Convatec Cautions on 2027 Cost Surge as Iran War Lifts Oil Prices
By Nithyashree R B
Convatec's Financial Performance and Outlook Amid Middle East Conflict
Slower Revenue Growth in Early 2026
May 21 (Reuters) - British medical products maker Convatec on Thursday posted slower organic revenue growth for the first four months of 2026 and its CEO warned of higher costs in 2027 due to the Iran conflict, sending shares 8% lower.
Impact of Rising Oil Prices
The war in the Middle East has driven up oil prices sharply, increasing the cost of petroleum-derived plastics and polymers which are used to make Convatec's products that span wound dressings, ostomy bags and infusion sets.
2026 Outlook and Hedging Strategy
Convatec kept its 2026 outlook unchanged despite posting overall organic revenue growth of 1.6% for the four months ended April 30, a slowdown from the 6.2% a year earlier, mainly due to customers placing orders later in the year compared to last year.
CEO's Statement on Cost Management
"If the current elevated spot prices continue at this level, we can still deliver our guidance. That is because in 2026, we are largely hedged," CEO Jonny Mason told Reuters.
Absorbing Cost Pressures
"We have enough plans, enough levers under our control that we could absorb that (cost pressure) and still achieve the guidance that we have given," Mason said, though he said that the group would have to re-evaluate the outlook if the situation materially worsens.
2027 Cost Inflation and Market Reaction
Convatec expects cost inflation to hit roughly 6% in 2027, twice the 3% it had planned for, creating a $20 million to $30 million cost pressure next year, Mason said.
The company's shares fell as much as 8%, making it the top loser on the FTSE 100 index.
Analyst Commentary and Growth Expectations
"We do not expect any material changes to forecasts, but 1.6% organic growth will require a decent acceleration in the last two months of H1 to get to consensus of 2.9%," JPMorgan analysts said.
Convatec expects growth to accelerate in the second half of the financial year, partly due to the rollout of new products.
(Reporting by Nithyashree R B in Bengaluru; Editing by Ronojoy Mazumdar)
