Ansell’s 1HY23 results show the stock is not so defensive after all

Ansell (ASX:ANN) 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 this company might not be as defensive as you may think. 

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Ansell’s sales and EBIT fall ~17%

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

Ansell 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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