Monday, November 8, 2010

Fisher & Paykel Healthcare & the US Dollar



Of late the fall in value of the US dollar against the Kiwi dollar has had a deleterious effect on the share price of Fisher & Paykel Healthcare Ltd [FPH.NZX]. This has impacted more so over the last week as the Kiwi was buying almost 80c US as the NZX came to a close last Friday. (see 1 month chart above)

The stock has dropped by over 10% in just over a week in a overall northwards market and will continue to do so as the US dollar does an impression of a kamikaze pilot on speed.

Is this bad news for the company?

Well, yes and no.

Yes because every cent the US dollar drops against ours is a couple of million dollars off the bottomline when revenue are brought back to New Zealand and onto the balance sheet.

The bulk of the "losses" via the currency change will not be shown on the November 24 2010 half year results because FPH still have some hedging in place but we will see some impact and a clearer view on how the company is going to deal with the currency issue for 2011 and onwards.

FPH is doing very well by increasing sales in US dollar terms and has historically done well for long term shareholders, the 2009 half year result was a record one and revenue growth has continued for the company for multiple consecutive years. FPH will manage currency in the future but attention instead investors should be focused on the performance of the business rather than macro issues that are largely out of its hands.

In news to come latter this morning the company is finally building a further extension to its Auckland manufacturing base to cope with increasing demand for its products.

Look for a good opportunity to lay your hands on some of these shares as the price inevitably dips below 3 bucks.

I am looking for sub $2.50.

Disclosure I own FPH shares in the Share Investor Portfolio

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