UK's Smith+Nephew cuts 2026 revenue view on weak US knee implant demand

By Raechel Thankam Job

Aug 4 (Reuters) - Smith+Nephew cut its forecast for annual revenue growth on Tuesday after missing second-quarter expectations, knocking its shares, as the British medical products maker grapples with weak knee implant demand and skin graft prices.

After three years of cost cuts and sales initiatives, Smith+Nephew is banking on newer products to shore up revenue as soft knee and hip implant demand and reimbursement policies for skin substitutes weigh on returns from the U.S., its largest market.

The group, which also makes wound dressings and surgical aids, now expects full-year revenue growth of around 4% versus about 6% earlier, with second-quarter growth of 1.6% missing analysts' expectations of 3.7%.

However, it left annual trading profit, free cash flow and return-on-invested-capital targets unchanged, helped by an additional $50 million in efficiency savings.

Its shares were down 7.9% at an intraday low of £11.02 ($14.81) as of 1008 GMT.

Jefferies analysts called the update a backward step, and said the long-awaited operational improvement was still lagging.

'NOT WHERE WE WANT IT TO BE'

Smith+Nephew said orthopaedics revenue fell 1% in the second quarter, with U.S. knee implant revenue down 7.2%. U.S. hip implants also declined 1.5% after four straight quarters of above-market growth, hit by delayed deployment of its surgical instrument kits.

"Orthopaedics is not where we want it to be, but we expect growth to accelerate as we fill portfolio gaps, starting later this year and continuing into 2027," CEO Deepak Nath said in a statement.

Underlying sales at the company's Advanced Wound Bioactives business fell 12.7% in the second quarter.

The company expects skin substitutes revenue to stabilise in the second half and fully normalise in 2027, but now sees the reimbursement hit towards the upper end of the guided $20 million to $40 million range.

Nath told Reuters that while the path to 2028 has changed, the company still expects to deliver revenue growth rates of 6% to 7% that year.

Smith+Nephew also expects U.S. tariffs to be broadly neutral to trading profit after refunds, as it offsets higher raw material prices in the wake of the Iran war through price rises and efficiencies in its supply chains.

($1 = 0.7442 pounds)

(Reporting by Raechel Thankam Job in Bengaluru; Editing by David Holmes and Jan Harvey)