Fisher and Paykel healthcare end-of-year profit up 37 percent catapulted by 'unprecedented' demand following COVID-19

Fisher and Paykel CEO and managing director Lewis Gradon said that since January, demand for respiratory humidifiers was 'unprecedented'.
Fisher and Paykel CEO and managing director Lewis Gradon said that since January, demand for respiratory humidifiers was 'unprecedented'. Photo credit: Supplied/F&PHealthcare.

Fisher and Paykel Healthcare has announced a full-year net profit after tax of $287.3 million, up 37 percent on the previous year.

Operating revenue reached a record $1.26 billion, an increase of 18 percent. Looking ahead, the company expects 2021 revenue to reach $1.48 billion and net profit after tax to be between $325 million and $340 million.  

The maker of respiratory and acute care products said that hospital hardware sales were strong over the year. CEO and managing director Lewis Gradon said that following the onset of COVID-19, use of Optiflow nasal high flow therapy ramped up and demand for respiratory humidifiers reached "unprecedented" levels.

"Beginning in January, the demand for our respiratory humidifiers accelerated in a way that has been unprecedented," Gradon said.

"With new processes, new procedures and new ways of working safely, we managed to double and in some instances triple, output for some of our hospital hardware products over just a few months at the end of the year," he added.

Operating revenue for hospital products used in respiratory, acute and surgical care, increased by 25 percent (21 percent in constant currency) compared to last year, to a total of $801.3 million. New applications consumables, including products used for nasal high flow therapy, increased by 23 percent. Revenue for homecare products, including those to treat obstructive sleep apnea and to provide in-home respiratory support, increased by 9 percent, to $457 million.

Gross margin fell by 73 basis points, to 66.1 percent, mainly driven by additional air freight costs and start-up costs of the company's second Mexico-based facility.

Directors have approved a final dividend of 15.5 cents per share, an increase of 15 percent on the final dividend last year, bringing the total to 27.5 cents per share.

The company signalled plans to increase its dividend as earnings grow, while taking into consideration its target gearing ratio.

For the first three months of the 2021 financial year (April to June), use of F&P hospital products continued to skyrocket.  Hardware growth was over 300 percent and hospital consumables were over a third higher compared to the first three months of 2020. Freight costs remained elevated.

Based on COVID-19 assumptions, the company expects 2021 operating revenue to increase to $1.48 billion. Net profit after tax is estimated to be between $325 and $340 million.

"Guidance is provided on the basis that global hospitalisations due to COVID-19 peak for the first quarter of this financial year, and hospitalisations for respiratory-related illnesses and OSA diagnostic activity steadily return to normal by the end of our first half," the 2020 full-year statement said.

The company's fourth manufacturing facility is now complete and 2021 capital expenditure is estimated at $160 million.  

In the last 12 months, Fisher & Paykel Healthcare shares have more than doubled.  On Monday, the company share price opened at $32 on the S&P NZX 50 - over double that of June 28, 2019, when the price was $15.46.  

Over the 2021 financial year, the company said it would expand its product range and increase manufacturing, including supply of respiratory products to meet increased demand.