Fisher & Paykel Healthcare reported a record $97.4 million interim profit on record sales across its two divisions.
Net profit rose 20 percent in the six months through September, and was 14 percent higher on a constant currency basis, the Auckland-based maker of hospital equipment and personal sleep apnoea products said.
That beat the firm’s $95 million forecast and saw it raise its interim dividend by 11 percent. Its shares rose 1.1 percent to $13.20.
Fisher & Paykel, which employs almost 4,200 people in 37 countries, is benefiting as ageing populations and changes in medical thinking increase demand for its products.
While just over half its staff are in New Zealand, only about 1 percent of its sales are in local currency, with about half in US dollars and almost 20 percent priced in euros.
The company reiterated its full-year earnings forecast at $205 million to $210 million. The forecast assumes exchange rates of 67 US cents and 60 euro cents for the period, from 72 US cents and 59 euro cents for the prior March year.
It also allows for an expected $20 million to $30 million spend on litigation for the full-year and a moderate flu season in the Northern Hemisphere. Last year the flu season there had been very strong, meaning more people got sick.
Fisher & Paykel has been locked in patent disputes with rival ResMed since 2016 and in September trimmed its earnings forecast after its San Diego-based rival lodged complaints with the US International Trade Commission.
Fisher & Paykel spent $15.6 million on litigation in the year ended March 31, down from $20.7 million a year earlier. Litigation cost it about $7.7 million in the six months through September.
Managing director Lewis Gradon noted the “lumpy” nature of legal action, and the fact the ITC action and a Federal Court action in Australia would cause “big spending” by company later in the second half.
He urged analysts not to try and forecast a litigation spend for the coming year based on the second-half rate.
Operating revenue for the six months through September climbed 12 percent to a record $511.3 million, up 8 percent on a constant currency basis.
Operating revenue for the hospital product group, which includes products used in respiratory, acute and surgical care, increased 13 percent to a record $297.3 million and was up 11 percent in constant currency.
Homecare product revenue – which includes sleep apnoea and respiratory support equipment – rose 10 percent to $211.1 million, up 6 percent in constant currency.
“Our devices and systems used for nasal high flow therapy continue to drive much of the growth in our hospital business,” Gradon said. “Our new F&P 950 heated humidification system for neonates is performing well in New Zealand and Australia, and we are looking forward to the release of the 950 in Europe next year.”
Growth in hardware devices used in the home was “robust” and the company experienced strong demand for its myAirvo and SleepStyle devices, he said. Sleep apnoea masks and accessories growth of 2 percent in constant currency terms was as expected, as the company anticipates the launch of new masks.
Minor changes had been needed to the manufacturing process for its new mask, which will now be introduced early in 2019, followed by further new masks during the year, Gradon said.
Fisher & Paykel is forecasting about $160 million of capital expenditure this year, mostly for construction of a fourth building in Auckland and a second in Mexico.
Gradon noted that while the new Mexican building should be completed in December, production won’t start until the new financial year. The Auckland building won’t be completed until late 2020 and consideration of other processing sites is probably several years away, he said.
The company noted that its full-year earnings forecast assumes a moderate flu season in the Northern Hemisphere, and that it had experienced a “very strong” flu season there last year.
Gradon said that, on a full-year basis, the difference between a strong and moderate flu season could be 2 to 4 percent of sales growth for the firm’s hospital division.
It was hard to be that precise on the earnings impact, he said, noting that in the past seven years the company had experienced two strong flu years, three moderate years and two weak ones.
The company will pay an interim 9.75 cents per share dividend on Dec. 21.