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Ansell Ltd. August 20, 2013

Ansell Limited Full Year Results 30 June 2013

F’13 HIGHLIGHTS:

   REPORTED IN AUSTRALIAN DOLLARS  REPORTED IN OPERATING CURRENCY - US DOLLARS
   F'12 A$M  F'13 A$M  %  F'12 US$M  F'13 US$M  %
 Sales  1,218.3  1,340.0  10  1,255.3  1,372.8  9
 EBIT  149.4  167.2  12  153.2  170.5  11
 Profit Attributable  130.0  136.8  5  133.0  139.2  5
 Earnings per Share ¢  99.1¢  104.6¢  6  101.4¢  105.5¢  5
 Dividend  35.5¢  38.0¢        
 Free Cash Flow  78.1  98.7  26  99.2  127.9  32

 

 CHAIRMAN’S COMMENT

“In a difficult global trading environment, your Company completed four acquisitions, launched a large number of new products and made significant investments in marketing, plant and equipment and its employees. After a first half with results below expectations, your Company delivered a much improved second half performance and overall, the full year performance was very gratifying. Once again your Board is pleased to announce an increase in the final dividend and an increased year on year total dividend” said Glenn Barnes, Ansell’s Chairman.

 

F’14 GUIDANCE

Ansell expects the trading environment to again be challenging in 2014. Taking account of this, Ansell expects EBIT to grow in the high single digits to low teens with EPS expected to be in the range of US112¢ - US118¢ (up 5%-11%) including declining Deferred Tax Asset/Non-Operational Tax Items (DTAs/NOTIs) of US3¢ - US5¢ a share.

Note: US Dollars used unless otherwise specified. The USD information is non IFRS financial information provided to assist readers by reporting Ansell’s results in the currency in which the business is managed. As in Ansell’s past market releases, the USD information contained in this presentation is a direct conversion of the IFRS AUD financial information included in Ansell’s statutory accounts, converted at the monthly average rate for profit and loss items and the year end rate for balance sheet items.

 

ANSELL LIMITED FULL YEAR 2013 RESULTS SUMMARY

Ansell Limited (ASX:ANN) is today announcing F’13 sales up 9% to US$1,372.8m (F’12 US$1,255.3m), EBIT up 11% to US$170.5m (F’12 US$153.2m) and a Profit Attributable to shareholders of US$139.2m up 5% on the previous year’s US$133.0m. EPS was US106.5¢ up 5% on last year’s US101.4¢. T

he Board has declared a final dividend of A22.0¢ per share unfranked, with a record date of 5th September, 2013 and a payment date of 26th September, 2013. This, when added to the interim dividend, results in a full year dividend of A38¢ up 7% on F’12’s A35.5¢.

 

BUSINESS REVIEW:

Magnus Nicolin, Ansell’s CEO commented, “F’13 was a challenging but ultimately rewarding year for Ansell. There were a number of significant achievements, such as completing four acquisitions, expanding our presence in Emerging Markets, releasing forty eight new products and improving manufacturing productivity and capability.

Importantly, the second half delivered strong profit growth supported by M&A acceleration, new product sales and strong manufacturing improvements.

The acquisitions are being integrated quickly and although the acquired business’ top line has been pressured by the weak global economy, negative FX effects and our product mix optimisation strategy, they are performing as expected at the bottom line.”

 

INDUSTRIAL GBU

   A$M  US$M
   F'12  F'13  F'12  F'13
 Sales  489.0  550.0  504.1  563.6
 Segment EBIT  81.3  90.2  83.7  92.0
 Ebit/Sales  16.6%  16.4%  16.6%  16.3%

 

INDUSTRIAL ACCOUNTED FOR 41% OF REVENUE AND 51% OF SEGMENT EBIT

Sales rose 11.8% with EBIT margin remaining above 16%.

After excluding acquisitions, organic sales were level with last year with moderate growth on a constant currency basis offset by negative FX movements. Demand strengthened through H2 with the business having resolved the ERP issues that affected the first half and with no repeat of the destocking seen at the end of H1. Modest improvements were seen in North America, Latin America and EMEA, however APAC was down as the Australian economy slowed.

Segment EBIT was boosted by the acquisition of Comasec and an improving core business that performed extremely well in H2.

The moderate decline in EBIT margin in comparison to last year was attributable to the acquired Comasec revenue stream, which has historically earned significantly lower EBIT margins than the Ansell average. Success in delivery of cost synergies and the ongoing progress of portfolio optimisation has substantially mitigated this dilutive margin effect.

New product releases continued actively in H2. The major success for the year was HyFlex® 11-518, a lightweight cut resistant glove that has delivered strong sales globally.

 

SPECIALTY MARKETS GBU

   A$M  US$M
   F'12  F'13  F'12  F'13
 Sales  172.4  224.6  177.5  230.0
 Segment EBIT  7.1  11.7  7.2  11.7
 Ebit/Sales  4.1%  5.2%  4.1%  5.1%

 

SPECIALTY MARKETS ACCOUNTED FOR 17% OF REVENUE AND 7% OF SEGMENT EBIT

The acquisitions of APS, Comasec and Hercules provided all of the GBU’s sales growth in F13. Organic sales were down across most regions. Unfavourable FX rate movements were a headwind, while North America sales were affected by dramatically reduced military spending following the announced withdrawal from Afghanistan and the decision in the US congress on sequestration of military spending. Segment EBIT was up based on the higher returns from the acquired businesses and more profitable organic sales mix. In the second half Specialty Markets profitability exceeded 7% EBIT/Sales moving toward a level that will realize the financial return potential of this business.

A significant number of new product releases were made during the year including new oil and gas gloves, construction and DIY general purpose and gardening gloves, food processing high cut protection gloves and Trellchem® suits. Their launches are expected to contribute significantly to sales momentum in F14.

APS is now fully integrated, Comasec Food and DIY are well established under the Ansell portfolio and the Hercules business is making excellent progress.

 

MEDICAL GBU

   A$M  US$M
   F'12  F'13  F'12  F'13
 Sales  346.0  341.2  356.4  349.5
 Segment EBIT  38.6  40.6  39.5  41.1
 Ebit/Sales  11.1%  11.9%  11.1%  11.8%

 

MEDICAL ACCOUNTED FOR 25% OF REVENUE AND 23% OF SEGMENT EBIT

Medical net sales experienced a 2% decline versus prior year predominantly attributable to lower NRL exam sales across most regions. Offsetting the exam shortfall, the synthetic surgical glove business had 22% volume growth, which carries higher margin contributions. In addition, 11% growth in Surgical Safety (SANDEL along with the Preferred Surgical Products (“PSP”) acquisition) favourably contributed to the profit improvement. In the emerging markets, Medical sales continued to have solid growth.

Growth in synthetic surgical gloves has been fueled by the strong positioning of Ansell's high performance synthetic product line, in a market that is increasingly favoring synthetic products over NRL gloves. New product launches continued with clinically relevant medical glove products, including the launch of Sensoprene surgical gloves offering a complete allergy free solution, as well as many new poly-isoprene variants. Furthermore, continued expansion of the proprietary antimicrobial products in our surgical glove line, as well as antibacterial product offered in a procedural glove, contributed to strengthening Ansell’s position as an innovation leader in Medical markets.

Within the Surgical Safety category, sales growth is due to raised market awareness of preventative measures that improve staff and patient safety as well as reducing healthcare costs. Both SANDEL and PSP STAT-PAC™ continue to gain traction and momentum delivering sales growth as they are integrated into the Ansell global network. The PSP acquisition expands Ansell’s product portfolio with disposable proprietary Operating Room turnover kits. It is strategically aligned with our initiatives to provide innovative solutions for improved safety and productivity in the medical space.

Segment EBIT of $41.1m increased by 4% in comparison to prior year. As a percentage of sales, segment EBIT improved due to a continued shift in product mix to higher margin sales, new product launches and the favourable impact of NRL costs.

 

SEXUAL WELLNESS GBU

   A$M  US$M
   F'12  F'13   F'12  F'13
 Sales  210.9  224.2  217.3  229.7
 Segment EBIT  32.2  33.6  33.2  34.2
 Ebit/Sales  15.3%  15.0%  15.3%  14.9%

SEXUAL WELLNESS ACCOUNTED FOR 17% OF REVENUE AND 19% OF SEGMENT EBIT

Sales increased 5.7% for the year (~8% excluding FX rate changes) with SKYN® being the major contributor growing 36% against last year and providing sustained growth on the back of major H1 advertising and promotional activity.

Solid contributors to sales growth were China, Poland, Brazil and France. Further adding to the top line was the launch of amele® in Australia and Orgazmax® across Australia, Poland and France.

Underlying EBIT improved due to higher margin SKYN® sales and higher tender sales but these gains were offset by the one-time cost of the closure of a US packaging plant in H1, some manufacturing efficiency issues, significant H1 costs associated with the global advertising and promotion of SKYN® and negative FX.

 

FINANCE:

Foreign exchange had a significant negative impact of $19.7m on organic sales when compared to the previous year’s rates. The weaker Euro was the major contributor.

After adjusting for acquisitions, working capital was up 3.6% on the previous year, with working capital days up from 70 days last year to 75.1 days this year reflecting the higher relative inventory levels of the acquired businesses.

Free cash flow was strong at $127.9m, up from the previous years $97.2m. Solid growth in EBITDA and improving working capital management of acquired businesses were the main contributors. Capital expenditure was higher, funding increased plant capacities in Bangkok, Melaka and Sri Lanka and the new R&D Centre in Sri Lanka. Interest expense increased due to acquisition expenditure. The four acquisitions (Comasec, PSP, Guangzhou and Hercules) cost $208.6m, while Net Debt increased $179.4m.

This year’s acquisitions caused gearing to rise from 7.2% last year to 23.3% this year. With interest cover at 18X (F’12 35X) and the Net Debt: EBITDA ratio at 1.2X (F’12 0.3X), Ansell continues to enjoy a strong balance sheet capable of supporting future growth.

During the year new long term debt (8-12 years) totalling $142.5.m was issued. At 30 June, 2013 the average maturity of drawn debt was 4.8 years (up from 1.2 years 18 months ago) and the Company had $305.3m of cash and $165m of available unused facilities.

The book tax rate was 10.3% an increase on last year’s 8.2%. This year’s DTA/NOTI benefit to the book tax expense at $9.7m was little changed from last year’s $9.8m.

During the year the Company announced a share buyback of 2-3m shares. At 30 June, 223,376 shares had been bought back at a cost of ~$3.5m. Additional share buybacks are permitted under the existing buyback authorisation.

 

REPORTING CURRENCY:

Ansell’s reporting currency has been the Australian dollar (A$). The Company’s operating currency is the United States dollar (US$). As of 1 July, 2013 Ansell Limited will be changing its reporting currency to US$ and will no longer be reporting in A$.

Going forward, dividends will be declared in US cents a share.

Shareholders will be formally notified of this change and be offered the opportunity to have their US$ dividend converted to and paid in Australian dollars (A$), New Zealand dollars, Euro (EUR) and Pounds Sterling (GBP).

 

DIVIDEND:

The Ansell Board has announced an increased final dividend of A22.0¢ (A20.5¢ in 2012) per share unfranked. The dividend will have a record date of 5th September, 2013 and a payment date of 26th September, 2013.

The total dividend for F’13 will be A38.0¢ per share up 7% on F’12’s A35.5¢. For non-resident shareholders, the dividend will not attract withholding tax as it is sourced entirely from the Company’s Conduit Foreign Income account. This will be the last dividend to be declared in A¢. In future Ansell’s dividend will be declared in US¢.

 

OUTLOOK:

Although some improvement in the global economic environment is anticipated in F’14 in North America and Latin America, this is expected to be offset by weakness in EMEA and APAC.

Ansell therefore anticipates a continued challenging environment in F’14, but still expects an EBIT growth rate in the high single digits to low teens for F’14.

F’14 EPS is expected to be in the range of US112¢ to US118¢ (up 5%-11%).

Within this EPS guidance the positive impact of Net Deferred Tax Asset / Non Operational Tax Item (DTA’s/NOTI’s) adjustments is expected to reduce and be in the range of US3¢-US5¢.

 

FOR FURTHER INFORMATION:

Investors & Analysts

Australia

David Graham, I.R.

Tel: +61 (0) 3 9270 7215 / +61 (0)401 140 749

david.graham@ansell.com

 

Media

Australia

Peter Brookes, Citadel

Tel: +61 (0)407 911 389

pbrookes@citadelpr.com.au

 

US

Frank Mantero, Communications

Tel: +1 732 345 2128

frank.mantero@ansell.com

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