Medical equipment manufacturer Hill-Rom reported a drop in third-quarter profits as costs outpaced revenue. Nonetheless, the company saw growth in multiple segments.
The Chicago-based company reported $19.1 million in profits in the quarter ended June 30, down 27% from $26.1 million during the same period the year before, partially due to a 29% increase in costs. The rising expenses, mostly sales and from product-related costs, may stem from the publicly held company's newly acquired subsidiary, Trumpf Medical.
Revenue was up 24% at $376.8 million, primarily due to the addition of Trumpf's business, but also due to 25% growth in the company's North American capital business. Excluding Trumpf, revenue at Hill-Rom grew 11%.
In the U.S., Hill-Rom reported a 19% increase in domestic revenue to $252.4 million. The gain in the company's capital business was coupled with a 9% gain in rental revenues. That was offset by Hill-Rom's recent exit from the third-party reimbursed home-care rental business.
Like many businesses, Hill-Rom's international revenues are less than satisfactory, as currency exchange rates have been unfavorable. Foreign revenues were down 15% at $102.4 million, in part due to declining rental revenues.
Hill-Rom's surgical and respiratory-care business is growing quickly, with revenues of $119.7 million, up 81%, almost entirely from Trumpf. The segment saw 3% organic growth.
Six-month revenues were $1.4 billion, up 17% from $1.2 billion the year before. Six-month profits were up 58% to $57.3 million, in part because its income tax expenses dropped by half.
Hill-Rom CEO John Greisch said the company isn't satisfied with its current profit margins. He noted that it closed two manufacturing facilities in the third quarter and will discuss further plans to improve its margins in the fall.
The company announced in June that it would acquire Welch Allyn, a Skaneateles Falls, N.Y.-based manufacturer of diagnostic and patient-monitoring equipment, for $2 billion. Greisch said that the deal is on track to close on or before Oct. 1, and that Alton Shader, president of Hill-Rom's North America business, will become president of Welch Allyn.
“We are excited about the breadth of leading products and increased scale that our combined company will bring to our global customers,” Greisch said. “Integration work has begun and we have already made substantial progress.”
