Ansell retreats from Russia with love, and regret as profit tumbles nearly 36pc

After 30 years, the company is calling time on its Russian business, saying it’s no longer viable after Moscow invaded Ukraine.

Neil Salmon is known as being measured and deliberate, so it was no surprise that it took Ansell six months to wind up its Russian operations following Moscow’s invasion of Ukraine.

And his understated strategy has paid off with investors, with Ansell’s shares soaring as high as 10 per cent to $27.93 on Monday.

Unlike the hundreds of Western companies, from Apple to McDonald’s, which severed ties with Russia within the first month of the war, the Ansell chief executive did not want his response to come at the expense of employees.

Ansell had been making its gloves and other protective equipment in Russia for 30 years. Mr Salmon says he wanted to ensure staff continued to have employment, rather than be left hanging like colleagues who worked for other foreign companies.

“We believe there are interested parties in taking over our operations in Russia and if we can achieve that, then that’s the best outcome for our people,” Mr Salmon said. “I’ve been pretty cautious about this and we haven’t declared our intentions earlier because we have a responsibility to protect our people and try to the best possible outcome for them.”

The withdrawal is expected to cost Ansell $US17m ($25m). Salmon is not expecting any further costs, despite talk from the Kremlin of seizing and nationalising the assets of Western companies who leave the country.

A man on top of a destroyed Russian tank at Khreshchatyk street in Kyiv. Picture: Dimitar Dilkoff/AFP

Ansell’s net profit has tumbled 35.7 per cent to $US158.7m as pandemic-fuelled demand wore off and it battled a modern slavery lawsuit. Removing the cost of withdrawing from Russia, this equated to adjusted earnings per share of US138.6c a share – near the top end of the guidance Mr Salmon gave in February.

Ansell shares rose 8.6 per cent – or $2.16 – to close at $27.30.

“Overall, the financial results are not a great success last year, given we had to downgrade guidance,” Mr Salmon said.

“But having reset expectations, we are pleased at what we did in the last six months,” he added.

Ansell is now expecting to deliver earnings per share in the year ahead of between US115c and 135c. Macquarie analysts said this implies a growth rate of 7-26 per cent.

“For FY23, we see commentary ex-Russia and (foreign exchange) as highlighting improved trends and a basis for growth into FY24+. We have an Outperform rating,” Macquarie equities analysts said in a note to investors.

Ord Minnett said the guidance implied about a 10 per cent drop at midpoint which is broadly in line with consensus. “The major headwinds are FX and the closed Russian operations which equate to a headwind of more than 20 per cent at the EBIT line.”

In the past 12 months, currency swings wiped $US34.6m off revenue – due to weakening of key currencies such as Euro, Australian dollar, Japanese yen and pound against the US dollar. Ansell’s overall revenue eased 3.7 per cent to $US1.95bn.

Mr Salmon warned of a similar result in the year ahead. “Foreign currency will be a headwind. Based on forecast rates, this is expected to have adverse (impact) of about $US32m,” he said.

Ansell is hiking up prices for its protective clothing to recover soaring raw material costs. “We put in place price increases in January but those weren‘t in the end sufficient to cover the inflation that we did see over that six month time period,” he said.

“We have now gone out with a second round of price increases over the period of May, June, July, and that should catch that business back up again in terms of ensuring that it’s passing on raw material cost to customers. We’ll consider a third round of increases if necessary, and the December-January time frame.”

Mr Salmon also dismissed a lawsuit launched against Ansell and Kimberly-Clark by former employees of Brightway – a Malaysian glove supplier – alleging modern slavery as “without merit”. Mr Salmon said Brightway had accounted for a “very small percentage of Ansell’s total purchases from third parties”.

“Ansell condemns all forms of modern slavery and human rights abuses, including the use of forced labour,” he said. “We have consistently communicated to suppliers our expectations for having effective systems in place for ensuring the highest standards of health and safety of all workers and remediating human rights abuses identified in their supply chains.”

Across its Healthcare business, sales fell 3.8 per cent to $US1.18bn, on lower demand after a spike during the pandemic. Meanwhile, its industrial division’s revenue declined 3.6 per cent to $US762.5m with Covid-19 fuelled demand wearing off and sales disrupted by shipping delays.

“While the business successfully increased prices and announced further price increases to take effect from FY23, it was unable to fully recover higher raw materials and freight costs within the second half of FY22,” Mr Salmon said.

Ansell will pay a final dividend of US 31.2 cents a share on September 15.

Originally published as Ansell retreats from Russia with love, and regret as profit tumbles nearly 36pc