Fisher & Paykel Healthcare Reports Record First Half Operating Profit from Strong Product Growth

Fisher & Paykel Healthcare Corporation Limited (NZX:FPH, ASX:FPH) announced today that ongoing growth from new products has contributed to record operating profit and a higher interim dividend. The company  achieved  an operating  profit of NZ$41.7  million,  up 13% on the prior comparable period, and record revenue of NZ$117.4 million for the six months ended 30 September 2004.

For the six months the company derived approximately  60% of its revenue in US dollars.   In US dollar terms, revenue increased by 24% and operating profit increased by 25% compared with the prior comparable six month period.  Operating margin continued to be very strong at 35.5%.

Strong acceptance of new products in each of the company’s respiratory humidification, obstructive sleep apnea (OSA) and neonatal categories helped generate the increases.  Recent significant new product releases are expected to deliver ongoing growth. Profit after tax increased 11% to NZ$28.1 million for the six months compared with NZ$25.2 million in the prior comparable period.

Dividend
The company’s directors have approved an increased interim dividend for the financial year ending
31 March 2005 of NZD 5 cents per ordinary share, carrying full imputation credit.  This dividend is equivalent   to  25  cents  per  share  prior  to  October’s  five  for  one  subdivision.   Non-resident shareholders will receive a supplementary dividend of 0.882 cents per share.  The interim dividend will be paid on 3 December 2004, with a record date of 23 November, and an ex-dividend date of 17 November for the ASX and 24 November for the NZX.

Revenue  Growth
Operating revenue for the company’s core product range grew 25%, in US dollar terms, over the prior  comparable  six  month  period.    This  increase  was  driven  by  strong  growth  in  sales  of respiratory  humidification  systems,  devices  for  the  treatment  of  obstructive  sleep  apnea  and neonatal  and  warming  products.    Respiratory  humidification  revenue  increased  by  16%,  OSA revenue  increased  by 34% and neonatal  and warming  revenue  increased  by 46% in US dollar terms.

“We  are again  very  encouraged  by the strong  revenue  growth  of our respiratory  humidification product  group.  This  was  driven  by  increased  penetration  of  our  MR850  respiratory  humidifier technology  and  strong  market  share  gains  in  both  adult  and  neonatal  breathing  circuits,”  said Managing Director and Chief Executive Officer, Michael Daniell.

“Vigorous OSA product group revenue growth, in US dollar terms, was driven by combined growth of more than 70% in nasal masks and CPAP flow generators.   Our expanded FlexiFit mask range has been very well accepted by both dealers and end users,” commented Mr Daniell.

Strong growth in the neonatal and warming product group was from both neonatal warmers and neonatal  breathing  systems,  which  include  the  company’s   infant  CPAP  system  and  infant resuscitator.

Research & Development, SG&A
Research and development expenses increased by 21% to NZ$8.2 million or 7.0% of revenue for the six months ended 30 September  2004 compared  to 6.4% in the prior corresponding  period. This was largely due to increased product development activity and the number of new products released during the six months.

Selling, general and administrative expenses grew 14% to NZ$34.5 million, or approximately 19% in constant currency terms, as the company continued to expand its operations and its sales teams in North America, Europe and Asia.

Outlook
“We  are  planning  further  significant  new  product  introductions  over  the  next  twelve  months, including a new humidifier system for use in hospital oxygen therapy as well as additions to our flow generator and mask product ranges.

Site works have started for a 23,300m2  building in addition to the existing 28,000m2  facility on our Auckland site. This will provide space for additional manufacturing and R&D capacity on completion in mid 2006.

We will continue to grow our international sales activities.  For the full year we expect a continuation of strong US dollar revenue growth with revenue to be in the range of US$155 million to US$160 million,” said Mr. Daniell.  “We expect operating margin percentage for the full year to continue to be in the mid thirties.”

Foreign Exchange Hedging
The  company  currently  has in place  a mix of foreign  exchange  contracts  and  call options,  the majority of which are up to 18 months forward, with a face value of approximately NZ$267 million. These instruments are at average exchange rates of approximately 0.43 US dollars and 0.43 Euros to the New Zealand dollar and are to protect the company from exchange rate volatility.

Financial Statements
Attached  to  this  news  release  are  condensed  financial  statements  in  both  NZ  dollars  and  US
dollars.

Half Year Results Conference Call
Fisher & Paykel Healthcare will host a conference call to review these results and to discuss the outlook for the remainder of the 2005 financial year.   The conference call will be broadcast simultaneously over the Internet.

To listen to the webcast, to be held at 10:00am NZDT, 8:00am AEDT on Wednesday 10 November (4:00pm  USEST,  Tuesday  9 November),  access  the  company’s  website  at  www.fphcare.com. Please allow extra time prior to the webcast to visit the site and download the streaming media software required.   An online archive of the event will be available approximately  two hours after the webcast and will remain onsite for approximately two weeks.

An audio replay of the conference call will also be available from approximately 11am NZDT on 10
November for two weeks.  To listen to the replay dial +61 3 9221 4752.  The passcode to access the recording is 075010.

About Fisher  & Paykel Healthcare
Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of heated humidification products and systems for use in respiratory care and the treatment of obstructive sleep apnea.  It also offers an innovative range of patient warming devices and neonatal care products.  The company’s products are sold in over 90 countries worldwide.

For further information contact Michael Daniell MD/CEO on +64 9 574 0161 or Tony Barclay CFO on +64 9 574 0119 at Fisher & Paykel Healthcare Corporation Limited or visit the company’s website at  www.fphcare.com.