FPH raises guidance after strong device sales

Chris Timms.
Chris Timms.
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 financial year.''

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 stronger-than-expected sales.

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 patient readmissions.

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.

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