Why the Ansell (ASX:ANN) share price is lifting this morning

The Ansell Limited (ASX: ANN) share price is on the rise this morning, up 3% on the open. This follows the release of the company’s results for the first half of the 2021 financial year (H1 FY21).

At the time of writing, shares in the company have retreated slightly, trading up 0.88% at $38.91.

What results did Ansell report?

In this morning’s release, the personal protection safety solution provider reported sales for the half year reached $937.8 million. That’s up 24.5% from H1 FY20 and up 22.9% in terms of organic growth.

(Organic growth compares the two periods at constant currency – using average foreign exchange rates – and excludes the impacts of acquisitions and divestments.)

Ansell’s healthcare segment had organic growth of 37.3%, while the company reported industrial organic growth of 7.0%.

Earnings before income and tax (EBIT) grew 60.6% over the previous corresponding period. Ansell credited sales growth coupled with higher production volumes and manufacturing efficiencies for much of the earnings growth.

Earnings per share (EPS) were also up 65.5% to 82.9 cents per share (cps), and profit attributable came in at $106.5 million, an increase of 61.9% year-on-year.

Ansell raised its half year dividend to 33.2 US cents, up 52.6% from the first half of the 2020 financial year and representing roughly a 40% dividend payout. Looking ahead, the company aims for a 40-50% dividend payout ratio from its profit attributable.

From the management

Commenting on the results, Ansell CEO Magnus Nicolin said:

We were able to deliver better than expected growth across all of our strategic business units. Exam/SU, Life Sciences and Chemical saw stronger performance partially driven by COVID-19 whilst Surgical and Mechanical SBU’s were able to demonstrate favourable performance and market share gains despite facing industry headwinds.

Our capacity expansions are progressing well despite the challenges of operating in a COVID-19 environment. During the first half, we started five new production lines and expect another eight production lines to go live during the second half.

Looking ahead, Nicolin stated that by 2022-2023 financial year, he expects Ansell will have more than doubled its in-house capacity to produce single use gloves and suits.

The company forecasts strong demand for personal protective equipment (PPE) will persist for the next 12 months, saying that even after 70% of the population is vaccinated, increased demand for most of its products will remain.

Ansell share price snapshot

Counterintuitively, Ansell’s share price was sold off heavily during the COVID fuelled panic last year, selling along with most other ASX shares. But shares have come back strongly since late March, reaching an all time high of $42.91 per share on 9 November.

Though the share price has retraced a bit from that record high, the Ansell share price is up 20.3% over the past 12 months and up 11.1% so far in 2021.

By comparison the S&P/ASX 200 Index (ASX: XJO) is up 3.1% in 2021.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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