UPDATE: F&P Healthcare first-half profit rises 4%, lifts forecast for annual earnings
(Updates share price, adds broker comment in sixth paragraph and additional company comment throughout)
By Tina Morrison
Nov. 21 (BusinessDesk) - Fisher & Paykel Healthcare, New Zealand's biggest listed company, increased first-half profit 4 percent, widened its margins, and lifted its forecast for full-year earnings to the top end of its range.
Net profit rose to $81.3 million, or 14.1 cents per share, in the six months ended Sept. 30, from $78.2 million, or 13.6 cents, in the same period a year earlier, the Auckland-based company said in a statement. The latest earnings included $12.2 million of patent litigation costs over disputes with rival Resmed compared with $2.4 million of costs a year earlier, and excluding those, profit would have risen 13 percent, it said. First-half revenue lifted 8 percent to $458.4 million. The company had forecast first-half revenue of about $460 million and profit of about $80 million.
Annual profit is likely to be between $185 million and $190 million, at the top end of its previous forecast of $180 million to $190 million, the company said today. It said it expects its gross margin to expand by 50-to-100 basis points for the full year.
F&P Healthcare, which makes respiratory products, lifted first-half sales of hospital products 11 percent to $262.5 million and sales of homecare-based products 4 percent to $191.3 million. Gross margin expanded 116 basis points to 66 percent as it sold more profitable products and increased production in Mexico, where it now makes 35 percent of its products.
Managing director Lewis Gradon said the first half results were in line with the company's expectations and reflect "consistent momentum" across both its product groups. F&P Healthcare is about to start construction of a new manufacturing facility in Tijuana, Mexico, which is expected to be operational in mid-2018, he said.
The shares slipped 2.4 percent to $13.55, after climbing to a record high $13.88 yesterday. James Smalley, senior advisor at Hamilton Hindin Greene, said investors appeared to be taking profits and rebalancing their portfolios following the stock's 60 percent gain over the past year.
In the latest period, F&P Healthcare increased research and development spending 13 percent to $47 million. It expects growth in R&D spending to slow in the future, reverting back to match revenue growth after a period of higher spending.
"We have a number of new products that will be released over the next few years and intend that these products, along with our consistent growth strategy, will support sustainable and profitable growth over the long term," Gradon said.
The company will pay a first-half dividend of 8.75 cents per share on Dec. 20, up from 8.25 cents in the year earlier period.
F&P Healthcare sells products in more than 120 countries, with 46 percent of its revenue coming from North America, and 29 percent from Europe. In the first half, the company booked a foreign exchange hedging gain of $10.4 million to pre-tax profit, compared with a $9.7 million gain recorded in the same period a year earlier. It expects to book a gain of $10 million for the full year.
Gradon said it was too early to tell what effect proposed tax changes in the US may have on the company.