Ansell has reported a 2.7 per cent rise in full year profit to $122.7 million for the 12 months to June 30 despite a 0.6 per cent slip in revenue to $1.228 billion.
It cheered investors with a forecast rise of up to 12 per cent for earnings per share in 2011/12 and a buyback of up to five million shares.
Ansell’s profit rise came despite a $50 million leap in the cost of raw materials, such as natural rubber latex (NRL) and cotton, that it uses to make its products.
Much of the rise in NRL costs was due to the growing appetite of China’s car manufacturers for rubber.
China has overtaken the US as the world’s biggest car maker, giving it an insatiable hunger for rubber to make tyres and other components such as gaskets.
Storms which struck the main rubber-producing countries of Malaysia and Thailand during the 2010 harvesting season also forced prices higher.
Ansell had begun to reduce its reliance on NRL for its gloves and condoms in favour of the synthetic rubber, nitrile.
But many other companies have done the same, forcing nitrile prices up to be around the same price as NRL.
Not that Ansell’s switch away from NRL has been a failure, with its new synthetic rubber Skyn condoms “taking the market by storm”, according to Mr Nicolin.
Ansell expects latex and nitrile prices to remain high in 2011/12 but says if the global financial downturn continues it could help reduce demand and lower the cost of raw materials.
In the meantime, it is seeking acquisitions and plans to spend more money on research and development as well as pilot lines for new products.
Melbourne-based Ansell’s net profit of $122.7 million for the 12 months to June 30 compares with $119.4 million a year earlier, it said in a statement on Monday.
The company said earnings per share rose 15 per cent to 91.6 US cents and forecast that EPS would increase to between 97 and 103 US cents in financial 2012.
Ansell chairman Peter Barnes announced an increased dividend and a new on-market share buyback of up to five million shares over the next 12 months.
He said the company’s earnings per share forecast included a deferred tax asset (DTA) adjustment of US7 cents to US10 cents.
“This guidance reflects uncertain global economic conditions with subdued growth and FX (foreign exchange) rates approximately at current levels,” the company said in a statement.
Financial 2011 proved to be a strong year with the company’s industrial division growing strongly, the sexual wellness division improving, especially in emerging markets, while the new verticals and medical divisions were held back, he said.
Ansell’s chief executive Magnus Nicolin said the company had achieved double digit sales and profit growth after it was reorganised into a global company.
Mr Nicolin said the company faced “strong head winds” in full year 2011 due to significant increases in the prices of natural rubber latex (NRL) and cotton, and more recently, utility costs.
But these were offset by higher volumes, price increases and improved efficiencies at all levels.
Ansell said the rollout of its new ERP platform in North America in July 2011 was progressing reasonably but it has experienced issues at one of its key US warehouses, causing delayed shipments and some lost business.
“While cost pressures remain, actions to mitigate them will also continue,” the company said.
“Ansell expects to build on its strong full year 2011 momentum, maintain emerging markets growth, execute acquisition opportunities and continue to reshape itself into a more agile and growth oriented competitor.”
The company said the buyback acknowledges Ansell’s “strong cash position”.
“Ansell’s strong preference remains, however, to enhance shareholder value through attractive acquisitions and investment opportunities that are being actively considered.”
