Cautious Optimism for Ansell's Protective-Garment Business

SYDNEY - Ansell, the protective-garment manufacturer, remains cautiously optimistic about demand in North America and hopes for a rebound in industrial activity in China, according to Chief Executive Neil Salmon.

Despite reports of softer growth rates from distributors in North America due to higher interest rates and uncertain end-market demand, Ansell is not seeing any signs of sales shrinking. Mr. Salmon shared with Dow Jones Newswires on Monday that there is a consistent sentiment across North America that an impending recession is always six months away, but it has yet to materialize.

As Ansell's largest source of revenue, representing 44% of its US$1.655 billion in sales for the 12 months through June, North America is a significant market for the Australia-listed company.

The situation in Europe is more mixed, while demand visibility remains challenging in China. Ansell is hopeful that China can stimulate industrial activity at the beginning of the 2024 calendar year, which would drive domestic demand for gloves and other products.

Although China's official gauge of manufacturing activity showed slight improvement in July, it remained in contraction for a fourth consecutive month. This points to continued weakness in the second-largest economy globally.

Ansell anticipates that customers worldwide will continue to deplete existing inventory throughout much of fiscal 2024. They will also temporarily reduce production while focusing on ensuring the reliability of supply networks, according to Mr. Salmon.

While the potential for new Covid-19 variants to drive increased demand for single-use gloves exists, the main factors influencing customers' decision-making are costs and inventory management. Holding inventory is costly, and products have a limited shelf life, Mr. Salmon added.

In conclusion, Ansell remains cautiously optimistic about its business prospects, particularly in North America. Despite challenges in Europe and China, the company is strategically managing its inventory and supply networks to adapt to the evolving market conditions.