Why Are ANN Shares Declining Today?

Key Highlights:

• Ansell Limited has issued a trading update and provided guidance for the upcoming fiscal years 2023 (FY23) and 2024 (FY24).
• Ansell expects to deliver statutory earnings per share (EPS) in the range of US117¢ to US118¢.
• Excluding provision adjustments associated with the Russia exit, underlying EPS will be at the low end of the original guidance range provided earlier.

Ansell Limited (ASX: ANN), a prominent company specializing in personal protection safety solutions, has issued a trading update and provided guidance for the upcoming fiscal years 2023 (FY23) and 2024 (FY24). Based on initial consolidation of its FY23 results, Ansell expects to deliver statutory earnings per share (EPS) in the range of US117¢ to US118¢. However, excluding provision adjustments associated with the Russia exit, underlying EPS will be at the low end of the original guidance range provided earlier. This announcement has impacted ANN shares negatively, leading to a decline in their value. The last price for Ansell Limited's stock is $24.000 with a today's change of -$3.769 (-13.575%).

In FY23, Ansell's Industrial GBU sales were around AU$750 million, showing organic growth in Mechanical and Chemical segments. Healthcare GBU sales reached approximately AU$900 million, but the impact of reduced inventory levels by channel partners and end customers affected the Surgical and Life Sciences businesses. While underlying demand for Surgical and Life Sciences products is expected to grow, distributors are anticipated to continue reducing inventories in FY24.

The company has also revealed its plans for FY24, including an investment program aimed at driving EPS growth and improving returns on capital employed. As part of this program, Ansell will temporarily slow down production to normalize inventory holdings, resulting in improved cash flow but temporarily lower earnings before interest and taxes (EBIT) due to reduced manufacturing overhead absorption.

Furthermore, Ansell will focus on simplifying its organizational structure, reducing manufacturing employee numbers, and investing in automation and new operating systems to enhance manufacturing productivity. The company plans to invest in digitization, including cloud-based supply chain planning and manufacturing ERP systems, to improve efficiency.

Due to these developments and the investment program costs, Ansell provides guidance for FY24 with adjusted EPS in the range of US92¢ to US112¢, excluding the investment program costs. Statutory EPS, including the program costs, is expected to be in the range of US57¢ to US77¢.

Investors are reacting to this news, causing a decline in ANN shares as they assess the impact of the FY23 results, the cautious outlook for FY24, and the implementation of the investment program.

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