KEY POINTS:
A product recall has come at a bad time for breathing-products manufacturer Fisher & Paykel Healthcare as the exchange rate continues to push back towards the US70c mark.
The listed-firm is recalling an older version of its continuous positive airway pressure (CPAP) mask and connector because of a
component that can break off if incorrectly cleaned.
The share price fell yesterday despite the company advising the stock exchange that no material impact was expected on earnings.
"Given this and the resurgent Kiwi dollar versus the US we're not particularly surprised to see a small downward movement," said David Lane, head of research at UBS.
The share price was still well ahead of where it was at the start of the year, he said. Shares closed down 5c yesterday at $4.28.
Chief executive Michael Daniell said the high margin nature of the company's products provided a degree of insulation from the rising dollar.
"As an exporter you'd like to see it creeping the other way but I think our shareholders and the market understand exactly where we sit with the exchange rate, they understand that the underlying business has been growing very strongly and we're really taking it on the chin at present and looking forward to it correcting when it does."
The firm said last month it had forward cover for about US$14 million ($20.34 million) at about 62c and up to 70 per cent of the balance remaining against other major currencies at levels marginally better than the then exchange rates.
The balance of US earnings - which account for more than 60 per cent of foreign currency exposure - were either hedged with options in the high 60c or 70c range or remained unhedged.
"So they're still out of the money at this point," Daniell said. "But they do provide a cap though and if the kiwi dollar continued to rise up towards 70c we would have a limit there on 50 per cent of our exposure over the next 12 months."
At this stage the product recall was not expected to have a material impact on projected full-year operating profit of about $98 million, Daniell said.
The masks are used in the treatment of obstructive sleep apnea and if a plastic tab incorporated into the connector failed, it could enter the patient's airway.
The rate of complaint about the older masks was about 0.01 per cent, while a new design had been sold for about seven months, Daniell said.
"Now that we have the new design ... we wanted to just remove the possibility of this occurring, particularly if patients receive a replacement ... connector or mask because of a breakage."
The company had taken out newspaper adverts in New Zealand and Australia as part of a consumer-level recall, and was consulting with international regulatory authorities about the appropriate action overseas.
The recall would cover 55 countries but the company estimated only a few of the older design masks and connectors remained in the supply chain.
People can call a toll-free information line to determine whether they need a replacement part, which would then be sent to them.
It was important that people did not stop using their equipment until they had a replacement part if it was in fact necessary, Daniell said.
Product recalls were not uncommon in the medical sector and the company did not expect the credibility of its other products to suffer, he said.
"Our experience has been one of not negative response ... you could say even positive response because both our retailers and dealers in hospitals and the patients using our devices appreciate the fact you're doing the right thing by them."
If the correct cleaning instructions were followed in-house tests showed a breakage should not occur during the normal life of a mask, Daniell said.
The average usage of the product was between 10 and 12 months - although this tended to be longer in New Zealand and Australia, he added.
More information can be had by calling 0800 000 997.
