Lowered demand for Covid-related products, supply chain concerns, the Russian war on Ukraine, Sri Lanka’s economic downfall and human rights lawsuits—global safety solutions company Ansell (ASX: ANN) year has been shrouded in problems. And the Company does not expect the impact of these challenges to go away any time soon.
Ansell announced sales of US $1,952.1 million in FY22, representing a decline of 3.7% on a reported basis and decline of 2.2% on an organic basis.
The Company’s healthcare GBU organic growth declined 2.4% and industrial GBU organic growth declined 1.9%. While the Surgical and Life Sciences arm continued to deliver strong results, sales were further brought down by Exam/SU which saw lower prices and volumes as demand for COVID-19 related PPE fell.
Besides lowering demand, profit margins were also negatively impacted by COVID-19-related manufacturing disruptions, higher freight costs and Ansell’s share of loss from Careplus JV (equity accounted).
Evidently, many products that thrived during peak Covid-19 suffered significantly over the past year. For instance, there was greater demand in the Cut Protection segment but that was offset by weaker performance from MultiPurpose gloves, which had benefited during the pandemic’s worst.
Along with that, Ansell’s Chemical offerings witnessed an organic growth decline of nearly 12%, driven by Protective Clothing. Though the demand for chemical gloves remained high, sales were affected by supply chain problems, like shipping delays, labour shortages and Covid-related production delays.
Thankfully (in a way), not all these declines were entirely out of the blue. The Company anticipated a significant price decline in the Standard Thin category, which increased the most during COVID-19. However, overall prices remain above pre COVID-19 levels.
Acknowledging the turbulent year, Managing Director and CEO. Neil Salmon commented, “Although I am not satisfied with our overall financial performance in FY22, we nevertheless achieved significant accomplishments against many of our strategic priorities during the year thanks to our hard-working and dedicated Ansell employees and I believe these will be important contributors to our future success.”
In FY22, the Company’s surgical organic growth was over 17%, with strong demand bolstered in part by the industry supply constraints. In addition to that, changing consumer preferences played into the Company’s favour. Customers are becoming increasingly eco-conscious and shifting away from powdered to powder-free NRL and synthetic gloves. Life Sciences achieved solid organic growth of 8.5% through pricing and mix despite some supply constraints.
This year, the Company also announced its decision to exit Russia owing to the war. This increased its costs for energy and certain raw materials, which we are now implementing price increases to offset. It also urged Ansell to reconsider the viability of its business in Russia with the ultimate decision being to exit both its commercial and manufacturing operations there.
Following this, Ansell has upped its R&D spend to generate new products with a focus on sustainable protection solutions. Salmon informed that, in FY22, Ansell continued its capital investment programme, with the greenfield Indian surgical gloves facility now operational in packaging.
Salmon added, “We also announced new goals on sustainability, including ambitious plans to reduce carbon emissions and be Net Zero for our own operations by 2040.”
Still, the Company feels that the slew of declines is not set to end any time soon. They expect an overall sales decline in FY23 owing to the Exam/SU price normalisation.
Additionally, addressing the lawsuit against Ansell and Kimberly-Clark by the former employees of supplier Brightway regarding poor labour practices, the company dubbed the allegations “without merit” and is all set to defend itself.
Alinda is a Business Reporter for The Sentiment
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