Smith & Nephew sees revenues up, but forex to hit margins

LONDON (Reuters) - Smith & Nephew (SN.L), Europe's largest maker of artificial hips and knees, forecast a rise in underlying revenue this year, but said its profit margin could fall due to the U.S. dollar's strength against emerging market currencies.

The company, which started as a chemist in Britain 160 years ago before acquiring the licence to sell Elastoplast bandages in the 1920s, posted a trading profit margin of 23.7 percent in 2015.

Were it not for the strength of the dollar against emerging market currencies, the margin would exceed 24 percent this year, S&N said, but currency moves would instead result in a 120 basis points drag.

Shares in S&N traded down 0.6 percent to 1,110 pence at 0947 GMT. Analysts at Jefferies said the margin guidance appeared cautious, while Berenberg analysts said S&N's guidance for 22.8 percent compared with their expectation of 23 percent.

"It is unfortunate that foreign exchange is making such a mess of them ... All told, we think the fourth quarter, second half performance and the 2016 guidance should not give investors any great cause for concern," the Berenberg analysts said.

S&N posted a 5 percent rise in fourth-quarter underlying revenue, an improvement from the third quarter when investors were spooked by a slowdown in growth in China.

That helped 2015 trading profit rise 4 percent to $1.099 billion last year, ahead of analysts' average forecast of $1.079 billion, on underlying revenue growth which also rose 4 percent to $4.63 billion.

S&N said last year's profit was boosted by growing market share in U.S. sports medicine-related surgeries, helped by its ArthroCare acquisition in 2014, and from the expansion of its emerging markets business, where full-year revenues were up 11 percent despite declines in China.

The company said on Monday Chief Executive Olivier Bohuon, had been diagnosed with a highly treatable form of cancer and he would remain in his role during treatment.

(Reporting by Sarah Young; Editing by Paul Sandle and Mark Potter)