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Post Market Wrap | Fisher & Paykel FY22 Revenue Guidance Down By 14 Percent to $1.7B



This Post Market Wrap is presented by KOSEC – Kodari Securities

  • Lower COVID hospitalisation cases impacting revenue and operating margin
  • Higher freight costs also creating margin pressure 
  • Future revenue growth dependent on success of new products 
  • No earnings guidance given prevailing uncertainty around COVID-19 variants. 

Fisher & Paykel Healthcare (FPH or the Company) is a New Zealand based medical device manufacturer of products and systems for use in chronic respiratory care, surgery and the treatment of obstructive sleep apnea. The Company comprises 2 key business units, Homecare and Hospital. FPH designs, manufactures and sells its products in 120 countries worldwide.

FY22 revenue guidance

FPH expects full year operating revenue for the March 2022 financial year to be in the range of $1.675 billion to $1.7 billion. This compares to operating revenue of $1.97 billion generated for the full year ended 31 March 2021, a decline of 14 percent. 

The Company attributes the decline to lower respiratory intervention requirements of the current Omicron variant, as compared with the more severe Delta variant. The comparatively mild flu season in the Northern Hemisphere has also contributed to lower demand for hospital consumables. This follows a period of unprecedented demand for humidification products used in respiratory, acute and surgical care during FY21, when hospitalisations in response to COVID-19 case numbers were extraordinary. Hospitalisation numbers are critical to revenue growth because the Hospital product group accounts for approximately 75 percent of total operating revenue. 

The 63.1 percent operating margin earned in FY21 represented a decline of close to 3 percent compared to the previous financial year. Higher air freight utilisation and elevated freight rates were cited as reasons for this margin decline. This adverse trend has continued into the FY22 financial year with the operating margin expected to come in at about 62.5 percent. This compares to Fisher & Paykel’s long term gross margin target of 65 percent.

Looking Ahead

The flattening of the curve following the global surge in COVID-19 has tempered revenue growth while higher freight costs have compressed operating margins, in the current reporting period. The Hospital product group, which was the primary beneficiary of the COVID-19 hospitalisation surge, saw revenue in the FY21 financial year, ramp up by 87 percent to $1.5 billion. This revenue spike was sustained up to the period when the Delta variance was rampant around the world, especially in North America. 

Given subsequent lower hospitalisation rates, the Hospital product group is now focused on testing and trialing new products. The success of such products, including the Visairo mask for non-invasive ventilation in the US and the Evora full mask on NZ and Australia, will have a bearing on medium term revenue growth. R & D research is also a key factor in future revenue growth, with $75 million expended in the first half of the current financial year.     

Significantly, the FPH board has not committed to firm earnings guidance for the FY22 year. The prevailing uncertainty around COVID-19 variants, including the effectiveness of vaccinations, is impacting the number of COVID-19 related hospitalisations around the world. The lack of clear and definitive qualitative evidence is grounds for FPH in leaving earnings details to the release of full financial year results on Wednesday May 25. 

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

Michael Kodari is one of the world's most consistent, top performing investor. A philanthropist and one of the prominent experts of the financial markets, he has been referred to as ‘the brightest 21st century entrepreneur in wealth management' by CNBC Asia and featured on Forbes. Featured on TV as the "Money Expert", on the weekly Sunday program "Elevator Pitch", he is recognised internationally by governments as he was the guest of honour for the event "Inside China's Future", chosen by the Chinese government from the funds management industry, attended by industry leaders, when they arrived in Sydney Australia, on April 2014. Michael and George Soros were the only two financiers in the world invited and chosen by the Chinese government to provide advice, and their expertise on Chinese government asset allocation offshore. With a strong background in funds management and stockbroking, Michael has worked with some of the most successful investors and consulted to leading financial institutions. He was the youngest person ever to appear on the expert panel for Fox, Sky News Business Channel at the age of 25 where he demonstrated his skillset across a 3 year period forming the most consistent track record and getting all his predictions right over that period. Michael writes for key financial publications, is regularly interviewed by various media and conducts conferences around the world.

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Management shake up at under fire Qantas



There’s been a management shake up at Australia’s flag carrier airline Qantas, which has come under fire for cancellations and delays

Jetstar CEO and longtime Qantas executive Gareth Evans has resigned.

He was touted as a potential replacement for controversial Qantas CEO Alan Joyce.

Gareth Evans has been with Qantas for 23 years.

He has been chief of Jetstar since 2017, but has worked across the group and has now “decided this is the right moment to move on”.

This comes as the aviation grapples with the higher fuel prices and staffing issues at airports that are affecting much of the industry globally.

Strong demand

Qantas has also updated the market, saying it’s on track to record second half earnings of just over 500 million dollars.

Underlying profit is set to return in FY23, while debt levels are now well below pre-pandemic levels.

Qantas says this is due to continued strong domestic and international travel demand.

Qantas has come under fire for long delays and cancellations
Qantas has come under fire for long delays and cancellations

After peaking at more than $6.4bn at the height of the pandemic, net debt is expected to fall to around $4bn by June 30, an improvement of around $1.5bn in the past six months.

The airline has come under sustained pressure, with many passengers complaining about long queues, cancellations and delays.

Qantas is calling for patience ahead of the winter school break rush as it hires more staff to manage increased demand at airports.

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Nike to fully exit Russia




U.S. sportswear maker Nike is making a full exit from Russia, three months after suspending its operations there, the company said in an emailed statement Thursday

The sportswear giant had said back in March that it would suspend operations at all the stores it owns or operates there.

On Thursday (June 23) the firm said it would leave the country altogether.

In a statement, Nike said it would scale down over the coming months.

The move is largely symbolic for the company, which gets less than 1% of its revenue from Russia and Ukraine combined.

It says any stores that are still open there are run by independent partners.

In May, Russian media reported that Nike had not renewed agreements with Inventive Retail Group, its largest franchisee there.

Now the full exit lputs Nike in line with other major western brands such as McDonald’s and Google.

Foreign companies seeking to leave face the prospect of new laws being passed that will allow Moscow to seize assets and impose criminal penalties.

That has prompted some businesses to accelerate their departure plans.

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U.S. orders vape company Juul to cease sales




Juul has been an industry leader in the vaping sphere since its establishment in 2015, controlling 75 per cent of America’s market by its third year of operations.

This is just the latest crackdown on the Tabacco industry by the Biden administration, all part of a sweeping effort to regulate the sector after years of delay.

The White House has also announced a rule to establish a maximum level of nicotine in tobacco products in an attempt to make them less addictive.

After a nearly two-year-long review, the FDA said Juul submitted insufficient and conflicting data to show that its e-cigarettes met public health standards.

The regulator also said the findings raised “significant questions,” including whether potentially harmful chemicals could leach out of Juul pods.

The decision potentially deals a fatal blow to the once high-flying San Francisco company.

Juul did not immediately respond to a Reuters request for comment.

The FDA had to judge whether Juul’s products, which have been sold for years without being officially authorized by the agency, were effective in getting smokers to quit and, if so, whether the benefits to smokers outweighed the potential health risks to new e-cigarette users, including teenagers.

“They prey on children.”

Democratic Senator Dick Durbin hailed the decision by the FDA on Thursday, but said “they’re in for a legal battle for sure.”

Earlier this week, the Biden administration said it also plans to propose a rule establishing a maximum nicotine level in cigarettes and other tobacco products to make them less addictive.

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