Ansell share price slumps 8% as healthcare sales fail to cough up

It's time to put on the gloves and pick apart this doozy of a report.

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Health professional putting on gloves.

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Key points

  • The Ansell share price is down 8.3% to $25.75 after the company released its figures for the first half
  • Sales under the healthcare division weighed on the company, while industrial sales grew
  • The company has revised its FY23 EPS guidance downward

The Ansell Limited (ASX: ANN) share price is in a world of pain on Tuesday following the release of its FY23 first-half results.

In the first hour of trading, shares in the glove manufacturer are down 8.3% to $25.75. The negative move makes Ansell one of only two healthcare shares in the S&P/ASX 200 Index (ASX: XJO) in the red today.

Let's unpack what happened in the first half for this top 100 ASX share.

Ansell share price descends amid 17% fall in sales

  • Sales dived 17.2% compared to the prior corresponding period, reducing to $835.3 million
  • Earnings before interest and tax (EBIT) of $91.5 million, down 17.6%
  • Net profit after tax (NPAT) came in at $64.8 million, down 16.5%
  • Earnings per share (EPS) weakened 16.5% to 50.6 US cents
  • Operating cash flow improved to $3.5 million compared to a $22.1 million outflow
  • Interim dividend of 24.24 US cents per share declared, down 17.1%

The popular glove maker recorded weaker metrics across the board for the December ending period.

It appears the woeful result stems from significantly reduced sales in the company's Healthcare segment. In the first half, healthcare sales declined 21.9% to $467 million. Expected destocking and price reductions weighed on this area of the business.

In contrast, Ansell's Industrial segment recorded sales growth of 6.4% year-on-year — tallying up $368.3 million in sales.

What did management say?

Managing director and CEO Neil Salmon unpacked the half-year performance which is impacting the Ansell share price, stating:

We saw destocking trends previously evident primarily in medical end markets extend more broadly into other markets with impacts on our Exam/SU products sold into industrial settings and Life Sciences. This was due to a combination of customers becoming cautious on economic conditions while growing more comfortable to reduce inventory as supply chain pressures have eased and product availability has broadly improved.

Furthermore, the executive named the strengthening US dollar as a contributor to the company's reduced EBIT in the first half.

Turning to the positives, Salmon told shareholders the difficult conditions have not discouraged continued investment in expansion, as well as research and development. Pleasingly, Ansell's construction of its India facility remains on track.

What's next?

Looking forward, management is confident growth momentum will continue for its industrial unit into the second half. Although, this could be offset by a delayed moderation of destocking under the healthcare unit.

Additionally, Ansell could see pressure on surgical glove demand in the second half as improved competitor supply comes to market.

For these reasons, the management team has revised Ansell's EPS guidance for FY23. Previously, the range was between US$1.15 to US$1.35 per share. However, the revised range is now between US$1.10 and US$1.20 per share — a 4% and an 11% reduction on the bottom and top ends respectively.

Ansell share price snapshot

Ansell shares had been holding up fairly well prior to today. Excluding today's move, the Ansell share price was up roughly 9% over the past year compared to the 3% gain in the benchmark index.

However, after today's disappointing move, the global glove manufacturer is barely in the green compared to a year ago.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell. 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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