The Ansell Limited (ASX: ANN) share price will be on watch today after reporting its FY21 first half result which showed high levels of growth.
Ansell is a producer of health and safety products such as gloves.
Ansell’s FY21 half-year result
The protective glove company reported that sales increased by 24.5% to $937.8 million. There was volume growth of 12.3% and price/mix growth of 10.6%.
Management said there was strong organic growth in the healthcare segment of 37.3%, with strong volume growth across all divisions, and a favourable price/mix impact.
The industrial segment also achieved organic growth, though much lower, at 7% with strong volume growth from chemical protective clothing and multi-purpose/electrical/cut gloves offsetting weaker demand from ‘impact gloves’.
Ansell’s EBIT (EBIT explained), which includes a $2.7 million share of profit from the sale of Careplus, grew by 60.6% to $147.4 million. The company’s net profit grew by 61.9% to $65.8 million whilst profit or earnings per share (EPS) went higher by 65.5% to 82.9 cents.
The one negative was that operating cashflow sank 74.9% to $12 million. Ansell explained that this reflected increased investment in working capital to support sales growth and higher capital expenditure to expand capacity to meet greater demand while achieving a return on capital employed (ROCE) of 16.3%.
Ansell dividend declared
The board decided to increase the interim dividend by 52.6% to 33.2 cents per share.
Ansell management comments
Ansell CEO and Managing Director Magnus Nicolin said: “Our capacity expansions are progressing well despite the challenges of operating in a COVID-19 environment. During the first half, we started five new production lines and expect another eight production lines to go live during the second half. This is an unprecedented expansion of capacity for Ansell and reflects a strategy to better meet increased demands but also control our destiny in terms of supply and improved sustainability practices. By FY22 to FY23 we expect to have more than doubled our in-house capacity of single use gloves and suits and will also have expanded capacity in surgical, multi-purpose, chemical and electrical gloves to be able to meet stronger demand”.
Summary thoughts
Ansell is expecting strong demand to continue for the next 12 months. Even when the world is 70% vaccinated, it still expects elevated demand for various reasons, including better protection awareness and improving industrial activity.
In FY21 it’s expecting EPS to be in the range of US$1.60 to US$1.70.
This was a strong result from the business. Whilst the circumstances of why the demand is so high is concerning, the fact that Ansell can help is good for the world and beneficial for shareholders.
The Ansell share price remains elevated but it doesn’t seem heavily overpriced given the ongoing demand and expected profit growth for the year. It could be one to watch for the long term.
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