Smith+Nephew first-quarter misses expectations as knee implants falter

* First-quarter underlying sales ​growth 3.1% versus expectations of 3.2%

* U.S. knee implants performance drags down wider orthopaedics business

* Company announces $500 million share buyback, keeps annual outlook

* Shares fall ​nearly ‌5%

May 6 (Reuters) - Medical products company Smith+Nephew missed first-quarter sales expectations and flagged slower first-half sales, sending its shares down ⁠nearly 5% on Wednesday, while predicting a stronger second half when ⁠it launches a new prosthetic knee.

In the three ​months ended March 28, the knee-implant business underperformed as the company said it had deliberately limited volumes ahead of its third-quarter product launch.

Overall underlying revenue growth was 3.1%, just under expectations of 3.2% from a company-compiled poll and ​below a 6.2% ‌fourth-quarter growth.

Smith+Nephew, which makes orthopaedic implants and wound dressings, completed a three-year turnaround at the end of last year that was aimed at driving sales and cutting costs to ease margin pressure from inflation and supply chain disruptions.

CFO SAYS SECOND-HALF ACCELERATION EXPECTED

On an investor call, CFO John Rogers said first-half sales growth was likely ​to be around 3.5% - below consensus of about 4.2%. That would be followed by growth of around 8% ‌in the second half, he said, bringing the company to expected annual growth of around 6%.

At 1145 GMT, London-listed shares had recovered from early losses of nearly ‌5% and were down 1.8% at 1,138.5 pence each, underperforming the wider index.

The company's unexpected $500 million share buyback announcement failed to inspire investors as some warned of possible outlook downgrades for the year, including brokerage ODDO BHF.

Referring to ​the second-half expected improvement, ODDO BHF analyst Oliver Metzger said "a back-end phasing is often not so attractive for investors".

YEARS OF WEAKNESS IN ‌US KNEE-IMPLANT BUSINESS

Orthopaedics, which account for about 40% of Smith+Nephew's sales, are a focus as the company seeks to overcome years of weak performance in the U.S. knee-implant business.

In the quarter, U.S. knee implants fell by 10.3%, ⁠leading to overall ⁠growth of just 0.8% at the unit.

U.S. tariffs are expected to ‌have a $60 million impact on Smith+Nephew's trading profit in 2026, the company said. Changes from the start of this year to U.S. reimbursement ​policy for skin substitutes and ​energy price surges driven by the war in the Middle East, where the ‌company has sizeable operations, add to the risks to profitability. Smith+Nephew said, however, it has largely hedged energy costs for 12 months, and has fixed-price supplier contracts and cost-saving programmes in place.

Smith & Nephew