ResMed swings to loss after tax dispute provision

Sleep apnoea treatments maker ResMed has recorded a quarterly loss after sales of ventilators slowed across the globe and the firm reserved more than $300 million in cash in anticipation of settling a long-running tax dispute.

Chief executive Mick Farrell said despite the challenging business dynamics of a post-COVID world, he was “even more confident” about the company’s long term prospects than he had been the previous year.

ResMed chief executive Mick Farrell. The company has swung to a $US78.5 million loss for the March quarter, with ventilator sales slowing and a large provision for an anticipated settlement with the ATO.Credit:Luis Ascui

“I think the long-term strategy has only been accelerated. Everyone is talking about remote care, remote health,” he told the Sydney Morning Herald and The Age.

The dual-ASX and NYSE-listed medtech firm had strung together multiple quarters of growth due to its rapid pivot to selling ventilators globally at the start of the pandemic. However, on Friday it told investors it had swung to a $US78.5 million ($101 million) loss for the March quarter, with ventilator sales slowing and a large provision for an anticipated settlement with the ATO.

The long-running dispute relates to audits of the business that the tax office conducted of the company’s finances between the 2009 and 2013 financial year. The tax office alleged the business owed $US151.7 million in additional income tax and $US38.4 million in accrued interest, though in 2018 the company said it was willing to head to court to fight it. 

ResMed’s chief financial officer Brett Sandercock told analysts the firm had set aside $US255 million in funds this quarter in anticipation of a written agreement being brokered with the ATO in the coming months.

Mr Farrell said tax disputes happened “from time to time” with global businesses and reserving the cash would give investors certainty.

“What is is that we have reached a number together… The way I look at it is allows us to focus on our core business.”

ResMed’s revenues were down 3 per cent on a constant-currency basis for the quarter, to $US768 million.

This quarter marks a significant pivot back from ventilator sales to the firm’s core sleep treatments and devices.

Sales of sleep devices were two per cent lower in the US and 11 per cent lower in Europe and Asia, however, with the patchy rollout of vaccines creating uncertainty around when sales will truly return to a post-COVID normal.

Mr Farrell said he was now most worried about new surges of the virus in India, South Asia and Brazil.

“It’s almost like [the situation in] China and Italy, but a year later,” he said.

Despite the slow recovery, Mr Farrell said he could not blame policymakers for the decisions made in the heat of pandemic conditions.

“This happens about once every century, and so the learning for governments and policymakers difficult when the cycle time is a century [between events],” he said.

Despite the slow flow back of patients, on the whole “there is always a trend upwards” and the firm is seeing the gradual recovery of sales compared with April of last year, Mr Farrell said.

Shares in ResMed closed flat at $.32 on Thursday.

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