Supply chain issues are a stretch too far for Ansell

Mon 31 Jan 22, 1:39pm (AEST)
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Key Points

  • Labour shortages, elevated costs and covid is eating away at Ansell margins
  • The business expects earnings to fall almost -25% compared to last year
  • Ansell shares have bounced strongly from a -23.5% fall after open

Ansell (ASX: ANN) joins the growing list of companies falling victim to supply chain issues, now expecting first half FY22 earnings to fall -24.7% compared to last year. 

Ansell said it has struggled to recover output lost as a result of imposed shutdowns on manufacturing earlier in the financial year. 

The business blamed the slower-than-anticipated ramp up on reduced labour availability and ongoing logistics disruptions. 

Adding further insult to injury was higher than expected increases in freight and labour costs. Ansell said these costs will be partially offset by price increases, effective from 1 January, 2022.

While still subject to audit, Ansell’s top-line has remained intact, rising 7.6% to US$1.01bn.

After taking into account its margin outlook, operations challenges and supply chain disruption, the company revised its FY22 earnings-per-share (EPS) guidance to be within the 125 cents to 145 cents range.

The revised guidance represents a sharp downgrade to the 175 cents to 195 cents EPS guidance provided on 11 November 2021. 

Ansell expects to deliver its half-year FY22 results on Tuesday, 15 February. 

How did other supply chain losers perform? 

Adairs (ASX: ADH) and Kogan (ASX: KGN) while very different businesses, have both been battered as a result of ongoing supply chain challenges and margin compression.

Adairs opened -5% lower last Monday, on the day of its earnings update. Overwhelming selling pressure dragged the stock down -21.5% by market close. 

Adairs has managed to stabilise around last Monday's lows.

2022-01-31 12 58 07-Window

Kogan (left) and Adairs (right) price chart, TradingView

Likewise, Kogan fell -12% last Thursday and stabilising around selloff lows.

Dip buyers have come to play

Ansell has bounced 14.7% from intraday lows of $23.76.

The move comes off immense volume, with 3.5m shares traded compared to a 20-day average of around 713,600. (As at 1:00 pm AEDT)

Ansell Price Chart


What do brokers think?

Macquarie has run the ruler for today’s update, rating the stock as Underperform with a $30.70 target price (15.8% upside). 

Macquarie said that the revised guidance was around -20% below market consensus, with additional omicron risks that are still unknown.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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