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Invacare Q1 results highlight mobility and seating product sales increase in Europe

Despite net sales in the first quarter of 2019 falling in comparison to the same period of 2018, Invacare’s Chairman, President and Chief Executive Officer Matt Monaghan says the company’s outlook is positive, highlighting improvements in operating loss, cost reductions and strong European performance.

In the company’s Q1 results, reported net sales decreased 5.8 percent to $223.4 million – down from $237.1 in 2018 – whilst constant currency net sales decreased 1.4 percent, fuelled mostly by declines in the company’s respiratory product segment in North America.

According to Monaghan, Invacare expects similar declines in revenue for the rest of the year in the North American respiratory market, due largely to reimbursement changes, however, says it is hopeful results in the region will strengthen over 2019 through other product areas.

“Mobility and seating net sales [in North America] grew modestly with major customer groups, tempered by a challenging sales environment underscored by various external factors impacting the segment,” said Monaghan.

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“We believe we are well-positioned to accelerate the business moving forward based on an extensive pipeline of new product introductions, good relationships with key customers and continued investment in the sales talent and infrastructure.”

Excluding its respiratory products from its Q1 results, Invacare highlights that its constant currency sales grew three percent on a consolidated basis, with European mobility and seating and lifestyle product sales growth playing a significant role.

“Our European business returned to growth as we realised constant currency net sales growth in mobility and seating and lifestyle products,” pointed out Monaghan.

In spite of the growth in sales, operating income decreased by $0.8 million, with Invacare citing unfavourable foreign exchange accounting for $0.7 million, as well as an unfavourable sales mix.

“While gross margin was negatively impacted by unfavourable foreign exchange, gross margins are expected to improve as we operationalize the production transfers that temporarily resulted in margin weakness, unfavourable manufacturing variances and higher levels of inventory in the past few quarters,” explained Monaghan.

Results for the quarter ended March 31, 2019, also revealed that the multinational supplier successfully managed to reduce costs, with constant currency selling, general and administrative (SG&A) expenses have improved by $3.7 million.

Commenting on the financial results, Kathy Leneghan, Senior Vice President and Chief Financial Officer, stated: “Our first quarter results demonstrate a continued focus on managing expenses and working capital, specifically inventory management, and positioning the business for sustainable growth and improved profitability. We have a clear line of sight into continuous improvement and building momentum throughout 2019.”

The company also improved free cash flow in comparison to 2018 and expects full-year free cash flow usage will be at or below $25 million, alongside sequential quarterly improvement during 2019 as it continues to reduce its operating loss and manage working capital, including a significant reduction in inventory levels.

Continuing its Enhanced Transformation and Growth Plan, the Q1 results follows on from the company’s financial results for the year ended December 31, 2018, when it reported a less substantial operating loss of $18.3million to that of 2017’s $21.9million.

Reflecting on the overall first-quarter results, Monaghan finished: “Overall, we are pleased with our results, considering that the first quarter is usually our slowest in terms of sales, due to typical seasonality.

“We made great progress in our cost reduction efforts, took actions to successfully mitigate the majority of the impact of tariffs, and will continue to invest in systems and processes that are intended to improve customers’ experiences, simplify the business, reduce overhead costs and ultimately result in improved financial results.

“Our transformation plan remains on track as our performance during the quarter and our outlook for the remainder of the year give us the confidence to reaffirm our prior guidance.”

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