Ansell predicts ‘more typical growth’ after post-Covid slump

CEO Neil Salmon says the gloves maker is back on track after a difficult few years, with signs sales of PPE are on the rise.

Ansell CEO Neil Salmon. Picture: Supplied

The gloves are off for Ansell after it predicted revenue growth should return to normal this year, forecasting an end to several years of soft sales when hospitals and distributors had overstocked on Covid-19 protective gear.

The prospect of a return to “more typical growth rates” was enough to trigger a share price spike of more than 7 per cent even as the company reported a drop in dividend, profit and sales for full year 2024.

Ansell’s annual earnings beat market expectations even with a 45.3 per cent drop in earnings to $US76.5m ($113.7m), and a fall in earnings before interest and tax of 1.3 per cent to $195.5m.

“It’s been a rough few years for Ansell,” said Hugh Dive from Atlas Funds Management. “This looks to be a good result.”

The company has spent several years shifting into high-margin specialised protective gloves and personal protective equipment and out of low-margin units such as household gloves.

This past year marks the end of that transition with the closure of its Malaysian household glove unit and cuts in Sri Lanka resulting in it firing 1,330 staff, mostly factory workers and 90 management jobs. None of the job losses were in Australia.

Its overall headcount rose by 1500 jobs largely due to its purchase of the Kimberly-Clark PPE division for $US640m, which it completed at the start of last month.

Ansell’s US-based managing director Neil Salmon told The Australian the Malaysian business was “the last piece that didn’t have a long-term future,” with the company.

“Now the portfolio has been cleaned up, the addition of products from Kimberly-Clark further enhances our differentiation so we’re doubling down on products that are unique to Ansell,” Mr Salmon said.

The CEO took home total pay of $US1.8m including short and long term bonuses, an increase of 29 per cent from the previous year, but significantly less than the $US4.9m he could have earned had he hit his targets.

The company’s focus is on products, “that bring safety benefits that you can’t get from anyone else, and customers are willing to pay a premium for because they see how important they are to the workers who wear them. We are the best at analysing a manufacturing or healthcare setting and understanding what are the problems and where are injuries occurring?”

Today, Ansell is the world’s biggest surgical glove manufacturer and also the leading producer of a number of specialised gloves. It’s a long way from its 1905 foundations as a condom and dishwashing gloves manufacturer.

Ansell was briefly a market favourite during the pandemic when demand for PPE exploded, but then its shares halved to about $21.50 in 2022 when demand dried up.

Ms Salmon said that after a difficult period when hospitals and distributors were using up surplus stock purchased at the height of the pandemic, demand was returning to its pre-Covid 3-5 per cent growth range.

EBIT would likely rise on increased sales and increased savings, he added.

There is “relief that this destocking phase is behind us and the true quality of the business can be more apparent to investors moving forward,” said Mr Salmon.

Despite market perceptions that there was ambiguity in the protective clothing industry, Ansell was constantly working to evolve its products, he said.

Mr Salmon said its R840 protective glove for loading containers, which are more comfortable to wear than traditional gloves, has led to correct usage and a 60 per cent drop in injuries. In addition, the glove lasts twice as long as previous iterations.

“As a result, customers are willing to pay a significantly higher price than for the PPE they were using before, because of the benefits you can provide when you solve these kinds of problems,” he said.

For the financial year ended June 30, Ansell’s industrial segment was its best performer, with sales rising 4.6 per cent after it raised prices and EBIT jumping 24.4 per cent to $129.3m as it also cut costs, making it the main contributor to group profitability.

Its healthcare unit was Ansell’s underperformer, with sales dropping 7.7 per cent as customers used surplus stock rather than reordering, leading to a near 29 per cent drop in EBIT to $81.1m.

Mr Salmon said he expected his forecast of 3-5 per cent revenue growth would be seen in both businesses going forward.

Investors lapped up the result, with Ansell’s shares rising 7.2 per cent to $29.33.

The midpoint of Ansell’s annual earnings per share guidance of between $US1.07-$US1.27 was 3 per cent above consensus, according to Barrenjoey.

For the 2024 year, Ansell cut its final dividend by 16 per cent as net profit, but Mr Salmon said that as it had a policy of paying out 40-50 per cent of its profit attributable to shareholders, that figure should rise this year.

Ansell has now owned the Kimberly-Clark business for almost two months, and Mr Salmon said it was performing as hoped.

“It is trading as we expected,” he said.

The KCPPE business designs, manufactures and markets hand, body and eye protection products under the Kimtech and KleenGuard brands, expanding Ansell’s reach in a sector such as the growing clean-room manufacturing area, which includes