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Smith & Nephew watches profits slip as it reorganizes

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European device giant Smith & Nephew ($SNN) posted a 2.3% drop in net profit last quarter, grappling with declining demand for reconstruction tech and plodding through a realignment of its business.

Fourth-quarter revenue fell 2.6% to $1.08 billion, and a 4.6% slump in Advanced Surgical Devices plus the costs of spinning off its biologics business helped drag profits down to $272 million. S&N's beleaguered line of hip implants declined 2% over the previous year, and pricing pressures for hips, knees and trauma devices accounted for another 2% decline in the surgical business.

But S&N sees a brighter path through its recent focus on wound care. That business rose 4% on the quarter, bringing in $280 million in revenue. And that's with no contribution from Healthpoint, the wound-management business S&N bought for $782 million in late December. Healthpoint grossed $190 million in 2012, a 21.5% increase over the prior year, and S&N says the company's revenues will count toward the wound unit from here on out.

And S&N will need all the revenue it can get out of wound care. The company is slashing jobs to save $150 million by 2014, but, facing the U.S. medical device tax and "continuing metal-on-metal headwinds" in the hip implant market, S&N isn't expecting a turnaround for its reconstructive devices and projects a lower 2013 profit margin.

But the company doesn't plan to stand pat, instead looking to continue its expense-slashing and keeping an eye out for more acquisitions and R&D opportunities, S&N said.

- check out the full results (pdf)

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