Investors take some profits as F&P Healthcare lifts half-year result
Fisher & Paykel Healthcare, New Zealand’s biggest listed company, increased first-half profit 4 per cent, 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 in the six months ended September 30, from $78.2m in the same period a year earlier, the Auckland-based company said.
The latest earnings included $12.2m of patent litigation costs over disputes with rival Resmed compared with $2.4m of costs a year earlier, and excluding those, profit would have risen 13 per cent, it said. First-half revenue lifted 8 per cent to $458.4m. 2016
The company had forecast firsthalf revenue of about $460m and profit of about $80m.
Annual profit is likely to be between $185m and $190m, at the top end of its previous forecast of $180m to $190m, the company said yesterday. 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 per cent to $262.5m and sales of homecare-based products 4 per cent to $191.3m.
Gross margin expanded 116 basis points to 66 per cent as it sold more profitable products and increased production in Mexico, where it now makes 35 per cent 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 mid2018, he said.
The company’s shares closed down 63c, or 4.5 per cent, to $13.25 yesterday, after climbing to a record high $13.88 on Monday.
James Smalley, senior advisor at Hamilton Hindin Greene, said investors appeared to be taking profits and rebalancing their portfolios following the stock’s 60 per cent gain over the past year.
In the latest period, F&P Healthcare increased research and development spending 13 per cent to $47m. It expected growth in R&D spending to slow, 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 8.75c per share on December 20, up from 8.25c in the year earlier period.
F&P Healthcare sells products in more than 120 countries, with 46 per cent of its revenue coming from North America, and 29 per cent from Europe.
In the first half, the company booked a foreign exchange hedging gain of $10.4m to pre-tax profit, compared with a $9.7m gain recorded in the same period a year earlier.
It expects to book a gain of $10m 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.