The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price is under pressure on Wednesday.
In morning trade, the medical device company's shares are down 6% to $24.20.
Image source: Getty Images
Why is the Fisher & Paykel Healthcare share price sinking?
Investors have been selling down the Fisher & Paykel Healthcare share price this morning following the release of a trading update out of the company.
According to the release, with the end of its financial year rapidly approaching, management now has a good idea of the revenue it will generate in FY 2022.
Based on current exchange rates, Fisher & Paykel Healthcare expects full year operating revenue for the 12 months ending 31 March to be in the range of NZ$1.675 billion to NZ$1.70 billion.
This represents a 13.7% to 15% decline year on year from NZ$1.97 billion in FY 2021.
Based on this, there has been a marked softening of its performance during the second half, as Fisher & Paykel Healthcare's half year operating revenue was only down 2% over the prior corresponding period.
What's happening?
Management explained that its performance has been impacted by softening demand in the hospital consumables segment due to the Omicron variant causing lower respiratory intervention requirements and a mild flu season in the Northern Hemisphere.
Fisher & Paykel Healthcare's Managing Director and Chief Executive Officer, Lewis Gradon, said: "Our second half hospital consumables revenue is currently tracking to be similar to the hospital consumables revenue that we reported in the first half of the 2022 financial year. This is consistent with reports of the increasing prevalence of the Omicron variant over the last two months and its associated lower respiratory intervention requirements, as well as a relatively mild flu season in the Northern Hemisphere."
"In our Homecare product group, growth in sales of our OSA masks is currently tracking above our first half growth rate despite supply constraints of treatment hardware in the market," he added.
Also putting pressure on the Fisher & Paykel Healthcare share price is news that its margins have been impacted by higher freight costs.
Mr Gradon said: "Freight rates remain elevated and for the 2022 financial year are expected to impact our long-term gross margin target of 65% by approximately 250 basis points."
Nevertheless, the Chief Executive Officer remains positive on the long term future of the company.
He concluded: "Regardless of how COVID-19 effects unfold over the short term, we are confident our business is well-placed to contribute to a positive change in clinical practice and improving outcomes for respiratory patients in general over the long term."
