Strong Near-Term Outlook for Ansell, No Change to Long Run Expectations

Narrow-moat Ansell posted a first-half result broadly in line with our expectations and maintained fiscal 2020 guidance despite significant currency headwinds. The industrial segment sales, a reflection of global manufacturing, recovered to positive growth sooner than we anticipated after declining in fiscal 2019. Consequently, we adjust our near-term industrial revenue forecast to positive 3% growth in fiscal year 2020 from negative 1% prior. However, operational costs in this segment also ran ahead as the company shifted manufacturing locations during the period, negating any earnings or valuation impact. Our long-term growth expectations are unchanged and we view Ansell as well-managed and able to deliver a consistent, growing earnings stream. However, we increase our fair value estimate to AUD 34 from AUD 32 to reflect the time value of money and an updated USD/AUD exchange rate of 0.67.