• Operating Revenue: $951 million, up 18% from the prior period (17% in constant currency).
• Net Profit After Tax: $153 million, up 43% from the prior period (51% in constant currency).
• Hospital Product Group Revenue: $591 million, up 21% year on year.
• Homecare Operating Revenue: $359 million, up 14% from the first half last year (13% in constant currency).
• Gross Margin: 61.9%, up 141 basis points from the same period last year (198 basis points in constant currency).
• Operating Margin: 22.9%, an increase of 394 basis points (420 basis points in constant currency).
• Operating Cash Flow: $233 million, up 49% from the same period last year.
• Capital Expenditure: $55 million for the half, down from $275.5 million in the same period last year.
• Net Cash: $50 million as of September 30.
• Interim Dividend: $0.185 per share, a 3% increase from the previous year.

• Warning! GuruFocus has detected 11 Warning Signs with FSPKF.

Release Date: November 27, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Fisher & Paykel Healthcare Corp Ltd (FSPKF) reported an 18% increase in operating revenue for the first half of the 2025 financial year, reaching $951 million.
• Net profit after tax rose by 43% to $153 million, indicating strong financial performance.
• The company successfully launched new products, including the 950 system and Airvo 3 in the US, contributing to momentum in the hospital business.
• The manufacturing site in Guangzhou is now operational, enhancing production capabilities.
• Gross margin improved to 61.9%, up 141 basis points from the previous year, driven by overhead efficiency and margin improvement efforts.

Negative Points

• Foreign currency movements negatively impacted net profit after tax by $2.7 million compared to the same period last year.
• The guidance for the second half remains uncertain due to the unpredictable nature of seasonal hospitalizations, including the impact of COVID, flu, and RSV.
• Operating expenses grew by 11%, which could pressure margins if revenue growth does not keep pace.
• The impact of tariffs and geopolitical tensions, particularly between the US and Mexico, remains a concern for future operations.
• Freight rates, currently a tailwind, are expected to become a headwind in the next financial year, potentially affecting margins.

Q & A Highlights

Q: Can you clarify the guidance on hospital revenues and how it compares to previous seasons? A: Our guidance considers a range from relatively low to moderate seasonal hospitalizations. We are comparing it to historical moderate flu seasons, specifically the years 2014-2015 and 2016-2017, which we classified as moderate. The top end of our guidance reflects a similar sequential growth to those years. - Lewis Gradon, CEO

Q: What is the outlook for gross margins in the second half of the year? A: We don't expect the same cadence of overhead efficiency improvements in the second half. The improvements can be lumpy, depending on when they kick in. We anticipate about a 150 basis point improvement in gross margin for the full year, considering the strong first half. - Lyndal York, CFO

Q: What drove the better-than-expected first-half revenue performance? A: The hospital census likely increased by 4% to 5%, contributing to the performance. Additionally, the FY24 flu season extended into April and May, providing a tailwind. These factors helped drive the strong revenue performance. - Lewis Gradon, CEO

Q: How is the new manufacturing facility in Guangzhou, China impacting margins? A: The Guangzhou facility is small and leased, so its impact on margins is negligible. It currently produces a subset of our nasal high flow Optiflow therapy, primarily for the Chinese market. - Lyndal York, CFO

Q: Can you provide insights into the competitive dynamics in the OSA mask market? A: We don't have a scientific basis to comment on market share shifts, but our growth rate suggests we might be gaining market share. It's difficult to pinpoint where the share is coming from, but it could be from various competitors. - Lewis Gradon, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.