Profits jump 13% at medical device giant Medtronic

Profits at Medtronic, the world's largest standalone medical device maker, jumped more than 13 per cent last year with growth in all its divisions.

The company, which has its corporate headquarters in Dublin, reported profit of $4.03 billion, or $2.89 per share, in the year to April 28th on Thursday, on the back of a 3 per cent rise in sales to $29.71 billion.

Net income in its fourthquarter was 5.3 per cent stronger at $1.16 billion, or 84 US cents per share, from $1.1 billion, or 78 cents per share, a year earlier. The company’s net sales rose 4.6 per cent to $7.92 billion in the final three months of its fiscal year.

The figures were ahead of analysts’ expectations.

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Chairman and chief executive Omar Ishrak said the company had "delivered record revenue, made progress in each of our growth strategies, executed on our Covidien cost synergy commitments, generated strong free cash flow growth and deployed our capital in line with our stated priorities, balancing the return of cash to our shareholders together with disciplined reinvestment in our businesses".

And he said Medtronic was well positioned to adapt to whatever approach US President Donald Trump takes in his ongoing efforts to encourage business back to the United States.

“We are a global company with a global footprint,” said Mr Ishrak. “Depending on the policies that are in place, we can optimise our footprint.”

He said Medtronic had not really adjusted its plans in any way specifically in response to likely policy change in the United States.

Medtronic is a classic example of the type of company Mr Trump is looking to influence to repatriate a greater portion of its business and profits . It relocated to Dublin from the US in a corporate inversion designed in part to lower the company’s tax bill.

Medtronic’s acquisition of Covidien in a $50 billion transaction in January 2015 was one of the largest corporate inversions and came just as the administration of Barack Obama was becoming increasingly active in its efforts to block such arrangements.

The Covidien deal has clearly paid off for Medtronic. Mr Ishrak confirmed that the company had secured $650 million in synergies from the merging of the two companies by the end of its 23017 fiscal year, April 28th.

The company said it expects to add a further $250 million to $275 million to this sum in the next 12 months bringing the synergies from the deal to or beyond the $850 million promised at the time it took over the company.

The minimally invasive therapies group which Medtronic acquired as part of the Covidien deal, was the best performing group within the company last year, with sales growing by 4 per cent to $9.9 billion last year.

“We are very pleased with Covidien,” said Mr Ishrak, noting that preserving revenues had been the main priority during the merger of the companies “and we are on the way to doing better than that”.

Mr Ishrak acknowledged the valuable workforce and critical factories in Ireland which, he said, was the global supply base for many of the company’s products.

“We are still excited by what we get in Ireland,” he said, citing both manufacturing operations and engineering input.

Medtronic employs close to 4,000 people in Ireland at plants in Galway, Athlone, Tullamore and Dublin. The Tullamore plant, where 350 people are employed, is currently changing hands as part of a $6.1 billion sale of the group’s medical supplies division to Cardinal Health that is due to be completed by the end of the summer.

– Additional reporting, Reuters