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- Ansell (ANN) is feeling the pinch of interest rates and macroeconomic strife
- The company will report the lowest end of its FY23 guidance with FY24 to be worse
- Ansell is preparing to cut down its manufacturing workforce, slow down output, and spend $50m in simplifying the company structure
- It expects positive earnings to result from this spend in FY26
- The news appears too much for some shareholders to bear, with nearly 1.5M shares being traded today – despite the four week average turnover being ~0.25M.
- Ansell shares were down 14.40 per cent trading at $23.77 at lunchtime trades on Tuesday
Ansell (ANN) shares plummeted -14.48% by 12:30pm AEST on Tuesday as the company reported it would clock the lowest end of its FY23 guidance.
The company expects earnings per share to be around US117c – US118c, which is in the middle of the guidance range provided at the half year in February 2023.
In effect, today’s announcement reflects Ansell’s second consecutive warning to its shareholders that FY23 performance will be subpar.
The company has also warned of a hairy FY24 ahead, adding to further losses on the bourse in Tuesday trades.
In summary: Ansell is cutting manufacturing jobs, slowing down its manufacturing output, and conducting a review of overall business structure. Earnings will be harmed, Ansell warned investors on Tuesday.
Without a hedge book gain in FY23, the company expects foreign exchange rates to hit FY24 earnings to the tune of $9 million.
Earnings before interest and tax costs for FY24 are expected to be down $39 million compared to FY23.
Interest costs will also increase for Ansell by around $30 million, reflective of higher average borrowing costs and increased debt.
FY24 capital expenditure could also hit $80 million, but the company noted a “period of elevated investment in additional manufacturing capacity” is nearing its end.
Turbulence ahead
In response to this fairly pessimistic picture, Ansell has announced it will undertake an investment program through FY24 designed to mitigate losses into FY25.
The company will slow down production of its finished goods to normalise inventory holdings. This, the company says, will improve FY24 cashflow but temporarily lower earnings.
The company is aiming to simplify and streamline its overall corporate structure, and, cut down its manufacturing workforce. Ansell expects this process to cost up to $50m, but result in pre-tax cost savings of $45m in FY26.
For many shareholders, that has today proven to be too long a time to wait. As at 12:40pm AEST, Tuesday’s share turnover in Ansell is at 1.499 million shares – versus a four week average turnover of only 241,699 per day.
Ansell shares were down 14.40 per cent trading at $23.77 at lunchtime trades on Tuesday.
