Ansell upgrades by 20pc as demand for personal protective equipment soars

Ansell shares jump as demand for PPE continues to surge across the globe.

Ansell shares jumped after it upgraded guidance on rising demand for PPE. (Photo by Ezra Acayan/Getty Images)

Rubber glove maker Ansell is expecting full year earnings to soar up to 18 per cent more than previously forecast as COVID-19 continues to propel demand for personal protective equipment.

Despite higher input costs from price gouging across the protective clothing supply chain and the global coronavirus vaccination program gathering pace, Ansell is expecting to deliver a bumper profit. Shares gained more than 6pc in early morning trade to $41.75 after the announcement on the ASX, compared with a 0.2 per cent gain across the broader share market.

The forecast underlines how COVID-19 has changed behaviours across the globe, as people pay more attention to personal hygiene and cloak themselves in personal protective equipment (PPE), with demand expected to remain elevated even when COVID-19 subsides.

Ansell is now expecting to deliver full year earnings per share of 192-202 US cents, compared with its previous forecast of 160-170 US cents.

“Ansell is continuing to support elevated demand for PPE around the world and our key capacity expansions remain on track to meet increased demand. Our financial performance since January 2021 has been stronger than expected,” the company said in a statement to the ASX.

It comes as 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 last financial year.

Chief executive Magnus Nicolin said at the company’s half-year results for this financial year in February that the company had “benefited from “unprecedented expansion” of Ansell’s capacity”.

The company expects to install 13 new production lines by June 30 to keep up with demand.

“We expect that COVID-19 will continue to impact the world for some time and once the pandemic is under control, elevated demand for our products is likely to persist, whether due to enhanced safety practices at plants and hospitals, better protection awareness in emerging markets, more research and testing activities worldwide or the potential need for annual COVID-19 vaccinations,” Mr Nicolin said in February.

But the spike in demand has also sparked price hikes across Ansell’s supply chain. As early as last August, the pandemic has seen suppliers raise prices three times.

On Wednesday, the company said it had managed “continued increases in raw material and outsourced supplier cost” for exam and surgical gloves through “better-than-expected execution of price increases”.

“We have been able to continue to supply customers with product despite tightness in raw material supply and disruptions in ocean freight capacity which has resulted in an increase in transportation transit times.

Demand for surgical gloves have also bounced back more quickly, given hospitals have resumed elective surgeries and have been working through a backlog from last year’s bans.

“Mechanical and Surgical SBUs which initially saw negative effects from COVID-19, have continued to deliver a faster and stronger comeback than previously foreseen and Chemical and Life Sciences continue to perform well,” the company said.

Meanwhile, international border closures have supported the company’s bottom line via lower-than-anticipated spending travel and marketing.

“Based on the above developments, we expect FY21 H2 year on year sales growth to be strong despite the solid performance of the prior comparable period and above 24.5 per cent growth reported in FY21 H1.”

Ansell will deliver its full year results on August 24.