Rising Costs and FX Risks Shadow Ansell’s Strong FY25 Half-Year Gains

Strong Financial Performance Amid Strategic Expansion

Ansell Limited (ASX: ANN), a global leader in personal protective equipment, has reported a significant uplift in its FY25 first-half results, underscoring the success of its growth strategy and operational initiatives. Revenue climbed 29.9% to US$1.02 billion, while net profit attributable to members soared 183.5% to US$55 million, reflecting both organic growth and the impact of the Kimberly-Clark Personal Protective Equipment business (KBU) acquisition completed in July 2024.

The company declared an interim dividend of US22.20 cents per share, signaling confidence in its cash flow and ongoing profitability.

Segment Growth and Operational Efficiencies

Healthcare segment sales rose 40.4% on a reported basis and 16.3% on an organic constant currency basis, recovering strongly from prior customer destocking and benefiting from timing effects related to surgical order fulfilments delayed by Red Sea disruptions. Industrial segment sales increased 19.0% reported and 8.1% organically, supported by robust demand in mechanical and chemical protective products.

Operating profit before significant items (EBIT) grew 62.9% to US$127.4 million, with margins expanding from 10.0% to 12.5%. This improvement was driven by higher sales volumes, enhanced manufacturing utilisation, and US$22 million in pre-tax savings from the Accelerated Productivity Investment Program (APIP), which focuses on manufacturing productivity and digitisation.

KBU Acquisition Integration Progress

The KBU acquisition, a transformative deal valued at US$635.1 million, contributed US$140.9 million in sales and US$34.8 million in EBIT during the half. Integration efforts are progressing with the establishment of a unified organisational structure and certification of key product lines. Ansell targets US$10 million in annualised net pre-tax cost synergies by FY27, with initial cost savings expected in the second half of FY25.

Balance Sheet and Cash Flow Highlights

Ansell’s balance sheet remains solid despite increased net debt of US$609 million, primarily due to the KBU acquisition payment. Excluding acquisition-related cash outflows, net debt decreased by US$26 million in the half. The company maintains strong liquidity with US$488.6 million in undrawn debt facilities and US$268.9 million in cash reserves. Operating cash flow was US$115.1 million, with a cash conversion rate of 104%, reflecting efficient working capital management despite incremental inventory from KBU.

Outlook and Market Challenges

Looking ahead, Ansell anticipates continued organic sales growth in the second half of FY25, though at a moderated pace due to muted manufacturing demand and the absence of one-off order benefits. The company plans to offset raw material cost inflation through pricing and reduce reliance on costly air freight. Foreign exchange headwinds are expected but will be partially mitigated by hedge gains. Additionally, recently announced tariffs on US imports from China, Mexico, and Canada are expected to have limited net impact due to pricing strategies.

Despite these challenges, Ansell’s strong first-half performance and strategic initiatives bolster confidence in delivering slightly better-than-expected results in the coming months.