Fisher & Paykel Healthcare Reports 15% Growth in Profit to NZ$71.6M

Fisher  &  Paykel  Healthcare  Corporation  Limited (NZSX:FPH, ASX:FPH) today reported a net profit of NZ$71.6 million for the year ended 31 March 2010, an increase of 15% compared to the prior year.  Strong growth in its obstructive sleep apnea (OSA) and respiratory and acute care product groups, as well as favourable foreign exchange hedging results, contributed to the result.

Operating revenue
Operating revenue for the year ended 31 March 2010 increased 14% over the prior year to a record
US$341.5 million, or 10% to NZ$503.3 million.

OSA product group operating revenue increased by 22% to US$160.8 million or 17% to NZ$237.0 million,  reflecting  strong  demand  for  the  company’s  premium  flow  generators  and  masks. Respiratory and acute care product group operating revenue increased by 11% to US$164.7 million or 7% to NZ$242.4 million.

“Operating revenue growth for our OSA product group was a robust 34% in US dollar terms in the second half and 17% in constant currency terms for the year, as we gained market share with our new premium products.  Late in the year, we began introduction of our new ICON flow generator range, which has been enthusiastically received by customers in New Zealand and Australia.

Accelerating growth in demand for our respiratory and acute care devices was encouraging, with second half revenue growth of 35% in US dollar terms, or 17% in constant currency, compared to the same period last year”, commented Fisher & Paykel Healthcare’s CEO, Mr Michael Daniell.

The company continued to generate strong operating revenue growth from clinical applications beyond its traditional invasive ventilation and OSA markets.  These include patients requiring non- invasive  ventilation,  oxygen  therapy,  humidity  therapy  and  laparoscopic  surgery.     Those applications contributed 27% of the company’s respiratory and acute care consumables revenue for the year.

In October 2009, the company ceased sales of its infant warmer product line in North America and transferred distribution of the Medela product line in Australia to Medela.

The company’s directors have approved a final dividend for the financial year ended 31 March 2010 of 7.0 NZ cents per ordinary share (2009: 7.0 cents), carrying full imputation credit.  Eligible non- resident shareholders will receive a supplementary dividend of 1.2353 NZ cents per share.  The final dividend will be paid on 9 July 2010, with a record date of 25 June, and an ex-dividend date of 21 June for the ASX and 28 June for the NZSX.

The company offers a dividend reinvestment plan (DRP), under which shareholders may elect to reinvest all or part of their cash dividends in additional Fisher & Paykel Healthcare shares.  A 3% discount will be applied when determining the price per share of shares issued under the DRP and will be applied in respect of the 2010 final dividend and future dividends, until such time as the directors determine otherwise.

The directors have reviewed the company’s capital structure and intend to progressively increase shareholders funds, to ensure that the company has capacity to continue to implement its foreign currency hedging policy as it grows.

A target debt to debt plus equity ratio of 5% to 15% (excluding unrealised financial instrument gains or losses) has been established.  The company expects that, subject to earnings performance, the dividend will be maintained in real terms until such time as the target capital structure is achieved. Longer  term,  the  directors  expect  that  a  dividend  payout  ratio  of  greater  than  60%  will  be appropriate to maintain target gearing.

Research & Development, SG&A
Research and development expenses increased by 25% over the prior year to NZ$35.3 million, representing 7.0% of operating revenue.  The company continued to expand its product and process research and development activities and current new product projects include flow generators, masks and additional respiratory care consumables.  For the 2010 financial year the company has included in other income an additional R&D tax credit of NZ$1.0 million, relating to R&D expenditure in the 2009 financial year.

Selling, general and administrative (SG&A) expenses grew 16% to NZ$137.5 million, or 23% in constant currency terms.  During the year, the company established new distribution and clinical sales support centres in Japan, Canada and Taiwan and continued to expand its operations and its sales teams in North America, Europe, Asia/Pacific and South America.

Capacity Expansion
During the year, the company invested NZ$48 million of capital expenditure.  Approximately NZ$27 million was invested in New Zealand.   This included equipment for increased manufacturing capacity, new product tooling, replacement equipment and the initial site works for a new 31,000m2 building, which will provide increased office, research and development, laboratory, manufacturing and warehouse space.
The company has invested approximately NZ$20 million establishing a manufacturing facility in Tijuana,  Mexico  that  will  primarily  accommodate  increased  manufacturing  capacity  for  the company’s more established, high volume consumable devices.

Foreign Exchange Hedging
To protect the company from exchange rate volatility, the company has in place a mix of foreign exchange contracts and collar options, up to five years forward, with a face value of approximately NZ$550 million.   For the remainder of the 2011 financial year, the company has in place approximately 67% cover for the US dollar and approximately 70% cover for the Euro at average rates of approximately 0.60 US dollars and 0.45 Euros to the New Zealand dollar.

During the year the company monetised (closed out) US$66 million of forward exchange contracts with maturity dates in the 2012, 2013 and 2014 financial years with a cash benefit of NZ$32 million being realised and applied to reduce bank debt.

“Over the year we will be introducing our new ICON flow generator range into Europe, North America and the remainder of our international markets.  We will also be expanding our R&D activities, our sales and distribution teams and our New Zealand and Mexico manufacturing capacity.” concluded Mr Daniell.

For the 2011 financial year the company expects to continue to achieve strong revenue growth and estimates that, at an average NZD:USD spot exchange rate for the year of 0.67, it will achieve operating revenue of approximately NZ$560 million and profit after tax of approximately NZ$70 million to NZ$75 million.

Financial Statements and Commentary
Attached to this news release are condensed NZ dollar financial statements and commentary. For convenience the income statement has been translated into US dollars.

The company’s financial statements for the year ended 31 March 2010 and the comparative financial information for the year ended 31 March 2009 have been prepared under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

Full Year Results Conference Call
Fisher & Paykel Healthcare will host a conference call today to review the results and to discuss the outlook for the 2011 financial year. The conference call is scheduled to begin at 10:00am NZST, 8:00am AEST (6:00pm USEDT) and will be broadcast simultaneously over the Internet.

To listen to the webcast, access the company’s website at Please allow extra time prior to the webcast to visit the site and download the streaming media software if required. An online archive of the event will be available approximately two hours after the webcast and will remain on the site for two weeks.

To attend the conference call, participants should dial in to one of the numbers below at least
5 minutes prior to the scheduled call time and identify themselves to the operator. When prompted, please quote the conference code of: 72611585.

New Zealand Toll Free 0800 446 041
USA Toll Free 1866 242 1388
Australia Toll Free 1800 701 269
Hong Kong Toll Free 800 968831
United Kingdom Toll Free 0808 234 7860
International +61 2 8823 6760

Conference Call Audio Replay
An audio replay of the conference call will be available approximately 2 hours after the call and will be accessible for two weeks by dialing one of the numbers below. When prompted please enter the conference code of: 72611585.

New Zealand Toll Free 0800 445 136
USA Toll Free 1866 214 5335
Australia Toll Free 1800 766 700
Hong Kong Toll Free 800 901596
United Kingdom Toll Free 0800 731 7846
International +61 2 8235 5000

About Fisher & Paykel Healthcare
Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of products and systems for use in respiratory care, acute care and the treatment of obstructive sleep apnea. The company’s products are sold in over 120 countries worldwide.   For more information about the company visit

Contact: Michael Daniell MD/CEO on +64 9 574 0161 or Tony Barclay CFO on +64 9 574 0119.