Investors reacted well to news yesterday Fisher &
Paykel Healthcare had raised its earnings guidance and would
expand its manufacturing facility in Tijuana, Mexico.
Craigs Investment Partners broker Chris Timms said the
company's share price rose 15c on the announcement.
The shares last traded up 10c, 2.47%, at $4.15.
Mr Timms was supportive of the expansion news because it
meant some natural hedging for FPH.
It could manufacture and sell in the same currency rather
than always relying on currency hedging.
The company now expected net profit after tax to be about $97
million for the year ending March 31, assuming a continuation
of current exchange rates.
At its previous guidance update in November 2013, the company
expected full-year net profit to be in a range of $90 million
to $95 million.
Mr Timms said guidance now implied 12% growth in the second
half for RAC (respiratory and acute care) and about 19%
growth for OSA (obstructive sleep apnoea) overall - including
better than 20% growth in OSA masks.
''The guidance upgrade appears to have been chiefly driven by
better-than-expected sales of the high-margin Simplus full
face mask in OSA.
"It is important to note that Simplus was only released in
the United States market in November and will fully ramp up
in the March quarter.
"We consider this upgrade also augurs very well for the 2015
FPH had not yet felt an impact from ResMed's January mask
release, although it was still early days, he said.
Currency was not a factor in the upgrade, with the company
90% hedged for the year in November.
The company also announced it would spend $4 million
upgrading its Mexico plant. The upgrade had been on the cards
but the company brought the capital expenditure forward given
FPH chief executive Michael Daniel said the $4 million
fit-out would increase the Mexico facility's manufacturing
area by two-thirds and would accommodate the installation of
additional manufacturing equipment over the next three years
for products such as breathing systems and masks.
''Our focus on medical devices, which can improve the
effectiveness and efficiency of care, supports the increasing
emphasis of health systems on patient outcomes,'' he said.
For example, in the US later this year, Medicare would start
penalising hospitals for excessive chronic respiratory
That was likely to increase the demand for FPH products that
could help improve care in patients' homes.
The company was also continuing to invest in its site in
Auckland, Mr Daniel said.