Swiss dental implant maker Straumann Holding AG (STMN.EB) Tuesday reported a 16% drop in first-half net profit as the economic downturn and the swiss franc's strength continued to hit sales, but the figure beat expectations because of cost cutting and a lower tax rate, and it said the worst may now be behind it.

Chief Executive Gilbert Achermann, who will become the company's new chairman next year, said the market had deteriorated in the second quarter compared to the first quarter, but he thinks the company has now seen the bottom of the market.

Straumann still expects the dental market to shrink between 5% and 10% this year, although the company should do better than that. Achermann told Dow Jones Newswires the market should have returned to high single-digit or low double-digit growth rates by 2011.

Straumann announced several management changes due to the retirement of its Chairman, Rudolf Maag. From March 2010, Achermann will be chairman, while Chief Financial Officer Beat Spalinger will step up to become CEO. The company said the moves will "ensure continuity and sustainability" as it continues to face the economic downturn.

The Basel, Switzerland-based company said net profit was CHF84.6 million ($78.3 million) in the six months to June 30, down from CHF100.5 million a year ago as sales fell 6.9% to CHF382.1 million. The net profit figure beat analysts' forecasts of CHF74.62 million, as lower tax payments and cost cutting went some way to offsetting the hit from falling demand, low capacity utilization in its plants and the impact of the strength of the swiss franc.

The company's margin between revenue and earnings before interest and tax, on which it bases its 2009 guidance, came in at 24.4%, beating analysts' estimates.

However, Straumann's shares didn't manage to sustain early gains and at 0806 GMT, the stock was trading down CHF4.90, or 2.1%, at CHF231.10, underperforming a slightly higher Swiss market. The stock has risen 27% so far in 2009 on hopes for a recovery in the dental implants market.

"Though better-than-expected on the operating level, Straumann's first-half figures show that the company is now suffering almost to the same degree as competitors from the strong effects of the recession," said Sarasin analyst David Kaegi, who rates the stock at reduce.

"Very little signs of improvement are visible in this...market. In our opinion, it is too early to jump in with hopes for a swift recovery," he said, noting that the stock has a high valuation compared to peers.

However, the company said it has taken market share from rivals like market leader Nobel Biocare Holding AG (NOBN.VX) during the recession because it believes its products are better priced. Zurich-based Nobel Biocare will report its second quarter earnings Wednesday.

Signaling its improved confidence, Achermann said Straumann has no plans to cut any more jobs, while it managed to keep prices of its products steady in the first half.

Analysts welcomed the margin development in the first half, even though Straumann said the figure should be lower in the second half and it is sticking to its full-year guidance for a margin of 20%.

"We view the figures positively," said Bernstein Research analyst Jack Scannell, who has an outperform rating and a CHF250 price target on the stock. "While the sales miss was disappointing, it is a question of when, not if, the implant market will turn around."

"Importantly, the results showed the company can be managed for better profitability. Margins are likely to improve when sales growth picks up," Scannell added.

Straumann makes implants like crowns and bridges as well as products for tissue regeneration and bone augmentation. It has seen demand for its products fall during the recession as fewer people go for expensive dental treatments, and has responded by cutting jobs and writing down inventories. It was posting annual sales growth of about 15% before the downturn.

-By Julia Mengewein, Dow Jones Newswires; +41 43 443 80 45; julia.mengewein@dowjones.com