Australia | May 25 2007
By Chris Shaw
The good news continues for Ansell (ANN) as SSL International, the world’s leading condom manufacturer, has posted 16% sales growth for the year for its Durex brand.
According to Southern Cross Equities this suggests strength in the global market for condoms, which should be supportive for Ansell’s earnings in coming years, particularly as latex prices are expected to ease further from recent highs.
The broker notes latex prices have fallen by 7% since March, which should flow through into lower costs and therefore higher margins for Ansell, especially as it latex prices are falling at the same time as the company should finish with some one-off costs associated with brand building in its consumer business.
This leads analyst Stuart Roberts to suggest there is potential for the company to beat its earnings forecasts, which currently call for earnings per share to grow from 58.1c this year to 79.7c in FY08.
On a cautionary note the broker points out the company had a fatality at one of its plants in Mexico, which is potentially of significance as the plant is involved in the manufacture of its HyFlex industrial gloves, which are the company’s biggest selling product.
The company’s safety record is very good so there may not be any cause for alarm, but the broker notes any credibility or regulatory issues that result from the accident would likely impact on earnings.
There is no change to the broker’s price target on the stock of $14.00, which compares to the average price target according to the FNArena database of $12.70 and a median price target according to Thomson One Analytics of $13.23.
Shares in Ansell today are slightly stronger, as at 1.50m the stock was up 5c at $12.15.