Ansell 1H25 Earnings Call Highlights

Ansell (ASX: ANN) shares rallied 6.6% in early trade after reporting a strong set of first-half results that exceeded expectations, along with an upgrade to its full-year outlook.

1H25 Earnings Summary

• Revenue up 30% to $1.02 billion vs. US$913 million consensus (12% beat)

• Net profit after tax up 57% to US$81 million vs. US$77 million consensus (6% beat)

• Earnings per share up 36% to 55.7 US cents vs. 51.2 US cents consensus (9% beat)

• Interim dividend of 22.2 US cents per share vs. 20.7 US cents consensus (7% beat)

• Upgraded FY25 guidance to underlying EPS of 118-128 cents per share (previously 107-127 cents)

Earnings Call Highlights

The below topics have been answered by CEO Neil Salmon and CFO Zubair Javeed.

1H25 earnings: “I'm very satisfied to report double-digit top and bottom line growth and that's come as a result of meeting or exceeding all our FY25 first half year performance objectives.”

Healthcare destocking trends: “Healthcare clearly showing evidence that the destocking effects for the last couple of years are firmly behind us.”

Customer trends: “We look to build on that. And I’m clear that the new customer-focused organic organisation structure that we put in place about 18 months ago, has been effective in strengthening our connection to the end user.”

Market recovery commentary:

• “Healthcare clearly showing evidence that the destocking effects for the last couple of years are firmly behind us, but we also saw some benefit from the catch-up of delayed surgical orders that we communicated to you six months ago.”

• “In industrial markets, manufacturing demand conditions remain subdued with PMIs under 50 in most major countries. There are signs of improvement, but it will take time before we see changes in demand conditions for Ansell.”

Industry participants' view on tariffs and potential impact:

• “Overall, our best view of us versus the industry is that Ansell exports fewer China-made products to the US than the industry more generally. And of course, we've taken actions to reduce that China sole country dependence.”

• “Specific to Mexico and Canada, we have no Canadian-made products as part of our supply chain. We have a very limited number of products that are made in Mexico but overall not a significant exposure.”

• “Should tariffs come into effect our first step is to try to mitigate those through sourcing options. If that's unavoidable then we do expect to be able to pass through tariff increases to our customers.”

KBU margins: “The KBU business has performed above our expectations, very satisfying to see the organic sales growth of 7% and also strong margins across the business geographically and in terms of the portfolio.”

Kimberly-Clark integration and business performance: “I'm confident that we will be able to cut over from Kimberly-Clark transition services to Ansell integration ahead of our original target of the end of fiscal 2025.” New guidance: “Strength in the first half plus my confidence in the second half are reasons I'll outline in a moment are behind our increase in the guidance range.”

Analyst Q&A Highlights

What do you think market growth has been and what do you think organic growth at the sales line is likely to be going forward?

"However, as you've heard in the past, we've long said that we believe a base market growth rate to be around that 3% or 4% growth rate. I would say the industrial demand growth is probably a little lower than average at this time and consistent with the PMI readings that we're seeing. Health care if you include the unwind of the destocking effect is clearly somewhat higher than that on a destocking adjustment basis, but in my view still below the 16% growth that we recorded in health care."

What has driven the margin expansion for KBU?

"It's more general to continued strong execution by the KBU team in pricing and margin metrics... KBU and the origin in Kimberly-Clark in terms of revenue management is more sophisticated than Ansell's historical approaches. And so we're looking to learn from that and extend that more broadly into Ansell."

Were there any risks in the first half of 2025 due to pull-forward of orders from customers because of tariff concerns?

"We see no major variation which would indicate no significant early ordering by our channel partners... So those are not tariff-related but those are two specific factors that we have called out in this presentation. But leaving those aside, then no we have no evidence of any major pull-through in revenue in the first half."

What factors affect the top and bottom of guidance?

"The upper end of our guidance would be driven by strong sales execution and smooth integration. On the other hand, any disruption from tariffs or integration challenges could result in performance closer to the lower end of our guidance."

Why the surprise at leverage improvement?

"Our initial guidance was conservative due to potential working capital pressures, but our execution has been better than expected. This has resulted in a stronger-than-anticipated cash flow and a positive improvement in leverage."

This article was generated with the support of AI and reviewed by an editor.