Ansell chief executive Magnus Nicolin says acquisitions are back on the agenda after two major deals completed by the rubber glove and condom maker last year have beaten management’s expectations.
The manufacturer put the brakes on deal-making after a $US615 million ($790 million) deal to buy BarrierSafe Solutions International in early 2014 left its balance sheet “obviously stretched”, Mr Nicolin said.
However better than expected sales of BarrierSafe products, and gloves from the Midas business that Ansell purchased in late 2013, were significant contributors to a 33.7 per cent rise in half-year net profit. In addition, the integration of the two businesses is running ahead of schedule and the $10 million to $11 million worth of benefits expected in 2014-15 was almost all delivered in the first six months, he said.
“We do see a number of attractive opportunities in our space that we feel confident could yield strong returns,” Mr Nicolin said on the outlook for acquisitions. “As always we’re going to be very picky.”
Ansell said net profit after tax for the six months ended December 31, 2014, was $87.7 million, which was up from $US65.6 million in the same period last year, and in line with consensus.
Revenue rose 20 per cent to $US847.3 million, which was just below the market consensus of $US851.3 million, according to analysts surveyed by Bloomberg.
Investors Mutual equities analyst Daniel Moore, whose firm has a stake in Ansell, backed management’s renewed consideration of acquisitions for assets that would will deliver returns. “The key is the cash flow has been very strong, so the debt has got well and truly under control and will be more so in six to 12 months time,” Mr Moore said.
Removing the effect of newly acquired products, organic growth across Ansell’s portfolio was 2.6 per cent. Among its 12 best performing core brands, which include SKYN condoms and Gammex surgical and healthcare gloves, organic growth reached 7 per cent.
The stock surged 5.4 per cent on the strong result to close at a 12-month high of $24.30. The stock has gained 27 per cent in the past year, compared to a 13 per cent rise in the S&P/ASX200 benchmark index.
The company maintained guidance of earnings per share growth of between 7 to 15 per cent for full 2015 financial year. Speaking to analysts Mr Nicolin attempted to head off queries about why guidance was maintained despite “such a strong first half”.
“The main reason is the world has become even more uncertain over the last three to four months,” he said.
Mr Nicolin said Russia, which is a big market for Ansell, was in “disarray”. The crash in the value of the Russian rouble has increased the cost of Ansell’s products, which has sent customers scrambling to find cheaper domestic glove and equipment suppliers.
Political uncertainty around Russia and Ukraine, as well as in the Middle East and Africa also weighed on his mind. “We are living in an unusually turbulent time,” he said. “That’s why we’re staying a little bit cautious here because it’s looking very difficult in some markets.”
However, Investors Mutual’s Mr Moore added that a strength Ansell’s was its geographic diversity. “The US was very strong, but Western Europe was quite weak and some emerging markets were very weak like Russia and Brazil,” he said. “One year ago it was the other way around.”
The company reported double-digit growth across India, the Middle East and Africa, Eastern Europe and south east Asia. Sales in Russia fell 3.4 per cent.
Mr Nicolin called out Ansell’s performance in a handful of industry sectors, such as oil and gas, health safety and life science, in which the company has dedicated more resources and delivered new products. “I think it’s a demonstration that when Ansell focuses on something we can accomplish some really important results” he said.
CLSA analyst Zara Lyons said Ansell was set to benefit from the a lower raw material cost, especially for natural and synthetic rubber. However some of that benefit would be passed on in the form of cheaper condoms and disposable gloves. “The key is that they continue to gain efficiencies ahead of the price decline,” she said.
The board declared an interim dividend of US20¢, which was up 18 per cent on last year’s interim distribution.
– smh.com.au
