F&P Health to save $20m annually in Mexico move

Photo / NZ Herald

Fisher & Paykel Healthcare will move part of its manufacturing to Mexico to eventually save up to $20 million a year but an unexpectedly gloomy forecast for its current year weighed on its share price yesterday.

Its shares dropped 20c, or 6.7 per cent, to $2.87.

The company reported a a 76 per cent rise in full-year net profit to $62.2 million, beating analysts' forecasts.

The increase was a result of 16 per cent growth in sales of its respiratory and acute care products and its obstructive sleep apnea machines, as well as favourable exchange rate movements.

Earnings before interest and tax for the year to the end of March also grew 76 per cent, compared with the previous year, to $102.4 million.

Operating revenue for the year rose 28 per cent to a record $458.7 million, or in US dollar terms grew 10 per cent to US$299.3 million.

The company said it estimated overall net profit growth of about 25 per cent for the 2010 financial year to about $75 million to $80 million, at an average exchange rate of US60c to the NZ dollar. Analysts said the consensus estimate for 2010 had been for a net profit of about $105 million.

Chief executive Michael Daniell said the company was being cautious about the new year after the 16 per cent increase in underlying growth in the reporting period.

"You could argue that we've seen no impact of the global recession but we are being cautious in forecasts for the new financial year. After all who knows what is going to happen around the world - a small amount of what we do is more discretionary spending."

"We will be expanding both our R&D activities and our manufacturing capacity in New Zealand, and will also establish an offshore manufacturing facility," Daniell said.

The company expected it would need to double manufacturing capacity in the next five years with about $30 million earmarked for capital development at its East Tamaki site and $18 million developing a new plant in Tijuana, Mexico.

That location would provide shorter delivery times and reduced freight and manufacturing costs, and work was scheduled to begin later this financial year.

High-volume consumable items, such as respiratory masks and breathing systems, would be manufactured in Mexico, making way for new products and processes at its East Tamaki site.

It was estimated the Mexico facility should generate savings of $15 million to $20 million annually within five years.

Forsyth Barr analyst Guy Hallwright said last year's result had benefited from unusually high revenue growth in the first quarter.

"There's nothing wrong with the result but the guidance was well below the market."

An explanation of its spending plans - regarded as a logical step - had been made public after the guidance and the subsequent steep drop in its share price, he said.

F&P HEALTHCARE

Year ended March 31

Operating revenue
2009: $458m
2008: $357m

Net profit
2009: $62.2m
2008: $35.3m

- NZPA