Drop in earnings hits Fisher & Paykel

AUCKLAND: Medical equipment maker Fisher & Paykel Healthcare has forecast a significant drop in its firsthalf earnings as the Covidrelated tailwinds which boosted sales fade.

It forecast a halfyear profit between $85 million and $95 million to the end of September compared with $222 million last year. Revenue is expected to drop to about $670 million from $900 million.

Fisher & Paykel Healthcare managing director Lewis Gradon said last year saw a dramatic increase in production and sales because of the pandemic, which resulted in the company selling 10 years worth of hardware in two years as hospitals bought up in anticipation of waves of Covid19.

‘‘During the most recent waves of the Omicron variant, fewer patients have required hospitalisation and respiratory support. We believe customer stock levels have been elevated during our first half, which impacts our shortterm sales.’’

Mr Gradon said sales overall were still tracking ahead of prepandemic levels, but its gross margin of 60% was below its longterm target of 65% because of increased freight costs, and operating costs were expected to be 5% higher.

‘‘This year, we are also experiencing some manufacturing inefficiencies, as we are carefully balancing demand fluctuations and targeted inventory levels with manufacturing throughput — while managing higher rates of absenteeism in our manufacturing workforce due to sickness,’’ he said.

‘‘Although we have reduced our manufacturing cost base over the past six months, manufacturing inefficiencies are likely to persist for this financial year as demand stabilises and inventory levels reduce to our targets.’’

The company did not give fullyear earnings guidance because of various uncertainties on customer stock levels and demand, but expected secondhalf revenue to be higher than the first six months.

However, Mr Gradon said the company would press on with research and development for new products, and increase its overseas sales team. —