F&P Healthcare to gain from US reforms

F&P Healthcare chief executive Michael Daniell said the Obama bill could boost sales of products used for the treatment of obstructive sleep apnoea. Photo / Paul Estcourt

Fisher & Paykel Healthcare says its sales in the United States stand to benefit from President Barack Obama's healthcare reform bill.

F&P Healthcare's largest market is North America, which accounts for 46 per cent of its sales.

The firm yesterday reported a net profit of $71.6 million for the year ended March 31, up 15 per cent on strong growth across its markets.

But shares dropped 15c yesterday to close at $3.25 last night.

Hamilton Hindin Greene client adviser James Smalley said Healthcare's share price had held out well compared with the rest of the NZX, until yesterday.

The share price's reaction to the result pointed towards an element of shareholder disappointment, he said.

"The reason the stock was holding out quite well was because investors obviously expected a bit more in the result. Obviously they haven't seen that there so the stock is getting sold off accordingly."

Obama's healthcare bill, which was passed by the House of Representatives in March, means more Americans will be covered by health insurance, and have the ability to access the US hospitals which the Manukau company supplies its products to.

"We're talking about up to 40 million additional Americans being covered by medical insurance who are currently not covered, so we see that as beneficial," said F&P Healthcare chief executive Michael Daniell.

He said the Obama bill could also boost sales of F&P Healthcare's products used for the treatment of obstructive sleep apnoea.

Operating revenue rose by 10 per cent to $503.3 million, the company said. A final dividend of 7c would be paid to shareholders on July 7.

Healthcare said growth in its lines of obstructive sleep apnoea and respiratory and acute care products, as well as positive foreign exchange hedging, contributed to the increased profits.

Daniell said a pretax profit of about $20 million was gained from foreign exchange hedging conducted last year.

Asked how the firm had kept up North American sales while other New Zealand exporters struggled with the impact of the recession in that market, Daniell said: "A very large proportion of our revenue comes from recurring items - that's consumables and accessories that are used in the treatment of each patient ... we've really had a minimal impact from the financial crisis over the past couple of years."

Healthcare invested $48 million in capital expenditure across its New Zealand and Mexican operations last year.

This included $27 million spent in New Zealand increasing its manufacturing capacity, new product tooling and replacement equipment, as well as initial site works for its new 31,000sq m building at East Tamaki.

It also spent about $20 million on getting its factory in the Mexican city of Tijuana up and running.

"A lot of that money that we have invested in both locations is capital expenditure, so it only has a small impact on earnings growth because it's an increase in depreciation.

"In Mexico we also had some operating expenses that did impact earnings, and if we hadn't been doing Mexico earnings would have been even stronger, but of course the facility is strategically important to us and it's worth that investment," he said.

The Tijuana plant was commissioned primarily to supply the North American market.

F&P HEALTHCARE

12 months to March 31

2010
Operating revenue - $503m
Net profit - $71.6m
Dividend - 7c

2009
Operating revenue - $459m
Net profit - $62.2m
Dividend - 7c