Fisher & Paykel Healthcare, originating from Fisher & Paykel Appliances, is a global leader in respiratory care. The company's innovative approach to respiratory care has proven that humidified air accelerates recovery for patients needing respiratory support.

The company operates two primary segments: Hospital Care and Homecare. The Hospital Care business provides humidified air to patients experiencing respiratory issues or requiring life support. The Homecare business offers masks and other products to individuals with Obstructive Sleep Apnea (OSA), a condition often linked to obesity.

Our investment manager, Mint Asset Management, has a significant holding in Fisher & Paykel Healthcare (FPH) because they believe the company has a winning formula for long-term success. Here are the key reasons why:

• Dynamic growth: The company has consistently achieved a compound annual growth rate exceeding 10%, with revenues doubling during the COVID-19 pandemic, driven by clinical adoption and the introduction of new products.

• Strong profit margins: Despite challenges from freight costs and supply chain issues, FPH maintains EBITDA margins above 30%, which is a testament to the company’s effective management and market position.

• Long-term investment: The company invests $200 million annually in research and development (11% of sales) and continues to invest in manufacturing capabilities in New Zealand, Mexico, and China to support future growth. Notably, FPH has secured land in Karaka for a new campus to be developed over the next 20-30 years.

• Strong balance sheet: Despite significant investments, FPH remains debt-free and generates substantial cash flow, allowing for dividend growth and other opportunities.

While there are concerns about potential US tariffs on Mexican imports and US pharmaceutical pricing, FPH has proactively addressed these issues, and the market appears to have factored them into the share price. We see these concerns as potential opportunities and remain optimistic about FPH's future.