F&P Healthcare may need to dust off contingency plans for US tariffs on Mexico

Friday, 31 May 2019

Fisher & Paykel Healthcare could face higher freight costs if US tariffs go on Mexico but doubts the impact would be significant.

New Zealand's second-most valuable company, Fisher & Paykel Healthcare, could cope with United States' tariffs on Mexico by shipping its products in different directions around the world.

President Trump announced on Friday that the US would impose a 5 per cent tariff on all goods from Mexico from June 10, with that rising to a 25 per cent tariff by October, unless the Mexican government took additional steps to stop illegal migration across the Mexican-US border.

Fisher & Paykel Healthcare vice president Marcus Driller said about a third of its production was based Mexico and its factories there produced about half of the products the company sold to the US, which is its largest market.

Driller said it was too soon to comment on how it might respond to tariffs, but he did not expect there would be significant issues for the firm, given it also had a manufacturing base in Auckland.

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'We make products in both facilities.'

If tariffs were imposed, Fisher & Paykel Healthcare, which is valued at $8.7 billion on the NZX, could change which factories it used to supply different markets.

That might increase its freight costs, 'but I doubt that would be very material', Driller said.

Fisher & Paykel Healthcare had considered similar contingencies in 2017 when Trump first threatened a 20 per cent tariff on goods from Mexico, that did not eventuate.

Earlier this month the company reported its annual revenues had topped $1 billion for the first time, with its net profit rising 10 per cent to $209m.

The result continued a long run of strong sales and profit growth for the business.