Higher Raw Material Costs Impact Ansell’s Near-Term Earnings but Outlook Remains Positive

Narrow-moat-rated Ansell reported adjusted net profit of USD 64 million for the first half of fiscal 2019, a 1% increase on last year. Earnings were constrained by higher raw material costs (primarily Nitrile), while uncertainty in the European automotive market impacted demand for Ansell’s protective gloves. However, the company is reaping the benefits of its ongoing transformation program and management now expects to exceed the original cost savings target. The board declared an interim unfranked dividend of USD 20.75 cents per share, a 1% increase on last year. We maintain our AUD 27 per share fair value estimate, and at current levels the stock is slightly undervalued.