Shares of glove and condom manufacturer Ansell Limited (ASX: ANN) have been poleaxed this morning, plummeting more than 19% to a low of just $20 before regaining some composure to trade at $20.45.
For the year ended 30 June 2015, Ansell reported a 3.5% growth in sales to $1.65 billion – well below the $1.76 billion forecast by analysts, according to Yahoo Finance – while earnings per share (EPS) came in marginally higher than expected at US122.5 cents per share (AU $1.66) – a reported change of 11% year over year.
At the same time, earnings before interest and tax (EBIT) rose 19% to $245 million, while net profit after tax (NPAT) was up 20% on the prior year at $188 million. (Note that all sales and earnings figures are reported in US dollar terms).
Although those earnings results might seem reasonable, the company admitted that the external market conditions became more challenging in the second half of the year with results impacted by unfavourable currency movements and a disappointing economic performance in many developed and emerging markets.
Ansell has undertaken cost reduction projects to offset some of these impacts (while it has also divested some businesses, strengthening its balance sheet), but the unfavourable trends are still expected to continue into the 2016 financial year (FY16).
Indeed, the group said that unfavourable currency movements are expected to shed another $55 million from total revenue and $30 million from EBIT during FY16, with EPS tipped to fall between US22 cents and US26 cents, which would explain today's massive setback.
The results are certainly disappointing for investors and paint a rather bleak picture for Ansell over the coming 12 months. While now could be a reasonable opportunity to start building a long-term position in the stock, other investors may prefer to remain on the sidelines for now in case of further volatility in the near future.
