F&P Healthcare posts record FY sales, profit growth stalls as margins shrink
By Hannah Lynch
May 25 (BusinessDesk) - Fisher & Paykel Healthcare, which makes respirators and sleep apnea products, reported record annual sales while profit growth, excluding a year-earlier tax charge, stalled as margins contracted.
Profit was $64.1 million in the 12 months ended March 31, from about $52.5 million a year earlier, when it took a one-time tax charge of $11.5 million. Excluding the charge, earnings were little changed. Sales climbed 2 percent to a record of $516.7 million.
Shares of F&P Healthcare dropped 4.5 percent to $2.32 after the results, which showed its gross margin shrank to 53.2 percent from 54.9 percent while its operating margin slipped back to 18 percent from 19.3 percent. Cost of sales in the year rose 6 percent, three times greater than sales growth.
The company gets 52 percent of sales in US dollars and the strength of the kiwi dollar sapped the value of overseas revenue when it was brought home.
Respiratory and acute care product sales jumped 18 percent to US$218.6 million, though in kiwi dollar terms the gain was 6.9 percent to $270.8 million. For OSA products, US dollar sales climbed 6.6 percent to US$184.9 million, while in local currency terms they fell 3.2 percent to $229 million. Total operating revenue in US dollars rose 12.4 percent.
Chief executive Michael Daniell forecast 2013 operating revenue would rise to a range of $540 million to $560 million, while profit would be $62 million to $70 million. The forecasts assume the New Zealand dollar trades in a range of 75 US cents to 80 cents for the remainder of the current year.
The company will pay a final dividend of 7 cents a share, unchanged from a year earlier. It will be paid on July 6.
“We expect our underlying revenue growth to begin to accelerate this year, particularly in the second half, as a number of new products, including new OSA masks, are introduced around the world," Daniell said. "We also anticipate a continuation of strong growth in demand for our products, which are used in a broad range of respiratory and surgical applications."
The company said it expects to improve its constant currency operating margin, with faster growth in higher margin products and cost reductions.
F&P Appliances invested $68 million in manufacturing, product tooling and replacement equipment in the latest year. That was predominately used to increase the quality of its Mexico manufacturing plant to cope with a ramp up in manufacturing. In Auckland, the company added a third building to its site at a cost of $47.4 million.
As at March 31, the company had a mix of foreign exchange contracts and collar options valued at about $450 million. It closed out foreign exchange contracts in the 2010 and 2012 financial years, which will contribute $17.8 million in the 2013 financial year and $21.3 million the year after in operating profit.