Stockholm – Demant, the Danish hearing aid and audio equipment maker, has seen its shares plummet to the bottom of the Stoxx Europe 600 index. This comes after the company reported a decrease in consumer interest for gaming equipment and a weaker demand from corporate clients.
At 1132 GMT, shares were trading 9% lower at DKK252.80.
Demant had previously announced its plans to gradually wind down its gaming business, which involves clearing out gaming-related inventories. Along with other minor one-off costs, this is expected to have an additional impact of 50 million to 100 million Danish kroner ($7.2 million-$14.4 million) on earnings before interest and tax in the second half of the year.
While the wind-down of the gaming business will expedite the path back to profitability for the overall communications division, it will also result in a significant sequential gross margin decline, according to Demant.
Although the company's main hearing healthcare business experienced organic growth of 14%, the communications business reported a 20% decline, compounded by a 24% drop in enterprise solutions.
"Demant has gained substantial market share in the normalised hearing healthcare market in recent quarters, but we are still seeing negative effects on the group's performance due to our decision to wind down our gaming activities, as well as a weak market for audio solutions," said Chief Executive Soren Nielsen.
In the third quarter, Demant's earnings and organic growth were broadly in line with a company-compiled consensus, but the company has revised its full-year guidance.
"Communications is suffering from a declining desire among consumers to spend, and it is disappointing," noted Sydbank senior analyst Soren Lontoft Hansen.
He added, "Shares have risen significantly in 2023, and the valuation leaves no room for disappointment in our view."
