F& P Healthcare says earnings growth may stall in 2015 as currency rates bite

Friday 23rd May 2014

Fisher & Paykel Healthcare Corp, which exports 98 percent of its breathing masks and respirators, expects profit growth to stall in the coming year as it takes a $32 million hit to operating profit, reflecting reduced hedging contracts and less favourable currency spot rates.

The Auckland-based company said profit rose 26 percent to $97.1 million in the year ended March 31, in line with guidance, and it expects "similar" profit in the 2015 year. Operating revenue rose 12 percent to $623.4 million in 2014 on increased volumes and is expected to be about $640 million in 2015, it said. The forecasts are based on the New Zealand dollar trading at 86 US cents.

F&P Healthcare, which competes with Resmed and Respironics, improved profitability in 2014 with gross margin rising to 58.6 percent from 55.3 percent, as it benefited from new products and gains from operating efficiencies by ramping up production in Mexico. Still, earnings are being crimped as the value of export revenue is reduced when converted into New Zealand dollars as the local currency holds at an "elevated" level. Foreign exchange hedging gains contributed $54.6 million to the company's $143.5 million operating profit in 2014.

"The company continues to have favourable foreign exchange hedging in place although substantially less than in the 2014 year," chief executive Michael Daniell said. "Despite the challenge of this large roll-off in hedging, we have momentum in both of our product groups and we believe that we can offset that headwind in the 2015 financial year."

In the past year, F&P Healthcare posted a 12 percent gain in operating revenue from its respiratory humidification products to $336.9 million, and a 15 percent increase in obstructive sleep apnea products to $270 million.

The company will pay a dividend of 7 cents a share on July 4.

Shares in F&P Healthcare fell 2.2 percent to $4.08, having gained 8.3 percent so far this year.

BusinessDesk.co.nz

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