformation strategy. Chief Executive Deepak Nath emphasized the company is generating more cash flow due to enhancements in leverage, productivity, and disciplined spending across the organization. As a result, trading profit rose by 8.2% to beyond $1 billion, showcasing improved margins at 18.1%. In the wake of these financial improvements, the company is also encountering rising pressures from its top 20 shareholders advocating for a potential spin-off of its orthopaedics division, which specializes in hip and knee replacements. These calls for restructuring come amidst a broader context of ongoing shifts in the medical technology sector and the company’s efforts to navigate operational challenges. The rebound in the US business served as a pivotal factor in restoring investor confidence and buoyed shares, which jumped by 9% following the financial report. Looking ahead, Smith & Nephew remains committed to capitalizing on its recent product launches, highlighting that over 60% of its revenue growth in the previous year stemmed from products introduced in the last five years. The company anticipates a strong pipeline of new offerings for 2025 and aims for significant margin expansions and returns for shareholders in the coming year, asserting confidence that its transformation efforts will yield substantial value.