Ansell's profit falls 17.2pc on pandemic hangover and supply chain pressures ease

Ansell’s profit has slumped 17 per cent as demand for rubber gloves wanes after a pandemic-fuelled frenzy and amid economic uncertainty.

Ansell’s half-year net profit has slumped 17.2 per cent to $US63.9m ($91.7m), as demand for rubber gloves wanes after a pandemic-fuelled frenzy and amid economic uncertainty.

Chief executive Neil Salmon said “de-stocking trends” had become more widespread, expanding from medical markets to broader industrial settings and life sciences.

“This was due to a combination of customers becoming cautious on economic conditions while growing more comfortable to reduce inventory as supply chain pressures have eased and product availability has broadly improved,” he said.

Revenue also dived 17.2 per cent to $US835.3m for the six months to December 31. Ansell will pay a dividend of US20.1c a share on March 9.

Sales in its biggest division – its healthcare business unit, which accounts for 56 per cent of revenue – fell 26.1 per cent to $US467m – or 21.9 per cent on a constant currency basis.

The result was largely driven by a 38.1 per cent decline in exam, single use and life science product sales, with Mr Salmon citing reductions in both price and volume as customers continued to work through excess inventory accumulated during the height of the pandemic

The fall in exam/SU and life sciences more than offset a 17.7 per cent jump in surgical glove sales – but Mr Salmon said demand was expected to cool in the next six months.

“With competitors no longer supply constrained and customers well stocked, growth in surgical is expected to moderate through the back half of the year.”

Chief executive Neil Salmon said “de-stocking trends” had become more widespread. Picture: Supplied

Sales across Ansell’s industrial division, which accounts for 44 per cent of overall revenue, dipped 2.3 per cent to $US368.3m. But on a constant currency basis, firmed 6.4 per cent following price rises.

“Demand for disposable clothing remains suppressed due to high customer inventory levels, however price-led growth in our hand-protection range acted as on offset,” Mr Salmon said.

Earnings before interest and tax fell 24 per cent following a strengthening US dollar and Ansell’s decision to withdraw from Russia.

“Industrial EBIT margin was lower than expected, largely due to the timing of price increases and cost increases in chemical (products), however we expect improvement in Industrial margins as the fiscal year progresses,” Mr Salmon said.

“Chemical margins were also subdued due to continued competitive intensity in the disposable clothing segment. Further price increases are targeted, and we also anticipate a moderation in cost pressures in coming months with an improvement in margins anticipated as a consequence in the second half.”

Currency swings wiped $US48m off overall revenue and $US13.8m off EBIT.

“The strengthening of the US dollar against the Euro and other key revenue currencies was only partially offset by corresponding weakness in major cost currencies,” Mr Salmon said.

“The unfavourable impact of FX to EBIT included a net foreign exchange gain on hedge contracts of $US7.2m, the equivalent number in FY22 H1 was a loss of $US0.9m.”

Mr Salmon said “with a high percentage of our currency volumes hedged, changes in foreign exchange rates are not likely to materially alter earnings through the rest of FY23”.

Ansell shares fell 8.7 per cent to $25.64 on Tuesday.