Fisher & Paykel Healthcare annual profit falls 28% as pandemic demand wanes

Wednesday, 25 May 2022

• F&P Healthcare’s annual profit fell 28%

• The company is coming off a period of huge demand for its products

• Revenue from its key hospital division fell 19%

• F&P Healthcare shares fell to a 2 ½ year low

Fisher & Paykel Healthcare reported a 28% drop in annual profit as demand for its breathing aids slowed from the unprecedented high levels during the earlier stages of the Covid-19 pandemic.

Profit fell to $376.9 million in the year to March 31, from $524.2m a year earlier, the company said in a statement to the NZX on Wednesday. Revenue slid 15% to $1.68 billion, in line with the company’s forecast for revenue of between $1.675b to $1.7b.

Fisher & Paykel experienced a surge in demand for its products during the pandemic, selling 10 years’ worth of devices in two years as hospital clinicians turned to nasal high flow therapy as a front-line treatment for Covid-19 patients.

“The last several years have been remarkable for our company,” said managing director Lewis Gradon.

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During the pandemic, Fisher & Paykel has sold its products to new countries, new hospitals and new areas within hospitals.

But demand for its breathing aids is now starting to slow, with revenue from its key hospital division, which includes humidification products used in respiratory, acute and surgical care, down 19% to $1.2b.

Gradon said the company had supplied an “extraordinary” amount of hospital hardware over the past two financial years but warned sales of the devices were now expected to fall.

“Covid-19 may have peaked in many parts of the world for the time being and many countries have boosted their hospital treatment capacity,” he said. “As a result, we do not expect hospital hardware revenue for the 2023 financial year to continue at FY22 levels.“

Over time, the company expects hospital clinicians to use the extra respiratory machines purchased during the pandemic for an increasing proportion of respiratory-compromised patients in general, boosting sales of consumables which connect to the machines and have to be replaced regularly.

“If the change in clinical practice occurs over a three-to-five-year timeframe, it would drive strong growth in hospital consumable sales over this period,” Gradon said.

Still, the uncertainty ahead meant the company could not provide guidance for the coming year, he said.

“Given the ongoing uncertainties regarding our customers’ stockholding choices and their capacity to implement new protocols with personnel shortages and the possibility of further surges of Covid-19 over the near term, we are not currently providing quantitative revenue or earnings guidance for the 2023 financial year,” Gradon said.

Higher freight costs weighed on the company’s gross profit margin, which fell to 62.6% from 63.2%, and Gradon said the margin was likely to be at a similar level this year.

Fisher & Paykel has ramped up production to cope with the surge in demand during the pandemic, and expects to spend about $700m over five years on land and buildings.

Chief financial officer Lyndal York said the company had started earthworks for a fifth building at its Auckland campus, which would see the site reach capacity, and was looking at acquiring a second campus in New Zealand. Its third building in Mexico was nearing completion and it was looking for another manufacturing location overseas, she said.

Fisher & Paykel increased its final dividend to 22.5 cents, bringing the full-year dividend to 39.5c from 38c the year earlier.

The directors approved a profit-sharing payment of $19m to employees who have worked for the company for a qualifying period.

Shares in Fisher & Paykel closed down 3.9% to $19.90, its lowest level since November 2019. The shares have shed 38% over the past year and have pulled back from a peak of over $37 in 2020.

“The result was in line, but there’s a lot of uncertainty about the outlook,” said Devon Funds Management head of retail Greg Smith.