With the coronavirus pandemic sweeping through the nation, consumers are stockpiling on protective products such as sanitiser, face masks and disposable gloves. Given the heightened demand, companies that supply these products could be seeing blockbuster sales.
Ansell Limited (ASX: ANN) is a global leader in developing, manufacturing and distributing health and safety protection solutions. The company operates in the industrial and healthcare sectors, providing gloves and other protective personal equipment.
How has coronavirus impacted Ansell?
Ansell shed some light on the impact of coronavirus when the company reported its half year results last month. The update highlighted that the coronavirus outbreak will bring new macroeconomic headwinds. Although the situation has evolved since Ansell released an update, the company was actively fast-tracking regulatory and product imports of protective equipment to help the people of China.
Overall, Ansell forecasts that the coronavirus outbreak will have both positive and negative impacts on the company, with the net impact on the bottom line expected to be minimal. Ansell has a plant in Xiamen, China, that produces protective medical suits. Despite potential quarantine measures, the plant has taken action to maximise production in order to meet booming demand. Ansell also implied that the supply chain of raw material from China could mean that production at other plants could be reduced.
How has Ansell performed?
Ansell reported a 67% increase in net profit after tax of $98.4 million for the FY20 half year. The company saw sales revenue lift by 3.9% to US$753.3 million, fuelled by a solid performance from the company's healthcare segment. The healthcare division saw organic sales growth of 3.4%, with strong demand seen in surgical and safety solutions. Ansell also highlighted strong cash flow of US$47.8 million and a nearly 93% cash conversion rate.
Despite the uncertainties surrounding global economies and trade, Ansell reaffirmed its full-year guidance. The company expects organic growth and continued margin expansion to drive growth, maintaining an earnings per share guidance range of between 112 and 122 cents.
Should you buy?
With the coronavirus pandemic still evolving, Ansell could see demand for its personal protective equipment increase. The company currently produces well known glove brands including Microflex, Gammex and Hyflex. Despite the potential for greater sales, the company could also experience supply chain constraints given it operates large plants in Thailand and Vietnam.
The Ansell share price is currently following the rest of the market and trading around 20% lower than its February high, although it has lifted by 5% in today's trade. Although coronavirus is expected to have minimal effect on the company's bottom-line, I think a prudent strategy would be to wait for positive price action before making an investment decision.
Another company in this space that you may want to keep an eye on is Wesfarmers Ltd (ASX:WES). Wesfarmers owns the Bunnings stores, which also stock health and safety equipment.
