Ansell Limited

Good day and welcome to the Ansell Limited FY26 full year results briefing. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. For operator assistance throughout the call, please press star 0. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Natalie Orstrom, Managing Director and Chief Executive Officer, to begin the conference. Natalie, over to you.

Thank you, Operator, and welcome everybody. It's a privilege to be here today together with Fred and walk you through our fantastic strong year, financial year 26. Equally also then talking about the outlook and then having the Q&A together with you. So we'll start with looking at the performance and then, as I said, coming to the Q&A. Starting with the purpose. We have a really strong purpose. It's an emotional purpose. It's a powerful purpose. And this leading the world to a safer future, this is who we are. This is our business. This is what it's all about. And that's how we translated it. Then also to our financial year 2016. And that's how we are bridging then the strong momentum to financial year 27. But let's start with the highlights of the year. As I said, the highlights is a very strong delivery in quite dynamic market conditions. The world is pretty – a lot is happening. But as I said, it's a strong delivery, and we grew the net sales by 5.7% adjusted. in this environment. Where I'm especially proud is that our second half growth momentum, 9.2% growth, really showed that we're also growing with volumes. So good, strong momentum here. On the sales growth, we also see that the momentum is in strategic areas. And areas to call out is our clean room and scientific business grew by 10% for the full year. And also U.S. by far the largest market grew by 10%. So improving the mix, growing in the future strategic areas has really helped us deliver a strong financial year 26 and also a very strong second half where also volumes came back. So strong net sales growth, of course, translates into a strong EBIT delivery. A EBIT margin of 15%. And we grew by 90 basic points versus last year. The star is of course healthcare, and I'll come to that soon. But you also see that our G paid grew by 70 basic points. And that's again thanks to this that we are growing in the more strategic areas where we are having higher gross margins and our value addition to customers is higher. Also this financial year 26, I said it was a dynamic market And our really decisive actions when it comes to US tariffs and Middle East crisis, things that are in our own hand on sourcing actions and then also price increases help to offset the impacts of both US tariffs and Middle East crisis. So strong net sales growth, good EBIT margin, and that's then also supported by a very strong cash conversion. Cash conversion of 113%. So we have a strong balance sheet in place compared to the financial year 25 when our cash conversion was 91%. Why this really mattered was in the Middle East crisis, and I'll talk about that a bit later. When Middle East crisis started, our focus was on enabling our customers to continue to serve, continue to ensure that we have availability. And that's where the strong balance sheet and some cash conversion really supported us. And then finally, adjusted EPS at the top range of 148.6 cents. That's a growth of 18.5% compared to last year. So we're very proud of it. And that also then translates into a higher dividend. We increased the dividend by 35.7%. So the full year dividend is 68.1 cents. So strong on top line, EBIT cash conversion, EPS. And this all is thanks to our strong team that we are having globally and the strong partnerships we are having with our customers and our partners. So that's the highlight of financial year 26. Then going to industrial. Industrial continued to perform on a high level. EBIT again grew and we see that the EBIT margin grew to 9.7% going from 17.3 to now to 18% EBIT margin what we really see is that of course the net sales growth especially mechanical where you see the mechanical also grew much faster in second half 7% that supported the net sales growth supported and then the overall higher growth in the second half. Moreover, what supported the continued improvement on EBIT is, again, what I'm talking about, is moving the portfolio upwards, focusing on the strategic verticals, focusing on the strategic markets, and especially here in industrial. It was, again, U.S., the strong performance in U.S., and also the verticals. Aerospace and Defense that helped us to move the portfolio upwards. Then, going to healthcare, and I must say I'm so proud of the team to deliver this improvement in healthcare. We received a step change in the EBIT margin from 12.8 to 14.3% EBIT margin improvement over one year. Of course, What helps is again the volumes. Volumes is always helping. And here you see the exceptionally strong growth in second half. And especially the star performer is clean room again. So it shows that where we have strong positions, where we have very strong brands, we also can grow. And of course the clean room that turbocharged the growth, majority of that was from the U.S. And as I said, in healthcare, the second half growth of 12.3% really helped us. So both industrial, healthcare delivering, healthcare at the total new level. Then, the dynamic world we are living in, looking at the US tariffs. We have really offset the US tariffs by sourcing, optimization, where do we source, how are we serving the US market, and then price adjustments. We also saw then in the second half that our U.S. growth momentum continues despite the price adjustments we've done to the market and accelerated the growth in industrial and scientific, the clean room, as I've mentioned before. So this success in the U.S. tariff really has been enabled by the strong customer partnerships we are having in the U.S. I just came myself with Fred a few days ago from the U.S., and it's wonderful to see the good strong partnerships we're having with our customers. And at the same time, we are ready to respond to any further changes in the tariffs as we go forward. US tariffs, not the only thing. We also have Middle East crisis. And here I'm really proud about the team. We went really decisive. We went quickly out to the market to offset the impact of the Middle East crisis. First, as said, we focused on supply chain resilience. we wanted to ensure that we ensure availability of customers. We have no disruptions in our production and serving the supply chain. As with the US statics, we also saw that the branding price, the brand pricing power is significant with Ansell. And I'm going to talk more about our brands because this really shows that we have the power of the brands and we are really delivering added value services. So thanks to our brands, we were able to do the price adjustments and could offset one-to-one the cost of the Middle East crisis. And we will continue to be flexible with the pricing as the Middle East crisis evolves. And then finally on balance sheet strength, as I mentioned, this was important because as prices were going up and down in March, April, May, We wanted to ensure that we have a strong balance sheet that we can serve our customers no matter what. And we are the trusted partner now and in the future to our customers that they can serve then going forward. So that's US, Middle East, it's in our hands. We reacted decisively to this. And finally on sustainability. I'm really proud how we are improving on many fronts in sustainability. As a few examples, our safety, we reduced our accidents by 32% during the year. Another example is that today of the sourced energy, 58% is renewable energy. And that's, of course, a huge asset for us, that we have 58% of our energy is renewable. So that also, of course, translates then into a financial impact. that we especially during the Middle East crisis saw benefit from. Then a more customer consumer facing area is that today more than 90% of all our packaging is recyclable, reusable or compostable. So proud to be here to talk about the strong financial year 26 and what all the team and together with our customer partners we've been able to accomplish. Now I'll hand over to Fred to talk more about the financial performance in detail. Over to you, Fred.

Thanks, Natalie. And good morning, everyone. It's great to be speaking with you today. I'll spend the next few minutes talking through our financial performance for fiscal year 26, expanding on Natalie's earlier comments. Firstly, on sales, we were pleased with the adjusted sales growth of 5.7%, which excludes the effects of foreign exchange, and some minor product exits, as well as the benefits we received from temporary order pattern favorability in both F25 and F26. In the second half of this year, we had $15 million in extra sales of exam single-use products as customers increased purchases in response to the Middle East crisis. These sales will unwind in F27, so we have excluded them from the adjusted sales growth calculation. Pricing was a key driver of sales growth for the year, particularly in the U.S., where we successfully offset the effects of higher tariffs. We also increased prices in the final months of the year to offset higher costs resulting from the Middle East crisis. Pleasingly, as Natalie had mentioned before, we saw sales really accelerate in the second half of the year supported by improved volume trends. Our G-Paid margin improved by 70 basis points versus F25, a great effort given the significant cost headwinds we faced throughout the year. We spoke at the half-year results about margins being supported by sourcing productivity efforts and lower freight costs. We also saw benefits across the year from improved sales mix, particularly in healthcare, with accelerated sales growth in our higher margin clean room products. The net price and cost effects of U.S. tariffs and the Middle East conflict were moderately dilutive to our overall G-paid margin percentage. Moving down the P&L to SG&A, this was well controlled with growth of 2.7% on an organic basis. Higher employee costs from both wage inflation and strategic hires were partially offset by improved SG&A productivity and the KVU cost synergies we mentioned before, which are tracking in line with our business case. On FX, while exchange rates were favorable on an underlying basis, we had a loss of $13.8 million on our hedge book, which meant that the currency was a headwind to EBIT of $4.3 million this year. So when you put all this together, we achieved organic EBIT growth of 14.9% versus F25, and a 90 basis point improvement in EBIT margin, growing to 15%, which is really great to see. Below EBIT, we booked $1.4 million in significant items. This includes the APIP costs related to the upcoming European upgrades, largely offset by an initial refund of tariffs paid in the U.S. prior to the February Supreme Court ruling. The interest line was broadly the same as F25, and our effective tax rate came in as guided at 24.1%. This all contributed to adjusted earnings per share of 148.6 cents, an 18.5% increase versus last year on an organic basis, and a result we're very happy with given the external challenges we have managed over the course of the year. Included in the adjusted EPS was a non-recurring benefit of 3.3 cents, which was largely due to the timing difference throughout the year between the cost that we've seen coming in through the P&L and the timing of when prices were adjusted in relation to the U.S. tariffs and the cost inflation from the Middle East. Now let's move to the balance sheet, which is in great shape. Working capital was lower than June 2025. largely driven by a reduction in inventory in the second half, as sales accelerated, and we also made targeted reductions in safety stocks in response to the Middle East crisis. Debtors were higher largely due to the higher sales, and payables fell with purchases from outsourced finished goods suppliers lower than at the same time last year. Looking at returns, we delivered return on capital employed or ROCE, of 12.7% and return of equity of 10.6%. As we've pointed out in the half-year results, the nominal reduction in ROSI versus F25 is due to the partial inclusion of KBU capital employed in the denominator in the F25 calculation, noting that we calculate ROSI based on the average capital employed on a trailing 12-month basis. If you normalize for this KBU in the denominator, the F25 ROCE would have been 11.2%, translating to a 150 basis point improvement in F26 on a like-for-like basis. Turning next to cash flow, which was really strong in F26, the biggest increase you see in statutory EBITDA was driven by our double-digit earnings growth, helped further by a large reduction and significant items, noting that we were booking KBU transactions and integration costs last year. Net receipts were significantly higher than F25, driven by statutory earnings growth and the improvement in working capital I outlined on the previous page. With growth in net receipts outpacing EBITDA, our cash conversion came in at 113% compared to 91% in F25, as Natalie noted before. Net capex was $48.6 million, lower than F25 following the completion of construction of our Greenfield India Surgical Facility. We also took the decision to prioritize only our most strategic capital projects while we were navigating through the effects of the Middle East crisis in the latter part of the year. So with the strong growth in net receipts and a reduction in capex, we were able to deliver a substantial year-on-year increase in our operating cash flow. This gave us the ability to fund the on-market share buyback program to the tune of $118.4 million, while also reducing net interest-bearing debt by $52.3 million as well. So let me wrap up by saying a few words on our funding profile. Our net debt to EBITDA was 1.3x at the end of this year, compared to 1.6 this time 12 months ago, and we have significant liquidity with $752 million of cash and undrawn bank facilities. Furthermore, the maturities of our debt are relatively long-dated, and we have approximately two-thirds our facilities at fixed rates. So you can see that our funding position is healthy, our maturity profile is well-balanced, which gives us flexibility to continue to pursue value-accretive growth opportunities in addition to capital management initiatives. With that, I'll hand it back to Natalie to talk about our strategic priorities and our outlook for F27.