Ansell automates and digitises to boost productivity

Global work and surgical glove manufacturer Ansell is embarking on a major productivity push as sales continue to be dampened as distributors reduce glove inventories built up in the wake of the Covid-19 pandemic.

The Melbourne-based manufacturer told investors the effects of channel partners and end customers reducing high levels of inventory over the past two years continued to be experienced in the second half.

Industrial rubber glove sales in FY23 were around $750 million, and healthcare sales around $900 million, delivering the company earnings per share (EPS) at the low end of original FY23 guidance given to the market.

While Ansell expects end user demand to pick up, it anticipates distributers will continue to reduce inventories.

The company said: “In response to these headwinds and to position Ansell for its next phase of growth, in FY24 we will commence an investment programme encompassing a series of productivity initiatives designed to drive EPS growth and improve returns on capital employed.

“This includes a decision to temporarily slow our prodction of finished goods to normalise inventory holdings, which will improve cashflow in FY24 but temporarily lower EBIT due to reduced manufacturing overhead absorption.”

The investment programme aims to:

• Simplify and streamline organisational structure, with less duplication of leadership responsibility
• And reduce manufacturing employee numbers while investing in longer term manufacturing productivity.

Ansell said it would increase automation, leverage new operating systems and make limited changes to manufacturing configurations where optimisation opportunities existed.

“We expect the cash cost of the above initiatives to be $40-$50 million with the majority to be incurred in FY24.

“These investments are expected to deliver annualised pre-tax cost savings of $45 million by FY26.”

Initial savings in FY24 of $15-$20 million will be offset by the effects of the cut in manufacturing output.

“In parallel with these initiatives, we will also accelerate our digitisation strategy, building on successes from recent investments in modern cloud-based supply chain planning and manufacturing ERP systems, and broadening to include our commercial units as we move to consistent global ERP and decision support systems.”

The cash cost of IT investments will be $30-$35 million.

“We are confident based on our recent track record of successful systems upgrades that these invetsments will deliver further gains in productivity and in our ability to service our customers efficiently.”

Picture: Ansell