Reporter’s notebook: F&P’s growth and gross margin

AUCKLAND, New Zealand – Fisher & Paykel Healthcare expects to make a $700 million investment in land and buildings over the next five years to accommodate future growth, say company officials. 

In November, the company was “making good progress” on its third manufacturing facility in Mexico and “earthworks were underway” on its fifth building site in Auckland, said CEO Lewis Gradon. 

“Once that fifth building site is complete, our current site here in Auckland will be full,” he said. “So, we have initiated the search for a second R&D and manufacturing campus in New Zealand and we expanded our direct sales footprint into several new locations.” 

F&P now has a physical presence in more than 50 countries. 

Company officials say that carrying additional manufacturing capacity served them well during the early months of the COVID-19 pandemic, when it enabled them to scale up quickly in response to increased need. 

“Maintaining this ability takes space and buildings,” said Lyndal York, CFO. 

Gross margin impact 

F&P expects elevated freight costs, particularly for air freight, to impact gross margin in the second half of its fiscal year by about 400 basis points compared to pre-COVID-19 rates. 

Freight costs, which are elevated due to supply chain challenges, impacted gross margin in the first half by about 190 basis points. 

“This would give a full-year impact of about 300 basis points,” York said. 

F&P expects elevated freight costs to continue for the next 18 to 24 months, and air freight to remain a higher proportion of total freight volume.