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F&P Healthcare 1H profit before tax charge falls 1% on high kiwi; FY profit seen higher

Wednesday 23rd November 2011

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Fisher & Paykel Healthcare, which makes respirators and sleep apnea treatment products, reported a 1 percent decline in first-half earnings, excluding a year-earlier tax charge, as gains in US dollar sales were eroded by the strong New Zealand dollar.

Profit excluding the 2010 tax expense was $28.3 million in the six months ended Sept. 30, from $28.6 million a year earlier, the Auckland-based company said in a statement. Sales rose 3 percent to a record $252 million.

F&P Healthcare gets about 53 percent of its operating revenue in US dollars and even with currency hedging in place, it had to grapple with a kiwi dollar that reached a post-float high above 88 US cents in the latest half.

In US dollar terms, profit before the year-earlier tax expense climbed 14 percent to US$23 million as sales rose 18 percent to US$205.7 million.

“Currency exchange rates continued to be very volatile,” the company said.

In US dollars, the fastest sales growth came from respiratory and acute care products, which rose 22 percent to US$107.6 million, while obstructive sleep apnea product sales gained 14 percent to US$92 million.

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

F&P Healthcare had capital spending of $27.3 million in the first half, with $18.3million of that used to expand capacity and retool its Auckland plant. At the same time, it has been expanding production at its facility in Tijuana, Mexico, which now accounts for 20 percent of its consumables volume and gives the company a closer source of products for the US market.

“We continued to generate significant operating leverage from disciplined expense control and positive contributions from our Mexico manufacturing facility and from new sales operations established over the past two years,” the company said.

Continued growth in demand for the company’s products would lift full-year profit to a range of $62 million to $67 million, up from $52.5million last year, with sales forecast to rise to between $520million to $530 million – an increase from $506 million in the previous year. The forecasts assume the kiwi dollar trades in a range of 75 US cents to 80 cents.

During the first half, the company closed out US$34 million of forward exchange contracts for a cash benefit of $20.6 million, which was used to repay bank debt, it said.

Shares of F&P Healthcare were unchanged at $2.42 on the NZX and have dropped 23 percent this year. The stock is rated a ‘hold’ based on the consensus of nine recommendations compiled by Reuters.

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