Car industry fallout ‘already here’, says condom maker Ansell

No protection: automotive manufacturing pain is laready being felt in the wider economy.The demise of car making in Australia is already causing pain in the wider economy, as Ansell chief executive Magnus Nicolin says the automotive manufacturers and their suppliers have begun to cut back on purchases of the protective equipment it supplies.

Australia was one of the weaker markets that dragged back Ansell’s underlying revenue growth to just 1 per cent in the December half.

Mr Nicolin said the looming exits of Ford, General Motors and Toyota in 2016 and 2017, and a slowdown in the mining sector, mean that ”Australia is taking a bit of a beating”.

”Even though the [automotive] shutdowns are not going to happen until 2016, 2017, volumes have not been impressive,” he said. ”The manufacturing sector in Australia has been relatively weak over the last six to nine months. That’s obviously having an indirect impact on us.”

Australia accounts for 6 per cent of Ansell’s sales, which were boosted by acquisitions to rise 9 per cent to $US703.6 million ($777.2 million) in the six months to December 31. Ansell shrugged off patchiness in the global economy to report a 14.9 per cent rise in interim net profit to $US65.6 million, just missing consensus of $US67.4 million. Earnings before interest and tax rose 20 per cent to $US82.7 million.

UBS analyst Andrew Goodsall described the result as ”soft” and underlying growth as ”uninspiring”. But he said improved trading towards the end of the half and the contribution from January 2 of US disposable glove maker BarrierSafe International, which Ansell acquired for $US615 million in November, meant the company should meet its full-year guidance. Ansell’s share price fell 5.1 per cent to $18.31 on Monday, off a 12-month high of $22.08 in September 2013.

Surgical sales within the medical division were a strong performer. Sales of synthetic gloves in the segment rose 23 per cent to $US29 million, off the back of a new range that Ansell first started developing three years ago.

The sexual wellness unit, which sells condoms, was the weakest division. Mr Nicolin blamed a change of distributors for some of the 5 per cent fall in sales of branded condoms, to $83 million, as new customers delayed purchases until old distributors had destocked.

Ansell declared an unfranked dividend of US17¢ a share, to be paid on March 25. The dividend is 1¢ higher than the previous corresponding period, when it was paid in Australian dollars at 16¢.