Ambu Shares Plunge After New CEO Delivers 2nd Profit Warning

(Bloomberg) --

Shares in medical equipment maker Ambu A/S plunged in Copenhagen after the new chief executive officer delivered his second profit warning in just two months.

Ambu sank 20% after trading started in the Danish capital, its worst performance since May, when it fired its previous CEO. The slump represented about 5.6 billion kroner ($825 million) in lost market value within the first few moments of trading.

The company cut both its full-year revenue and profit margin forecasts after it chose to end a distribution deal with Tri-anim Health Services in the U.S. Ambu will now have to take back products that have already been booked as revenue and shipped to its soon-to-be former partner.

Nordnet investment economist Per Hansen said the lowered outlook means investors face “less now and more in the future,” according to a note to clients. He also said that “it wouldn’t be surprising if short-selling interest rises today and over the coming days.”

CEO Juan Jose Gonzalez, who joined the Ballerup, Denmark-based company three months ago, said the move was an investment that will help Ambu achieve “very rapid growth’’ in the long term because the Danish company’s own sales force can do a better job than Tri-anim.

“We want to do the right thing to make this one of the largest European medical device companies,” the CEO said in a phone interview. “And if that means that at some points we can take advantage of opportunities and in the process adjust our guidance we will definitely do that.”

While he acknowledged that explaining the bright side of a profit warning “isn’t a straightforward message to convey,’’ he also said that Ambu is a volatile stock and that he’s not concerned about short-term moves because “the most important thing we focus on is to create value for the long term.”

Ambu shares are now down about 40% this year after analysts raised questions about the future success of the company’s single-use scopes. Former CEO Lars Marcher, whose May dismissal surprised the market, had overseen a rapid growth phase that was accompanied by a 5,000% jump in the share price over a decade.

Gonzalaz said there may be more adjustments ahead for Ambu’s distribution network, though not on the same scale as Thursday’s announcement. Tri-anim had handled 40% of Ambu’s aScope product sales in the U.S.

“When you terminate a distributor deal there’s always a transition but you have to do it at some point,” the CEO said. “The sooner you do it, the quicker you can accelerate growth.”

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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