Cochlear (COH) Trading update summary

Business performance and market conditions

• Sales and profit are lower due to weaker demand in developed markets, especially among adults and seniors, and significant disruptions in emerging markets, notably the Middle East due to conflict and China due to reimbursement changes.

• Developed market growth, particularly in cochlear implants, is below expectations, with adult and senior segment growth likely under 5% for the year; surgical volumes are reduced due to hospital constraints and lower referrals.

• Hospital system pressures in Europe, including surgery cancellations, growing waiting lists, and industrial action, are reducing procedure volumes.

• U.S. consumer sentiment is at a historic low, impacting both referrals and conversion rates for hearing treatments, with a drop in volumes from mid-February.

• Hearing loss is being deprioritized by both consumers and healthcare systems under financial pressure.

Financial guidance and operational impacts

• FY26 underlying net profit guidance reduced to $290-330 million, down from previous $435-460 million, reflecting lower sales, margin pressure, and FX impacts.

• Guidance range for the year is wide due to ongoing uncertainty, especially regarding Middle East sales and receivables; potential receivables provisioning could impact net profit by up to $10 million.

• Lowered manufacturing output to manage inventory, resulting in unrecovered overhead costs impacting the current year’s P&L; lower demand and production plan expected to reduce gross margin by about one percentage point ($20 million net profit impact).

• Gross margin guidance has been revised down to 72%.

• Restructuring charges of AUD 25–35 million will be recognized in the second half, accelerating cost base reshaping; cost base reshaping and stronger AUD expected to further impact net profit by $18-25 million and $25 million respectively.

Strategic response and long-term outlook

• Strategy remains focused on medicalizing hearing loss and increasing its priority in healthcare systems and among consumers, with accelerated investment in adults and seniors and strengthening referral pathways.

• Investment is being redirected to accelerate growth initiatives, advocacy, and policy engagement, especially to influence hospital and payer priorities.

• Product pipeline remains robust, with confidence in upcoming launches, ongoing clinical trials, and next-generation implant studies.

• Long-term targets of 10% revenue growth and 18% net margin are maintained, but achieving these will take several years.

• Cost base is being reshaped to increase flexibility, efficiency, and capacity for investment in growth, leveraging new systems and AI, and reallocating resources to support long-term growth.