ANSELL LIMITED — Management Reports 2010

Aug 22, 2010

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----- Start of picture text ----- Attention ASX Company Announcements PlatformLodgement of Open Briefing []----- End of picture text -----

ASX Announcement: 23 August 2010

CEO & CFO on Results & Outlook

Open Briefing interview with CEO Magnus Nicolin & CFO Rustom Jilla

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Ansell Limited Level 3 678 Victoria Street Richmond VIC 3121

In this Open Briefing[®] , Magnus & Rustom give us insight on:

• 2010 earnings benefits from restructuring, turnaround in Occupational business

• Reasons for expecting earnings to continue to benefit from restructuring, improved efficiency

• o Reorganising to accelerate growth

Record of interview:

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Ansell Limited today reported net profit of US$106.2 million for the year ended 30 June 2010 (F’10), up 18 percent from the previous year. EPS was US$0.797, up 20 percent from the previous year and 7 percent above consensus of US$0.748 on August 12. Where did actual performance differ most substantially from your expectations?

CEO Magnus Nicolin

Firstly, there was the rapid recovery of our Occupational business. As you know, the business was impacted by the GFC in F’09 but late in the year it bottomed, and returned to growth more rapidly than we expected in F’10. In addition to the pick-up in industrial demand, Ansell benefited from being able to offer the right kinds of solutions by utilising our Guardian program. Our earnings were also helped by the fact that we had restructured quickly and reduced our cost base.

CFO Rustom Jilla

Finally, about US$0.034 of EPS came from the net impact of additional deferred tax adjustments (partly offset by non-operational tax items) in the second half.

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For the current F’11 full year you’re expecting EPS in the range of US$0.86 to US$0.91, including an expected deferred tax adjustment of US$0.08 to US$0.10. Do you continue to expect a US$0.09 benefit in F’11 from recent restructuring? What are expected to be the other key influences on F’11 EPS and what are your assumptions regarding currency and input prices?

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CFO Rustom Jilla

Yes – we expect a year-on-year EPS benefit of at least US$0.09 in F’11 vs. F’10. This is because there were restructuring costs incurred in F’10 and some savings. In F’11, we won’t have those costs but there will be full year savings. We also expect to see a continuing benefit from the strong momentum in the Occupational business and from the favourable shift in our sales mix within Professional. There are cost pressures around raw materials and other costs in Asia but these are built into our guidance.

Our assumptions on currency are that it will be negative overall versus F’10. However, we have about half of F’11’s projected foreign exchange needs hedged at rates at least equal to those used in our EPS guidance.

CEO Magnus Nicolin

We’re also expecting to do some additional restructuring: we recently reorganised the company to focus on global business units or GBUs as we call them and there may be some additional cost from that, offsetting a small portion of the savings coming from F’10’s restructuring.

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The restructure into GBUs contrasts with Ansell’s previous regional structure. What level of growth are you targeting and what level of investment will be required to achieve it? To what extent will growth be achieved organically and to what extent by acquisition?

CEO Magnus Nicolin

We will still have Regions and they will remain responsible for sales, trade marketing, customer service and local warehousing. However, we want to avoid the duplication of marketing and product development efforts that happens today. The plan we’ve laid out calls for a realignment of resources into the GBUs, giving us better innovation and brand development focus and higher efficiency, so we’re not expecting an increased level of spending per se. Instead we’re trying to optimise our spending, whether it’s R&D spending or people spending, by targeting it at the most promising products or projects or at sales growth in geographies or business verticals that we see as particularly interesting. We expect this to have a meaningful impact on organic growth. Also, as we’ve said, we see opportunities for acquisitions.

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Where do you see Ansell’s most attractive organic and acquisitive growth opportunities and what are your acquisition criteria?

CEO Magnus Nicolin

In all of our three traditional areas: Occupational, Professional and Consumer, we have verticals that offer significant potential for growth. We also see tremendous potential in places like the Middle East, China, Brazil and so forth, and we’re targeting some of our investments at those opportunities.

Our acquisition criteria will include the potential of an acquisition to move our company forward in a targeted vertical or a targeted geography in the fastest possible way. We’re also setting a tight target for the kind of return we want on our acquisitions. We recognise the risk-free way to invest our excess cash is to buy back our own stock: if we’re going to make

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acquisitions we need to be confident they will yield a much better return than buying back our own stock.

CFO Rustom Jilla

Some other key acquisition criteria are obviously things like business fit, ease of integration, early EPS accretion and competitive impact.

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Ansell’s Occupational business booked EBIT of US$74.8 million, up 40 percent, on sales of US$525.7 million, up 10 percent. Second half EBIT of US$42.0 million marked almost complete recovery to the record level of the F’08 second half. How do you reconcile this with the continued lacklustre performance of manufacturing in key markets such as the US and in Europe?

CEO Magnus Nicolin

First, our restructuring took costs out, so we’re more efficient: we need fewer people to produce more volume. Second, we’ve taken some price increases where warranted to make sure we defend or enhance our margins. Third, we’re taking market share. Even though total manufacturing has been going down in some of our markets, it hasn’t meant that we can’t grow.

Our Guardian solution-selling program is really helping us. We use the Guardian software and processes to help customers configure their manufacturing for improved safety and efficiency, allowing us to capture more business from those customers while still helping them reduce their overall cost or spending

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The Professional business booked EBIT of US$46.6 million, up 16 percent, on revenue of US$352.8 million, up 6 percent. Second half EBIT was down from the previous corresponding period. To what extent was this attributable to the increase in latex prices? How are you positioned to pass these cost rises on to customers and how indicative is the second half of prospective performance in F’11?

CFO Rustom Jilla

The year-on-year fall in the second half was about $3 million and was entirely due to the increase in latex prices. This was not a surprise. We had said in February that the increase in natural rubber latex (NRL) cost per kilogram was too large to be offset simply by further improvements in our surgical vs. exam gloves mix or by pricing alone. Certainly Ansell (along with the rest of the industry) is now better positioned to pass these costs on to customers because latex prices have been high for a sustained period of time. We are looking at sharing/indexing latex price movements with customers and also working on some interesting sourcing arrangements with key NRL suppliers. Margins are also driven by product mix, where surgical now accounts for 58 percent of Professional sales and innovation. In May, we also rolled out the new Gammex AMT antimicrobial surgical glove in Australia. This is an exciting development for us and we’re currently going through the regulatory processes in our other markets to roll it out globally.

Our F’11 guidance includes the assumption that Professional segment EBIT/sales will be in line with or better than the 11.6 percent achieved in the second half.

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The Consumer business booked EBIT of US$15.5 million, down 27 percent on sales of US$207.7 million, up 7 percent. Many of the factors you’ve attributed the earnings drop to: restructuring costs, increased marketing costs and manufacturing under-performance, appear to be within your control. Can a better internal performance alone turn the business around?

CEO Magnus Nicolin

Absolutely. We incurred a US$2.5 million increase in restructuring costs in F’10, with a lot of work done on addressing some of Unimil’s remaining structural problems. That work has now been completed and we have some pretty aggressive plans in place to improve the business.

We’re very confident about our condom business in F’11; we’ve had continued growth in our new SKYN and Zero products, and while we had some challenges in the government tenders business in F’10, we’re now seeing signs of a resurgence which should have a positive impact on performance, simply by getting more volume through our facilities.

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In F’10, Ansell’s deferred tax adjustments (DTA) and non-operational tax items netted out to a tax credit of US$12.6 million, up from the previous US$6.9 million. You’ve indicated that the DTA will be an ongoing feature of results. Can you comment?

CFO Rustom Jilla

As we noted last February, Ansell has large off-balance sheet tax losses in Australia totalling A$419 million and it’s likely (based on current trends), that we’ll continue to generate profit in Australia and therefore will continue to bring further DTAs on to our balance sheet. That’s why we consider the DTAs part of underlying earnings. However, we’ll continue to identify them separately and, as noted in our releases, are estimating that DTAs will contribute US$0.08 to US$0.10 to EPS in the current year.

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Ansell generated free cash flow of US$107.0 million in F’10, down from US$121.5 million, primarily reflecting a doubling of capex to US$28.1 million due to US$16.6 million spending on the Fusion ERP project. With major spending on Fusion yet to come over the three-year investment program, what is the outlook for free cash flow in the nearer term?

CEO Magnus Nicolin

One reason for the lower free cash flow in F’10 versus F’09 is that the business is growing again. Whenever you’re growing you’re consuming more cash to pay for inventories and receivables. To the extent we’re successful in growing, there will continue to be some negative drag on cash flow, offset of course by our continuing efforts to improve working capital management and capital efficiency.

Fusion will consume significant cash but we’re very excited about the project and what it will do for our efficiency across the company. We also think there are opportunities to meaningfully improve operational productivity: we’ve just hired a new head for our

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integrated operations group who will do a thorough review of the efficiency of our plants and supply chain.

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Net debt totalled US$53.0 million as at the end of June, down from US$103.5 million a year earlier. Net debt to net debt plus equity was 9 percent, down from 17 percent. In light of your stated growth objectives, how will you seek to strike a balance between maintaining balance sheet capacity for acquisitions and returning cash to shareholders?

CFO Rustom Jilla

Frankly, sitting on 9 percent gearing is not optimal for the company or for our shareholders, so we need to take decisive action, which we are. We’re looking at a variety of acquisition opportunities right now and expect to move forward with them if they make sense. If we can’t execute sufficiently attractive acquisitions then we will return surplus funds to shareholders, as we have done for several years.

CEO Magnus Nicolin

I’ll happily buy back our stock at these levels but would much prefer to make good acquisitions.

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Ansell announced an unfranked final dividend of A$0.17.5 per share, up from A$0.16 last year, and bringing the full year payment to A$0.305, up from A$0.28. What is the outlook for dividends in the current year?

CEO Magnus Nicolin

Ultimately, dividends are a decision of the board and are based on a number of different factors, including whether we find any attractive acquisition opportunities. However, Ansell has a very strong track record of providing steady, reliable dividend growth and this is unlikely to change.

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Thank you Magnus and Rustom.

For more information about Ansell, please visit www.ansell.com or call David Graham on (+61 3) 9270 7215

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DISCLAIMER: Orient Capital Pty Ltd has taken reasonable care in publishing the information contained in this Open Briefing®. It is information given in a summary form and does not purport to be complete. The information contained is not intended to be used as the basis for making any investment decision and you are solely responsible for any use you choose to make of the information. We strongly advise that you seek independent professional advice before making any investment decisions. Orient Capital Pty Ltd is not responsible for any consequences of the use you make of the information, including any loss or damage you or a third party might suffer as a result of that use.

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