Gloom and more gloom at the annual meeting of protective goods group, Ansell (ANN) yesterday with news of a weak start to the 2015-16 financial year, confirmation of weak to lower earnings for the year to June 2016, and the first strike from shareholders on the company’s pay policies.
The news on earnings and weak sales growth helped support the 35% slide in the value of the company’s shares since its August profit report when the company warned of a tough 2015-16. Nearly half that fall came on the day of the profit report and warning in August when the lost 16% in value.
The shares lost another 1% yesterday to $18.34.
ANN 1Y – Weak start to the year puts Ansell under pressure
Shareholders were told that sales had had a disappointing start to the financial year because of softer markets in parts of North America, Europe and southeast Asia, thanks to the stronger US dollar.
CEO, Magnus Nicolin told the meeting that growth in north American economy is slowing, while Europe is still struggling with economic problems and the integration of refugees.
There is also softness in the southeast Asian market in reaction to the slowdown in China’s economy.
"So, a tough market,” Mr Nicolin told shareholders. “We have seen an overall one per cent decline in our sales in the first quarter compared to the first quarter of last year."
But Mr Nicolin did point out to shareholders that the comparison with the first quarter of 2014-15 was a bit unfair because the first three months of that financial year was the strongest quarter of that year, and was boosted by some price increases.
Mr Nicolin said Ansell’s industrial division – which makes gloves, body suits and ventilation systems – was generating good growth, but its medical business – the maker of surgical and examination gloves – was a bit weaker because of supply constraints.
That’s because Ansell is currently upgrading capacity at one of its manufacturing plants.
The company has benefitted from slightly more favourable currency movements recently, but volatility was expected to continue, Mr Nicolin said. First quarter sales were also about one per cent lower, at constant currency levels, the company said yesterday.
Ansell reports in US dollars, and about half of its revenue comes in Australian dollars, British pounds and euros – all of which have lost ground against the greenback since June 30.
Chairman Peter Barnes told the meeting that the rising US dollar had put pressure on sales revenue and costs, resulting in a drag in Ansell’s non-US dollar earnings.
"But in the current economic climate, we foresee this negative drag remaining throughout the current year and a reducing offset as our currency hedges run off," Mr Barnes said.
"This means that our financial results will continue to be adversely affected in 2016."
Ansell’s underlying profit rose 20% to $US187.5 million in the 2014-15, but it has forecast weaker earnings per share in 2015-16, largely because of a slowdown in growth in north America.
But the most interesting news was the first strike from the meeting on the company’s pay policy.
Around a third of shareholder votes opposed Ansell’s remuneration report for 2014-15, more than the 25% needed to deliver a strike against the company.
A second strike next year could lead to a vote to spill the company’s board.
The vote comes despite a fall in Mr Nicolin’s remuneration to $3.1 million, and a relatively small increase of just over $1 million in total executive pay.
Chairman Barnes said the board will review the remuneration policy by the end of June 2016.
