Ansell settles US$640 M Kimberly-Clark Personal Protective Equipment business acquisition

About Ansell Limited

Ansell Limited (Ansell, the Group, ASX: ANN) was established in 1893 as a bicycle tyre factory. Today the Group employs 15,000 people in 58 countries as an integrated manufacturer of Personal Protection Equipment for healthcare and industrial workplaces. Group revenue is split approximately 48% industrial and 52% healthcare products.

Kimberly-Clark Personal Protective Equipment business acquisition

On 2 July Ansell announced final settlement of the acquisition of the Kimberly-Clark Personal Protective Equipment business for US$640 million in cash. The Kimberly-Clark acquisition covers hand, body, and eye protection products used for cleanroom and laboratory personal protection solutions. This is a specialised sector that is branded as ‘Scientific’ and it is a fast-growing and difficult area in which to build a sizeable market presence quickly.

The acquisition complements Ansell’s existing global footprint and supply chain and opens new opportunities into Scientific verticals which include manufacturing of pharmaceuticals, medical devices and entry into laboratories for academic and industrial research.

Although a relatively small transaction for the US consumer goods giant which owns the Kleenex and Huggies brands, this is a significant transaction for Ansell. The acquisition builds on Ansell’s US operations and facilitates entry into highly regulated manufacturing processes where sterility and cleanliness of controlled and critical manufacturing environments are essential.

Business strategy 

The ‘Scientific’ sector has long been a priority growth area for Ansell. Quality products that ensure sterility and cleanliness in controlled environments attract premium pricing and generate superior margins to other more commonly used healthcare Personal Protective Equipment consumables. Revenue from Ansell’s healthcare and life sciences business segment demonstrates far lower cyclicality than revenue from the industrial business segment. The industrial segment is exposed to global manufacturing cycles while revenue from the healthcare and scientific segment is more dependable and earns higher margins.

The Group’s multi-year Accelerated Productivity Investment Program announced in July 2023 in response to post-pandemic operating conditions is progressing satisfactorily. Manufacturing headcount reductions have been implemented and longer-term productivity plans are on track. Targeted FY26 annualised pre-tax savings have been increased to $50 million while expected one-off pre-tax cash costs are now estimated to be within the range of $85 to $90 million.

Ansell is committed to maintaining a moderately geared balance sheet and anticipates deleveraging the balance sheet to below 2.0 times within the next 12 months. Leverage is calculated as net debt divided by EBITDA and was 2.3 times at December 2023.

The Future

Like all its peers, Ansell relies on raw material inputs that account for a significant proportion of its total cost of sales. Natural rubber latex and synthetic rubbers derived from chemicals sourced from petroleum products are subject to considerable price variability. However, Ansell is positioned as either the highest or second highest in market share across its key verticals and so the Group’s strong and trusted brands enable it to pass most of these costs through to customers and maintain sales margins at consistent levels.

This brand captivity and being a consistent and reliable supplier to the healthcare and scientific sectors should see a positive earnings outlook for FY25 and beyond when Ansell’s full year 30 June results are announced on 20 August 2024.