Fisher & Paykel Healthcare Corporation Limited (ASX: FPH), a global leader in respiratory care and medical devices, is navigating a significant challenge as the United States introduces new tariffs on imports from Mexico and China. With 43% of its revenue derived from the US market and a substantial portion of its manufacturing based in Mexico, FPH is at the forefront of addressing these trade policy shifts.
Tariff Announcement and Immediate Impact
On 3rd February 2025, the United States announced a 25% tariff on products imported from Mexico and a 10% tariff on those from China, effective from 4th February 2025. This decision has significant implications for Fisher & Paykel Healthcare, which manufactures approximately 45% of its volume in Mexico and supplies 60% of its US volumes from these facilities.
The company has stated that the tariffs will not materially impact its net profit after tax (NPAT) for the 2025 financial year. However, the introduction of these tariffs is expected to increase costs in the 2026 financial year, as FPH absorbs higher import duties and adjusts its supply chain.
Financial Performance and Short-Term Outlook
Fisher & Paykel Healthcare reported that 43% of its revenue for the first half of FY2025 came from the US market, underscoring the region’s importance to its overall financial performance. While the company remains confident in its ability to manage short-term challenges, the tariffs are expected to add 2-3 years to its timeline for achieving a 65% gross margin target.
The company’s long-standing focus on continuous improvement and efficient growth into existing infrastructure will help mitigate some of the cost pressures. However, the fluidity of the global economic environment, potential foreign currency movements, and responses to US tariffs introduce uncertainties that could further impact FPH’s financial outlook.
Strategic Developments and Mitigation Efforts
In response to the tariffs, Fisher & Paykel Healthcare is taking a proactive approach to minimise disruptions and maintain its competitive edge. The company is working closely with global suppliers and US customers to develop solutions that mitigate the impact of the tariffs on all parties.
Lewis Gradon, the Managing Director and CEO, highlighted the company’s focus on the long-term, noting that their products and therapies are fundamentally aimed at improving patient care and outcomes while reducing healthcare costs. He also mentioned that the company is continuously working on enhancing efficiency and reducing costs across the business.
FPH’s strategic initiatives include exploring alternative manufacturing and distribution strategies to reduce reliance on tariff-affected regions, accelerate continuous improvement activities to offset rising costs and engage with US customers to share the burden of tariff-related cost increases.
Industry Context and Competitive Landscape
The medical device industry is highly competitive, with companies constantly navigating regulatory changes, supply chain disruptions, and cost pressures. The US tariff regime adds another layer of complexity, particularly for companies like Fisher & Paykel Healthcare, which rely heavily on international manufacturing and export markets.
Despite these challenges, FPH’s strong market position, innovative product portfolio, and commitment to operational excellence provide a solid foundation for navigating the new tariff environment. The company’s ability to adapt to changing conditions and maintain its focus on delivering value to patients and customers will be critical to its long-term success.
Looking Ahead: Future Forecast
While the new US tariffs present near-term challenges, Fisher & Paykel Healthcare is well-positioned to navigate these headwinds and emerge stronger in the long run. Despite tariff-related cost pressures, FPH’s strong market presence and innovative product offerings are expected to drive steady revenue growth, particularly in the US and emerging markets. While the 65% gross margin target may be delayed by 2-3 years, the company’s focus on cost efficiency and supply chain optimisation will help restore margins over time.
In addition, FPH is likely to explore new manufacturing hubs and partnerships to diversify its supply chain and reduce dependency on tariff-affected regions. Continued investment in R&D will ensure FPH remains at the forefront of medical device innovation, driving demand for its products despite external challenges. The company’s proactive approach to mitigating tariff impacts and its strong financial position is expected to maintain investor confidence, supporting its share price performance.
In the coming months, investors and stakeholders will closely monitor FPH’s full-year results in May 2025 for further updates on its outlook and strategic response. With its resilient business model and forward-thinking leadership, Fisher & Paykel Healthcare is poised to turn challenges into opportunities, reinforcing its position as a global leader in healthcare innovation.