Gloves and protective clothing maker Ansell (ANN) edged its interim dividend up by just a quarter of a cent for the December half after reporting a flat first-half net profit.
Net profit rose 0.3% to $US69.8 million for the six months to December 31, with revenue down 1.1% to $US775.8 million and an unfranked dividend of 20.25 cents, up from 20 US cents a share.
That 1.1% drop in sales following the sale of Ansell’s Onguard footwear business. Without divestments and currency shifts, total sales grew 1.4% in the half, the company said yesterday, which hardly convincing.
But investors were not taken in by the tiny dividend boost and sent the shares down 2.1% to $21.65 amid talk of rising costs from higher raw material prices. That was after they were down more than 6% in early trading to a six month low.
Some investors had been looking for an announcement about the future of its wellness division, which makes condoms.
Ansell said that the review of its sexual wellness business is progressing in line with its expectations, revealing that it has received “multiple expressions of interest” from several parties.
Some investors had been looking for news of a sale in yesterday’s announcement and some capital management initiatives. Ansell reaffirmed its full year earnings target, which helped steady the shares. But the assurances were hardly inspiring.
CEO, Magnus Nicolin said seasonal factors typically boosted second-half earnings, meaning his company could still meet expectations in spite of headwinds such as a rising rubber price and fall in the value of revenue earned in euros.
“We’ll have to run extra hard to achieve a significantly stronger EPS in the second half,” he said during a conference call with analyst.
That worried investors because to cover the impact of the higher raw material prices, Ansell says it will raise product prices in coming months, but the full benefit is not expected to flow through until 2017-18.
The company warned that second half profit for 2016-17 would be dragged down slightly by the “unfavourable cost inflation” because it would not be able to push through cost increases quickly enough.
However, Ansell maintained its profit guidance for full-year earnings per share of $US1.00 ($1.30) to $US1.12, which compares to earnings per share of $US1.05 in 2015-16.
Mr Nicolin said the condom “sale process continues essentially according to plan. There’s strong interest from multiple parties, both strategic and financial … we feel confident that we’re on the right track.”
Sales of industrial products, which includes safety gloves and arm protectors and make up 42% of revenue, were up 4.2%, while medical gloves sales fell 1.6%.
Total earnings before interest and tax grew 5.3% to $US104.6 million ($136 million).
