Ansell share price higher despite FY23 earnings decline

Ansell's exit from Russia and currency headwinds weighed on its performance in FY23.

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The Ansell Limited (ASX: ANN) share price is edging higher on Monday.

In morning trade, the safety products company's shares are up 1% to $24.48. This follows the release of the company's FY 2023 results.

Ansell share price higher on FY23 results

  • Sales down 15.2% (11% constant currency) to US$1,655.1 million
  • Earnings before interest and tax (EBIT) margin down 10 basis points to 12.5%
  • EBIT down 15.8% (6.7% in constant currency) to US$206.3 million
  • Adjusted earnings per share of 115.3 US cents
  • Operating cash flow down 34.8% to US$74.3 million
  • Dividends per share down 17.2% to 45.9 US cents

What happened in FY 2023?

For the 12 months ended 30 June, Ansell reported a 15.2% decline in sales to US$1,655.1 million. This reflects weakness in the company's Healthcare business, which offset growth in the Industrial business.

Industrial organic constant currency growth was 4.3%, with first and second-half growth in both Mechanical and Chemical. However, management advised that its growth moderated in the second half as industrial end market conditions softened.

Ansell's Healthcare sales declined 20.7% on an organic constant currency basis. Customer destocking affected sales in all SBUs, becoming more pronounced in Surgical and Life Sciences in the second half. Positively, Exam/SU sales improved in the second half, with volumes exceeding first-half levels with stabilised pricing.

Ansell's EBIT came in 15.8% lower on a reported basis and 6.7% on an organic constant currency basis. The former reflects unfavourable foreign exchange movements and its exit from Russia.

A final dividend of 25.8 US cents per share was declared, bringing its full-year dividend to 45.9 US cents. This represents a 40% payout ratio, which is consistent with its dividend policy.

Management commentary

Ansell's managing director and CEO, Neil Salmon, appeared pleased with how the company performed in a challenging environment. He said:

FY23 presented a unique range of challenges as we continued to experience the lingering effects of pandemicrelated changes to customer behaviour on our business in addition to evolving global economic conditions. With pandemic-related supply chain risks subsiding, channel partners and end users took decisions to reduce inventory which materially affected sales in our Healthcare GBU.

We also saw softening in certain industrial end markets towards the end of the year as global interest rate rises began to weigh on manufacturing activity. Despite these challenges, we were able to deliver FY23 EPS within the original guidance range we provided to the market alongside our FY22 results release in August 2022.

Outlook

Management has reaffirmed its guidance for FY 2024 and continues to expect its earnings to decline again.

It is forecasting adjusted earnings per share of 92 US cents to 112 US cents and statutory earnings per share of 57 US cents to 77 US cents. The latter includes investment program costs.

This guidance reflects an expectation for sales growth in the Industrial business and mixed sales trends in the Healthcare business.

Motley Fool contributor James Mickleboro 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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