The Fisher & Paykel Healthcare Corp Ltd
(ASX: FPH) share price is in focus after releasing a trading update for FY22.
FY22 update
This update is for the first four months of FY22, ending 31 July 2021.
Revenue for these four months was $583 million. In constant currency terms, that was a decline of 2% compared to the first four months of FY21 – that was when there was high demand due to COVID-19 in North America and Europe.
Of that revenue total, 74% was hospital product revenue and the other 26% from the homecare product group.
Hospital product revenue
The hospital product revenue was 3% lower in constant currency terms. This consisted of a 13% decline in hardware sales (which accounted for 34% of hospital sales) and a 2% rise in consumable sales (which accounted for 66% of hospital revenue).
Compared to pre-COVID levels, overall hardware volumes remained elevated. This was largely driven by some regions experiencing COVID-19 hospitalisation surges and requiring healthcare help.
Hardware sales in America and Europe and slumped 62%, whilst outside those regions hardware sales were up 42% and consumables grew 31%. It was demand higher that sent the Fisher & Paykel Healthcare share price higher.
The hospital consumable growth continues to reflect the clinical practice shift from invasive ventilation towards the use of Optiflow nasal high flow therapy. There was new applications consumables growth of 17% in constant currency.
Homecare product revenue
Fisher & Paykel saw 4% growth for this segment in the first four months, with 4% growth of obstructive sleep apnea masks.
Outlook for FY22 and the Fisher & Paykel Healthcare share price
Due to the uncertainty of vaccination rates, the effectiveness of vaccines against variants and public responses to COVID-19, the company said it wasn’t able to provide guidance for FY22.
The company isn’t expecting its hospital hardware revenue to continue at this elevated level for the rest of the year. However, it did note there is an increase in demand with hospitalisations in the US. Client choices about stock levels will have a sizeable impact on COVID-related product demand.
But, the longer-term impact is an increased installed base of hardware and increased global physician awareness and experience with therapies and products in hospitals. This is expected to result in an increased number of patients receiving the therapies and products for years to come.
Freight costs remain elevated and Fisher & Paykel Healthcare continues to grow its investment in R&D and advertising. That may suggest the EBITDA margin (EBITDA explained) may be a little lower.
The company is a quality business, but it’s hard to know what demand will look like in FY23 and onwards. There are other ASX growth shares that could be better ideas for growth for the (pre-open) value.
