Invacare reveals restructuring plans as it announces strong mobility and seating sales growth
Medical equipment provider Invacare has revealed its restructuring plans as it announced its financial results for the fourth quarter and year ended December 31 2021 recently.
The Ohio-based company posted profits of US$1.9m on sales of US$226.2m for the three months ending December 31 2021 for a bottom-line gain out of the red on sales growth of one per cent.
This growth, the firm stated, was driven by double-digit increases in sales of mobility and seating products which was largely offset by lower sales in all other product categories.
Its operating income was US$9.8m, an improvement of US$8.6m over the fourth quarter of 2020, which it claimed was driven by lower operating expenses. Its gross profit margin was unfavourable due to increased input costs for material and freight, partially offset by the benefit of pricing actions.
Reflecting on the results, Matt Monaghan, Chairperson, President and CEO for Invacare, commented: “We ended the year sustaining strong new order intake and growing customer interest in our leading portfolio of products.
“We continue to manage this demand and to take actions to mitigate against higher input costs and longer supply lead times.”
Fourth quarter results
In the fourth quarter of 2021 EBITDA – adjusted earnings before interest, taxes, depreciation, and amortization – had been US$13.1m compared to US$9.5m the previous year, driven by lower operating expenses and partially offset by reduced gross profit.
Meanwhile, free cash flow was US$19.2m, an improvement of US$3.6m, driven primarily by lower working capital.
In Europe, Invacare reported that its net sales and constant currency net sales increased by 7.1 per cent. This was primarily driven by increases in mobility and seating of 15.8 per cent and lifestyle products of 7.2 per cent, which benefited from improved access to healthcare and easing public health restrictions.
Growth was partially offset by a decrease in respiratory products, according to Invacare’s report, which had been impacted by supply chain challenges. Gross profit increased US$4.5m, as a result of higher sales, favourable product mix and operational variances which were partially offset by higher material and freight costs.
Meanwhile, operating income increased to US$9.3m, which was primarily driven by gross profit improvement and reduced employee-related costs.
Strategic changes for 2022
In 2022, Invacare stated that it expects sustained customer demand and persistent supply chain challenges, so it is taking “strategic actions” this year to ensure its durable, long-term success.
The firm stated that it began its actions in December 2021 by combining the Europe and Asia Pacific businesses under one leader. It expects more changes around organisational restructuring and supply chain changes to be implemented this year.
There will also be a narrowing of the product portfolio for those items which no longer meet customer or business needs, driving improved profitability.
Monaghan stated: “During the course of the year, we expect further actions to optimize our product portfolio, shift where and how products are made and distributed, align staff and how staff are organised, and implement working capital improvements to enhance free cash flow while strengthening the balance sheet.
“We anticipate these actions will drive sequential quarterly improvements for the final three quarters of the year with the majority of the restructuring benefits occurring in the second half of 2022.”
He also added: “Taken together, we believe actions to mitigate increased input costs, elective implementation of pricing actions, narrowing our product offering, and additional restructuring actions will drive favourable product mix, improved profitability and free cash flow in 2022 and build long-term shareholder value.”
The company anticipates that its EBITDA will be negative with sequential quarterly improvements for the balance of the year as the expected profit improvement actions take effect.
The company experienced Omicron-related impacts during the first quarter of 2022 across its employee, production and supplier bases, causing temporary inefficiencies in operations, which have since subsided.
Invacare stated that it expects to benefit from new enterprise resource planning software in 2022, after a bumpy fourth quarter during which the software required additional labor and overtime costs in manufacturing, distribution and customer service, contributing to a 6.9 per cent decrease in net sales for North America.
The company stated that it has historically had negative free cash flow during the first half of the year as a result of annual customer rebates and higher working capital usage but the absence of these factors, coupled with seasonally stronger sales and the benefits from anticipated restructuring and cost mitigation actions, are expected to drive growth in the second half of the year.
https://thiis.co.uk/invacare-reveals-restructuring-plans-as-it-announces-strong-mobility-and-seating-sales-growth/https://thiis.co.uk/wp-content/uploads/2019/10/Smoov-One-Invacare.jpghttps://thiis.co.uk/wp-content/uploads/2019/10/Smoov-One-Invacare-150x150.jpgNewsroomSupplier NewsTrade Newsfinancial,gain,income,Invacare,Mobility,seating,strategic changesMedical equipment provider Invacare has revealed its restructuring plans as it announced its financial results for the fourth quarter and year ended December 31 2021 recently. The Ohio-based company posted profits of US$1.9m on sales of US$226.2m for the three months ending December 31 2021 for a bottom-line gain out...Liane McIvorLiane McIvorliane@thiis.co.ukEditorTHIIS Magazine