KEY POINTS:
Promising gains in the snoring sector have not helped Fisher & Paykel Healthcare avoid the choking effect of the high New Zealand dollar.
In its results for the year ended March 31, the New Zealand-based healthcare giant reported an 18 per cent drop in net profit to $57.6 million.
This was despite a 27 per cent rise in revenue from products designed to alleviate obstructive sleep apnea (OSA), a breathing condition often associated with snoring.
Other core product groups grew strongly, with a 15 per cent rise in revenue from its humidification products and 25 per cent from its neonatal and warming devices boosting overall trading revenue to a record $349.3 million.
"The aggregate revenue rise was up 20 per cent, in constant currency terms over the prior year," chief executive Michael Daniell said.
But a 79 per cent drop in net foreign exchange hedging gains to $7.9 million didn't help its pre-tax profit, which slumped to $89.6 million from $104.1 million.
The drop in hedging gains reflected the end of a favourable hedging rate in March last year. Under that deal, Healthcare had an effective exchange rate of US55c, compared with yesterday's close of US72.66.
A final dividend of 7c per ordinary share was approved, unchanged from the year before, with a supplementary dividend of 1.2353c per share for non-resident shareholders.
Although expansion of its operations and sales teams in North America, Europe and Asia/Pacific had swollen expenses, Daniell emphasised the gain in market share in the OSA treatment market, citing pleasing growth from its wide range of masks and flow generators.
Daniell expected that in the 2008 year, revenue would grow to around US$270 million ($370 million) but that operating profit would slip further.
"Our opportunities to grow market share in the OSA and intensive care ventilation markets continue to be positive and we expect to see a contribution to growth from recently introduced products for the treatment of patients in a range of additional applications which include non-invasive ventilation, oxygen therapy, humidity therapy and resuscitation.
"Taking into account underlying growth and allowing for current exchange rates, we expect to achieve an operating profit of $75 million for the 2008 year."
F&P Healthcare derived the majority of its trading revenue (62 per cent) in US dollars, against which the kiwi dollar rose the most during the year.
Euros accounted for 20 per cent, Australian dollars 7 per cent, British pounds 6 per cent, and NZ dollars 1 per cent.
Goldman Sachs JBWere healthcare sector analyst Marcus Curley expected F&P Healthcare would face a stronger NZ dollar in the next financial year.
F&P Healthcare chief financial officer Tony Barclay said that the company's overall tax rate from its various markets was estimated to be 34 per cent for the 2008 financial year, but that the reduction in New Zealand business tax rate to 30 cents in the dollar - plus the Government's 15 per cent R&D tax credit - could effectively slash that by 7 per cent.
"Our estimated effective tax rate for the 2008 year could be 27 per cent if both the rate reduction and the tax credit were in operation at a saving of approximately $5 million."
He said KiwiSaver was unlikely to have a measurable effect on the company as it already operated a subsidised super plan.
Forsyth Barr analyst Guy Hallright said F&P Healthcare's result had met expectations. Its shares rose 9c to $3.69.
