GN ReSound is in good shape, despite the longstanding uncertainty about its ownership. In the second quarter, the company generated organic growth of 8.3% in value terms and 15.2% in volume terms. By comparison, GN estimates that the global market volume is growing 7-9%.
The company’s growth is based especially on its two new advanced hearing instruments in the high-end segment, the Azure and the Marq, whose roll-outs began in April and May. GN recorded double-digit growth in key markets such as the UK, Japan, Spain, the Netherlands, Norway and China, as well as in Beltone’s network in the United States. GN’s performance in the UK is a real comeback after the National Health Service restructured its procedures for procuring hearing aids. Also supporting volume growth were shipments through new sales channels, e.g. a shipment of INTERTON hearing devices to a new national sales channel in the US.
Last year, GN ReSound closed a central warehouse in Ireland; it is now working to optimize all aspects of operations. For example, lead times for new products have been reduced by 30-40%, so now it takes 15 months at most from idea to launch of a whole new hearing instrument. The time needed for major updating of existing products has also been reduced. Greater efficiency and higher selling prices for the new products lifted the gross margin to 66%, and with costs remaining constant, the EBITA margin improved from 13.5% to 16.7% in the second quarter.
“We’re beginning to see some results of the investments we’ve made. We’re spending more on product development; we’ve hired a lot of new R&D staff; and we’ve become more effective, also in innovation. That’s why it’s quicker for us to develop the new products we need to keep driving growth,” says GN ReSound CEO Jesper Mailind. He is also pleased that, by and large, the business remains intact. Some good people have left because of the uncertain future of the company, but this loss of staff is still well below the average in Danish industry, and it is not difficult for GN ReSound to attract new people.
“People can see that we’re investing in the future and in improving our business, and that makes them more motivated,” says Mailind. After recent years’ growing investments in R&D, GN ReSound's pipeline is stronger than ever. In the second quarter alone, R&D costs rose by 21% to reach DKK 103 million. The flat performance of the first quarter, when no new products were launched, shows even more how important new products are.
The associated operations of GN Otometrics are also improving. The full year 2007 guidance indicates an EBITA in the range of DKK 500-550 million for GN ReSound and GN Otometrics.