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Fisher and Paykel Healthcare raises 2014 earnings forecast on higher sales, margins

Tuesday 27th August 2013

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Fisher & Paykel Healthcare Corp, which makes breathing masks and respirators, raised its earnings forecast as new products boost sales and widen margins.

Fisher & Paykel profit is likely to be $90 million to $95 million in the year ending March 31, up from its May forecast of $85 million to $90 million, and as much as 23 percent ahead of its 2013 profit of $77.1 million, the Auckland-based company said in a statement.

Fisher & Paykel Healthcare, which competes with Resmed and Respironics, is boosting profit margins on record sales, higher-margin new products and lower costs from its plant in Mexico. The company estimates it is tapping a potential market for respiratory products of more than US$5 billion a year and more than 100 million patients.

"Growth so far this year has continued to be robust," chief executive Mike Daniell said in notes for delivery at the company's annual meeting in Auckland today. "Our margins are increasing as a result of new products and applications driving a favourable product mix, and as we gain efficiencies through lean manufacturing, logistics and supply chain improvement."

Shares in Fisher & Paykel Healthcare were unchanged at $3.57, having gained 45 percent so far this year.

The company said it expects full-year operating revenue of $625 million to $645 million, up from its May forecast of $610 million to $630 million and ahead of 2013's record $556.3 million.

Fisher & Paykel's lastest full-year forecasts are based on the New Zealand dollar trading at about 80 US cents, while its previous forecasts in May were based on the kiwi trading at 80-85 US cents, the company said. Some 99 percent of the company's products are exported and Fisher & Paykel took advantage of a recent dip in the New Zealand dollar to add to its foreign exchange hedging, Daniell said.

Profit in the six months ending Sept. 30 should rise 29 percent to $43 million on robust revenue growth, improving gross margins and favourable hedging, the company said today. First half operating revenue should increase 16 percent to $310 million, the company said.

On a constant currency basis, the first-half gross margin should increase by more than 200 basis points from the year earlier period, Daniell said.

Also in constant currency terms, first-half sales should rise about 15 percent as sales of respiratory and acute care products increase 18 percent and obstructive sleep apnea products advance 14 percent, the company said.

Fisher & Paykel expects, subject to earnings performance, to maintain its dividend level in real terms until it reaches its target capital structure of a debt to debt plus equity ratio of 5 to15 percent, excluding unrealised financial instrument gains or losses.

In 2013, the company paid a dividend of 12.4 cents a share, which equated to 87 percent of after-tax profit. Longer term, a payout ratio of more than 60 percent of profit is appropriate, chairman Tony Carter said today.

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