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F&P Healthcare trims full-year profit forecast

Wednesday 24th November 2010

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Fisher & Paykel Healthcare trimmed its forecast for full-year profit after unfavourable currency movements and tax charges eroded its first-half result, while R&D and selling costs rose.

Net income fell to $16.9 million, or 3.2 cents a share in the six months ended September 30, from $37 million, or 7 cents a year earlier, the Auckland-based company said in a statement. Sales fell 3% to $245 million. The shares fell 1.3% to $2.98 and have declined about 8% this year.

The maker of respirators and breathing masks to alleviate the symptoms of obstructive sleep apnea (OSA) expanded its distribution and sales teams including at new centres in Japan, Hong Kong and Turkey. The company is ramping up production and is more than doubling New Zealand research and development capacity.

F&P Healthcare gets 56% of sales in US dollars and 23% in euros, while sales in kiwi dollars makes up just 2%, which requires the manufacturer to take foreign exchange hedging that currently stands at $520 million for out to five years. The company has about 70% of its US dollar requirement covered at about 60 US cents and 72% cover for euros at 45 euro cents for the remainder of 2011.

In US dollars, sales rose 9%. Respiratory and acute care product sales rose 18% in US dollars while OSA sales rose 7%.

The company will pay a first-half dividend of 5.4 cents a share, unchanged from a year earlier.

Chief executive Mike Daniell said full-year operating revenue would be about $510 million and net profit of $60 million to $63 million, based on an exchange rate of 77 US cents. Profit guidance is down from its previous forecast of $65 million to $70 million. Profit last year was $71.6 million.

The manufacturer said 2011 profit may rise as much as 4.7% as it introduces its new range of ICON flow generators, ramps up research and development, bolsters sales and distribution teams and expands manufacturing capacity in New Zealand and Mexico. Sales will rise about 11% to $560 million, assuming the kiwi dollar averages around 67 US cents. The local currency was recently at 66.91 cents.

The company began rolling out its new ICON flow generator range in the first half and Daniell said customer reaction "has been very positive and we expect sales to build strongly in the second half." Still, some customers "will remain cautious regarding capital equipment purchases in the current economic environment."

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