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GN Store Nord Shares Sink on Profit Warning

Danish headset and hearing aid maker GN Store Nord lost nearly a quarter of its market value on Tuesday after issuing a profit warning for 2007 on lower-than-expected growth at its ReSound and Netcom units.

GN shares fell 23 percent to 26.50 crowns.

GN said hearing aid arm ReSound will post a full-year EBITA of about 300 million Danish crowns ($59.90 million), including non-recurring costs of about 40 million crowns, instead of the previously forecast 400 million to 450 million crowns.

The company said ReSound was still reeling from the effects of the 16-month-long process of its failed sale to Switzerland's Sonova GN abandoned the sale this summer after German competition authorities blocked the deal.

"You have in ReSound an organization that was nearly paralyzed for a while and it takes time to get it up and running again," said Rune Moller, an analyst at Jyske Bank.

The company said its hearing instruments unit posted negative organic growth of 15 percent in the fourth quarter.

"We've lost customers because of the insecurity of the sale process," said Anders Boyer, GN chief financial officer.

Headset unit Netcom reported lower-than-expected sales in office and mobile headsets in the fourth quarter, leading to a downgrade of the full-year EBITA to 60 million to 70 million crowns before non-recurring costs of about 70 million.

That forecast is down from GN's previous forecast of about 100 million crowns.

"Looking at Netcom, the downgrade is huge," said Holger Smitt, an analyst at Gudme Raaschou. "It's even more disappointing because they've had a turnaround strategy throughout 2007."

GN said Netcom was hit by a downturn in retail markets in the United States as well as in the Asia/Pacific region.

The company said it cut costs and improved efficiency in the fourth quarter, putting a new global sales structure in place.

"We are looking from top to bottom in both units to get the sales machine to run and to bring costs down," Boyer said.

GN said ReSound would focus on launching new products this year. It would also reduce back-office functions in the United States to save 50 million crowns and announce a new management team for the unit later this month.