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Ansell Limited (ASX:ANN) share price plummets despite tripling NPAT

Healthcare product provider Ansell Limited (ASX: ANN) shares are down 8.6% to $25.40 at the time of writing on the release of its FY18 results.

Ansell reported a tripling of its NPAT to $US484.3 million for FY18 – up from $US147.4 million in FY17 – a rise of 228% – but this figure does take into account the sale of its condom business, which raked in a one-off after-tax gain of US$345 million.

Shareholders anticipating a dividend lift were not disappointed, with Ansell raising its dividend to US25c per share to be payable on September 13 – a rise from US23.75c in FY17.

But Ansell met with some issues as a result of an increase in rubber prices in its first half, an unexpected headwind, although the company managed to recover well in the second half and its industrial division performed especially well.

Overall Ansell’s healthcare business unit constituted 52% of revenue, coming in ahead of its industrial unit, which accounted for the remaining 48%, but the industrial segment did experience mechanical sales growth of 6.4% over the period with strong growth in new products in its gloves and sleeves range.

FY19 Outlook

External market conditions in FY19 are expected to “remain supportive to top-line growth” for Ansell but obstacles will include uncertainty surrounding the potential introduction of new tariffs on imports from the US to China and the possibility of increasing raw materials costs.

Ansell CEO and managing director, Mangus Nicolin, says Ansell continues to progress on the execution of its growth strategy and is driven by innovation emerging market expansion, brand focus and distribution partnerships.

“We continue to build on our leading position in the growing global personal protection sector in what were generally position external market conditions,” Mr Nicolin said.

“We remain very active in evaluation merger and acquisition opportunities, while still remaining disciplined against both strategic fit and value creation criteria.”

Overall Ansell has labelled FY18 as a “transformational year of positive outcomes” but if the market’s reaction is anything to go by investors were hoping for better revenue growth, after total revenue fell from $1.59 billion in FY17 to $1.55 billion in FY18.

Ansell was named by Credit Suisse as an underperformer back in April when the broker had a $23.60 price target on the stock.

But Ansell shares hit a 52-week high back in late July, finishing off July 30 trading at $29.09 as UBS increased its 12-month price target on the stock from $25 to $27.45 as it soared towards three-year highs.

Other healthcare shares on watch during earning season include Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC) as its results are handed down in late August, with Healthscope Ltd (ASX: HSO) due to report tomorrow.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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