Chapter 2

Figures converted from Swiss francs (CHF) at historical FX rates — see data/company.json.fx_rates for the rate table. Ratios, margins, and multiples are unitless and unchanged.

Financials and Estimates

Sonova's reported franc figures and its underlying operating record tell two different stories, and separating them is the first task of any financial read. On a restated continuing-operations basis, group sales have been flat in Swiss francs for four years while growing mid-single-digits in local currency; the normalized operating margin troughed in FY2024 and has since recovered about two points; cash conversion stays high and net debt keeps falling. A strengthening Swiss franc — not franchise decay — explains most of the reported softness, though it has kept franc-denominated earnings flat.

The record, three ways

A cold reader meeting Sonova's income statement will find three different earnings-per-share numbers for the year ended 31 March 2026, and needs to know which is which. Basic EPS including discontinued operations was $9.04; from continuing operations it was $11.28; and normalized for nonrecurring items it was $13.03 [1]. The $2.24 gap between the first two is the accounting loss on the Consumer Hearing (Sennheiser) business now classified as discontinued; the $1.75 gap above that is management's add-back of items it deems one-off [2].

Source: FY2025/26 Annual Report, Five Year Key Figures [3].

The restatement matters because it removes a moving part. When the FY2025/26 report reclassified Consumer Hearing as a discontinued operation, it restated every comparative year to the continuing business, so the five-year record below is finally like-for-like [4]. Read on that clean basis, the core hearing business — Hearing Instruments and Cochlear Implants — is the whole company.

Source: FY2025/26 Annual Report, Five Year Key Figures (continuing operations, restated) [5]. Fiscal years end 31 March.

Two facts stand out and frame everything that follows. Sales in francs have gone nowhere — $3,637.0m in FY2022 to $4,509.5m in FY2026, with a FY2023 peak of $4,078.6m in between — and normalized EPS has been flat-to-down, $11.92 at its FY2023 peak against $13.03 now [6]. Return on capital employed has stepped down from 24.1% to 19.0% over the same span [7]. For a shareholder who owns the franc-denominated earnings stream, five flat years are the plain fact the price reflects. (In dollars, the franc's appreciation lifts the translated figures; the franc-holder's flat return is the point.)

Sales: francs against local currency

The reason the franc line looks flat is currency, and the size of the effect is unusually large for a company this quality. Sonova sells almost entirely outside Switzerland but reports in a franc that has strengthened against nearly every customer currency, so reported growth has trailed underlying growth by three to nine points every year.

Sources: FY2022/23 Annual Report [8]; FY2023/24 results release [9]; FY2024/25 results release [10]; FY2025/26 results release [11]. Growth rates are unitless and identical in both currency views.

In FY2026, group sales rose 5.9% in local currencies but fell 0.2% in francs, with the combined wholesale and retail businesses growing 7.5% in local currency and wholesale accelerating to 10.9% in the second half [12]. The pattern is consistent, not a one-year quirk: FY2023 grew 14.6% local against 11.1% reported, and FY2024 grew 3.2% local while franc sales fell 3.0% [13] [14]. The underlying business has grown every year; the franc has taken most of it back. That distinction is the crux of the through-line: whether the softness is a franchise problem or a translation one.

The honest caveat is that for a franc-reporting, franc-dividend-paying company, translation is not free. The FY2023–FY2025 growth figures also still include the Consumer Hearing business now being divested, so the earlier years flatter the core slightly; only FY2026 is a clean continuing-operations comparison [15]. A strong franc may persist for years, so the local-currency growth is real but does not automatically convert into franc returns for the holder.

Margins: a trough, then a recovery

The margin story is the clearest evidence that the recent weakness is largely cyclical. On the normalized EBITA measure — which strips acquisition-related amortization and one-off items to show underlying profitability — the margin fell from a post-COVID high of 24.7% in FY2022 to a trough of 20.6% in FY2024, then recovered to 22.5% in FY2026 [16]. It has climbed two points off the bottom but sits about two points below the peak.

Source: FY2025/26 Annual Report, Five Year Key Figures (continuing operations, restated) [17]. Margins are unitless and identical in both currency views.

The engine of the FY2026 recovery was operating leverage, not price. Normalized sales-and-marketing costs rose only 1.5% in local currency against 5.9% sales growth, and gross margin held at 73.7% [18]. Normalized EBITA grew 17.3% in local currency — but currency alone cut it by $133.2m, or 1.5 margin points, which is why the same figure rose just 3.7% in francs [19]. The recovery is genuine; the franc masks it.

A skeptic should weigh two offsets. First, the reported EBIT margin — the number with nothing added back — is 18.7%, still well below the 22.6% of FY2022 and choppy year to year [20]. Second, the $108.8m bridge from reported to normalized EBITA in FY2026 leans on a $43.4m software impairment and $35.3m of litigation costs [21]. To the company's credit, restructuring costs of $20.9m were left inside normalized EBITA rather than added back, and that charge itself fell from $49.8m the prior year [22]. The add-backs are defensible this year, but a reader should track whether "one-off" litigation and impairment items keep recurring as the company runs a multi-year operating-model transformation.

Cash generation and the balance sheet

Sonova converts profit to cash well and runs a conservative balance sheet — the part of the record least in dispute. Operating free cash flow was $649.2m in FY2026, about 95% of continuing income after tax, on capital expenditure of just $128.4m, under 3% of sales [23]. This is an asset-light manufacturer-plus-retailer, not a capital sink.

Source: FY2025/26 Annual Report, Five Year Key Figures [24]. Free cash flow is after acquisition/divestment consideration; operating free cash flow excludes it.

The one cash-flow wrinkle worth naming is working capital. Net working capital more than doubled to $313.2m in FY2026 from $130.5m, a roughly $183m build in receivables and inventory that held reported free cash flow ($592.4m) below net income [25]. It is worth watching, but on a five-year view cash generation is steady and the FY2022 operating-cash spike reflected a pandemic-era working-capital swing rather than a new normal.

Leverage has fallen through the entire de-rating. Net debt declined from a FY2023 peak of $1,632.0m to $1,243.5m — about 1.2 times normalized EBITA, inside the company's stated 1.0–1.5x net-debt-to-EBITDA target [26] — while equity financing rose to 46.8% of assets [27]. The dividend is a record $5.88, though the path was not a straight line: it was trimmed to $4.76 in FY2024 before rebuilding [28].

Source: FY2025/26 Annual Report, Five Year Key Figures [29].

Forward estimates

Management and the sell-side both model continued mid-single-digit growth and a gradual earnings recovery — a return toward, not far beyond, the prior peak. For FY2026/27, Sonova guides to consolidated sales growth of 5–8% and core EBIT growth of 7–10%, both at constant exchange rates [30]. Consensus sits inside that frame: revenue near $4,783m and EPS of $13.01 in FY2027, rising to $5,058m and $14.26 in FY2028.

Sources: FY2026 actual per the FY2025/26 Five Year Key Figures [31]; FY2027–FY2028 consensus estimates, as reported (converted at the FY2026 year-end rate).

Two features of the estimates are worth flagging. Consensus FY2027 EPS of $13.01 sits essentially level with the $13.03 the company already earned on a normalized basis in FY2026 — the street expects reported EPS to catch up to the normalized figure rather than a step-change higher [32]. And these are constant-currency-flavoured forecasts; a franc that keeps strengthening would again split reported from underlying results, as it has every year since FY2022.

Against the current price near $257 — where the shares have fallen 32.6% over two years — that consensus puts Sonova on roughly 20 times forward earnings with a dividend yield near 2.2% [33]. Consensus price targets cluster around $253–293 against a mixed, cautious-leaning rating. Whether that multiple is cheap for a recovering compounder or fair for a business whose franc earnings have stalled is a valuation question this chapter deliberately leaves open; the record it establishes is that the operating recovery is real in local currency, incomplete in francs, and cash-backed throughout.