Lending Association

Ansell joins trend of narrowing earnings guidance amidst softening demand

Ansell (ASX:ANN), like other major industrial players this interim reporting season, has followed suit in ‘narrowing’ its earnings guidance without explicitly signaling a potential reduction in results by June 30.

Telstra and Sonic Healthcare set the precedent last week, adjusting their earnings ranges downward. Ansell followed suit on Tuesday, citing a decline in first-half profit and sales due to weakening demand for its protective clothing products, a scenario previously anticipated.

While Ansell initially weathered the pandemic well, along with other companies like Sonic, the fading of that resilience has made sustaining growth challenging, even at reduced rates compared to previous prosperous periods.

The company reported a 70% drop in net profit for the six months ending December 2023, totaling US$19.4 million ($29.7 million), alongside a 6% decrease in revenue to US$784.9 million. Consequently, Ansell will pay a lower unfranked interim dividend of 16.5 US cents per share, down from 20.1 US cents a year ago.

The decline in sales, particularly in its healthcare unit, offset any growth reported in its industrial unit. Ansell had previously cautioned about the possibility of lower volumes and price cuts in the first half due to oversupply in the protective gear market.

The company now anticipates full-year adjusted earnings per share to be within the range of 94 US cents to 110 US cents, slightly lower than the previous estimate of 92 US cents to 112 US cents. This is significantly below the 138.6 US cents reported in 2022-23 (excluding the impact of exiting the Russian market).

Despite the current challenges, Ansell’s CEO, Neil Salmon, remains optimistic, stating that the anticipated headwinds are moderating, and performance is expected to improve in the second half of the year.

In essence, Ansell views 2023-24 as a transitional period, with a potential path back to growth emerging in 2024-25.