Ansell confident it can handle Trump tariffs after stronger-than-expected first half

The personal protection group plans to raise prices to counter tariffs approved by Donald Trump, as it says all companies need diversification to handle coming uncertainty.

Ansell CEO Neil Salmon says the company is on track for a better 2025 fiscal year than previously guided. Picture: Supplied

Ansell will hike its prices to offset Donald Trump’s sharp tariff moves as it reveals rising geopolitical tensions has forced it to fly new categories of products by air to get around prolonged Red Sea shipping disruptions.

Chief executive Neil Salmon said rising raw material and manufacturing costs were fuelling the price rises and the new US tariff regime would force it to shift some of its manufacturing out of China to other parts of Asia.

The medical gloves and protective product manufacturer reported a better-than-expected first half and upgraded its outlook for the fiscal year on Monday, with investors welcoming its strategy to overcome economic headwinds, sending its shares more than eight per cent higher.

The first half was hampered by higher freight costs due to port congestion and challenges with vessel availability from shipping disruptions in the Red Sea, prompting Ansell to spend more on expensive airfreight to meet demand and protect its market share, Mr Salmon said.

“All our product is travelling longer distances, so that means more time on the water, and that means a good chunk of inventory is not available to customers because it’s on boats,” he said. “We decided to invest significantly in the use of airfreight. Airfreight is already relatively expensive because when sea freight goes up, airfreight goes up too.

“It is a lot of money to spend, but it is absolutely the right thing to do, because it meant we could respond to that customer demand opportunity, and now we’ve secured that business, and now we should be able to move to low-cost rate options into the second half.”

Ansell expects to cut costs in the second half as it flies less product by air as sea freight capacity improves.

It comes as all steel and aluminium imports to the US are set to be slapped with 25 per cent tariffs, Trump announced, marking a major escalation of his administration’s move to up-end global trade policy.

“Our raw materials come from other countries, not from the US, and utility prices and also minimum wage rates work for us,” Mr Salmon said.

“We follow government policy in Southeast Asia and Sri Lanka, those are the markets that we’re sensitive to. There is nothing that I see today that suggests inflation on Ansell will increase as a result of any government policy, but it is something we are watching.”

US President Donald Trump announced a fresh round of tariffs on steel. Picture: Roberto Schmidt/AFP

Mr Salmon said the tariff increases on US imports of China medical gloves had accelerated Chinese manufacturers relocating their production to Southeast Asia. Ansell has relocated production of some Chemical clothing from China to Sri Lanka, but would also offset tariff increases on China, Mexico and Canada through price hikes and by manufacturing more of its product outside of China.

“The most important thing for any company to do at the moment is to have options because it is unclear where tariffs are going to land,” he said. “We produce in nine countries and have sourcing relationships in further countries which is fundamental at the moment”

While Mr Salmon expects the direct cost impact of the tariffs to be minimal due to strategies in place, he warned that second-order effects on demand in affected markets were harder to predict.

Ansell raised its interim dividend by 34.5 per cent to US22.2c, after its first-half net profit surged 184 per cent to $US55m ($87.8 million) for the six months to December 31. It came as it delivered a 29.9 per cent increase in first-half sales to $1.02bn.

The company lifted its full-year earnings guidance, with adjusted earnings per share (EPS) increasing from 110 cents to 118 cents. Shares rallied 8.1 per cent to $37.77 on Monday.

“We’ve over-delivered in the first half and the confidence is that we’re not going to see any major change in external conditions in the second half that allows me to upgrade the guidance at this point, Mr Salmon said.

“We had to make some tough decisions two years ago, and we set some bold objectives for the company at the same time. It’s really satisfying to see those things come through, and it’s a real testament to the Ansell team.”

Ansell has taken steps to reduce its reliance on China.

A major driver of Ansell’s growth has been its $635m acquisition of Kimberly-Clark’s personal protective equipment business (KBU), which Mr Salmon said the performance had been of expectation, with it on track to complete integration by June.

“It will double down on our most attractive market,” he said,

“This requirement for protection is very high and there’s a premium to quality, consistency, and reliability. Ansell has earned that right, but also Kimberly-Clark has earned that right over a number of years.” “When you put the two leading players in one of our most attractive market positions together, customers are pleased because it further cements us as their leading option,” he said.

RBC Capital Markets analyst Saul Hadassin said Ansell exceeded consensus expectations with stronger than expected organic revenue growth in both the Healthcare and Industrial segments and KBU performing ahead of expectations.

Barrenjoey analyst Saul Hadassin said delivered a “strong result” coming ahead of market expectations from better than expected organic revenue growth in both the Healthcare and Industrial segments and KBU performing ahead of expectations.

“Group EBIT increased 19 per cent, a robust result albeit off a weak comp that was impacted by de-stocking,” he said.

Originally published as Ansell confident it can handle Trump tariffs after stronger-than-expected first half