A bit of a mixed bag from three of our big industrial companies on Tuesday, with James Hardie and Ansell both taking an earnings hit late last year but old reliable CSL still going strong.
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Australian global building products giant James Hardie Industries (ASX: JHX) has lowered earnings guidance for the year to March 31 after a worsening in demand hit revenues and earnings in the three months to December.
It was the third cut in full year guidance from Hardie in the past few months and means the company is looking at little if any earnings growth in the 2022-23 financial year.
Hardie said it now expects full-year adjusted net operating income between $US600 million and $US620 million, down from its earlier forecast of $US650 million to $US710 million. That compares with $US620.7 million posted last year.
Investors weren’t impressed, the shares closed down more than 4% on Tuesday at $30.40 after being as low as $28.98 just after the opening.
Hardie is just another of the growing list of corporates to take damaging hits from the inflationary surge after the Russian invasion of Ukraine a year ago and the boost that gave to energy costs and the move by central banks to start a rapid lift in interest rates to try and control those cost pressures.
That has damaged demand for housing especially and some parts of business construction but infrastructure spending remains solid, though Hardie products are not in wide demand from this sector.
In Australia new home loan approvals are currently dominated by existing mortgagees refinancing existing loans while lending for new homes has dropped sharply, which in turn means a drop in demand for Hardie products (and those of other companies in the sector) later this year and into 2022.
The company said revenue and earnings slid in the three months to December as demand faded in the US and Australia in particular.
Global net sales fell 4% to $US861 million in the third quarter, with adjusted net income falling 16% to $US129.2 million from $US154.1 million a year earlier.
Directors joined a myriad of other companies here and in the US in portraying what they faced in the marketplace as “challenging” conditions.
“Based on our lower than expected second half volume results in both North America and APAC and restructuring charges incurred in the second half, management has lowered the fiscal year 2023 adjusted net income guidance range,” it said in its quarterly statement to the ASX.
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CSL (ASX: CSL) shareholders will get another record profit after the company topped estimates for the December half, putting the 2022-23 interim period up 2.9% on a year ago to $US1.07 per share (or $A1.55, up 9%).
The release and dividend news saw the shares rise in the weak wider market to end the day at $300.
That was after CSL a reported net profit after tax of $US1.62 billion for December 2022 half (steady on a constant currency basis). Underlying profit was $US1.82 billion, up 10% on a constant currency basis.
For the six months to December 31, CSL reported revenue up 19% to $US7.183.5 billion and a 10% lift in net profit after tax before amortisation in constant currency to a record $US1.957 billion for an interim period.
This was driven partly by a five-month contribution from $A18 billion buy, Vifor Pharma, strong growth in its core immunoglobulin (blood) and albumin sales, and record levels of plasma collections.
Directors reaffirmed June 30 guidance for an after-tax profit of approximately $US2.7 billion to $US2.8 billion (on a constant currency basis).
The result crowns the career of retiring CEO Paul Perreault, who said in Tuesday’s statement, “Given the challenges we have faced over the pandemic, I am proud of the way CSL has responded and continued to execute on our patient focused strategy.
“The strong growth we have seen in plasma collections and our immunoglobulins franchise is expected to continue.
“Seqirus (the vaccines business) continues to perform strongly and will deliver another profitable year. Consistent with the seasonal nature of the business we anticipate, however, a loss in the second half of the year.
“The integration of CSL Vifor is well advanced and we will focus on driving organic growth and efficiencies across the product portfolio and deliver on our synergy objectives.
Analysts say Vifor has the potential to be the next big driver of CSL earnings.
Looking at the first half Mr Perreault said “CSL delivered a solid performance in the first half of the financial year demonstrating the strong fundamentals of the company and the disciplined execution of our patient focused strategy.
“Our focused investment across our business units underpinned our resilience throughout the pandemic, and as we emerge from it we are starting to deliver positive momentum behind our sustainable growth agenda.
“CSL’s largest franchise, the immunoglobulin portfolio, grew strongly, up 19%, driven by the significant increase in plasma supply and the increased patient demand for our leading Ig products.
“The increased plasma supply also drove our albumin growth by 11%.
“Plasma collections growth was impressive – up 36% for the period. This acceleration in plasma collections underpins our ability to manufacture our plasma products going forward which is excellent news for patient care”, Mr Perreault said.
“Our vaccines business, CSL Seqirus, delivered another strong performance with revenue up 9%. This was achieved against a backdrop of reduced rates of immunisation. This highlights the strength of CSL Seqirus strategy and its high value differentiated product portfolio.
“During the period, we successfully completed the acquisition of Vifor Pharma and CSL Vifor contributed 5 months of earnings towards our first half result. I am confident that CSL Vifor will add value to CSL’s shareholders and towards the sustainability of CSL’s growth.
“We were also pleased to receive FDA approval for HEMGENIX, the first and only one-time gene therapy for appropriate adults with haemophilia B. This has been a great achievement for our people and the patients we serve,” Mr Perreault concluded.
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Protective wear products group Ansell (ASX: ANN) has followed a 17% slide in revenues and earnings with a dividend cut of the same size after it was forced to confront a series of events – foreign currency, the Covid demand boom finally exhausting itself in the six months to December 31, the cost of the exit from Russia and higher energy.
Interim dividend has been cut to 20.1 US cents a share from 24.25 US cents a year ago and the uncertain outlook for some of the company’s businesses saw it cut its earnings guidance for the full year.
Earnings before interest and tax fell 17% to $US91.5 million from $US111 million a year earlier.
Ansell said the impact of currency movements was unfavourable to revenue by $US48 million “and unfavourable to EBIT by $13.8m.
The strengthening of the USD against the EUR and other key revenue currencies was only partially offset by corresponding weakness in major cost currencies,” Ansell explained.
The company said sales of $835.3 million were down 17% on a reported basis or 11.5% on a constant currency basis as “strong growth in Industrial (was) more than offset by a 22% slide in Healthcare sales.”
“Continued strong performance in Surgical was more than offset by planned price reductions in Exam/SU and weaker market conditions including the impact of customer destocking affecting demand.
Industrial sales were up in constant currency terms.
CEO Neil Salmon said in Tuesday’s release:
“Compared to the first half of FY22, EBIT was negatively affected by the stronger US dollar and the absence of a profit contribution from our exited Russian operations. Adjusting for these factors, we were able to improve our EBIT margin by 120 basis points.
“This was assisted by Healthcare EBIT margin normalising with high-cost Exam/SU inventory now sold through. Industrial EBIT margin was lower than expected, largely due to the timing of price increases and cost increases in Chemical, however we expect improvement in Industrial margins as the fiscal year progresses,” he forecast.
“The performance of our Industrial GBU was particularly pleasing, with strong results in our Mechanical portfolio and improving trends in our Chemical portfolio.
“Previous acquisitions and successful new product innovation over several years have broadened the market verticals in which the Mechanical business is well positioned. Our enhanced position in energy and electrification grew strongly in the half and new products, particularly in cut protection, gained traction.
“This more than offset a decline in gloves supplied to the warehousing and logistics sector as customers normalised inventory levels and business activity quietened following a period of elevated pandemic demand.
The Healthcare GBU continued to record strong growth in sales of Surgical gloves. However, we saw destocking trends previously evident primarily in medical end markets extend more broadly into other markets with impacts on our Exam/SU products sold into industrial settings and Life Sciences.
“This was due to a combination of customers becoming cautious on economic conditions while growing more comfortable to reduce inventory as supply chain pressures have eased and product availability has broadly improved.”
Investors didn’t like the numbers and the cut in guidance and sold the shares down more than 8% to $25.64 after they looked at what was a weak outlook from the company for the rest of the year.
The weaker outlook saw Ansell revise its 2022-23 earnings per share (EPS) guidance from the original range of US115¢ – US135¢ to a new range of US110¢ – US120¢.That was after first half eps slipped to 50.6 US cents from 60.6 US cents a year earlier.
