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Greatbatch profits exceed expectations despite lower medical device sales

Greatbatch Inc.’s second-quarter profits narrowly topped analyst forecasts even though sales of its medical devices and batteries were slightly worse than expected.

Greatbatch’s profits rose by 27 percent to $12.4 million, or 48 cents per share, from $9.8 million, or 39 cents per share, a year earlier.

The company’s adjusted operating profits, which exclude expenses for items such as plant consolidation and new-product testing, grew by 7 percent to $23.8 million, or 60 cents per share, from $22.2 million, or 56 cents per share, topping the 59 cents per share that analysts were expecting.

Greatbatch executives also said they are standing by their earlier forecast that the company’s adjusted earnings will rise to between $2.25 and $2.35 per share.

Greatbatch executives said the improvement in earnings stemmed from double-digit sales growth at businesses that sell orthopedic and vascular products, which offset weaker sales in its cardiac and neurostimulation markets and of its portable medical devices. As a result, Greatbatch’s sales grew by less than 1 percent to $172.1 million from $171.3 million.

Greatbatch’s recent cost-cutting efforts, including a revamp of its orthopedic business in Europe that involved the closing its factories in Switzerland and shifting those operations to plants in Tijuana, Mexico, and Fort Wayne, Ind., have helped bolster the company’s profitability, said Gregory Chodaczek, an analyst at Sterne Agree.

The company currently plans to shift production of three portable medical device product lines, now made at its sites in Massachusetts and Minnesota, to its facilities in Tijuana as part of a $35 million project. Once that project is completed, within the next 18 months to two years, Greatbatch will employ 1,400 people in Mexico. The company’s research and development facility is in Clarence, which includes some battery manufacturing.

Sales for the company’s cardiac rhythm management products, which include batteries and other components used in pacemakers and implantable cardiac defibrillators, fell by 4 percent to $80 million from $83.2 million a year ago as orders fell for two of its customers’ aging products.

Revenues from orthopedic products business rose 17 percent to $37.9 million, compared with $32.3 million a year ago.

Sales of portable medical devices dropped by 24 percent to $16.7 million as the company stopped selling or reduced the volumes of some of its less profitable products – a shift expected to continue to weigh on the unit’s revenues this year.

Vascular product sales jumped by 25 percent to $15.3 million, partly because the company relaunched one of the vascular medical devices that it had voluntarily recalled near the end of 2012.

Battery sales to its energy, military and environmental market grew by 4 percent to $21.4 million, mainly because of a 9 percent increase in revenues from customers in the energy industry, which offset lower military and environmental sales.

Shares closed down $1.77, or 3.58 percent, at $47.74 Friday.