According to Australian investors, the headache from the hangover of the Covid boom 2020-2021 year seems to have eased for protective gear products company Ansell.
They bid the shares up nearly 10% at one stage yesterday in the wake of the company’s release of its 2021-22 results.
The shares closed up more than 8.5% at $27.30 even though the results, on face value, didn’t justify that sort of strength.
Besides the ending of the Covid boom, the results also revealed the impact of Ansell’s departure from the Russian market in the wake of the invasion of Ukraine in late February.
Ansell reported a 3.7% dip in revenue to $US1.95 billion of revenue and a 35.6% slump in operating profit for the June to June 30 to $US158.7 million.
The falls were mainly due to the fading sales of Covid protective gear products and the impact of the retreat from Russia which was reported as $US17 million.
Earnings per share (a measure Ansell places a great deal of emphasis on) came in within guidance at $US1.252 per share. That rose to $US1.386 when adjusted for the exit Russia costs (13.4 US cent cut to its EPS).
That seems to have impressed the market and pushed the shares up by around 10% at one stage.
Ansell’s guidance of between $US1.15 and $US1.35 of EPS for financial year 2023 helped bolster the share price.
Final dividend was 31.20 US cents a share, taking full year dividend to 55.45 US cents a share and payout ratio of 40% based on adjusted earnings.
The 55.45 cents a share was down sharply from the 75.80 US cents a share paid for 2020-21 and perhaps a better view of the modest nature of Ansell’s latest profit and financial year performance, as well as its outlook for the 2023 financial year.
CEO Neil Salmon had mixed views about the result, saying in the ASX statement.
“I am pleased to report that Ansell delivered second half results in line with revised expectations communicated at the half year. Sequential sales growth, particularly in our more differentiated businesses, improved margins and significantly better cash conversion all contributed to the stronger second half result.
“Overall, FY22 was a challenging year for the business. Sales were lower vs FY21 on lower pricing and volumes for the products most in demand in the prior year for protection against COVID-19. We also experienced the impact of the factors noted at the half year which led to us lowering our earnings expectations for FY22 at that time.
“These included selling through outsourced Exam/SU products purchased earlier at relatively high cost into a market that was declining in price, the impact on operations due to government enforced COVID-19 related shutdowns, and other supply disruptions including labour shortages. We managed all these items more effectively in the second half and that contributed to improved second half results.
“New external challenges presented themselves during the second half. As the Sri Lankan political and economic crisis developed, our teams at our two manufacturing sites in the country did an outstanding job in maintaining continuity of operations while also implementing many measures to support our employees.
“Russia’s invasion of Ukraine had two effects: it increased costs for energy and certain raw materials, which we are now implementing price increases to offset. It has also caused us to reconsider the viability of our business in Russia with the ultimate decision being to exit both our commercial and manufacturing operations there.
“Despite these complexities, we have retained focus on the long-term strategies that will drive Ansell’s success. We saw strong results from emerging markets as we continued to invest in these regions. Our increased R&D spend generated growth in new products and strengthened our innovation pipeline with a particular focus on more sustainable protection solutions.
“We continued our capital investment programme, with our greenfield Indian surgical gloves facility now operational in packaging. We also announced new goals on sustainability, including ambitious plans to reduce carbon emissions and be Net Zero for our own operations by 2040,” Mr Salmon added.
