Fire Damages Symmetry Medical Plant

Zacks Equity Research
September 17, 2013

Orthopedic implants and instruments maker Symmetry Medical (SMA) announced the break-out of a fire in its Sheffield, U.K.-based manufacturing facility on Sep 13. The plant produces about 30% of the company’s global implant capacity. The company plans to report the financial impact of the fire in its third-quarter 2013 results after further scrutiny of the situation.

Management reported that the fire had damaged only the Acid Shop and no other operations had been affected. Fortunately, no casualties were reported among the 250 employees working in the plant.

The Acid Shop is used to remove materials from the forging process through acidic baths, and hence operates in conjunction with the forging unit at the Sheffield plant. However, gas, electric, and water utilities serving the casting and forging areas of the plant have been temporarily discontinued as a measure of precaution. Management hopes to restore services to the undamaged portion of the plant within a week.

In an effort to minimize customer disruptions, Symmetry has deployed its Business Continuity Plan to ensure restoration of smooth activity in the rest of the plant. Management has also informed their customers regarding the unfortunate breach in timely delivery of orders. Meanwhile, they expect SMA’s other global manufacturing facilities to replace the functions of the impacted Acid Shop.

Symmetry has a Zacks Rank #4 (Sell). Although the company managed to beat the Zacks Consensus Estimates on both fronts, both its revenues and earnings failed to achieve growth in the second quarter of 2013. The sudden turn of events in the high-margin Surgical business from the beginning of 2013 is a cause of concern. The company needs to resolve integration-related issues of its latest acquisitions to avoid wastage of resources.

While we choose to avoid SMA until we see clear signs of improvement in the underlying business, other medical products companies that warrant a look include Alere (ALR), carrying a Zacks Rank #1 (Strong Buy), and Boston Scientific (BSX) and Exactech (EXAC), both carrying a Zacks Rank #2 (Buy).

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