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Ansell Ltd. February 09, 2011

Ansell Limited Half Year Results 31 December, 2010


  • Sales of US$583.7m, up 9%
  • EBIT of US$69.3m, up 6%
  • Profit attributable of US$61.0m, up 12%
  • Return on Assets and Return on Equity both remain over 20%
  • Earnings Per Share (EPS) of US46.0¢, up 14%
  • Reorganisation for accelerated growth completed
  • Interim dividend increased to A14¢ (up 8%)



Ansell's Chairman, Mr Peter Barnes commented:

"This was a challenging six month period, as Ansell faced substantial increases in key raw material costs and adverse foreign exchange movements, continued to invest significant resources in Fusion (the company's major ERP project) and implemented a major reorganisation.

I am pleased to report that, even with these substantial pressures, the half's results were up solidly enabling your Board to continue its well established program of increasing dividends."



The current forecast EPS for the year of US86¢-US91¢ a share is reconfirmed. Within this guidance, the Deferred Tax Asset adjustment remains in the previously forecast US8¢-US10¢ range.



Ansell Limited (ASX:ANN) today announced Profit Attributable for the first half of US$61.0m, up 12% on the previous year's US$54.3m.

EPS in Ansell's operating currency, the US dollar, rose 14% from F'10 H1 driven by strong sales, the benefits of past restructuring actions, lower interest and tax expenses. Based on this, the Board declared an Interim Dividend of A14.0¢ a share, unfranked and payable on 16 March, 2011.


  F'10 H1 A$M F'11 H1 A$M % F'10 H1 US$M F'11 H1 US$M %
Sales  611.6 617.5 1 533.3 583.7 9
EBIT 74.4 73.3 1 65.6 69.3 6
Profit Attributable (PA) 61.4 64.2 5 54.3 61.0 12
Earnings Per Share (EPS)* 45.6¢ 48.4¢ 6 40.3 46.0 14
Dividend# 13.0¢ 14.0¢ 8      


The Company's results translated into Australian dollars, showed a lower period on period improvement, entirely due to the AUD's 9% appreciation vs. the USD.



Ansell's CEO, Magnus Nicolin, stated: "Last July's reorganisation into four Global Business Units (GBU's) has been completed ahead of schedule. The GBU's have responsibility for strategy, innovation, global marketing and brand development and have made significant progress on a more focused innovation agenda as well as on driving simplification. We continued to make steady progress on Project Fusion, and expect to commence a phased implementation with the roll out of the new ERP system in the Americas Region in the 2nd half.

These two major company-wide initiatives consumed significant effort. Ansell nevertheless delivered its best sales growth in many years with a 9% increase. In fact, this would have been a double digit increase if not for negative FX rate movements. Ansell's EBIT growth was solid. The Industrial GBU had an outstanding half globally while Sexual Health & Well Being also had a strong result. Medical GBU sales and EBIT drifted lower, negatively impacted by NRL while New Verticals requires further attention. Natural rubber latex (NRL) costs increased an average of 75% in H1 compared to the prior period. Ansell is mitigating this through price increases, plant productivity initiatives and moves to synthetics and these efforts will continue in H2. Over the last 3 years, Ansell has reduced its NRL consumption by approximately 25%."



   A$M  US$M
   F'10 H1  F'11 H1  F'10 H1  F'11 H1
Sales  200.9  180.0  175.1  170.2
Segment EBIT  29.6  22.1  26.0  20.8
Ebit/Sales  14.7%  12.3%  14.8%  12.2%


Medical accounts for 29% of Revenue and 28% of Segment EBIT.

Sales were down 3% with surgical gloves rising 5% and examination gloves falling 10% - as Ansell sought price increases on vinyl and NRL based products. NRL prices increased an unprecedented 75% on the prior period (in USD terms). Given the difficulty in fully recovering NRL cost increases and the drag of long term fixed price contracts, EBIT declined 20% despite a more favourable product mix.

Ansell continues to expand its polyisoprene range of surgical gloves, with two more products added in the last six months. These complement Ansell's exclusive, accelerator free neoprene synthetic glove that removes the risk of Type I and IV allergies.




   A$M  US$M
   F'10 H1  F'11 H1  F'10 H1  F'11 H1
 Sales  217.8  247.0  189.9  233.2
 Segment EBIT  31.9  45.3  28.1  42.8
 Ebit/Sales  14.6%  18.3%  14.8%  18.4%


Industrial accounts for 40% of revenue and 57% of segment EBIT.

Solid global industrial growth, Ansell's excellent product range and the proprietary, patent pending Guardian® Solutions System has enabled Industrial to increase sales by 23% and EBIT by 52%.

All product categories grew strongly with HyFlex® volumes up 32%. Sales rose in all our key developed markets while the Emerging Markets also continued to grow strongly. Customised product ranges are being developed to enable more attractive offerings for the Emerging Markets and additional sales personnel have been hired to expand Ansell's geographical and vertical coverage.

The Guardian® Program continues to drive growth with eleven contract closures worth ~US$6m of new business in the US alone. This solution selling approach has mainly been applied to large customers but has now been redesigned to service smaller ones as well. The Guardian® Program is now available in more than 10 languages and is being used in both developed and emerging



  A$M US$M
  F'10 H1 F'11 H1 F'10 H1 F'11 H1
 Sales 94.0 87.5 82.0 82.6
 Segment EBIT 7.6 0.7 6.8 0.7
 Ebit/Sales 8.1% 0.8% 8.3% 0.8%


New Verticals accounts for 14% of revenue and 1% of Segment EBIT.

Sales were flat in the half while EBIT was negatively affected by product mix, NRL costs, a weaker Euro (that hurt our EMEA household glove business), lower revenues from military glove contracts along with lower production yields. Our DIY channel in the US continues to grow with its strong link to ARCA car racing and new lines of specialist construction gloves in the ProjeX® Series driving sales.

NV was broken out as a separate business to put the spotlight on 5 Verticals or businesses with very different needs and challenges. Improving NV's profitability is the primary challenge and will be accomplished with dedicated management focus on simplification, price management, mix management as well as new product launches in the most attractive segments.



   A$M  US$M
   F'10 H1   F'11 H1  F'10 H1  F'11 H1 
Sales   94.0  87.5  82.0  82.6
Segment EBIT  7.6  0.7  6.8  0.7
Ebit/Sales  8.1%  0.8%  8.3%



Sexual Health & Well Being accounts for 17% of Revenue and 14% of Segment EBIT.

With sales up 13% and segment EBIT up 30%, SHWB has seen significant improvement on the prior period.

The SKYN® polyisoprene condom continues to be an outstanding success with launches into new countries, including Australia and China. Ansell's operations in Brazil (Blowtex) and China (Jissbon) have strong impetus based on more focused Advertising & Promotion spend and new product launches.

The tender business has seen a solid turn-around with supply into India and Brazil and sales up more than US$5m for the half compared to F'10 H1.



FX was a headwind in the first half. Ansell's strong organic sales growth of 9% would have been approximately 11% if not for a weaker Euro which devalued 9% (though this was partially offset by a stronger AUD (+9%) and CAD (+5%). The major cost currencies, the MYR and THB, appreciated 9% and 8% respectively. Ansell's FX hedging program significantly mitigated the adverse EBIT impact of FX. We expect continued volatility in FX markets but Ansell's existing hedges provide adequate coverage in the 2nd half.

Book taxes were lower than in the previous year (US$4.2m compared to US$5.0m) mostly due to the mix of taxable income by jurisdiction. There was a DTA adjustment of US$7.9m in the half, which was comparable to the corresponding period's US$8.1m.

Working capital rose during the half and was US$33.4m higher than the corresponding half in F'10. Debtors were in line with December 2009 despite much higher sales and Creditors were slightly higher. The increase came from inventories, which went from US$158.2m to US$201.1m half on half. This was due to FX and higher raw material costs, the need to support increased sales and sales & operations planning challenges. With NRL prices expected to be high in H2 due to seasonal wintering and the roll out of Fusion in the Americas Region, higher opening inventories offer some advantages. However, Ansell's intention is to manage inventory closer to more normal levels by the end of H2.

The business made significant capital investments during the period in support of increased sales and productivity improvements. Capital expenditure rose by $17.9m, with US$6.5m attributable to ramped up spending on additional production capacity while the remaining US$11.4m came from capitalised Fusion costs. In addition, the increase in inventory as noted above contributed to a reduction in Free Cash Flow to US$13.8m (from US$67.2m).

The Balance Sheet continues to be extremely strong with gearing (NIBD/NIBD + Equity) at 6.5%, being well below the previous year's 13.4%, and the June 30, 2010 level of 8.6%. Interest cover at 30.1x and Net Debt/EBITDA of 0.6x are also robust. Liquidity is also strong with US$218.7m of cash.



The Ansell Board has announced an increased interim dividend of A14¢ (A13¢ in 2010) per share unfranked. The dividend will have a record date of 23 February, 2011 and payment date of 16 March, 2011.

For non-resident shareholders, the dividend will not attract withholding tax.



We anticipate further pressure from raw material price increases. Ansell is continuing its programs to mitigate this impact and the strong global momentum in the Industrial and SH&WB businesses are expected to provide a favourable offset.

Ansell therefore reconfirms the previously communicated EPS guidance range of US86¢ to US91¢ which is up 8-14% on the F'10 US79.7¢ EPS result.

Within the guidance, the EPS impact of DTA adjustments remain in the previously forecast US8¢ to US10¢ range.