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F&P Healthcare lifts bottom of profit guidance, shares up 4.1%

BUSINESSDESK: Fisher & Paykel Healthcare, the respirators and sleep apnea products maker, raised the bottom end of its forecast for annual earnings on stronger first-half trading and after revising its assumption for the kiwi dollar.

The shares climbed 4.1%.

The Auckland-based manufacturer expects to post an annual net profit of between $65 million and $69 million on sales of between $540 million and $550 million, chief executive Michael Daniell told shareholders at yesterday's annual meeting.

That compares to previous profit guidance of between $62 million and $70 million on revenue of between $540 million and $560 million.

First-half profit is likely to rise 10% to $31 million on operating revenue of $265 million, Mr Daniell says.

F&P Healthcare has embarked on a strategy to limit the impact of a strong New Zealand currency – as 52% of its sales are generated in US dollars and 23% in euros – by increasing capacity at its Mexican plant, running a considerable hedging programme, stripping out costs where it can and using the local currency of more countries.

"We expect our constant currency gross margin to increase about two percentage points compared to the first half last year," Mr Daniell says.

Chairman Tony Carter sais the company's share price performance has been disappointing, with the "elevated exchange rate is undoubtedly a major reason" for the weakness.

The shares rose 4 cents to $2.04 in trading today, having shed 23% this year. The stock is rated an average "hold" based on seven analyst recommendations compiled by Reuters, with a median target price of $2.41.