Australia | Jun 04 2025
A consensus-beating FY25 result from Fisher & Paykel Healthcare was undermined by disappointing FY26 guidance, with tariffs partly to blame.
-Fisher & Paykel Healthcare's FY25 result beats consensus
-FY26 guidance falls short on tariff impact
-Margin expansion trajectory delayed
-Brokers maintain positive views
By Greg Peel
New Zealand-based and Australian-listed medical devices company Fisher & Paykel Healthcare ((FPH)) reported FY25 (end-March) revenue and profit ahead of consensus on a better than expected gross margin and lower operating expense.
The company manufactures sleep apnoea and respiratory devices and supporting software for hospital and home use.
As the manufacturer is specifically reliant on its presence in the large US market, forex movements are influential and, more recently, so are Trump's tariffs.
More on tariffs later.
Fisher & Paykel Healthcare demonstrated strong double-digit growth across almost all product segments from new products and change in clinical practice, with an added boost from a severe US flu season. Hospital revenue grew 18% year on year, albeit 21% in the first half and 15% in the second. Hardware grew 18% and Consumables 18%, with the company noting broad-based growth across its portfolio.
Homecare revenue advanced by 13% year on year (14% first half, 13% second), underpinned by a strong contribution from new masks. The key call-out for this division, suggests Jarden, was Consumables (mostly sleep apnoea masks) fading on a year-year basis (16% first half, 11% second, I sense a pattern), attributed to multiple new masks being introduced by competitors.
On the other hand, gross margin snuck up to 63% for the year, and 64% in the second half. Margin strength came from a combination of improvement initiatives and overhead efficiency. The earnings margin rose to 25% (second half 27%). The strong second half performance was attributed to gross margin improvement and lower-than-expected selling, general & administrative costs.
Tariffs
Management reassured on the tariff headwinds, albeit the situation remains (in exquisite understatement) "fluid".
The overwhelming majority of products made in Mexico, as Citi notes, are compliant with the USMCA (US-Mexico-Canada free trade agreement), making them exempt from tariffs. Products from the Homecare division for the treatment of sleep apnea are also exempt from tariffs under the Nairobi Protocol.
The Nairobi Protocol to the Agreement on the Importation of Educational, Scientific, and Cultural Materials Act of 1982 established the duty-free treatment for certain articles for the handicapped.
This leaves a 10% US tariff on hospital products made in New Zealand. Management estimates the gross margin impact at -75 basis points (-50bps in FY26, -25bps in FY27). Tariffs have effectively added another year to margin recovery timelines (the company is targeting 100bps annual of gross margin GM improvements).
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