Ansell announces ‘productivity initiative’ to raise earnings

Richmond, Australia – Protection equipment supplier Ansell Ltd has announced plans to launch a restructuring programme to address post-pandemic operating conditions and to position itself for ‘next phase of growth’.

The “investment programme” will aim to simplify and streamline organisational structure, enabling “clearer organisational alignment to customer and market-oriented growth strategies”, said Ansell.

The initiative, the Australian group said 14 Aug, is in response to headwinds such as low demand and inventor destocking by clients.

As part of the move, Ansell said it aimed to temporarily slow production of finished goods to normalise inventory holdings.

This, it said, will improve cashflow in fiscal 2024, started in July, but temporarily lower earnings (EBIT) due to reduced manufacturing overhead absorption.

In addition, the group will look to reduce costs with “less duplication of leadership responsibility”, said Ansell in its full year financial report.

The measures, Ansell expects, will reduce manufacturing employee numbers to provide “a partial offset to the unfavourable impact of slowing production.”

Meanwhile, the group will be investing in improving longer term manufacturing productivity through increasing automation and leveraging new operating systems.

This, Ansell said, will include making “limited changes” to its manufacturing configuration where optimisation opportunities exist.

In parallel to the initiatives, the Richmond-based group will also accelerate its digitisation strategy, using cloud-based supply chain planning and manufacturing ERP systems.

Ansell expects the cash cost of the initiatives to be $40 - $50 million (€38 - €47 million) with the majority to be incurred in fiscal year 2024.

The investments are expected to deliver annualised pre-tax cost savings of $45 million by fiscal 2026.

For the fiscal year ended 30 June, Ansell reported a 16% year-on-year decline in earnings to $206 million, on 15% lower sales of $1.65 billion.

The ‘healthcare' gloves unit, in particular, experienced “significant customer destocking” throughout the fiscal year as channel partners and end users reduced inventory.

Segment sales declined 21% as destocking affected all business units.

The decline, however, was more pronounced in surgical and life sciences segments in the second half of the year.

Volumes in the examination gloves segment exceeded the first half with stabilised pricing, Ansell added.

The most significant destocking, the group noted, occurred in ‘life sciences’ segment, where the “very conservative positions” taken by buyers during Covid translated to “a more prolonged inventory unwind”.

The industrial gloves and products segment recorded “good top-line growth”, posting an overall year-on-year increase of 4.3% in revenue.

The growth reflected increases in both halves of the year, across mechanical and chemical gloves segments.