Ansell (ASX:ANN) reported what outgoing Chief Executive Officer Neil Salmon described as “another half of double-digit earnings growth,” as the company worked to offset the impact of U.S. tariffs through pricing and other mitigation measures. Salmon, speaking from Melbourne on his final day as CEO, said he believed the company had “very solid foundations in place” to support long-term shareholder value creation.
Sales trends and tariff response
On an organic constant currency basis, sales declined 0.6% in the half. Management repeatedly emphasized that the prior-year period included $27 million of temporary sales tied to “order favorability and back order clearance” that were not expected to recur. Adjusting for that benefit, management said the company delivered approximately 2% adjusted organic growth.
Management also pointed to demand effects outside the U.S. tied to “second-order consequences” of tariffs, particularly in export-dependent economies. Salmon cited Mexico as the most notable example, saying Ansell has a significant presence there and had seen negative demand effects.
Segment performance: Industrial and healthcare
Salmon walked through performance across the industrial and healthcare segments, again using adjusted growth rates to remove the prior-year $27 million benefit.
- Industrial (mechanical and chemical): Mechanical delivered nearly 6% adjusted growth, which Salmon attributed primarily to new products. Chemical posted a moderate sales decline, with weakness concentrated in less differentiated offerings sold into the food industry, where customers reduced activity and workforce levels. More differentiated chemical ranges “continue to perform well,” he said.
- Industrial profitability: Salmon called industrial margin performance a standout, citing contributions from the Kimberly-Clark Business Unit (KBU) acquisition, synergy delivery, lower freight costs, and manufacturing productivity improvements.
- Healthcare (surgical, clean room/scientific, and exam single use): Surgical delivered a “good result” on an adjusted basis, following a strong prior period. In clean room, Salmon said customers had been holding higher-than-typical inventories before Ansell acquired Kimberly-Clark and before completion of transition services. After integration, Ansell gained visibility into distributor sell-out data, and Salmon said destocking of KBU products became apparent during the last six months, while comparable Ansell-branded clean-room products continued to show good growth.
- Exam single use: Management said the less differentiated end of the exam business remains more price sensitive and lower margin. The company reported continued growth in more differentiated, higher-margin products alongside declines in lower-margin segments.
In response to analyst questions, Salmon said instances of customers refusing tariff-related price increases were “very limited” and largely concentrated in lower-margin, ancillary areas of the portfolio. He also said that in some medical examination glove categories, customers were disaggregating purchases—staying with Ansell for more differentiated products while seeking lower price points for more commoditized medical exam products—adding that this part of the market is not a major focus for Ansell.
Margin, cash flow, and balance sheet
Chief Financial Officer Brian Montgomery reported adjusted EPS of $0.663 for the half. GPAT margin improved by 220 basis points versus the prior-year first half, driven in part by normalization of freight costs. Montgomery said freight had been elevated in the prior period due to air freight used to clear surgical back orders and to fast-track shipments of new industrial products; air freight usage has since returned to normal. He also cited sourcing savings across key raw materials and outsourced finished goods.
Montgomery said tariff-related pricing in the U.S. was the primary driver of adjusted sales growth, partially offset by reduced volumes of medical examination gloves. While pricing offset higher tariff costs, he said the net effect of incremental tariff-related pricing and cost increases was “moderately dilutive” to GPAT margin rate in the half.
SG&A rose 0.4% on an organic constant currency basis, reflecting wage inflation and strategic hires, partially offset by improved SG&A productivity and about $6 million of KBU cost synergies during the half.
EBIT grew 15.4% on an organic constant currency basis, and EBIT margin improved 180 basis points to 14.3%. Significant items totaled $7.3 million, primarily APIC costs linked to upcoming ERP system upgrades. The effective tax rate was 24.1%, which management said was in line with guidance.
Cash flow was a focal point. Montgomery said net receipts increased significantly year over year, driven by higher earnings and improved working capital. Normalized cash conversion was 112%, reflecting working capital inflow from improved collections and reduced inventory. Net capex was $28 million, including investment in dipping lines at a new surgical manufacturing facility in India, where commercial manufacturing is now underway.
Ansell repurchased $47 million of shares under its on-market buyback, contributing to an approximately $20 million increase in net interest-bearing debt over six months. Even with the buyback, Montgomery said net debt-to-EBITDA improved to 1.5x, describing the balance sheet as healthy and the debt maturity profile as well balanced.
Outlook, FX headwinds, and leadership transition
Nathalie Ahlström, who succeeded Salmon as CEO and Managing Director, said she was excited to take over a company she described as “much more focused, efficient, and really well positioned.” Ahlström highlighted what she called all-time highs in net sales, absolute EBIT, and strong cash flow.
For the remainder of the year, Ahlström said priorities include driving sales growth through innovation and the Ansell Guardian platform, maintaining a strong focus on productivity, continuing delivery of KBU synergies, and progressing the ERP project. She also reiterated the company’s sustainability focus, including broadening the supplier management framework.
Management said market conditions are expected to remain “fairly subdued” in the second half. Ahlström said that since the company’s October AGM, foreign exchange had shifted to an EBIT headwind, citing approximately $5 million of full-year FX headwinds tied to cost currencies. Montgomery added that earlier expectations for FX moved from roughly flat at the start of the year to a $2 million to $3 million benefit around the AGM, and now to a negative $5 million for the full year, driven largely by the strengthening Malaysian ringgit and Thai baht against the U.S. dollar.
Despite the FX headwind, Ansell maintained its full-year adjusted EPS guidance range of $1.37 to $1.49 and said it would continue its buyback program.
Strategy: innovation, service differentiation, and sustainability
Beyond the financials, Salmon emphasized initiatives he believes support long-term value creation, including digital transformation work to improve data management and systems, the APIC program’s organizational and cost benefits, and what he described as improved operational effectiveness and service levels. He cited customer recognition for supply-chain reliability and described the Kimberly-Clark acquisition and integration as a key execution example.
Salmon also discussed new product activity, highlighting ongoing industrial launches and calling out products aimed at unmet needs, including a disposable glove designed for protection against acetone and other ketones and a PFAS-free fire protection suit for first responders that meets NFPA standards. He also pointed to investments in service differentiation, including continued development of the Ansell Guardian platform and growth in the RightCycle waste management program, which he said increased recycled tonnage by about 30% while reducing the company’s cost to operate the program.
On sustainability, Salmon said Ansell reduced emissions and water withdrawals and maintained zero-waste-to-landfill certification, while also lowering its internal injury rate and extending supplier management coverage deeper into its supply base.
About Ansell (ASX:ANN)
Ansell Limited designs, develops, and manufactures protection solutions in the Asia Pacific, Europe, the Middle East, Africa, Latin America, the Caribbean, and North America. It operates in two segments, Healthcare and Industrial. The Healthcare segment manufactures and markets solutions comprising surgical gloves, single use and examination gloves, and clean and sterile gloves and garments, as well as consumables used by hospitals, surgical centers, dental practices, veterinary clinics, first responders, manufacturers, auto repair shops, chemical plants, laboratories, and life sciences and pharmaceutical companies.
