F&P Healthcare lowers guidance on strong NZD

Inside the Fisher and Paykel Healthcare factory in East Tamaki, Auckland. Photo / Dean Purcell

Fisher & Paykel Healthcare lowered full year earnings guidance due to the strong New Zealand dollar and patent litigation costs, and separately announced plans to expand manufacturing to a third country.

In May, the medical devices maker said it expected operating revenue to be about $1 billion and net profit in a range of $180 million-to-$190m, based on the New Zealand dollar trading at 69 US cents. However, while trading has been in-line with expectations for the first five months of the financial year, the kiwi has been firmer than forecast.

Assuming an exchange rate of approximately 72.5 US cents for the remainder of the year, F&P Healthcare expects operating revenue to approach $1b and net profit to be "in the range" of approximately $180m to $190m dollars, chief executive Lewis Gradon said in speech notes published ahead of the annual general meeting.

The Auckland-based company lifted annual profit to a record $169m in the 12 months ended March 31, from $143m a year earlier, on a 10 per cent lift in revenue climbed 10 per cent to $894m.

In the first half of the year, it is expecting operating revenue of about $460m and net profit of some $80m.

Regarding the patent litigation costs, Gradon noted ResMed withdrew its complaint in the US International Trade Commission three months ago, saying it would file again shortly, but this has not occurred to date.

Various court hearings have been held in Germany over the past month and the company is awaiting the outcome of those decisions. "To date we have been pleased with how the litigation has progressed" and the board and management "believe that it is in the best interests of the company to assert our patent rights and vigorously defend the allegations made against us," he said.

Gradon also said construction of the company's fourth building on our Auckland site is on track to be complete by 2020. In Mexico, the earthworks for a second building are complete and the design and construction phases will begin shortly. It anticipates the facility will be operational in mid-2018 and will provide additional manufacturing capacity.

"Once this facility is complete, we will begin to look into the possibility of manufacturing in a third location outside of both New Zealand and Mexico, in order to further diversify our manufacturing operations," he said. He provided no further detail.

Fisher & Paykel Healthcare shares slipped 0.1 per cent to $11.64 and are up 37 per cent so far this year.