Fisher & Paykel Healthcare anticipates increased costs from newly imposed US tariffs on imports from Mexico and China, potentially delaying its gross margin recovery timeline but expects no immediate profit impact for FY2025.
- New US tariffs: 25% on Mexico/Canada imports, 10% on China
- 45% of manufacturing volume in Mexico, 60% of US supply from Mexico
- No material net profit impact expected for FY2025
- Cost increases likely in FY2026, delaying gross margin target by 2-3 years
- Company working on mitigation strategies with suppliers and customers
Tariff Changes and Immediate Impact
Fisher & Paykel Healthcare Corporation Limited has revealed that the recent US government announcement imposing tariffs on imports from Mexico, Canada, and China will affect its cost structure. Effective from February 4, 2025, a 25% tariff on products from Mexico and Canada, and a 10% tariff on Chinese imports, introduces new challenges for the New Zealand-based medical device manufacturer.
Approximately 45% of Fisher & Paykel Healthcare’s manufacturing volume is based in Mexico, with 60% of its US-bound supply coming from these facilities. Despite this significant exposure, the company does not anticipate a material impact on its net profit after tax for the 2025 financial year, reflecting confidence in its current operational resilience and cost management.
Longer-Term Cost Pressures and Margin Outlook
Looking ahead to the 2026 financial year, Fisher & Paykel Healthcare acknowledges that the tariffs will likely increase costs. The company highlighted the fluidity of the economic environment, including potential global responses to the tariffs and foreign currency fluctuations, which could influence the ultimate financial impact.
Crucially, the company expects these tariffs to delay its timeline for achieving a 65% gross margin target by an estimated two to three years. This target has been a cornerstone of Fisher & Paykel Healthcare’s long-term strategy, supported by continuous improvement initiatives and efficient growth within existing infrastructure.
Strategic Response and Market Position
CEO Lewis Gradon emphasized the company’s long-term perspective, noting ongoing efforts to collaborate with global suppliers and US customers to mitigate tariff impacts. He underscored the company’s commitment to improving efficiencies and reducing costs, which have historically enabled it to navigate various cost challenges.
Fisher & Paykel Healthcare’s products, designed to improve patient outcomes and reduce healthcare costs, remain in demand across over 120 countries. The company’s ability to adapt to these new trade barriers will be critical in maintaining its competitive edge in the acute and chronic respiratory care and sleep apnea treatment markets.
Next Steps and Investor Watchpoints
The company plans to provide an updated outlook on the 2026 financial year and revised gross margin timeline at its full-year results announcement in May. Investors will be keenly watching for further clarity on how Fisher & Paykel Healthcare intends to balance tariff-related cost pressures with its growth and profitability ambitions.
Overall, while the immediate financial impact appears manageable, the tariff regime introduces a layer of uncertainty that could influence strategic decisions and operational adjustments in the near term.
Bottom Line?
Fisher & Paykel Healthcare braces for tariff-driven cost pressures that could reshape its margin recovery timeline.
Questions in the middle?
- How will Fisher & Paykel Healthcare adjust its supply chain to mitigate tariff impacts?
- What specific cost-saving measures will the company implement to preserve margins?
- Could currency fluctuations or global trade responses exacerbate or alleviate tariff effects?