Ansell’s results show the stock is not so defensive after all

Ansell‘s results in 1H23 were not received well be investors. This company once took the radical step of declaring its products (Personal Protective Equipment, or PPE equipment) were ‘recession-proof’. But today’s 1HY23 results show that Ansell might not be as defensive as you may think.

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Ansell’s results were headlined by a ~17% drop in EBIT

Throughout the pandemic, Ansell’s sales surged from $1.5bn in FY19 to over $2bn in FY21 as demand for PPE equipment skyrocketed. As the pandemic subsided, sales retreated to pre-pandemic levels. The company recorded $835.3m in sales for the first half, down 17.2% from $1bn 12 months ago.

Also impacting the bottom line were negative forex conditions and the company’s exit from Russia. Ansell’s EBIT amounted to $91.5m, down 17.6%, although the company’s EBIT margin remained at 11%.  The company’s EPS fell 16.5% to US$0.606 and its dividend was reduced by 17.1% to US$0.243.

FY23 EPS guidance reduced

Ansell cut its FY23 EPS guidance from US$1.15-US$1.35 to US$1.10-US$1.20. For comparison’s sake, the company achieved earnings per share of US$1.386 on an adjusted basis and US$1.252 on a statutory basis (after accounting for the impact of the Russian exit). The mid-point of the old guidance would represent near parity with FY22, but the new guidance implies a 5-12% reduction.

Ansell (ASX:ANN) share price chart, log scale (Source: TradingView)

Not so recession proof after all

The company’s shares fell by 9% at the market open.  To be fair to the company, it is not the only stock that saw a surge in demand for its products during the pandemic only to have demand return to normal levels post-pandemic. Pathology stocks have been notorious for experiencing this. But we think this morning’s drop, combined with others over the years, puts to bed any argument about Ansell being a defensive stock, because defensive stocks tend to be relatively stable in terms of their price and reslient to economic conditions.

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