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ANSELL LIMITED — Interim / Quarterly Report 2012
Feb 7, 2012
64385_rns_2012-02-07_029711c9-df04-4b73-8517-f1aa43822a93.pdf
Interim / Quarterly Report
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Ansell Limited Half Year Results 31[st] December 2011 Magnus Nicolin - Chief Executive Officer Rustom Jilla - Chief Financial Officer
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Disclaimer
The following presentation has been prepared by Ansell Limited for information purposes only. The presentation may contain forward looking statements or statements of opinion.
No representation or warranty is made regarding the accuracy, completeness or reliability of the forward looking statements or opinion or the assumptions on which either are based. All such information is, by its nature, subject to significant uncertainties outside of the control of the company.
To the maximum extent permitted by law, the company and its officers do not accept any liability for any loss arising from the use of the information contained in this presentation.
The information included in this presentation is not investment or financial product advice. Before making any investment decision, you should seek appropriate financial advice, which may take into account your particular investment needs, objectives and financial circumstances. Past performance is no guarantee of future performance.
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Agenda
Business Overview - Magnus Nicolin Financial Report - Rustom Jilla Full Year Outlook - Magnus Nicolin
US dollars used in all slides unless otherwise specified.
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F’12 H1 – Results Summary
| Statutory Result in | Statutory Result in | Results in Operating | Results in Operating | |||
|---|---|---|---|---|---|---|
| Australian Dollars | Currency | – US Dollars | ||||
| F’11 H1 | F’12 H1 | F’11 H1 | F’12 H1 | |||
| A$M | A$M | US$M | US$M | |||
| Sales | 617.5 | 594.1 | 583.7 | 611.5 | ||
| EBIT | 73.3 | 72.8 | 69.3 | 74.7 | ||
| Profit Attributable(PA) | 64.2 | 64.9 | 61.0 | 66.6 | ||
| Earnings Per Share (EPS) | 48.4¢ | 49.3¢ | 46.0 | 50.6 | ||
| Dividend | 14.0¢ | 15.0¢ |
The USD is Ansell’s predominant global currency and the one in which the business is managed. The USD information contained in this presentation is purely a convenience translation of IFRS AUD financial information.
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4
F’12 H1 – The Half in Brief
Positives
-
Double digit organic sales growth in Sexual Wellness GBU
-
Strong results in Asia Pacific and EMEA
-
Strong Emerging Markets growth
-
Progress made on New Verticals t urnaroun d
Negatives
- Problems experienced in Fusion ERP rollout in North America and LAC Regions
- Continuing high inventory levels in 3 out of 4 regions
- Euro e – reater economic uncertaint **p g y**
- and slowing Industrial sales
-
Stepped up Business Dev actions;
-
2 acquisitions
-
4 investments or technology alliances
-
Interim dividend raised by A1.0¢ to A15.0¢
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5
F’12 H1 – Strong Bottom Line Results
| F’11 H1 | F’12 H1 | % Change | ||
|---|---|---|---|---|
| Sales (US$M) | 583.7 | 611.5 | + 5% | ✓ |
| EBIT (US$M) | 69.3 | 74.7 | + 8% | ✓ |
| PA (US$M) | 61.0 | 66.6 | + 9% | ✓ |
| EPS (US¢) | 46.0 | 50.6 | + 10% | ✓ |
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6
F’12 H1 – Focus on Growth Continues
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----- Start of picture text -----
F’13+
Additional
F’12 Acquisitions,
brand building
Sandel Acquisition
focused on core
& New Product
brands, steady stream
Launches in New
F’11
of New Product
Verticals (ActivArmr [®] ),
Introduced Global releases, Emerging
Sexual Wellness
Business Units & Markets growth and
(Lubricants,
Matrix. More feet on Fusion completion.
SKYN [®] variants) and
the streets in
Medical (AMT [TM] and
Emerging Markets
synthetics into EMEA)
and in under-
represented verticals
----- End of picture text -----
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7
F’12 H1 – Emerging Markets Growth
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----- Start of picture text -----
Other EMEA Russia
• Growth YOY +11% • Growth YOY +8%
India
• 4% of global sales • 3% of global sales
• Growth YOY +31%
(CIS, Medit. Poland,
• 2% of global sales
CEE)
China
• Growth YOY +28%
Latin America & Caribbean • 4% of global sales
• Growth YOY +4%
• 6% of global sales SE Asia
(Mostly Brazil) • Growth YOY +19%
Middle East & Africa
• 3% of global sales
• Growth YOY +62%
• 2% of global sales
Emerging Markets
� Growth YOY 16%
� Represents 24% of Ansell’s Sales
----- End of picture text -----
8
F’12 H1 – New Product Launches
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SKYN[®] Extra Lubricated - Launched in December 2011
-
Intense lubricated condom made from Polyisoprene
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Provides a softer, more natural feel and enhanced sensation
-
Continued geographic roll out of SKYN[®] into Brazil, Thailand and Vietnam
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Cold Weather Glove - Launched in September 2011
-
Military & Security Personnel
-
Patented, unique to market combination of flame resistance, high performing insulation, waterproof construction and dexterity
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Application Specific - Launched 4 styles in July 2011
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HVAC, Carpentry, Electrician, Plumbing
-
Patented, first to market and best in class combination of comfort, dexterity and protection in a hybrid knit, dip and cut & sew design
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9
F’12 H1 – Fusion ERP Implementation
-
In 2009, Ansell recognized the need to update its business processes and consolidate 25 legacy systems into a single global platform. An ERP platform and a systems integrator were chosen and project defined
-
The first phase (North America and part of LAC) went live July 5 2011, but ran into systems design and interface issues, particularly with our largest (3rd party) warehouse
-
Significant resources have been devoted to enhancing systems performance, correcting design problems, stabilizing the platform and returning to normality
-
Much progress has been made but we have lost some customers, incurred extra costs and the global roll out has been delayed
-
It is hard to quantify the impact of Fusion, but lost sales in H1 are estimated at US$13US$15M and excess working capital at ~US$25-US$30M. Lost margins and higher expenses have been partly offset through other initiatives and savings
-
Ansell expects to continue to recover lost ground during H2 and to continue the global roll out in F’13
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10
F’12 H1 – Portfolio Performance
Sales EBIT US$611.5M 4.8% US$74.7M 7.9% F’12 v F’11 F’12 v F’11 Ind NV Med SW Total Ind NV Med SW Total NA LAC EMEA AP Total
+5% From 0% to +5% < 0%
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11
F’12 H1 – Industrial GBU Overview
40% of Revenue and 50% of Segment EBIT
| US$M HyFlex® Other General Purpose Chemical/Liquid Handling Single Use All Other Sales Segment EBIT EBIT/Sales |
F’11 H1 86.8 59.3 35.5 42.6* 8.7 232 9 . 42.7 18.3%* |
F’12 H1 92.6 7%�AP & EMEA growth, NA flat 57.7 3%�NA & EMEA down 36.7 3%�NA & LAC down 47.4 11%�EMEA growth, driven by CE 9.2 6%�Thermal gloves for Russia 243 6 5% �Overall volumes down prices up . , 39.7 7%�Fusion, input costs, restructuring, 16.3% SG&A, partly offset by price/mix |
|---|---|---|
*US$0.3M re-class in F’11 H1 to NV
Strategy
-
Product leadership with increased emphasis on global core brand equity
-
Guardian[®] Solution Selling to accelerate organic growth
-
Reduce complexity of brand and product portfolio
-
Continue high investment in Emerging Markets
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12
F’12 H1 – New Verticals GBU Overview
14% of Revenue and 6% of Segment EBIT
US$M F’11 H1 F’12 H1 HHG - Retail 11.1 17.0 53% � Volume growth, pricing Chemical/Liquid Handling 25.0 25.8 3% � Single Use *22.7 20.3 11% � Rationalized poor performers Military/First Responders 9.7 10.2 5% � Improved mix Other General Purpose 6.5 6.3 3% � All Other 7.9 6.8 14% � Rationalized poor performers Sales *82.9 86.4 4% � Segment EBIT 0.8 4.8 500% � Higher pricing, better product EBIT/Sales 0.9% 5.5% mix, SG&A kept flat
*** US$0.3M re-class in F’11 H1 from Industrial**
Strategy
-
Focus on attractive, under developed, growth verticals
-
Differentiate with improved branding, innovation, new product development
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Reshape existing business/product portfolios to drive improved margins
-
Accelerate growth with accretive bolt on acquisitions
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13
F’12 H1 – Medical GBU Overview
28% of Revenue and 20% of Segment EBIT
US$M F’11 H1 F’12 H1
| US$M | F’11 H1 | F’12 H1 | ||
|---|---|---|---|---|
| **Surgical gloves: ** | PF | 58.4 | 59.1 | 1%�Pricing & mix gains |
| Powdered | 30.3 | 29.2 | 4%�Conversions to PF | |
| Synthetic | 16.7 | 20.0 | 20%�Vol up 28%; growth in all regions | |
| Exam gloves: | PF Powdered |
29.8 3.4 |
23.9 3.6 |
Volumes down 38%, higher pricing 17%� |
| Synthetic | 26.3 | 26.8 | 2%�Nitrile up in EMEA & AP | |
| Surgical Supplies | 5.3 | 9.6 | 81%�Sandel US$5.6m | |
| Sales | 170.2 | 172.2 | 1%�Rationalisation in EMEA | |
| Segment EBIT | 20.8 | 16.3 | 22%�Fusion, NRL, SG&A investments | |
| EBIT/Sales | 12.2% | 9.5% |
Strategy
-
Broaden scope to include perioperative safety
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Expand presence in Emerging Markets
-
Improve operating efficiencies through brand consolidation, SKU rationalisation
-
Build new capabilities both organically and through M&A
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14
F’12 H1 – Sexual Wellness GBU Overview
18% of Revenue and 24% of Segment EBIT
US$M F’11 H1 F’12 H1 Condoms: Branded 77.0 82.0 6% �[Growth in SKYN][®][, ZERO][®][, Key ] Emerging Markets, USA, ANZ Tenders/Private Label 12.0 16.1 34% � Tenders down, Private Label up Lube/Devices/Other 8.7 11.2 29% � Mostly Fragrances (India) Sales 97.7 109.3 12% � Segment EBIT 10.9 18.8 72% � Higher volumes, pricing/product mix, EBIT/Sales 11.2% 17.2% flat SG&A, partly offset by restructuring
Strategy
-
Global roll out of SKYN[®] , ZERO[®] , focus on power brands
-
Increase investment in high growth markets
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Adjacent category growth through lubricants, devices, female sexual health
-
Cost effective operational structure, packaging efficiencies, complexity reduction
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15
Financial Results
Rustom Jilla Chief Financial Officer
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F’12 H1 – Total Shareholder Return
Total Shareholder Return
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�
Ansell’s CAGR (since its 2002 Inception) AUD ~10% USD ~18%
�
ASX 200 CAGR (also since Ansell’s inception) 2%
16.0
Dec 11
14.0 A$14.54
12.0
Jun 11
A$14.16
10.0
Jan 02
Ansell
8.0 A$5.20
6.0 ASX 200
4.0
Jun 11
Dec 11
Jan 02
2.0
4,590
4,060
3,390
0.0
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F’12 H1 – Profit and Loss
| US$M Sales GPADE SG&A EBIT Net Interest Taxes Minority Interests Profit Attributable EBIT:Sales EPS (US¢) |
F’11 H1 583.7 205.5 (136.2) 69.3 (2.3) (4.2) (1 8) . 61.0 11.9% 46.0 |
F’12 H1 611.5 5%� 225.0 (150.3) 74.7 8%� (1.8) (4.5) (1 8) . 66.6 9%� 12.2% 50.6 10 %� |
|---|---|---|
5% � Up ~3% in constant FX
GPADE/Sales up ~160 basis points
Better funding and deposit mix
DTAs/NOTIs were US$8.0m, LY US$7.9m
-
Sandel integration is proceeding well. Results broadly in line with business case, with sales lower and EBIT higher. Expected to be EPS accretive in F’12
-
Restructuring cost US$2.9M vs. last year’s US$1.8M
-
The book tax rate excluding Deferred Tax Asset (DTA) adjustments and Non-Operational Tax Items (NOTIs) was 17.3% in H1, compared to 18.0% last year
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F’12 H1 – EBIT Bridge
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100 [US$M ] 23.7 (4.2)
(1.1) (5.3)
(7.7)
74.7
80 69.3
60
40
20
0
EBIT GPADE GPADE SG&A SG&A SG&A EBIT
F'11 H1 Margins Distribution Restructuring Salaries & "All Other" F'12 H1
Costs Incentives
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-
Higher margins driven by SW volumes, better pricing/mix across the board and FX hedge gains
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Higher distribution costs due to Fusion issues in NA and a warehouse consolidation in EMEA
-
Salaries & Incentives include lower LTI/STI costs (US$5.6M) offset by higher employee costs (US$10.9M) reflecting sales and marketing heads added plus Sandel
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Growth in SG&A “All Other” comes from Travel (US$3.1M), A&P (US$2.0M), and Consulting (US$2.6M)
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F’12 H1 - Raw Material Input Costs
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4.00 [US$]
3.50
3.00
2.50
Cotton (Lb)
2.00
NR Latex (wkg)
1.50
1.00 Nitrile Latex (wkg)
0.50
0.00
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11
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-
F’11 was negatively impacted by significant raw material price rises
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This reversed over F’12 H1, with prices below June 30 2011 levels across the board
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As usual, raw material purchases to finished goods sales have a lag of 3-4 months
-
Ansell follows a practice of purchasing fixed price contracts in H1 for part of H2 requirements of NRL
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F’12 H1 – Balance Sheet
| US$M | F’11 H1 | F’11 | F’12 H1 |
|---|---|---|---|
| Fixed Assets | 148.1 | 150.4 | 149.9 |
| Intangibles | 341.6 | 361.8 | 369.7 |
| Other Assets/Liabilities | (8.4) | (26.4) | 2.1 |
| Working Capital | 228.9 | 227.2 | 275.4 |
| Net Operating Assets | 710.2 | 713.0 | 797.1 |
| Net Interest Bearing Debt | 46.0 | (10.2) | 108.0 |
| Shareholders’ Funds | 664.2 | 723.2 | 689.1 |
| Gearing % (NIBD:NIBD & Equity) | 6.5% | (1.4)% | 13.5% |
| ROA% | 20.9% | 20.5% | 19.8% |
| �Gross debt was US$312.2M (F’11 H1 US$264.7M) while cash was US$204.2M US$218.7M) ROE% 20.5% 19.3% |
(F’11 H1 19.4% |
-
In H1, bank facilities were increased by US$145M to US$444M with the average maturity extended to 3 yrs
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Intangibles includes US$46.4M of capitalised Fusion costs
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Decline in Other Assets/Liabilities due mostly to payment of incentives for F’11 (US$16.0M)
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F’12 H1 – Working Capital
| F’12 H1 Inventories Debtors Creditors Total US$M F’11 F’12 % Mvt F’11 F’12 % Mvt F’11 F’12 % Mvt F’11 F’12 % Mvt NA/LAC 80.7 100.7 36.7 59.0 (31.8) (42.8) 85.6 116.9 37� EMEA 50.4 62.1 75.9 71.1 (32.4) (31.8) 93.9 101.4 8� AP 16.9 21.0 42.1 42.9 (12.6) (12.5) 46.4 51.4 11� Ops 53.1 55.2 (0.3) 0.3 (49.8) (49.8) 3.0 5.7 90� �NA & LAC: Inventory and Debtors higher due to Fusion launch (~US$25-US$30M) �EMEA: Expected reductions in inventories did not occur as Industrial sales slowed in Q2. Accounts Receivable continued to steadily improve �AP: Higher inventory related to strong sales; stock turns improved. DSO up slightly �Operations: Inventory remains high, but with “Lean” initiatives kicking off in H1, progress is expected by year end Total 201.1 239.0 19� 154.4 173.3 12�(126.6) (136.9) 8� 228.9 275.4 20� |
Inventories Debtors Creditors Total |
Inventories Debtors Creditors Total |
Inventories Debtors Creditors Total |
Inventories Debtors Creditors Total |
|---|---|---|---|---|
| F’11 F’12 % Mvt |
F’11 F’12 % Mvt |
F’11 F’12 % Mvt |
F’11 F’12 % Mvt |
|
| 80.7 100.7 50.4 62.1 16.9 21.0 53.1 55.2 |
36.7 59.0 75.9 71.1 42.1 42.9 (0.3) 0.3 |
(31.8) (42.8) (32.4) (31.8) (12.6) (12.5) (49.8) (49.8) |
85.6 116.9 37� 93.9 101.4 8� 46.4 51.4 11� 3.0 5.7 90� |
|
| 201.1 239.0 19� |
154.4 173.3 12� |
(126.6) (136.9) 8� |
228.9 275.4 20� |
|
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22
F’12 H1 – Cash Flow Bridge
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F'12 H1
74.7 10.0 (46.1)
(21.4)
(2.1) (8.8) 6.3 (46.4)
(25.9)
(33.4)
(18.8)
(118.2)
EBIT Depn Work CAPEX INT Taxes FCF Other DIV Share Acq./ Net
/WO Cap B/Back/ Invest. Debt
Issues Mvt .
9.4 (32.7)
69.3 F'11 H1
(23.2)
(2.2) (6.8) 13.8 11.1 (21.7)
3.8 7.0
�
Capex includes US$5.9M of Fusion (F’11 H1 US$11.4M). Plant Capex came from capacity
expansions and a new R&D center
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-
During the half, 2.45m shares were bought back on-market at an average price of A$13.30
-
“Other “ due to F’11 incentive payments, FX movements on Working Capital and NIBD
-
Acquisitions include Sandel (US$13.6M), and investments include Lakeland (US$4.6M)
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23
F’12 H1 – Improving Competitiveness in Manufacturing
Capex investments in capacity Increases
-
Production volume growth in Key Product categories. For example;
-
Touch N Tuff[®] +35% year on year
-
NRL condoms and HyFlex[®] product lines operating near full capacity
-
Expansion of Polyisoprene condom and Surgical Powder Free production capacities completed to meet the growth in these Product categories
-
New Industrial p lant ( se p arate buildin g with lines ) bein g constructed at existin g site in Colombo. Sri Lanka remains a low cost country for manufacturing
Other investments in improving competitiveness
-
Restructuring (~US$2.0M) completed at two higher cost manufacturing plants (Germany
-
condoms and US - Industrial). Facilities closed and production moved to Asia
-
LEAN manufacturing process being implemented at Key Production plants in Asia
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F’12 H1 – Financial Summary
H1 financials in brief
-
Sales have been mixed; AP strong, LAC and NA pulled down by Fusion in Q1 with recovery since then. EMEA started strongly but slowed in Q2
-
Profits have been strong with other savings offsetting the drag from Fusion
-
FCF was disappointing with working capital too high. However, good progress was made in January on reducing NA/LAC receivables
-
Solid progress on Business Development initiatives with two acquisitions (Sandel and a d i st ri buto r ) a n d inv est m e n ts o r a lli a n ces; Sta r p h a rm a ( Viv aGe l[®] ), Y u l e x (guayu l e), L a k e l a n d (protective clothing), and Koreca (Korean distributor)
Cash generation and usage in H2
-
A strong focus on cash; with a “course correction” of our inventory management approach, and ongoing catch up on NA/LAC collections should enable WC reduction
-
Capex is expected to be higher in H2 with several large projects already underway but Ansell should nevertheless deliver full year FCF closer to norms.
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25
Full Year Outlook
Magnus Nicolin Chief Executive Officer
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26
F’12 – Guidance
H2 Outlook
-
Economic outlook mixed;
-
FX (Euro) and European economic weakness expected to impact sales
-
US seeing better economic outlook; LAC to regain momentum
-
Asia Pacific to remain strong
-
Raw material costs favourable to F’11
-
Fusion implementation to continue; residual issues expected to be fixed in H2
-
Selective SG&A investments to continue, but with phased roll outs depending on sales/EBIT growth
Guidance
-
F’12’s EPS forecast remains unchanged from the previously communicated US97¢ - US103¢ range, up 6% - 12% from F’11’s US91.6¢
-
Within this guidance range, the likely impact of DTA/NOTI adjustments on EPS also remains unchanged at US7¢ - US10¢
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27