Australia | Dec 04 2025

Following a surprisingly weak first half, Metcash’s early second half metrics suggest improvement, perhaps signalling a trough, although caution remains.

-Metcash posts first half earnings miss
-Food okay, but Liquor and Hardware disappoint
-RBA policy a headwind for Hardware sales
-Competition rife in Liquor

By Greg Peel

The share price of grocery wholesaler and hardware chain Metcash ((MTS)) plunged -9% on the release of the company’s first half FY26 (April year-end) result, which showed earnings -5% short of consensus.

The 'miss' was driven partly by the earlier recognition of restructuring costs than consensus had forecast. The key food business (IGA and other chains) met forecasts, but the hardware (IHG, Total Tools) and liquor (IGA) divisions both fell short of expectations.

Analysts agree the Food business performed relatively well. The commercial food services division increased earnings before interest and tax by 1.4%. In Ord Minnett’s view, this was a creditable performance given sales of tobacco dived -35% on a year ago, the same sort of slide we have seen across the other tobacco retailers Woolworths Group ((WOW)) and Coles Group ((COL)).

Excluding the decline in tobacco sales, revenue increased circa 7%. As Macquarie notes, earnings were offset by improving margins given lower tobacco sales.

While competitive intensity has increased, IGA price competitiveness has improved, Morgan Stanley notes. Improved product mix and improved contribution from food service and convenience drove margin expansion. Management suggested it still has levers in food to defend margins despite the competitive environment.

As had been highlighted by rivals Endeavour Group ((EDV)) and Coles, the liquor market continues to be a struggle, as the industry faces headwinds from changing consumer attitudes to health and cost of living pressures. Liquor earnings fell -8.4% excluding reconstruction costs.

Analysts highlight the risk of greater promotional intensity from rivals as suppliers battle for market share.

Coles has a new strategy to boost its liquor market share, forcing Endeavour to respond. Lower price inflation and flat volumes make absorption of cost of doing business inflation more difficult. Despite these difficult trading conditions, Morgan Stanley notes Metcash is actually gaining share and sees improved strategic positioning.

Though Metcash’s independents continue to take share, this doesn’t appear sustainable to Citi, with the major competitors (particularly Endeavour) looking to arrest share declines.

Metcash has signaled it will not fund increased discounting, but further margin decline appears likely with sales growth unlikely to match cost growth and strategic buying gains being more limited in a less inflationary pricing environment.

Hardware Getting Harder

Hardware earnings for the first half fell -4% -- the fifth-straight half-year fall. In Macquarie’s view, the key source of earnings and valuation upside for Metcash is in Hardware.

Macquarie had previously been positive due to improving housing signals, including increases from the trough in approvals and new home sales. While the trajectory in these indicators remain on an upward trajectory, recent macro updates, including the October CPI, and implications for the cash rate suggest the potential upside is more constrained.

One would expect that perennially rising house prices and the federal and state governments desperate attempts to increase housing supply would be positive drivers for hardware sales.

Prior to Metcash’s result, much of the consensus FY27 profit growth forecast of 14% hinged on a 15% earnings uplift in Hardware. Citi continues to view this as overly optimistic considering detached housing approvals were flat year on year in September and the interest rate outlook is for no more rate cuts, with the possibility of hikes next year.

Hardware suffered retail margin pressure, Morgan Stanley notes, driven by trade distribution sites where competitive pressure remains elevated. Total Tools’ retail margins were nevertheless more consistent.

As volume lifts in hardware, Metcash’s plan is designed to deliver earnings leverage. But the focus remains on execution. Morgans Stanley comments while excess market capacity exists, pricing power is limited.

That said, Metcash highlighted the division lifted earnings in the second quarter, (three months to October), which provides Ord Minnett with some confidence the bottom may have been reached.

This broker notes, however, any uptick in the housing market that would materially lift hardware earnings is unlikely to be as strong as previously anticipated given the broader inflation and interest rate environment.

Australia | Dec 02 2025

Fisher & Paykel Healthcare's first half saw lower costs overcoming a drag from US tariffs. Declining US vaccination rates could provide a boost in the second half.

• Fisher & Paykel Healthcare's H1 beats on cost efficiencies
• Increases margin despite US tariffs
• Top-end guidance achievable on lower US vaccination rates
• Earnings growth forecasts superior in the sector

By Greg Peel

New Zealand-based Fisher & Paykel Healthcare ((FPH)) is a leading designer, manufacturer and marketer of products and systems for use in acute and chronic respiratory care, surgery and the treatment of obstructive sleep apnea.

The company’s first half FY26 (March year-end) proved significantly ahead of expectations on a slight revenue beat supported by lower selling, general & administrative (SG&A) and R&D spending compared to consensus.

Brokers are nevertheless quick to point out the first half was flattered by multiple factors.

These include the pull-forward of some CPAP (continuous positive airway pressure) device sales, outperformance of hospital hardware (up 21%) that is not expected to repeat in the second half, opex patterns that mean full year spending growth will be in the high single-digits rather than the 10% previously expected, and foreign exchange movements.

Constant currency earnings rose 26% thanks to lower SG&A and R&D spending. Management suggested R&D spend will be below sales growth for the next two years. Constant currency revenue growth of 12% featured a slight Hospital 'beat' reflecting higher device sales, but Homecare missed on lower OSA (obstructive sleep apnoea) mask share, UBS notes.

Management expects lower device sales in the second half, partly reflecting Homecare benefiting from an Asian tender win in the first. Hospital consumables sales growth rose from 11% in the prior half to 14% in the first half driven by HFT (high-flow therapy) adoption and wider global IV use post covid. Slower OSA mask growth (6%) reflects tougher full-face competition.

Full-face competition will lift again, UBS suggests, with two recent ResMed ((RMD)) releases, which offsets gains from Fisher & Paykel's Duet and Nova Micro mask releases.

The gross margin rose 110 basis points in the first half thanks to manufacturing efficiencies and a lower New Zealand dollar countering an initial US tariff impact.

The Trump Factor

The gross margin grew to 63%, supported by continuous improvement activities leading to efficiency gains, and included a -32bps drag from the US tariff impact.

Management expects an annualised impact of around -130bps from current tariffs, with a -75bps impact in FY26. Despite this, management anticipates net 50bps of FY26 margin expansion in constant currency, and still expects to achieve its gross margin target of 65% by FY28.

Unsurprisingly for Jarden, no comment was offered on the FY27 risk of US section 232 tariff introductions. Section 232 tariffs aim to protect US “national security”.

The Trump administration has already used this tool to raise levies on aluminium, buses, cars and car parts, copper, furniture, lumber, steel, timber, and trucks, and has launched Section 232 investigations into nine other types of products.

Jarden’s sensitivity analysis --based on steel and aluminium sector precedents-- suggests a potential revision size at the profit line of between -9% to -22% for FY27. This sensitivity also assumes Homecare products are exempt under Nairobi protocol protection.

The Nairobi Protocol covers goods specially designed or adapted for the use or benefit of people with disabilities.

UBS incorporates the US country tariff impact of -NZ$12m in FY26 with exemptions for Mexico (where Fisher & Paykel manufactures) and Homecare imports, but excludes any future US medical device tariffs.

The company is notable among Citi’s coverage universe in that it treats tariffs as a cost of doing business, weighing up efforts to reduce with the opportunity cost of spending time on growth activities. The company has a large range of initiatives which have more than offset any damage this time around.

Goods manufactured in Mexico, where the company has substantial operations, are exempt under the USMCA. The USMCA is due for review in 2026, although Citi does not have a strong sense of the risk anything changes.

The RFK Jr Factor

Fisher & Paykel Healthcare was a major beneficiary of covid, along with other manufacturers of respiratory devices such as hospital ventilators.

Indeed, Canaccord Genuity points out the company is “materially more valuable” compared to pre-covid times, recalling that the pandemic brought High-Flow Nasal Cannula (HFNC) to new global audiences (especially in emergency care), which subsequently kept using it in preference to conventional oxygen.

As covid risk eases globally, flu risk is rising, and no more so than in the US. Fisher & Paykel Healthcare continues to message that reaching the top of its upgraded guidance range is a scenario commensurate with a severe flu season, as was the case last year (northern winter).

Often severe flu seasons are followed by weaker ones, Citi notes, but this can be attributed to several factors, including dominant flu strains similar to the prior year (some cross protection typically occurs) and vaccine uptake.

US health secretary Robert F. Kennedy Jr’s antivax stance is leading to declining vaccination rates in the US for everything from measles to the flu. See also CSL's ((CSL)) struggles in this segment.

Brokers agree this unfortunate reality provides upside risk for Fisher & Paykel Healthcare. Morgan Stanley notes industry participants expect lower vaccination rates for the 2025-26 flu season.

Australia | Nov 21 2025

Rising demand for commodities testing, supported by the soaring gold price, provided a strong first half for ALS Ltd, and it appears there’s more to come.

-ALS Ltd first half beat expectations
-Better than expected growth in minerals testing
-Junior miners set to begin exploration, increasing demand
-Guidance seen as conservative

By Greg Peel

ALS Ltd ((ALQ)) falls within the Testing, Inspection and Certification (TIC) sector, providing laboratory testing across two segments; Commodities and Life Sciences.

The Commodities division provides geochemistry and metallurgy testing of that which miners pull out of the ground at newly developed sites, as well as equipment reliability.

The Life Sciences business provides testing of food, pharmaceuticals and personal care products –-referred to as the “legacy” business-– and the subsequently added environmental testing business (water/air quality, site remediation etc) which has grown to 80% of the Life Sciences segment.

ALS Ltd’s first half FY26 result was ahead of expectations. Profit was up 17% year on year and earnings up 15%.

Divisionally, both Commodities and Life Sciences exceeded expectations, partly offset by higher corporate costs and FX.

Commodities

In the middle quarters of FY25 (March year-end), weaker demand and lower commodities testing volumes forced ALS to discount its pricing, but that trend swung the other way in the final quarter and continued into the first half of FY26 (to September).

While there has been a general increase in volumes across commodities, this year’s surging gold price in particular, along with the copper price, have been primary drivers,

In the Minerals sub-segment, volumes and mix drove a 220 basis point improvement in the margin in the first half. However, this was weighed down by a -120bps impact from pricing as the price discounting from second and third quarters of FY25 continued to wash through.

The good news is those legacy contracts at lower prices have now largely expired.

Importantly, UBS notes, Minerals sample volumes were up low double digits throughout the half, given supportive commodity prices (gold/copper) and demand from onshoring and mineral security trends.

Analysts specifically note volume growth to date is still being driven (75%) by major and mid-tier miners.

Here Come the Juniors

On a trailing 12-month basis, resource capital raisings are up 60%, Macquarie notes. In Morgans’ view, equity raisings are the most powerful key lead indicator for geochemistry sample volumes and therefore the share price of ALS.

Morgans’ data, which the broker notes have reached unprecedented levels over the last few months, imply that volumes will grow 25-35% year on year during the December quarter and will be up around 40% in January.

The data have an 86% correlation with ALS’ sample volumes over nearly a ten-year period, which gives Morgans confidence volumes will be there or thereabouts.

Juniors represented some 20-30% of overall activity levels in the past, Citi notes, so momentum in Geochemistry could increase from here on.

The company has, however, called out that the time lag between capital raised and sample volumes has increased, which makes sense given lengthy approval processes.

Morgans sees this as a timing issue.

Life Sciences

Life Sciences earnings beat by 4% on better margins despite weaker demand in the US and challenges regarding the York acquisition integration, Macquarie notes. US-based York is an environmental testing company with a particular focus on PFAS.

The previously acquired Nuvisan (Europe pharma testing) is finally starting to hit its straps, Macquarie points out, with positive revenue growth and earnings margins up 475bps on a material cost-out.

Life Sciences earnings were up 19% year on year on margins of 15.1% (up 74bps). Excluding acquisitions, margins rose by 57bps, Morgans notes.  

Life Sciences’ margin was 30bps higher than assumed as cost-out continued at Nuvisan and legacy Life Sciences operations delivered margin expansion ahead of the 20-40bps FY26 target.

Notwithstanding this strength, the outlook for Life Sciences is considered more mixed.  Concerningly for Jarden this appears, at this stage, to be focused on the Environmental business in the Americas (Latam and US) where legacy earnings margins are guided to decline -25bps to -40bps through the second half.

Tempering Jarden’s positive view on the outlook for Commodities is concern that fundamentals have deteriorated for ALS' legacy Life Sciences business and, more specifically, its Environmental operations. Operating conditions remain challenging and competitive intensity has built, based on Jarden’s assessment of the market.

Brokers aren’t prepared to call it out specifically but clearly Trump’s environmental policies (or lack thereof) and deregulation will impact on demand for testing. Tariffs are also a drag. Then there’s the upending of the US Department of Health, which is not a positive for the legacy business either.

Ord Minnett points out the earnings beat in the Life Sciences division was supported by both revenue growth and margin expansion, although a slowing in the rate of revenue growth to 4.5% from 9.3% a year ago in its legacy business caused some concern.

Ord Minnett expects the 4.3% rate to hold in the second half of FY26 before picking up in FY27 and later years.

Conservative Guidance

At the group level, ALS’ FY26 organic revenue guidance has been upgraded to 6-8% growth from 5-7% with steady margin improvement reiterated. The seasonality is expected to be 48:52 between the first and second halves.

Profit guidance is slightly trimmed incorporating the impact from costs pushed above the line (restructuring and greenfields), for which a decision was taken to drive improved accountability given these costs are often recurring for TIC businesses.

ALS is now anticipating Commodities organic revenue growth of 12-14% in FY26 (up from 5-7%). To Morgans, this feels conservative given Commodities delivered 12% growth in the first half, pricing is turning favourable in the second half and, in Morgan’s view, volumes are set to accelerate.

In everyone’s view actually.

Citi believes ALS’ upgraded Commodities organic revenue growth guidance purely factors in the observed run-rate in the first six-seven weeks of the second half. In other words, a meaningful return of juniors or any progressive uptick in exploration levels are not fully factored in.

Citi also thinks risk to the margin for Commodities is likely to the upside, underpinned by higher sample volumes and continued high-performance metal take-up.

There are healthy signs for the Commodities business heading into second half, Jarden agrees. Geochemistry sampling flows have lifted by "early double digits" in the first half FY26, an “impressive” acceleration from the 5% achieved in the second half FY25.

More importantly, in Jarden’s view, this coincided with price/mix lifting from a negative -4% in the prior half to positive 2% in this half. Jarden anticipates "double digit" sampling flow growth to continue in the second half and for price/mix benefits to be retained.

The broker notes this outlook is not presently captured in guided half-on-half improvement in underlying Commodities earnings margins of 100 to 125bps. Accordingly, Jarden’s forecasts sit at greater than double this guidance (320bps) boosted by price/mix leverage.

There is also a degree of conservatism in FY26 Life Sciences margin guidance, Citi suggests, implying a sequential deterioration in margin, despite full-year organic revenue growth being expected to remain flat or 1-2ppt higher versus the first half.

Australia | Nov 17 2025

Orica posted a strong FY25 result and forecasts improving growth across all three business segments through FY26.

-Orica’s FY25 result solid, slightly ahead of consensus
-Specialty Chemicals and Digital Solutions now primary drivers
-Around half of earnings stem from gold and copper sectors
-Adds incremental $100m to recently completed $400m buyback program

By Greg Peel

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Orica ((ORI)) is not only the world’s largest explosives company, it’s the global leader in geotechnical and structural monitoring in mining and civil infrastructure and the world’s largest producer of sodium cyanide.

Orica is leading the industry with its technology offering. Importantly, notes Morgans, this area is high growth and high margin work. Orica’s management team continues to execute well and has a solid track record.

The company delivered a strong FY25 result (September year-end), with earnings growth across all segments reflecting improvements in mix and margin, ammonium nitrate re-contracting benefits, elevated mining exploration activity and record gold prices driving demand for sodium cyanide.

Earnings per share increased by 30% year on year, slightly ahead of consensus. Net operating cash flow was a standout, UBS suggests, increasing by 18% to $949m. Leverage of 1.4x was therefore at the low end of the target range of 1.25-2.0x. As such, Orica has allocated an incremental $100m to its recently completed $400m buyback program.

In Morgans’ view, this was a strong outcome given the geopolitical risks, economic uncertainty, adverse weather and weak demand for thermal coal. In FY25, Orica benefited from its continued commercial discipline, the uptake of its premium products and technology (mix benefits), which resulted in higher margins.

FY25 also benefited from new acquisitions (Terra and Cyanco), re-contracting benefits, less turnaround activity than FY24, and a general uptick in exploration activity.

Macquarie notes the composition of Orica's earnings growth is changing, with Speciality Mining Chemicals and Digital Solutions coming to the fore and the rate of growth in Australia-Pacific slowing after moving through the bulk of ammonium nitrate price re-sets.

Specialty Mining Chemicals is benefiting from strong demand from the gold mining sector for sodium cyanide, while Digital Solutions is benefiting from increasing global exploration activity.

Good momentum

Orica has started the year "with good momentum", according to management, which expects improved FY26 earnings across all three key segments.

Blasting Solutions earnings growth is now expected above that of GDP growth “through the mining cycle”, supported by improved product mix, wider margins earnings and technology benefits, up from previous guidance of just “growth”.

Digital Solutions' earnings growth is now forecast to be in the mid-teen percentage, up from low double-digits previously, as customer adoption accelerates and exploration activity increases.

Specialty Chemicals' earnings growth is now guided to high single-digits, up from mid single-digits prior, buoyed by strong mining sector activity, especially in the gold industry.

The gold and copper sectors now make up around half of Orica’s group sales, Ord Minnett points out.

Blasting Solutions is forecast to see further re-contracting benefits, offset by weaker demand from the US and Indonesian thermal coal markets, the major Carseland ammonium nitrate facility (Canada) turnaround (scheduled for early second half FY26) and a non-repeat of a $15m carbon credit benefit.

Expanding global exploration activity and further cross-selling opportunity conversion is expected to support Digital Solutions. Speciality Mining Chemical earnings are anticipated to strengthen on strong demand for sodium cyanide from gold customers and higher manufacturing facility output as Winnemucca (Nevada) ramps up.

Operational challenges at the Winnemucca facility have been progressively addressed with the planned critical safety upgrades completed successfully.

It’s a blast

Despite Blasting Solutions volumes falling by -4.2% in FY25, earnings were up 14.9%. Morgans notes earnings per tonne increased to $217.2/t versus $181.1/t in prior year, proving Orica doesn’t require rising ammonium nitrate volumes to grow but is now a mix and margin improvement story. Its premium products and advanced blasting technologies are gaining strong traction.

Blasting Solutions is in the driver’s seat, Jarden suggests, despite disruptions. Orica saw its underlying earnings per tonne accelerate through the second half, driven by improving pricing dynamics (Asia-Pacific) and prudent cost control across its operations.

The outlook for FY26 starts the year mixed, Orica will cycle the $15m of carbon credit benefits and will undergo a major turnaround in North Americas (Carseland), which has been well flagged to the market in Orica's disclosures.

The balance of the outlook for North Americas now swings on Orica's ability to offset any near-term supply chain disruptions for its North Americas distribution market where its major supplier, CF Industries, has declared force majeure.

Orica can likely offset these headwinds via its global sourcing, but that likely will come at the sacrifice of some near-term margin given higher transportation and route to market costs, Jarden points out.