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Sherman So

Mindray Medical International, the largest medical equipment maker on the mainland,  expects its margins to improve  with the ongoing integration of its newly acquired  United States operations.
The Shenzhen-based company reported its first quarterly result since  its May acquisition of the patient monitoring division of US-based Datascope, a 40-year-old business half its size in terms of sales.  Its operating margin dropped to 19 per cent from about 29 per cent a year earlier.
Datascope's earnings before interest and tax  margin was about 7 per cent while Mindray's ebit  margin was 57 per cent, said Joyce Hsu, chief financial officer.
However, Ms Hsu  expressed confidence that the situation  would improve as the US division sourced more components from Mindray's mainland factory and  carried out more research and development  on the mainland.
'We see  potential cost savings of 12 to 15 per cent this year, and by 2011 we hope to achieve savings of 30 per cent,' said Ms Hsu.
The company has also combined its sales  operations in the US and Europe to promote both Datascope's and Mindray's  products.
'We have been leveraging Datascope's well-established path in direct sales and service teams in the US and Europe,' said Ronald Eit, group vice-president of international operations.
'The government has increased  spending  on medical equipment in the last two to three years  following the health-care reforms,  aiming to improve health-care services available in rural areas,' said Ms Hsu.
Government spending on health care is growing at 25 to 30 per cent  per year, compared with 15 to 20 per cent a few years ago.
Mindray's domestic sales, which accounted for about 40 per cent of  the total, grew 59 per cent in the second quarter to US$57.9 million - a trend Ms Hsu  said would likely  continue  for the next few years.
'Partly, it is due to growth in government spending and partly because Mindray is moving into more high-end products,' said Ms Hsu.
The  company  aims to challenge  Philips and GE in  the high-end medical equipment market.
'Mindray is a good company and  has significantly outperformed the stock market this year. I still like the company, although I think it's a bit over-loved right now. I don't see much upside,' said a fund manager.
New York-listed  shares of Mindray closed at US$35.11  last Friday,  down 18.3 per cent from the beginning of the year.



Mindray expects wider margins following acquisition of US firm