F&P Healthcare hit by exchange rate

Exchange rate movements were a key factor in a decline in Fisher & Paykel Healthcare's half year profit, and in a cut to its full year profit forecast.

The company today reported net profit of $28.6 million for the six months to the end of September, before a one-off non-cash deferred tax charge of $11.7m that took the bottom line result to $16.9m. A year earlier net profit was $37m.

Chief executive Michael Daniell said core products operating revenue, which excludes discontinued lines, grew 12 percent, taking total operating revenue to $US174m.

A weak US and a strong NZ dollar meant that core operating revenue in NZ dollars rose by 1 percent, while total revenue fell almost 3 percent to $245m.

With an average spot exchange rate of US77c for the NZ dollar for the rest of the year, F&P Healthcare estimated full year operating revenue of about $510m with net profit between about $60m and $63m, or between $48m and $51m after the one-off non-cash tax adjustment.

That is down from expected operating revenue of around $530m for the year, with a net profit before the tax adjustment of between about $65m and $70m, which the company provided at its annual meeting three months ago.

Most of the change from the previous guidance was due to exchange rate movements, Mr Daniell said.

The company is to pay an unchanged 5.4c per share interim dividend.

F&P Healthcare said strong growth was being seen in the respiratory and acute care product group and there had a been a "positive" response to the company's new ICON flow generator range, to be used for the treatment of obstructive sleep apnea (OSA).

Underlying revenue growth was expected to increase substantially in the second half in the OSA product group as ICON sales ramped up, although some customers would remain cautious regarding capital equipment purchases in the current economic environment.

During the latest half year growth in demand for respiratory and acute care consumables was encouraging at 23 percent in US dollar terms, or 15 percent in constant currency.

Strong consumables and accessories revenue growth was offset somewhat by reduced demand for humidifier controllers, Mr Daniell said.

Preparations for a possible H1N1 pandemic in third quarter last year had resulted in exceptional placement of humidifier hardware.

"We believe that health systems around the world are still digesting those. In addition, as a result of the economic situation, particularly in Europe, we've seen some deferral of capital expenditure which can have some effect on ventilator and associated humidifier control and demand."

The company was becoming less exposed to the US dollar, with sales in Canada, Japan, Taiwan, Turkey and Hong Kong moving from US dollars to local currencies in the past year or so, Mr Daniell said.

The 56 percent of operating revenue in US dollars in the latest half compared to 58 percent a year earlier.

The cost base was also becoming more diverse as the company's Mexican operation was developed, with manufacturing having started at the Tijuana facility in April.