F&P Healthcare shares slump
Fisher & Paykel Healthcare shares slumped after the company said its first-half profit could fall as much as 62%, as demand from hospitals for its breathing aids slows.
The company forecast net profit in the six months to September 30 could fall to between $85 million and $95m, down from $221.8m last year.
Its shares were the biggest decliner on the S&P/NZX 50 benchmark index in mid-morning trading yesterday, down 8.8% to $19.30.
Fisher & Paykel experienced a surge in demand for its products during the pandemic, selling 10 years’ worth of devices in two years as hospital clinicians turned to nasal highflow therapy as a frontline treatment for Covid-19 patients. However, demand has now slowed as hospitals have stocked up their supplies and fewer patients are requiring treatment.
‘‘During the most recent waves of the Omicron variant, fewer patients have required hospitalisation and respiratory support,’’ said managing director Lewis Gradon.
‘‘We believe customer stock levels have been elevated during our first half, which impacts our short-term sales.’’
The company expects first-half revenue of about $670m, down from $900m in the same period last year but ahead of the pre-pandemic level of $570.9m for the six months to September 30 in 2019.
Revenue should increase in the second half from the first half as hospitalisation rates rose during the northern hemisphere winter and sales of sleep apnoea products increased, it said.
Gradon said the company expected a gross profit margin for the year of about 60%, below its long-term target of 65%, as it faced higher freight and Covid-19 costs. ‘‘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 work force 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 provide profit guidance for the full year, citing uncertainties around customer inventory levels, their staffing challenges, and their capacity to change their practice to use Fisher & Paykel’s products for a broader range of patients requiring respiratory support.
Gradon said Fisher & Paykel remained confident it could reach more patients with its respiratory therapies, providing longer-term growth for the company.
It continued to increase its investment in research and development, and grow its sales teams, he said.