Zimmer Biomet

Medical-device company Zimmer Biomet Holdings Inc. reduced its sales guidance for the full year on Monday and lowered its high end of its profit guidance after a disappointing third quarter in which sales were lower than management’s expectations.

The Warsaw, Ind. based company, identified the drop in sales due to issues within its supply chain which didn’t allow it to meet consumer demand for its artificial hip and knee-joint replacement products.

The group was the result of a $13.35 billion merger last year when Zimmer Holdings Inc and Biomet Inc joined to create one of the world’s largest makers of orthopedic implants.

Executives at the group said they are still struggling to integrate the supply chains of the two large companies which have product portfolios and customers that overlap. Chief Financial Officer Dan Florin told analysts that the issues would run into the first quarter of 2017 during a conference call on Monday.

On the call, Florin said:

“We are working diligently to enhance our supply-chain processes and execution, particularly in the areas of demand forecasting, global inventory tracking and other areas”.

During Q3, knee-implant revenue dropped 0.1% to $631 million, under analyst estimates of $649 million. Hip-replacement product sales rose 1.7% to $441 million, in line with analysts’ consensus.

Total sales in the third-quarter were up 4% to $1.83 billion, as products within sports medicine and trauma offset the as better-than-expected sales in a unit that includes products for sports medicine and trauma care helped to slightly offset the worse than expected results.

The group reported a profit of $158.8 million in Q3, or 78 cents a share, rising from $22.2 million, or 11 cents a share, in the year before. The rise in profit was attributed to a lower cost of goods sold and tax benefits through sales in lower-tax “supply-chain jurisdictions”.

The company lowered its full year guidance with adjusted earnings down to a range of $7.90 and $7.95 a share, compared to the range of $7.90 to $8 a share issued in July. Zimmer Biomet sees sales falling within the range of $7.63 billion to $7.65 billion, compared to $7.68 billion to $7.72 billion which was forecast previously.