As it had warned on the last day of January, personal protective group Ansell (ASX: ANN) saw a sharp fall in earnings because of problems in one of its key manufacturing regions in the six months to December.
The rushed-out warning saw the shares slump more than 14% in a day – yesterday’s reaction to the confirmation of the weak outcome was far more sedate – the shares actually edged a touch higher for a while before tipping 1.1% lower by the end at $25.47. That is still lower than the end of the January 31 sell-down of $26.76.
The manufacturing challenges that hit Ansell including COVID-related shutdowns in Malaysia and one of its major suppliers getting banned from the US.
Ansell revealed Tuesday that that while sales jumped 7.5% for the half to just over $US1 billion ($1.4 billion), earnings a share slumped 32.5% in constant currency terms.
Profits fell to $US77.2 million in the latest half from $US105.9 million during back half of 2020.
Earnings a share were 60.6 US cents a fraction under the downgraded estimate on January 31 of around 61 US cents.
CEO Neil Salmon said in Tuesday’s statement the company had faced challenging conditions including a drop in the price of surgical gloves back to pre-COVID levels and the Omicron surge, which saw the company shutter operations one of its production facilities temporarily.
“At the time, we expected these would be short term [interruptions] in nature which would allow us to make up for this lost production in subsequent months, however achieving this was hampered by limited availability of labour and continued logistical delays, contributing to increased back orders for key product styles,” he said.
Ansell is still working out how to source products to plug a gap left by one of its major suppliers, YTY, which was blocked from exporting to the US last month after allegations of forced labour practises in its supply chain.
The company will pay an interim dividend of 24.25 US cents a share, down sharply from the 33.20 US cents a year earlier, but up on the pre-Covid December, 2019 half’s 21.75 US cents a share.
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The numbers were mixed for property trust group Dexus (ASX: DXS) in the six months to December – solid valuation uplifts (as we have seen with Mirvac and GPT) produced a big rise in earnings, but the key measures – Funds From Operations (FFO) and distributions for each security – were weak.
Dexus did report strong rent collections of nearly 98% its property portfolio for the six months to December as the delay in office workers returning to city towers in Sydney and Melbourne and supply chain disruptions didn’t appear that much of an impact.
But Dexus management did say in the group’s ASX filing on Tuesday that Covid Omicron is still impacting confidence and creating challenges in supply chains and delaying the return of workers to their offices.
“Despite this, the vaccine was successfully rolled out across Australia enabling the easing of restrictions before Christmas. Subsequently, the Omicron variant of COVID-19 continues to impact confidence, creating challenges in supply chains and delaying the new year return to the office, which is expected to persist for the first quarter of 2022,” Dexus told the market.
“The key megatrends of urbanisation, technology advances and the growth in pension capital flows have evolved and increased in importance as a result of the pandemic. We are well positioned to continue to leverage these trends to support investor returns,” CEO Darren Steinberg said in the release.
Dexus reported a net profit of $803.2 million for the half-year, up 82% on the previous corresponding period, thanks to the strong valuation gains of $486.2 million across its property portfolio.
Those valuation uplifts were $341.5 million above those for the December, 2020 half year.
Adjusted funds from operations – the key earnings metric in the property sector – of 28.1 cents a security dipped 2.4% from the back half of 2020 (which was weak because of Covid alpha and delta).
The interim distribution of 28 cents a security was down 2.7% from the December 2020 half.
Dexus said that underlying Funds from Operations (FFO) per security of 34.9 cents, which excludes trading profits, increased by 15.9% as a result of property acquisitions and growth in management operations income, as well as income generated on Dexus’s pooled fund co-investments and lower net finance costs.
The falls in adjusted FFO and the distribution was “primarily due to the amount of trading profits in the first half of FY22 being lower than those in the first half of FY21, as well as higher maintenance capital expenditure and incentives,” Dexus explained.
The securities rose 2.6% to $10.43.
