New Zealand-based medical products group Fisher and Paykel has confirmed full year revenue will be down sharply from 2020-21’s Covid boosted record of more than $NZ1.9 billion.
The company told the ASX on Wednesday that full-year revenues for the year to March 31 will end up between $NZ1.65 billion and $NZ1.7 billion, a fall that was clear from the first half performance when it fell to $NZ900 million from $NZ1.060 billion previously.
No estimate was provided for full year earnings, but they were down 1% to $NZ222 million in the September 30 half year.
Full year earnings for 2020-21 were a record $NZ524 million – up 82%.
With revenue down more than $NZ200 million from a year ago, most of that will drop to the P/L account, so earnings will be hard pressed to top $NZ400 million this year.
CEO Lewis Gradon said on Wednesday “Our second half hospital consumables revenue is currently tracking to be similar to the hospital consumables revenue that we reported in the first half of the 2022 financial year.
This is consistent with reports of the increasing prevalence of the Omicron variant over the last two months and its associated lower respiratory intervention requirements, as well as a relatively mild flu season in the Northern Hemisphere.
“In our Homecare product group, growth in sales of our OSA masks is currently tracking above our first half growth rate despite supply constraints of treatment hardware in the market.
“Freight rates remain elevated and for the 2022 financial year are expected to impact our long- term gross margin target of 65% by approximately 250 basis points.
The shares fell 7.8% to $23.73.
Rival medical products maker and global giant, ResMed supported FPH’s comments on the negative impact of freight rates in comments a senior executive made to a US investment conference on Tuesday.
ResMed chief operating officer Rob Douglas revealed that that supply cost inflation was hitting the business on a number of fronts.
“Freight is very, very challenging for our supply chain, mostly in Southeast Asia. That’s added a lot of cost that turns up into our COGS as well. And that’s not likely to simplify and change overnight,” Douglas said.
The company isn’t able to meet strong demand for its sleep aid products, however, with shortages of electrical components slowing down production.
“In the chip world, in the electronics world, where typically, we’d be negotiating ongoing cost improvements, in times of shortage, you don’t make any headway in doing that.”
ResMed imposed price surcharges on some customers in January to try and recover some of the rising costs, but that didn’t bridge the gap entirely.
“We did introduce a surcharge in January that we mentioned was sort of a sharing of some of the cost increases. It was actually only a fraction of the cost increases in there,” Douglas said.
From the limited amount FPH released on Wednesday, they seem to be in a similar situation with margins under rising pressure from higher costs.
