F Healthcare flees from over-valued kiwi, trims guidance
By Jonathan Underhill
Aug. 19 (BusinessDesk) – Fisher & Paykel Healthcare, whose strong sales growth in the U.S. is being clipped by an equally strong kiwi dollar, will expand
production in Mexico and target sales growth in other currencies.
The company “is acutely conscious of the effect of the high NZ dollar on shareholder returns,” said managing director
Michael Daniell. “Exchange rate volatility continues to be extreme, with the New Zealand dollar well above its long-term
average value, particularly when compared to the U.S. dollar and euro.”
Foreign exchange hedging earned $38 million in Healthcare’s latest year, when it posted record operating revenue of $506
million. But net profit fell 27% in New Zealand dollars, its reporting currency, to about $53 million. The decrease
reflected “unfavourable exchange rate movements” which turned a 9% gain in sales in U.S. dollars into a 1% gain in the
kiwi currency to $506 million.
So far this year, the kiwi dollar has advanced 6% against the greenback and traded recently at 82.17 U.S. cents. But on
a trade-weighted basis the gain is only 2%. The U.S. Dollar Index, which measures the greenback against a basket of
major currencies, has declined 6.1%.
Healthcare gets 54% of operating revenue in U.S. dollars and 23% in euros. The kiwi has slipped just 1.5% against the
euro this year.
Assuming the kiwi dollar trades between 80 cents and 85 cents for the rest of the financial year, the company sees
annual revenue of between $515 million and $530 million, Daniell told the meeting. That would be up from $503 million
Annual net profit is forecast at $60 million to $65 million, down from the range it gave in May of $62 million to $76
million and down from last year’s $71.6 million.
The company’s response has been to expand its plant in Mexico, where its operations have widened from manufacturing its
respirators and sleep apnea masks to direct sales and even R The shift has lowered.
Sleep apnea may be an untapped global market, based on figures the company cites of 10 million people who have the
condition worldwide where they stop breathing momentarily during sleep. This has been linked to heart disease and other
ailments, it says.
It plans to generate most of the growth in its consumables products by ramping up output at its factory in Tijuana,
where it began manufacturing in April last year.
“We are achieving the expected manufacturing cost savings, and the Mexico facility is beginning to contribute positively
to operating margin,” Daniell said.
The shift to Mexico has accelerated. Originally half of its high-volume consumables were to be made there within fives
years. By speeding up the move, it will “achieve the expected $20 million of annual savings sooner.”
The shares rose 1.7% to $2.38 on the NZX today.