Fisher & Paykel Healthcare has again revised its assumptions of the global pandemic and its ensuing impact on demand for the company’s ventilator component technology.
At the company’s annual meeting, chief executive Lewis Gradon provided an updated revenue “guide” of $1.61 billion in the upcoming financial year and a net profit after tax of $365 million to $385 million, predicated on the assumption demand for their hospital division products would return to normal by the end of December.
“Once Covid goes away you might expect that our hardware sales might fall to normal levels but then the ones we’ve placed in hospitals – it’ll be our job to make sure they keep using them for non-Covid patients.”
It’s a four-month extension to the assumption based on the company’s last “guide” published with its annual report in late June, which assumed hospitalisations would return to normal by August.
“Certainly the shape of our demand kind of matches the shape of the Covid curves around the planet.”
When asked by the NBR whether this was again an optimistic view of the pandemic when the number of new daily cases globally continue to be in the hundreds of thousands, Gradon said the assumption was to give analysts “a peg in the sand”.
“We can’t predict it and I feel like we wouldn’t be doing anyone any favours if we gave no guidance, so we wanted to give people a bit more than no guidance at all,” Gradon said.
Forsyth Barr analyst Chelsea Leadbetter said in her report on the updated guidance she viewed the revised assumptions as “conservative”.
“We increase our FY21 forecasts, which were already top of the revised range to above FPH’s ‘guide’, reflecting stronger revenue growth,” Leadbetter wrote.
Forsyth Barr in comparison predicts the company would have a net profit after tax of $408.7m, and revenues of $1.7b by the end of the 2021 financial year. It set a $32.50 target price on the share price compared to its current trading price of around $37.
Expansion mode
The company continues to expand its footprint in Tijuana, Mexico – where it has land that can fit four buildings and the company recently announced its plan to begin construction on a third facility there over the next 12 to 18 months.
Gradon said the expansion on the land has been “brought forward by a couple of years” by demand from Covid patients.
He said “a fair chunk – more than half of Mexico facilities output” was going to United States, but some of the output was also sold within the Mexican market.
The latter fact would save Fisher & Paykel production from a similar fate to that of Smiths Medical, a Minneapolis-based company that produced ventilator components in Baja California – a Mexican state.
The company’s Baja Californian site was closed in mid-April after the governor closed it because it only exported its products and did not sell them in the Mexican market.
Fisher & Paykel has also been on a hiring spree in light of Covid-related demand, hiring 1500 new staff – 700 in New Zealand and 800 to staff its second manufacturing facility in Mexico.
When asked what he expects demand to return to after the pandemic, Gradon said previously after a particularly bad flu season or respiratory-related outbreak, demand tended to return to “normal levels”, but there was a fundamental incompatibility with comparing that to Covid.
“We’ve never seen anything of this scale – we kind of see ongoing usage of what we’ve sold.”
“The main thing is once they’ve got the hardware, they’re clearly using the hardware with Covid patients and we hope they’re seeing the benefits they get with Covid patients and they then continue to use the hardware for respiratory patients in general.”
While Gradon estimates New Zealand is probably less than 1% of its output, it put in a special order with its ventilator manufacturing clients and was able to purchase 80 ventilators in March it donated to the Ministry of Health.
The company also has 24 intensive care ventilators in its R&D lab it offered to make available to the Ministry.
When the Covid outbreak peaked in New Zealand in March, 12 of these machines were deployed to Auckland medical facilities, though they’ve since been returned to F&P’s lab.
“We’re in a bit of a special position in that we deal with [ventilator] manufacturers because they are all our customers so we were able to order some during the global mad dash.”
