William Demant moves hearing aid production from U.S., Denmark to Poland, Mexico

William Demant (CPH:WDH) plans to shift production from the U.S. and Denmark to Poland and Mexico to cut costs by around $30 million (DKK200 million) a year, the Danish hearing aid maker said today.

A plant in Eagan, Minn., has already closed and operations in Thisted, Denmark, are slated to be moved to Poland before the end of 2018, meaning job cuts for about 200 workers there, Demant said in its 1st-half earnings release.

Demant, the world’s 2nd-largest hearing aid manufacturer after Sonova (SIX:SOON), said it’s also considering a move for its R&D shop in Switzerland to Poland and Denmark, “where we expect to increase staff.”

“We consider cost-efficient and strong set-ups in operations and R&D to be among the key drivers of future profit growth,” the company said, noting that the operational moves are expected to cost $75.8 million (DKK500 million) between 2016 and 2018.

Demant posted a 1st-half bottom-line slide of -5.2% to DKK634 million ($96.1 million), despite sales growth of 15.2% to $880.4 million (DKK5.81 billion). Operating profits fell to -2.3% to $127.3 million (DKK840 million), missing a Reuters poll forecast for $138.5 million (DKK914 million).

“I am happy to see the positive top-line growth of an impressive 16%. We have yet to see the effect of Oticon Opn launched late in the period, which – in combination with a relatively high cost base – has led to an [earnings before interest & taxes] skewed towards the 2nd-half year. Therefore, I am particularly delighted with the exceptionally positive end-user reactions to Opn, which makes me confident that we will see strong performance in the 2nd-half year and onwards,” president & CEO Niels Jacobsen said in prepared remarks.

“We have so far only received positive feedback from retailers and we are able to get the expected sales price,” Jacobsen told Reuters.

WDH shares were off -1.6% to DKK136.60 ($20.70) apiece in mid-afternoon trading in Copenhagen today. The company said it would spend DKK500 million ($75.8 million) crowns on the restructuring program between 2016 and 2018.

Sonova and William Demant are estimated to own a 40% share of the $6 billion global wholesale market for hearing aids.

“Competition in the global hearing aids wholesale market remains fierce, and we are seeing the largest players in the market behaving in a commercially aggressive way,” Demant said in its interim report.

($1 = DKK6.5995)

Material from Reuters was used in this report.

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