KEY POINTS:
Reduced exchange rate protection is cutting into profits at Fisher & Paykel Healthcare, but its half-year result was still ahead of forecast as the business enjoys continuing double-digit growth, the breathing-products maker said yesterday.
Operating profit for the six months ending September 30 was $46.1 million, down from
$47.4 million last year but ahead of guidance in August of between $44 million and $45 million.
Chief executive Michael Daniell said he was pleased with the result considering net foreign exchange hedging gains contributed just $2.8 million compared with $22.6 million for the same period last year.
The result was better than originally anticipated despite the persistent strength of the dollar, he said.
"We're also looking to stronger performance for the full year than indicated by our initial 2007 operating-profit and exchange-rate sensitivity guidance," Daniell said.
In May, Daniell said operating profit would be similar to last year's record $104 million, based on an exchange rate of US60c.
The full-year operating profit was now expected to be about $98 million, provided exchange rates remained at similar levels to those experienced during the first six months.
"This compares favourably to our original guidance back in May which indicated a full-year operating profit of approximately $94 million at a 63c rate," Daniell said.
Fisher & Paykel Healthcare's share price closed up 13c yesterday at $4.31 a share.
Goldman Sachs JBWere analyst Marcus Curley said the operating-profit guidance was less than market expectations of about $104 million, principally reflecting the strength in the dollar.
The share price rose on the basis of future promise from new products and on confirmation the underlying business was still solid, Curley said.
"Most people see the strengthening New Zealand dollar as a temporary issue, and so the other two are much more powerful themes."
The company had forward cover for about US$14 million at 62c and up to 70 per cent of the balance remaining against other major currencies, but at levels marginally better than current rates.
During the six months ending September, US dollars accounted for 62 per cent of trading revenue, and the company's sensitivity to exchange rate movements continued to be about $3.5 million of operating profit for every one cent shift.
Despite the slight fall in profit, trading revenue - before the effect of hedging gains - was up 28 per cent at $173.2 million.
"For the remainder of the financial year we expect a continuation of strong, underlying revenue growth across our product groups and international markets, with constant-currency growth of approximately 20 per cent," Daniell said.
There were clear opportunities for continued market-share growth in obstructive sleep apnoea, intensive care and neonatal sectors - while patient applications would expand through the introduction of new products including non-invasive ventilation, oxygen and humidity therapy and resuscitation.