Smith & Nephew, the FTSE 100 medical devices company, has lowered its full-year revenue growth forecast amid weakening demand for knee implants in the United States, its largest market. Following the announcement in its first-half results, the company’s shares dropped 6.3 percent, closing at £11.22.
The company now anticipates full-year revenue growth of approximately 4 percent, down from the previous forecast of around 6 percent. Chief Executive Deepak Nath cited “ongoing challenges” in the US knee implant segment during the second quarter, ahead of the planned introduction of new products. Knee implant sales in the US have been hindered by supply disruptions, leading to a loss of market share to competitors.
Smith & Nephew has been restructuring its US business and orthopaedics division over the past three years, simplifying its portfolio to channel investments into higher-growth areas and reduce inventory levels. Despite these efforts, revenue growth in the second quarter came in at 1.6 percent, falling short of analysts' projected 3.7 percent. Revenue from US knee implants declined by 7.2 percent during the same period.
The company also reported a 1.5 percent drop in US hip implant revenue in the quarter, marking the first decline after four consecutive quarters of growth above market rates. This decrease was attributed to delayed deployment of surgical instrument kits. Additionally, the advanced wound bioactives segment recorded a 12.7 percent fall in sales, with Santyl, a wound-healing ointment, underperforming expectations. Smith & Nephew anticipates skin substitutes revenue to stabilize in the second half of the year and return to normal levels in 2027.
Despite these headwinds, cost-saving measures contributed to a 5 percent increase in first-half pre-tax profit, which reached $380 million on revenue growth of 4.7 percent to $3.1 billion. Revenue from knee implants declined 1.8 percent to $492 million overall, while hip implant revenue rose 4.3 percent to $326 million. Outside the US, knee implant sales fell 1.4 percent, whereas hip implant performance was notably strong in Japan, bolstered by the recent launch of Catalystem, a device designed for total hip replacement surgeries.
Nath acknowledged that orthopaedics “is not where we want it to be” but expressed confidence that growth will accelerate later this year and into 2027 as the company addresses portfolio gaps.
The firm also expects US tariffs to have a largely neutral impact on trading profit after refunds, with higher raw material costs related to the Iran conflict being offset through price adjustments and efficiencies in the supply chain.
Operating profits in the first half of 2026 were affected by $13 million in legal and other costs, up from $6 million in the same period last year. These expenses are linked to ongoing claims related to metal-on-metal hip implants. Smith & Nephew has settled hundreds of lawsuits following the recall of a metal liner used in some hip systems, which were associated with complications such as infections, fractures, and dislocations.
Analysts from Jefferies described the results as a setback, noting that the anticipated operational improvements remain overdue. Founded in Hull in 1856, Smith & Nephew operates across approximately 100 countries and employs around 17,000 people. Its portfolio is organized into three main business units: orthopaedics; advanced wound management; and sports medicine and ear, nose and throat.