KEY POINTS:
Fisher & Paykel Healthcare is hopeful a widely anticipated fall in the New Zealand dollar will boost its fortunes.
The medical equipment maker yesterday reported a 30 per cent drop in net profit for the year ended March, despite strong growth in its key US market.
It posted
a record operating revenue of $357.9 million on the strength of increased demand and an expansion in international markets. But the company - which derived 58 per cent of its revenue in US dollars for the 2008 financial year - saw after-tax profit take a dive from $50.5 million to $35.3 million, primarily as a result of the weaker US dollar and strong kiwi.
Chief executive Michael Daniell expects strong revenue growth to continue for the 2009 financial year, although profit was contingent on the NZ-US dollar exchange rate.
Operating revenue was expected to grow by around 15 per cent in US dollar terms to approximately US$310 million. At an average NZ dollar exchange rate of US80c, that would keep operating revenue and profit similar to this financial year.
But if that were to fall to an average of US75c, operating revenue would be around $415 million, with a 20 per cent boost in operating profit, the company said. The kiwi yesterday closed at US77.47c, having fallen from above US82c in mid-March.
Many have been tipping decline in the New Zealand dollar. Deutsche Bank is expecting it to average US74c this year. Goldman Sachs JBWere, meanwhile, expects quite significant weakness over the next 12 months, especially if New Zealand interest rates start to come down, as is expected. An analyst, who preferred not to be named, said Fisher & Paykel Healthcare's guidance for 2009 was relatively light, probably reflecting a cautiousness on management's part.
"This is a company that has had to downgrade guidance in recent years - they probably would like to avoid that happening again, so we suspect there's a level of conservatism in this guidance which is higher than it perhaps was last year.
"Operationally it sounds like things are going well, although currency remains an issue."
Daniell said the new financial year has already started strongly, with robust sales and another significant bulk contract for US hospitals secured by its American distribution partner, Cardinal Health.
F&P Healthcare shares closed down 2c at $2.74.
NOT AS HEALTHY
Year to March 31
F&P Healthcare
Operating revenue
2008 - $357.9m
2007 - $347.5m
Ebit
2008 - $58.1m
2007 - $79.6m
Net profit
2008 - $35.3m
2007 - $50.5m
Final dividend
2008 - 7cps
2007 - 7cps
SITE IN MEXICO LIKELY OPTION
A factory in Mexico is looking more likely for Fisher & Paykel Healthcare as it looks to expand its manufacturing operations overseas.
The company had signalled at its last annual meeting that it was eyeing overseas sites to complement its East Tamaki headquarters, which covers more than 51,000sq m and employs about 1500 people, but was expected to reach capacity in about two years.
Chief executive Michael Daniell said the company had been gathering data on manufacturing in places like China, Thailand and Mexico.
"Mexico probably is ahead at present - although we haven't made a decision - because it's very close to our largest market, the United States and Canada. It makes sense from a transportation and lead time point of view to be close to a large market."
North America makes up 46 per cent of the market for the company's products, well ahead of Europe (32 per cent) and the Asia Pacific and other markets, which make up 22 per cent.
Daniell said the company had been having difficulty finding enough staff in New Zealand to satisfy the growing business' needs.
Expanding overseas would mitigate the risk of a natural disaster affecting operations and there were also opportunities for cost savings.
"The thinking is to be primarily putting growth and expansion there and therefore having a relatively small effect in New Zealand," he said.