Fisher & Paykel Healthcare experienced a surge in demand for its products during the pandemic. (File photo)
Fisher & Paykel Healthcare reported a 34% drop in annual profit as demand for its breathing aids starts to return to more normal levels from the unprecedented highs seen during the Covid-19 pandemic.
Profit fell to $250.3 million in the year to March 31, from $376.9m a year earlier, the company said in a statement to the NZX on Friday. Revenue slid 6% to $1.58 billion, in line with the company’s forecast for revenue of between $1.55b to $1.6b. The company forecast revenue would increase to $1.7b this year.
Fisher & Paykel experienced a surge in demand for its products during the pandemic, selling 10 years’ worth of devices in two years as hospital clinicians turned to nasal high flow therapy as a front-line treatment for Covid-19 patients. Demand subsequently dipped as hospitals worked through their excess inventory, but is now starting to return to normal with second-half revenue up 14%.
“We are coming out of three financial years that were impacted by the Covid-19 pandemic, and our people, suppliers and customers have worked tirelessly to meet global demand surges,” said managing director Lewis Gradon.
“The second half result was encouraging as market conditions progressed towards more of a normal state and both our hospital and homecare product groups delivered good growth.”
During the pandemic, Fisher & Paykel sold its breathing aids to new countries, new hospitals and new areas within hospitals but as the pandemic waned, sales fell from their highs. In the latest year, revenue from its key hospital division, which includes humidification products used in respiratory, acute and surgical care, fell 15% to $1.02b.
The company said hospital hardware sales were down 53% in constant currency terms compared with the 2022 financial year, which was more heavily impacted by global Covid-19 surges. Hardware sales in countries or regions that did not experience Covid-19 surges were tracking close to pre-pandemic patterns.
Over time, the company expects hospital clinicians to use the extra respiratory machines purchased during the pandemic for an increasing proportion of respiratory-compromised patients, boosting sales of consumables which connect to the machines and have to be replaced regularly.
In the latest year, hospital new applications consumables revenue fell 6% in constant currency terms as hospital customers worked through their excess inventory. But the company said this trend abated throughout the year, and new applications consumables revenue for the second half rose 13% in constant currency.
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Sales of the company’s homecare products, which are used to treat obstructive sleep apnea and provide respiratory support at home, rose 18% to a record $553.8m.
The company said it benefited from strong growth in masks and accessories revenue, which in constant currency was up 17% for the full year, and up 24% for the second half.
Higher freight costs and manufacturing inefficiencies due to demand fluctuations weighed on the company’s gross profit margin, which fell 369 basis points to 59.4% in constant currency terms.
Gradon said he expected margins to lift from here, with an improvement of about 200 basis points in constant currency terms expected this year.
“Prior to the pandemic, we had a track record of incremental improvements in gross margin,” he said.
“During the last three years, our responsibility was to get as much product as possible into the hands of our customers. Now, as every team in our business turns back to efficiency gains, we are confident in our ability to return to our long-term target of 65% within three to four years.”
The company will pay a final dividend of 23 cents, taking its total dividend for the year to 40.5c, up 3% from the previous year.