Ansell (ASX:ANN) share price crashes 20% as guidance slashed

Ansell is getting no protection from increased selling pressure following its latest update…

| More on:
A female scientist sits at her desk looking stressed out while working in an AnteoTech lab.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Ansell share price is down more than 20% on Monday
  • First half earnings are expected to be significantly impacted due to COVID-19 demand dwindling
  • A US customs order brings disposable glove supply to a halt
  • Full year guidance has now been revised lower

The Ansell Limited (ASX: ANN) share price is falling off a cliff following the release of a trading update.

In morning trade, shares in the protective personal equipment manufacturer are down 20.4% to $24.90. After opening, the company's share price touched a new 52-week low of $23.85.

Ansell share price sinks on disappointing first half earnings

Investors are applying selling pressure to the Ansell share price on Monday morning after checking out the company's latest trading update.

The details contained in the release relate to the half-year ended 31 December 2021. While the official first-half results are expected to be released on 15 February 2022, today's announcement gives shareholders a fair idea of what those numbers will look like.

According to the release, Ansell expects to deliver FY22 first-half sales of US$1,009 million. Notably, this represents an increase of 7.6% compared to the prior corresponding period. However, as we run further through the financials we'll see this is the full extent of positive news.

Preliminary numbers suggest Ansell will report earnings before interest and tax (EBIT) of US$111 million. In addition, earnings per share (EPS) is slated to come in at 61 US cents for the half. Disappointingly, these metrics are down 24.7% and 26.4% respectively from the previous year's first half. Unsurprisingly, the Ansell share price is struggling on this news.

According to Ansell, margin compression is a result of COVID-19 related operational challenges and softer demand in the exam/SU division.

Additionally, the company's outsourced finished goods experienced a lower volume of sales as customers opted to reduce inventories prior to ordering more.

Other factors hurting business during the half included higher freight and labour costs; as well as manufacturing shutdowns. Although, higher costs were partially dealt with through passing on price increases to customers.

What else?

Investors could be responding negatively to Ansell's other portion of today's update. Regarding manufacturing and supply, the company has been witnessing an increase in COVID-19 cases at its manufacturing facilities. Because of this, the Malaysia facility had to shut down completely last week.

Meanwhile, on 28 January 2022, the United States Customers and Border Protection issued a withhold release order against YTY Industry Holdings Sdn Bhd (YTY). This company is a major supplier of exam/SU gloves to Ansell.

The order means ASX-listed Ansell will be unable to import its disposable gloves into the US while the order stands. At this stage, YTY is working with the necessary parties to show that its operations are free of forced labour practices.

Lastly, Ansell provided a guidance update today to allow for disruptions to YTY supply. As a result, the company now expects FY22 EPS to be between 125 cents to 145 cents. This is compared to the previous range of 175 cents to 195 cents.

The Ansell share price is now down ~37% in the last 12 months following today's update.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Megaport, Pilbara Minerals, Vysarn, and WiseTech shares are falling today

These shares are ending the week in the red. But why?

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Accent, Sayona Mining, Web Travel, and Weebit Nano shares are dropping today

These shares are having a tough time on Thursday. Why are they being sold off?

Read more »

A smartly-dressed man screams to the sky in a trendy office.
Share Fallers

Why Appen, DroneShield, PWR, and Webjet shares are sinking today

These shares are having a tough time on hump day. But why?

Read more »

a car driver sits up and looks alert with wide eyes and an expression of concentration while he holds the wheel of a car.
Share Fallers

Why this ASX All Ordinaries stock just crashed 24%!

Investors are punishing the ASX All Ords company today. Let’s find out why.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Elders, KMD, Lovisa, and Telix shares are dropping today

These shares are missing out on the good times on Tuesday. But why?

Read more »

A woman with short brown hair and wearing a yellow top looks at the camera with a puzzled and shocked look on her face as the Westpac share price goes down for no reason today
Share Fallers

Why Life360, Lovisa, NAB, and Resolute shares are falling today

These shares are starting the week in the red. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Healthcare Shares

This ASX All Ords share is diving 18% as inflation pain draws blood

This healthcare company delivered a trading update at its annual general meeting today.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Healius, Opthea, Peninsula Energy, and Wildcat shares are falling today

These shares are having a tough finish to the week. But why?

Read more »