Ansell triples single use gloves business during COVID-19, profit jumps 40pc

Home working will hit productivity long term, says Magnus Nicolin, who expects the virus to remain for at least 12 months.

Ansell protective clothing

COVID-19 is expected to be a continued part of life until at least mid next year, underscoring the need to find a way to live with the highly infectious virus, according to Ansell chief executive Magnus Nicolin.

Mr Nicolin said in the short term, lockdowns and working from home for those who are able to had lifted productivity, but in the longer-term he expects staying in isolation will lead to losses in efficiency and effectiveness.

He said Sweden, his home country, which chose not to enforce widespread lockdowns had responded to pandemic well except in one key area: aged care.

“Sweden is an interesting case. They did certain things really well and certain things really poorly,” Mr Nicolin said.

“Where they really messed up was how they handled their nursing homes because … they have rotating caretakers who go from nursing home to nursing home. So a given caretaker might see 20 different seniors in a day, and that wasn’t a good idea because obviously it just spreads the virus.

“But when it comes to the economy generally and keeping schools open, keeping plants open and even keeping stores open, for the most part that has worked and for that reason the GDP drop in Sweden has been lower than in most countries. If they had only figured out the risk in the nursing homes early, it would have been a really nice way to respond to this disease.”

Sweden is now beating many other European countries in battling coronavirus. Figures from the European Centre for Disease Prevention and Control show that the infection rate in France is more than 60 per cent higher than that of Sweden.

France, which enforced a strict lockdown in its spring and required masks to be worn in many public areas, has a fortnightly infection rate of 60 cases per 100,000 people. Meanwhile Sweden, which decided not to implement compulsory measures at that time and rejected the use of masks, has a rate of 37 cases per 100,000 people. The government is recording between 200 and 300 new cases a day.

“We do expect COVID-19 to be part of our lives for at least another 12 months, probably longer, therefore it will go into the 2020 financial year,” Mr Nicolin said.

“This is a nasty virus and it’s not done yet. We are going to have to be vigilant and continue with our safe practices for probably years, and it’s not going to be easy.

“We have seen a lot of enthusiasm from people being able to work from home but there is going to come a time where we are going to have to meet face-to-face again, need to travel again and walking that fine line of moving forward into a post COVID-19 environment is going to be tricky.”

Mr Nicolin said a way to live with the virus will need to be found to ensure workplace productivity and efficiency.

“In the medium term we are going to start to lose some effectiveness, we believe, because you need a little bit of that face-to-face discussion and informal discussion with colleagues, training and development and that type of thing.

“Over time we are going to lose that effectiveness and efficiency by working in this way.”

The pandemic has heightened awareness about personal hygiene and the use of PPE — or personal protective equipment — which Mr Nicolin said six months ago “nobody knew what it was”. This has propelled a 42.1 per cent rise in Ansell’s full-year profit to $US158.7m ($221.52m).

Revenue, meanwhile, jumped 7.7 per cent to $US1.614bn. Ansell has tripled the size of its exam/single use gloves business, mainly through acquisitions, with the division recording 34.4 per cent growth in the second half of the year, compared with 1.4 per cent in the second half.

Mr Nicolin anticipated demand for single use gloves to continue to soar this financial year and expected to deliver a fourth price rise to its customers in 12 months as its suppliers seek to “profiteer” on the pandemic.

“We are seeing significant cost increases and this is not done yet. We expect these cost increases to peak in the second half of this fiscal year and our mission is going to be to protect, and solely protect, our shareholders by passing price increases on.

“We have already taken three price increases and we will need to take a fourth one in all likelihood towards the end of the calendar year. The EBIT margin is percentage terms will see some negative effects from this. The reason is we are electing to focus on the long-term as opposed to desperately protecting an EBIT margin for the short-term and royally upsetting our customers.”

Macquarie analysts, who have an underperform rating on Ansell, are also expected supply shortages and increased costs from outsourced suppliers. “This is expected to negatively impact EBIT margin,” the analysts said in a note to investors.

They said the company’s result was: “on balance, a slightly better-than-expected FY20 result, with the midpoint of guidance also slightly ahead, albeit with a range of factors contributing to a dispersed guidance range”.

Citi analyst John Deakin-Bell forecast “low single digit upgrades” to consensus earnings estimates this financial year. “If COVID-19 persists then the earnings risk remains to the

upside for the 2021 financial year,” he said.

JPMorgan analyst David Low meanwhile said given Ansell reports in US dollars “currency remains a significant influence on both the top and bottom lines”.

“Any movements in exchange rates that vary significantly from our forecasts likely to impact on our earnings estimates,” he said.

Ansell will pay a full year dividend of US50c, representing a 7 per cent rise on 2019, on September 17.