The Ansell Limited (ASX: ANN) share price has jumped more than 8% in response to the company’s FY22 result and outlook.
Ansell is one of the world’s largest manufacturers of safety gloves for household, health and industrial settings.
Ansell’s difficult FY22 result
Here are some of the highlights from the glovemaker’s result for the 12 months to 30 June 2022:
- Sales decreased by 3.7% to $1.95 billion
- Adjusted EBIT (EBIT explained) fell by 27.5% to $245.1 million
- The adjusted number reflects the Russian business disruption and exit of $17 million, statutory EBIT dropped 33% to $228.1 million
- Statutory earnings per share (EPS) fell 34.9% to 125.2 cents
Divisional performance
The healthcare unit represents 61% of revenue and 58% of EBIT. FY22 sales dropped 3.8% to $1.19 billion. It saw positive organic growth from surgical and life sciences, but this was offset by the decline from exam and single use which suffered from a decline of 11.1% due to lower prices and volumes.
Healthcare EBIT dropped 39.4% and the margin reduced 740 basis points to 12.7% – selling high cost inventory from outsourced suppliers at lower margins was the key driver for this.
The industrial unit represents 39% of revenue and 42% of EBIT. FY22 sales declined by 3.6% to $762.5 million. Positive organic growth from mechanical was more than offset by a decline from chemical. Mechanical saw positive organic growth of 3.7% thanks to both the pricing and mix of products sold. Chemical saw a decline of 11.6% – this was driven by protective clothing which saw a sales decline on lower demand for COVID-19 protection.
Industrial EBIT decreased by 4.8% compared to FY21 and the margin declined 20 basis points to 14%. Higher prices were unable to fully recover higher raw materials and freight costs within the second half of FY22.
FY23 outlook and thoughts on the Ansell share price
Ansell said that it expects to generate EPS in the range of US$1.15 to US$1.35. That represents a potential reasonably small rise to small fall for profit over the year.
However, this guidance assumes an external environment that remains supportive for continued demand for its products and is expected to drive volume growth.
Exam and single use price normalisation is expected to result in an overall sales decline in FY23.
It’s expecting higher wage inflation in FY23, though it also said it would “leverage pricing and operations initiatives with the expectation to fully offset negative headwinds from higher raw materials, energy and salary costs.”
Ansell also said that the exit from Russia will mean that $9 million of EBIT, and 5.8 cents of EPS, from FY22 will not reoccur in FY23.
This seems like a good, quality business. It’s still down 17% for the year, so it seems the update was better than investors were expecting. However, it’s not the type of business I’d normally buy for my portfolio, so I would rather go for other ASX growth shares.
