Medical device maker Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) today reported a record net profit after tax (NPAT) result for the 2015 fiscal year, exceeding its own earnings guidance that it provided in November.
So What: Fisher & Paykel Healthcare Corp is a New Zealand-based medical device maker which provides respiratory and acute care systems for the treatment of obstructive sleep apnea (OSA).
Indeed, this is a rapidly expanding field given OSA, which is mostly caused by excess weight and obesity (another growing health concern in Western societies), can lead to other serious complications, including cardiovascular disease and premature death. Given that most cases of OSA remain undiagnosed, there is an enormous market pool that remains untapped.
The products that Fisher & Paykel provide are designed to increase the effectiveness and efficiency of care, allowing OSA sufferers to enjoy a better night's sleep and an all-round healthier day-to-day life. The company estimated that its products were used in the treatment of more than 10 million patients through the year.
For the 12-month period ended 31 March 2015, the company reported an 8% lift in operating revenue to NZ$672.3 million, which equated to a 13% rise on a constant currency basis. The company's two major product groups, being Respiratory and Acute Care (RAC) and Obstructive Sleep Apnea (OSA), recorded sales growth of 9% and 8% respectively during the period, while consumables and accessories accounted for a whopping 81% of total group revenue.
This helped it to achieve a record NPAT result of NZ$113.2 million (A$106.2 million) for the year – compared to management's guidance of NZ$105-110 million – while its operating profit grew 19% to NZ$170.1 million. On a constant currency basis, operating profit grew a remarkable 57%.
In addition, the company improved its gross margin by 443 basis points (4.43%) in constant currency – a result of a favourable product mix, increased volumes from its Mexico manufacturing facility and improvements made to logistics and manufacturing – while it also declared a final dividend of NZ 8 cents per share.
Commenting on the result, the company's CEO Michael Daniell said: "We have exceeded our earnings guidance provided in November as a result of robust revenue growth in both major product groups, a continuation of gross margin expansion and through operating leverage, and despite a $26.7 million reduction in foreign exchange hedging gains compared to the prior year."
Now What: Fisher & Paykel is well positioned to profit as the world becomes more aware of OSA, but it mightn't be the greatest option today.
ResMed Inc. (CHESS) (ASX: RMD) has fallen in price heavily in recent weeks, and now looks to be a better buy than its New Zealand-based rival. Investors could also look to the smaller end of the market where Somnomed Limited (ASX: SOM) is quickly making a name for itself, and offers a cheaper and less invasive treatment alternative to that offered by either ResMed or Fisher & Paykel.
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