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ConvaTec shares plunge on profit warning and CEO departure

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By Justin George Varghese and Shariq Khan

(Reuters) – ConvaTec <CTEC.L> warned of lower sales and profitability and announced the departure of its CEO on Monday, sending shares in the British medical devices maker tumbling more than 30 percent.

Paul Moraviec, who took the helm in 2014 and guided ConvaTec through a $1.8 billion (1.4 billion pounds) initial public offering two years later, is stepping down with immediate effect and will be replaced on interim basis by non-executive director Rick Anderson, who was previously chairman at Johnson & Johnson <JNJ.N>.

ConvaTec did not give reasons for Moraviec’s departure, which comes a year after CFO Nigel Clerkin left the company, but some analysts had been critical of the company’s management.

“We are not surprised to see the CEO stepping down given ConvaTec’s numerous missteps since the IPO,” Bernstein analysts said.

The company’s continence care business was hit by a minor recall because of packaging errors that Bernstein analysts said had a bigger than expected impact on third-quarter growth. The unit’s third-quarter organic revenue growth of 1.4 percent fell well short of analysts’ consensus estimate of 3.3 percent

The maker of catheters and colostomy bags has also been plagued by logistical problems including hurricane-disrupted shipping lanes in the Caribbean and the shifting of its Ostomy Care manufacturing operation from the United States to the Dominican Republic.

Moraviec did not respond immediately to a Reuters request for comment via the LinkedIn social networking site.

ConvaTec said that it now expects full-year organic revenue growth between flat and 1 percent, compared with previous guidance for 2.5-3 percent.

It also lowered its 2018 EBIT margin forecast to 23 percent from 24 percent, compared with previous guidance of 24-25 percent.

The company blamed a change to inventory policy by a leading customer of the business that makes components for insulin pumps for diabetes.

Brokerage Bernstein said the guidance cut was a one-off hit from changes to inventory management at Medtronic <MDT.N>.

The customer’s decision is expected to dent fourth-quarter revenue by between $18 million and $23 million, ConvaTec said.

“The latest developments show a company struggling to regain its footing following last year’s supply issues,” Bernstein analysts wrote.

Shares in ConvaTec fell more than 30 percent and by 0917 GMT were down 29.5 percent at 158 pence.

(Reporting by Justin George Varghese and Shariq Khan in Bengaluru; Editing by Vyas Mohan and David Goodman)

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