Thank you and good morning all. It's a pleasure to be back in Melbourne today and in a position to comment on a successful fiscal year 2025 and give you a look ahead to fiscal 2026. Let me start with the contents page on page three. This both gives you an overview of what we will cover today, the team who will present, who I will introduce in a moment, but also your key takeaways that I hope you gain from this presentation. With regards to our performance overview that I will cover, we've seen successful delivery against all the FY 2025 performance objectives we set out, including adjusted EPS of $1.26 at the upper end of our guidance range. I'll then give a bit more color to the drivers behind that result, including the performance of our recently acquired KBU business and our successful integration of that business.
I'm joined by Deanna Johnston who's our Chief Information Officer who successfully led the KBU integration. She is here in fact to talk about the next phase of our Accelerated Productivity Investment Programme, APIP. That phase being the rollout of a modern ERP system across Ansell. Brian Montgomery will join us. Brian is our new Chief Financial Officer. Four months now with Ansell and he'll give you more color on the strong financial results and also talk to our on-market share buyback which we have announced with this result. Finally, I'll look ahead to fiscal year 2026, our strategy to adapt to higher tariffs and our adjusted EPS guidance range which you can see we have announced in the $1.33 to $1.45 range. Let's proceed with the performance overview and this slide shows the similar format to the one we've had over the last few reporting periods.
On the left hand side are the goals that we set out at the beginning of the year and down the middle you can see those green checks indicate we believe we've delivered on pretty much every goal that we set out. We'll provide more details on those as we go through this presentation. There's also a nice summary symmetry to our financial results. 8% organic growth translated to 10% EBIT growth, adjusted EPS growth approaching 20% and we were able to reward shareholders with a 30% increase in the dividend and that's a satisfying set of financial outcomes to report to you today. Let's continue with the story behind these numbers and if I begin with the industrial segment we can go to the next page please.
Overall, a record result for Industrial, record sales, a record EBIT margin, and of course that also means record profitability and I'm very pleased with that. Organic growth approaching 6% and the 10% EBIT growth. Breaking it out by business unit, we saw a very strong first half in Mechanical. We did indicate at the time that some of that was safety stock build by distributors and end users of our top selling R840 style, and therefore we did expect it to moderate some in the second half. I still believe 3% growth in the second half is very creditable in an environment in which many of our core industrial verticals saw softer demand, and an overall 7% growth for the year for Mechanical is a strong result.
Chemical saw more consistent first half, second half growth, and what's pleasing in Chemical is that we're seeing that growth come across the full portfolio of both hand and body protection, and again supported by some very promising success from pretty important new product launches in that space. Turning to EBIT performance, sales clearly benefited. We saw improved manufacturing utilization and also productivity, in part from the APIP savings, a reminder that first half margins were lower. We saw these trends in both Industrial and Healthcare from elevated air freight that was needed to support that strong growth. Margins improved in the second half as freight costs returned more to normal and we got some price increases through end business. Let me now turn to the Healthcare segment. Here, encouraging to see Healthcare back to a solid performance. Industrial has been very consistent the last two years.
Healthcare now showing strong growth again as the destocking effects that have affected this segment for the last couple of years are clearly now in the rearview mirror. Almost 10% organic growth and a slightly higher level of EBIT growth meant we also improved EBIT margins in this space. The reported EBIT margin improved much more than organic because of the benefit of the consolidation of the KBU business, again by business unit. Strong first half in Exam, but some of that 9% growth was the pull forward of orders that otherwise would have been invoiced in the second half as customers began to position for the first round of tariff increases that went into effect in January. The organic growth rate improved again through the half for Exam single use, and overall that business is well positioned to grow again into this coming fiscal year.
Very strong and very satisfying results for our surgical and our clean room business. Surgical, again as we said at the half, was benefited in the first half by $17 million of orders that were delayed out of the fiscal 2024 time period by shipping delays related to the Red Sea disruption, and that 14% growth in the second half is very encouraging and 20% overall for the year, a great result. Clean room is where we've doubled down with investment, again very strong first half, second half at 8%, continuing to grow above our estimate of market rates, and that through that period of KBU integration which we navigated successfully. We always expected to have a somewhat lower sales outcome with customers positioning ahead of the cutover. EBIT growth benefiting from the same trends as industrial, the consolidation of KBU, improved manufacturing utilization, and APIP savings.
First half had the headwind from higher freight and raw material costs, second half improved as those moderated and we got some initial pricing through. Overall, pleased with both segments' performance in the year. Let's move forward now to some further detail in the drivers behind that growth, and this page summarizes the four dimensions which I hope you as shareholders will think are the long-term source of shareholder value creation. For each of these four boxes, I'm just going to call out one specific element and others we'll talk to in other parts of the presentation. Differentiated customer solutions, and I think perhaps our differentiation is still not fully understood by the market. I've mentioned already the success we've had with new products. Here I want to highlight how important our range of service offerings is to the customer.
For example, under the AnsellGUARDIAN brand, we have the world's leading database to inform customers on what the right PPE is to use, depending on the chemicals that workers may be exposed to in that environment. The use of the AnsellGUARDIAN chemical system increased 30% year on year, with more than 50,000 queries recorded either by customers directly for a limited version of the system or in partnership with our sales teams for more complex queries. We're seeing it lead to share gain in markets in which Ansell has previously struggled to gain share. For example, in Japan, where regulations around protecting workers from chemical hazard have been tightened. As a result, we've seen a significant increase in Japanese customers coming to AnsellGUARDIAN for advice, and that in turn has led to increased share gains and growth in Japan.
Our diverse vertical and geographic presence is another core feature of Ansell. While some of our verticals are seeing reduced demand or limited growth, we have plenty of places in which we can still grow. We've doubled down in the pharmaceuticals and biotechnology area. I want to mention here the success of emerging markets. Emerging markets, it's a mixed picture. Some of our reliable multi-year growth markets have not grown in the year, for example, Mexico, but in other places, Brazil, China, India, we saw solid growth in the year. Again, within the broad universe of emerging markets, we can find places to grow. The right-hand side talks more to productivity, capital allocation, and here with the success of APIP behind us, ERP will talk about, but I want to highlight our increasing confidence in being able to generate returns from automation investments.
We have a number of pilots running this year, particularly looking at more automated packaging solutions where a lot of our people are employed today. With success with those pilots this year, we should see another path forward to improve productivity. Brian will cover more on our capital allocation, but I want to highlight our internal capital expenditure, which is always our priority where we have good return projects. The most important project this year is our India Surgical Greenfield facility, which is on track to begin dipping of gloves in the second half of fiscal 2026. Let's move forward now to the next page, and here I summarize the performance of the acquired Kimberly-Clark PPE business, or KBU as it's known within Ansell. Firstly, the performance of that business itself was ahead of business case.
Secondly, the integration is complete, and Ansell CEO has never been able to say that before. Just one year after an acquisition, and this was by far the most complex integration task that we've taken on, and with success under those two headings, I'm able to now increase our synergies target from $10 million - $15 million. Let me go through a few more details under each of those headings. Sales were ahead of business case. Also, strong double-digit growth in our clean room products, which is really what we bought this business for. You're aware that when we bought the business, we did anticipate some decline in the industrial safety products, particularly in the period in which they were still being supported by the Kimberly-Clark sales team.
In recent months, they have now been transitioned to the Ansell sales team, and we want to get those products back to growth as well. Overall, moderate sales growth of 1% but double-digit growth in clean room, very satisfying and overall ahead of business case. EBIT also ahead of business case on those sales. Better product margin and the early exit of transition services means we started to record SG&A synergies ahead of our original business case assumption. The integration was the most important job we had to do, and we had to do it well this year. Customers in the clean room area do not forgive you if you disrupt their operations with supply chain lack of reliability. The real test of our success is our customers. They were nervous about this. It's a complex integration.
They've seen issues with other companies before, and they've reported to me that they viewed this as a seamless experience for them. That's very satisfying to hear. As a result, all our transition service arrangements from Kimberly-Clark were exited ahead of schedule. Now we can focus on our motto that we always apply to every acquisition: Where is the opportunity to leverage the best of both of the base Ansell business and the acquired business? Two highlights here. KBU's RightCycle post-customer use end-of-life recycling service really resonates, and it resonates all over the world. Today, we're looking to scale that up to improve the economics of the service, which is subsidized by Ansell, so that we can bring it to many more customers.
As we've dug into the quality of the business that we've bought and done research on the strength of the KBU brands, we've made a decision that we need to double down on those acquired brands, and we also need to simplify the overall Ansell brand portfolio. That means today we're announcing that some older Ansell brands, which have equity, have value in the market, but they will be superseded by the key KBU brands, Kimtech and KleenGuard. We'll transition products today under an older Ansell brand to either KleenGuard or Kimtech. This to me is a value-creating step. Accounting rules require us to record an impairment because we will not be continuing with some of those other brands that have a current balance sheet value, and then an upgrade to synergies target.
Remember our net figure of $10 million was a balance of gross cost savings with some offset for some revenue risk. Twelve months in, we're seeing less of that revenue risk than we had anticipated. We have secured the SG&A savings, which is the biggest piece of the gross cost synergy with the success of the integration, and the opportunity I see is in increased supply chain savings opportunities. We're still working through that, but I'm confident that we should have at least a $5 million upside to our original $10 million target. Of that $15 million, we realized $5 million in fiscal 2025. We won't be all the way to $15 million in the next twelve months, but we'll get close to that $15 million figure.
If I turn to our brand portfolio, I won't cover this page in detail, but really I think this is by far the strongest set of brands of any player in the PPE world. Each one of these represents revenues in the range of $80 million to $90 million to $300 million. Each of these brands are known globally. Each of these have a clear role within the Ansell portfolio, and you can see how well KleenGuard and Kimtech fit into this portfolio. The most important brand on this page is the Ansell brand in the top corner here. What we also want to make sure is that people buying HyFlex know very clearly they're buying Ansell, as Ansell recent research confirms is the best known brand in our industry.
I also highlight the strength of our service brands, AnsellGUARDIAN, the RightCycle recycling, and the Apex Program, which goes more to the use versus the adoption of PPE. Let's turn to the APIP program, and this is the last time that we will present the three strands of APIP here because the organization work stream and the manufacturing work stream are substantially complete, and we have delivered to our upgraded savings target of $50 million, which you will see in full in the next fiscal year. From here on, we will focus on the IT stream. We've had success to date, but the big work is still to come, and I'd now like to hand over to Deanna Johnston to give you further details on this.
Thank you, Neil. By way of further introduction, I've now been with Ansell over five years and during that time my role has evolved significantly. In addition to leading our global IT function, my responsibilities have expanded to include overseeing Ansell's broader portfolio of change initiatives. Most recently, this included leading the integration of KBU into our business ahead of schedule. There are three factors that really resulted in the success of that integration. First, we developed a tightly interconnected dependency plan, carefully mapped how all the complex parts fit together. Second, we really maintained a constant steering and rapid issue escalation, catching potential problems early and addressing them quickly. Lastly, and most importantly, we followed strict cutover readiness criteria, ensuring all of our stakeholders were aligned and confident in our preparedness. These criteria were defined in advance, measurable, and never compromised.
We plan to apply those same principles to our upcoming digital transformation work stream within APIP. Before diving into that, let's just quickly review what we've accomplished in the space though over the past six years. In 2019, Ansell was operating 16 different ERP systems, a legacy from our many acquisitions. This created significant inefficiencies across our systems and processes. We made a strategic decision to consolidate all of our manufacturing plants onto a single cloud-based ERP platform. Over the last six years, we've been executing this transformation plant by plant. As of today, our nine largest facilities have successfully migrated, including our Thailand plant, which just went live earlier this month without an issue. The confidence we've gained from these transformations and from our successful KBU integration has positioned us to take the next challenge, which is migrating our customer-facing entities onto that same ERP platform.
From here on, this becomes the core focus of APIP. These migrations are going to take place over the next three years, beginning with North America later this fiscal year. Once complete, Ansell will operate on a unified ERP system, unlocking benefits across cost efficiencies, process optimizations, and customer experience. Our customers will see an improved service and stronger partnerships, and we will be better equipped to deliver value in areas like pricing, inventory management, and integration of future acquisitions. We're genuinely excited about the potential of this initiative. We're working really closely with our customers to ensure a seamless transition and look forward to sharing updates with you on our progress in the years ahead. With that, I'll hand it back to Neil.
Thank you, Deanna. A few words on our sustainability progress before I then hand over to Brian for more details on our financial results, and two aspects of this I would highlight. Firstly, our net zero emissions goal has now been extended to include our scope 3 emissions, with our net zero target including scope 3 remaining at the FY 2045 dates. I'm pleased to say that the Science Based Targets initiative has validated our targets as well grounded and meeting their criteria for Science Based targets. On the left hand side of the page, I'd highlight our progress in reducing injuries. You may remember that in fiscal year 2024, that was one year we seldom see this, but one year in which we did see an increase in injuries, and it is important to get back on track.
I'm satisfied with a 16% reduction in the overall level of total recordable injury frequency rates. I also think there's further progress that we can make, and we're very focused on the leading indicators and the proactive risk reduction steps that we can take to get to the lowest possible injury occurrence in our company. It continues to be very satisfying to see the recognition we gain from authorities around the world consistently rating Ansell as a leading company in our delivery of sustainability objectives. Now let me hand over to Brian Montgomery to go through our financial performance.
Brian, thanks Neil, and good morning everyone. Great to be here speaking with you today. I've been with Ansell now for a few months and I'm really impressed with the quality of the company we've got here and looking forward to working with Neil and the team to drive the business forward in the coming years. Neil's provided a few comments on the full year result already, but let me get into it in a little bit more detail. Overall, we were pleased with EPS coming in at $126.1 on an adjusted basis, which excludes significant items. As Neil mentioned, this was in the upper end of our upgraded guidance range that we provided alongside our half year results in February.
Starting at the top, sales were up 7.7% on an organic basis, which excludes the effects of foreign exchange, the acquisition of KBU, and the exit of our chemical household gloves business in fiscal 2024. This is the best rate of organic growth we have delivered in over a decade, excluding fiscal year 2021, which was distorted by pandemic-related pricing and demand. [GP&AID] margin improved by 280 basis points versus fiscal year 2024, helped by improved manufacturing utilization, growing APIP savings, and the mix benefits from KBU. We did experience some margin headwinds from higher freight costs and raw material costs, which we spoke about in the half year results. However, we saw improvements in both items in the second half, with the use of air freight reducing and key raw material prices softening moderately.
Second half margins also benefited from pricing put in place in January to offset increases we saw in raw material costs in the first half. Overall, a solid result on [GP&AID] margins but with opportunities for further improvement as we move into fiscal year 2026. Turning to SGA, this was up 12.2% on an organic basis. The main driver was increased accruals to fund higher incentive outcomes versus fiscal year 2024, as well as annual merit increases, partially offset by higher APIP savings across the year. Foreign exchange is a headwind to EBIT by about $1.5 million. Underlying currency changes were unfavorable to EBIT by $11.5 million, but our hedge book did its job and neutralized the majority of this negative movement. We did see an FX swing in the last quarter with the U.S. dollar depreciating against key revenue currencies including the Euro.
This sets us up for an underlying FX tailwind in fiscal year 2026, though this will be blunted in the short term by the expected losses on our hedge book, but a positive development for earnings in the longer term, all else being equal. All this translated to organic EBIT increase of 10.4% versus fiscal year 2024 as well as a 200 basis point improvement in our EBIT margin, which now is at 14.1%. Moving further down the P&L, we booked $98 million in significant items in fiscal year 2025.
This is higher than the guidance we gave at the first half due to the decision that Neil Salmon outlined to leverage the market leading KBU brands across other parts of our product portfolio, and this required us to book a non-cash charge of $41 million against the value of each retired brand which had all come to Ansell as part of earlier acquisitions, bridging down to net profit. Interest was also higher due to the incremental borrowings required to fund the KBU acquisition, and our effective tax rate came in as guided at 23.5%. On the whole, a solid 2025 result in some challenging market conditions, and we look forward to carrying this momentum forward into fiscal year 2026. Now on to the balance sheet, which I'm pleased to say is in a very healthy condition. Working capital was higher than fiscal year 2024, most notably in inventory.
There are four key drivers there, including incremental inventory from the KBU acquisition, natural investment in stock to support higher sales, increased safety stock levels in the U.S. to get ahead of higher tariff rates, and then the translation effect of a weaker U.S. dollar at year end, which also inflated stock levels in the second half. Looking at inventory turns more operationally, these were higher than fiscal year 2024, helped by a mixed benefit from KBU products where manufacturing is outsourced. Pleasingly, inventory health also improved over the course of the year with lower customer backorders and improved in-stock percentages. This has supported revenue growth in fiscal year 2025 and continues to help support growth here in fiscal year 2026. Receivables and payables both inflated in the second half as we rolled off transition services with Kimberly-Clark and those order to cash processes transferred to Ansell.
Both receivables and payables were not included in the KBU transaction perimeter. Operationally, debtor and creditor days were relatively stable throughout the year. Finally, it was great to see a step up in return on capital employed. This business is on this improvement off the back of our earnings growth, which included strong initial returns from the KBU business. It's not often that an acquisition is accretive to ROCE in year one, but that's what we've been able to achieve with KBU. Next, turning to cash flow. While both sales and earnings were significantly higher than fiscal year 2024, net receipts and operating cash flow were both lower. It's important to remember that in fiscal 2024 we benefited from a significant one-off working capital release of over $100 million when production was slowed to reduce inventory, which drove an abnormally high cash flow result.
Working capital increased in fiscal year 2025 as sales picked up and we built inventory where we needed it. For example, in the U.S. towards the end of the year. It's this significant year-on-year swing which explains the year-on-year reduction in operating cash flow. Cash conversion, which we define as the percentage of net receipts to EBITDA excluding significant items, was 91% for the year. This decreased somewhat from the 104% that we showed at the half year, mainly due to the second half inventory moves and those TSA exits that I talked about earlier. We have $45 million in one-off cash costs associated with APIP and the KBU transaction integration that were included both in EBITDA and net receipts.
The majority of the significant items of the P&L were non-cash, including the $41 million non-cash charge against retired brands I mentioned earlier and incentive accruals, which were significantly higher than fiscal year 2024. These make up a large piece of the $115 million other balance items you see between EBITDA, working capital movements, and net receipts. Net CapEx was $68 million in the year, which includes the continued construction of our new surgical plant in India. Of course, the large increase in net interest-bearing debt was due to the payment for the KBU acquisition made at the start of the year. Turning to the next slide, just a couple of words on our funding profile. If we adjust for the timing of payment for the KBU acquisition at the start of the year, net interest-bearing debt reduced by $29 million in the year.
Net debt to EBITDA at the start of the year was 1.6x, down from 1.8x at the beginning of the financial year. Maturities of our debt are relatively long-dated, with approximately a third of our facilities at floating rates. There is scope for some improved interest outcomes if rates decrease throughout fiscal year 2026. All in all, we're in good shape with a healthy balance sheet and well-balanced maturity profile, meaning we can continue to underwrite value-accretive internal and inorganic investments as and when we see them. We can also turn to further capital management to ensure our balance sheet remains efficient, and to this end, we will be resuming our on-market share buyback program here in fiscal year 2026, aiming to make up to $200 million of repurchases.
Finally, I want to take the chance to say a few words about the opportunities I see for improved financial performance over time. I'm a few months into my tenure here, and what has struck me is really the strength of the IT in our business, clear material science and manufacturing technology, our services offerings, and of course our market-leading brands. I see good opportunities to leverage these strengths to accelerate revenue growth through the work we're doing to optimize our brand positioning, which includes greater use of the acquired KBU brands, and through stepped-up product and service innovation. There's also potential to drive better revenue management and pricing practices to ensure the value of our products is reflected in the prices paid by our customers. Looking at margins, our team have done a great job in the past couple of years of driving improvement, particularly in the industrial segment.
I see a lot of potential for further gains through a continuous focus on driving variable production costs down by deploying lean tools and automation in our plants, by improving our sourcing capabilities, and through more efficient distribution. The upgrades we are doing to our ERP systems will be a key enabler, and there are also opportunities to be smarter around our use of shared services. On cash flow, we want to build on the improvements that we've made in our supply chain planning over the past few years to turn inventory faster and look to tighten up our receivable and payable terms where we can. These improvements will further enhance our ability to invest for continued growth and return capital to shareholders. I want to say a few quick words about how we're thinking about this.
You know, first, we know that the best returns are from internal investments and we've invested significantly in manufacturing capacity over the last few years, which enables us to meet the growing demand for our most differentiated products. Now we're turning our focus to productivity investments, specifically opportunities to introduce greater automation to key manufacturing processes. Secondly, M&A is a key part of our strategy and we're continuing to look for acquisitions that will enhance our differentiation and growth potential, building on the success that we've had with KBU. Finally, if we're sitting on excess capital, we won't hesitate to return it to shareholders via our on-market share buyback program, which we are now resuming. With that, I'll hand it back over to Neil to talk through our outlook for fiscal year 2026.
Thank you, Brian. Clearly, when talking about fiscal 2026, I have to begin with the impact of tariffs. This page highlights across the top the four reasons that I think will give you confidence that we are in a position to offset tariff cost increases without a negative value outcome. Firstly, remember that PPE products in general are essential. Customers do not have the option whether or not to use them. They are required, and often required for regulatory reasons. In the workplace, the specific Ansell PPE solutions are differentiated. In addition to protection, they provide comfort. They generally are more durable than competitive offerings and often they protect against multiple risks in a single product. That means they keep workers and production processes safe. It also means customers buy Ansell products because of that broader value proposition, which through Guardian we can demonstrate creates value in use.
The second point to make is the entire gloves manufacturing industry and clothing manufacturing industry is in a very similar position. In the end, the way tariffs are currently, there isn't a big advantage in any particular manufacturing country. I would say that the economics of onshore production in mature markets, for example, the U.S., remain challenged and we don't think what has happened to date shifts that materially. The third point to make is that Ansell, more than anyone else in our industry, has a diverse manufacturing and sourcing network. In a time when it's very difficult to be confident about any particular future scenario, the only way to be prepared is to have options. Our 14 manufacturing facilities in nine countries, supported by a well-developed supplier network, means Ansell has more options than any other participant in our industry to navigate whatever the future throws at us.
Finally, I feel in my 12 years at Ansell that I've been here several times saying to you we have the pricing power to be able to offset a source of cost inflation, whatever that may be. At different times it's been different things. Each time we have shown that we can offset step change cost inflation through well-managed price increases and clear communication to our customers. What are we doing? What have we done so far? What are our plans? In summary, our pricing plans are to offset those higher tariffs in full. We have already begun on this journey based on the initial tariff rates. China an additional 30% and the rest of world at 10%. We communicated in the fourth quarter to customers that we would need to take a first step of price increase.
Those went through in the June and July timeframe, and generally we've seen good market acceptance of those. In the more recent weeks with the next indication of what tariff rates to the U.S. will be, we need to go to the market again with further increases. We have communicated those to customers. We're in the process of implementing them, and they will come into effect for the most part during the first half fiscal year 2026. I believe that we will see a similar outcome to the price increases already achieved. Meanwhile, we continue to work to mitigate the higher costs. We have many steps in place to reduce our exposure to China's sourcing.
Even though there's less of a cost benefit now to that than previously some had assumed, customers still want to be sure that their supply chains do not contain a high level of sole source risk to China. Back to that resilience, we can offer more options than others. We're also looking for cost mitigation across our supply chain. Taking all these steps together and the fundamentals of our industry situation, I believe we will be able to navigate tariffs successfully in the U.S. and in other markets. With that secured as an assumption, let me go now to the other assumptions that make up our earnings guidance for the year. A range of $1.33 - $1.45 as you've seen already, and of course that requires continued good earnings growth versus the $1.26 that we've just reported. We anticipate continued sales growth.
Yes, some industrial verticals will see subdued demand, but in other spots we see the opportunity for growth in industrial, and we expect overall solid healthcare demand. We anticipate general volume growth across the business, and then tariff related pricing will clearly also contribute to sales growth. Adjusted EPS. Those sales will support EPS. As Brian Montgomery has outlined, we have an ongoing productivity program. Even with APIP coming to an end, there are other initiatives that we have underway that should improve manufacturing and supply chain productivity, and we'll see a further step up in KBU synergy delivery. Finally, we remain very focused on cash flow. We remain committed to strong cash conversion, and you've heard our continued balanced approach to capital allocation.
Now let me conclude, returning to those four dimensions across the bottom here that I believe shareholders should see as long-term sources of value creation, and across the top are the enablers or the pillars of building those dimensions. Let me just highlight a few key priorities for the next 12 months. Firstly, under leading positions in growing markets, clearly as vertical conditions change, as some markets show opportunities and others less, we need to be adaptable and we need to be effective in pivoting our focus to those favored verticals. The increase we put on really understanding our end users helps us be more agile and quicker in doing that. The broad portfolio we have means we can present well-rounded solutions into verticals such as defense or energy, where there are meaningful growth opportunities. We continue to round out our comprehensive product portfolio.
We've had success with new-to-industry product launches, and there are more that will launch in the next 12 months that we think will provide very important solutions to customers that aren't available to them. Today I talked about our service solutions, and it's particularly exciting how the development of technology really enables us to envisage a new future for our services, which are much even more powerful than they are today and also much more responsive, enabling us to reach more customers with this very important advice on what the right PPE is to use. We plan to scale up our RightCycle recycling program, working on the economics and making it available to customers who are asking for it. Today we continue to invest behind that resilient supply chain. I continue to believe our sustainability leadership is important also for share growth.
We're expanding our portfolio of low carbon solutions, and that's resonating very well with customers. Also, let's remember that our investment in renewable energy is also a smart cost move, and we see lower energy costs coming from those renewable investments. Further investments in fiscal 2026 will continue to have energy cost benefit. Finally, all this is made possible by cash flow. Our CapEx mix will continue broadly about the same dollar levels but shifting from growth investments to productivity investments, with automation being a key component. As you've heard, we're resuming the on-market share buyback program. I hope that gives you a good overview of our results in the last 12 months and a good sense of our priorities for the next 12 months. We would be very happy to take your questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're using a speakerphone, please pick up the handset to ask your question. We ask that questions be limited to two per person. Please rejoin the queue for any follow up questions. The first question today comes from Vanessa Thomson from Jefferies. Please go ahead. Vanessa.
Good morning team. Thanks for taking my questions. Yeah, great result. I just wanted to ask with the U.S. tariffs and your insourcing strategy, I guess the outsourcing KBU strategy does give you some extra flexibility at this time. Does that change your attitude to sourcing in the near term? Thank you.
I don't think it changes us structurally, and I don't think we expect a meaningful shift in the percentage of in-sourced, outsourced. It does all come back to those options as I was describing. In fact, the Kimberly-Clark business, when we acquired it, as is true for pretty much everyone else in the industry, had some greater dependency on China for some aspects of its sourcing, and we've quickly been able to come up with alternatives there, which is a combination of leveraging our own sourcing, outsource network, and then also looking at Sri Lanka, for example, as a location in which we can make in-house products that previously Kimberly-Clark only had the option to outsource. It's the options that we provide to an already strong KBU sourcing network that give us more dimensions to move.
To answer the question specifically, I don't expect a step change in the outsourcing overall mix for the company.
Thank you. My second question was around we've seen commentary about pull forward of purchasing effectively, I guess into the fourth quarter of FY 2025. I wondered how you're seeing purchasing into the start of FY 2026. Thank you.
Yes. I need to caveat my comments by saying we don't have perfect visibility on this. We do track much more carefully now the distributor sellout data and match that to our sell-in data to watch for changes in distributor inventory levels. Of course, we're also tracking order patterns as we begin this fiscal year. Overall, we don't see any signs of that, Vanessa. We haven't seen any material pre-buy in the fourth quarter of the last fiscal year, and also as we progress through this year, we're not seeing any meaningful change in order intake that would suggest there was a pre-buy. It's a little early for me to draw a definitive conclusion on this, but so far so good. No, I don't. The information I have today would suggest that wasn't a big factor, it wasn't a material factor in our fourth quarter result.
Okay, thank you.
Thank you. The next question comes from David Low from JP Morgan. Please go ahead.
Hi David.
Morning. Thank you. Morning. Can I start with tariffs? Of course. I mean I see the price increases that have gone through. I'm just wondering how much or how much you worry about in volume impact. I also observed that both divisions saw their growth slow to 3% in the second half. I know there's a lot of moving parts there, but worries whether you see any of even a link between the price increases and what's up in the sales.
Yeah, clearly it's that equation that is at the heart of our success. We've taken a price strategy which we don't believe will have a major volume risk effect, and we'll be agile as we work that through. We have flexibility within the overall commitment I've made to you to adjust if there are specific customer situations that we need to respond to. We've taken account of that in the targets that we've set here. I think the volume effects that we're seeing are not so much related to price that we've taken, but we are seeing already some second and third order consequences of higher tariffs. For example, Mexico, which for many, many years has been one of our highest growing countries, activity in Mexico has slowed significantly because of the increased barriers of trade between Mexico and the U.S.
In some sectors in the U.S. we're seeing promising order opportunity. In other sectors, for example, automotive, similarly automotive in Europe, we're seeing weaker growth opportunity. Those are the volume effects we're seeing, not related directly to our price increases, more related to industries around us adjusting to the realities of the new trade world order.
All right, thank you for that. I noticed again that EBIT margins have a strong uplift there, and KBU is obviously part of that. What is the potential margins that you see out of this business? I mean, we've seen a fair bit of movement in margins across both divisions over the years. What do you think are the principles that are medium term targets?
Yes. I think we need to do some more work on resetting our medium term targets. We currently have work underway looking further ahead again, and we'll look to update you on those as we reach conclusion. Billy, Industrial right now is in fact trading quite a bit ahead of what I'd said two or three years ago was my target margin for that business. There's nothing in that margin performance that I would say is unusual or temporary in nature. It's really coming about through consistent delivery of those priorities we've outlined to you for a while. Encouragingly, and you've challenged us on this in the past, David, we've been able to retain the margin improvements that we're making internally by overall ensuring that we price our products to value rather than to any particular cost equation.
That price to value is the theme of the revenue management that Brian was talking about, which we want to become more sophisticated in. I don't have a new mid year target for Industrial for you, but I do expect continued margin improvement in that business as we've got a long way to go with those strategies that I've outlined. Healthcare is still trading below its historic margin level. I'm pleased that we saw some improvement in the last 12 months, but we've got longer to go to really get the Healthcare business back to an acceptable level of margin. I expect margins to improve in the next 12 months. Really key to Healthcare are those productivity and automation investments.
With success in those pilot lines that will materially reduce the labor required, particularly in the packaging processes, for example, of our surgical portfolio, we should see a step up in Healthcare cubic margins as well as the other strategies that are consistent between Industrial and Healthcare. Let's stop short of directly answering your question, David, but that gives you a directional sense, I hope.
Yeah. Thanks, Neil. I appreciate you guys have delivered on the EBIT targets so far, so well done. Thanks very much.
Thank you. The next question comes from Dan Hurren from MST Marquee. Please go ahead.
Good morning. Thanks very much. Again, sorry to carry on with the tariff question, but it's still on the topic of the day. The market is really trying to understand the risk of downgrading either within your own portfolio or downgrading to triple brands. As you sort of go through the second wave of price negotiations with customers, can you just characterize how you're seeing that play out? Is there a tendency for customers to go for super products within your range or to alternate providers? I should say so.
I think the first comment to make with regards to that is pretty much the whole industry is moving up, and you've seen our customers also who are managing both brands within their portfolio, our distributor customers, I mean, and also managing their own private label portfolios, also saying that they expect to offset the impact to tariffs with higher price increases. This is a classic question of tide lifting all boats, and the relative price difference may not move that much, in fact, between the Ansell premium position and other lower price but perhaps also lower value products.
The second point I would make is the one I was making on the call, which is that Guardian Value Sell methodology allows us to really demonstrate to customers that even if the Ansell price point per glove is higher, the overall cost in use is often lower, and when your products last two or three times as long as cheaper alternatives, that's not a very difficult case to make. The third statement is indeed we do have options within our portfolio. We have mid tier products that are still very good but don't quite offer the full value of our premium products. This is not different to our strategy over many years. We're always flexible with customers if for different reasons they need to have some flexibility within the portfolio.
All of those factors have been considered as we've tried to give you our best view of our outcome from our strategies over the next 12 months.
Okay, thanks. I'll leave it there. Thank you.
Thank you. The next question comes from Craig Wong-Pan from RBC, please go ahead.
Morning. Just wanted to touch on the margins in the divisions again. You know we saw good uplift in those second half margins. Just wanted to understand if there were any kind of one-off benefits or seasonal benefits in those second half margins to understand how sustainable that level is.
Yeah, maybe I can bring in Brian Montgomery to comment on this. We have pulled out the main factors there, but I think it's worth reiterating some of those. Brian.
Yeah, that's a very good question. As we shift from the first half to the second half, a couple dynamics helped us out. One was in the first half we were responding to demand that were in some cases back ordered and needed to be accelerated. We responded to that with higher air freight, which on a rate basis is obviously much higher than what you'd see on the ocean. As we shifted to the second half, that got back to more normal patterns. That's one of the reasons why we think that's a sustainable position to be in over time.
The other side of it is we did see some higher raw material costs in the first half of the year, and either we priced for those as we got in the second half of the year or some of those abated a bit as expected in the second half as well. Some of the adjustments we made for the first half and second half, again, we believe are sustainable as we look forward over time. The other thing that we see as benefit is those productivity investments coming online. We're very focused now on moving our capital from just capacity and growth, which has been more our focus, to more of this productivity piece. That should be added as we go over time, helping to offset the increased inflation we see in things like wages throughout our supply chain.
Just to add one comment, while the second half margin result was fairly clean for the reasons that Ron described, remember there's always some seasonality in our EBIT margin. Generally, the second half dynamics lead to a higher margin in the second half. You can't take the second half margin and roll it forward. You need to take the full year adjusted for some of the first half factors that Ron described, and that creates that potential for year on year growth as opposed to necessarily growing on the second half rate into next year.
Thanks. Just to follow up on that seasonal part, are you able to specify how much that kind of benefit normally is in the second half versus the first half?
Sorry, I missed the second half benefit. Can you repeat that?
You kind of talked about the seasonal benefit there that you get, that sort of skew. Can you kind of quantify how much that is?
I don't remember offhand. I think we disclosed the half on half mix fairly consistently over time, but there's generally a couple hundred basis points difference between first half margins and second half margins, sometimes more, sometimes less, depending on specific patterns within the year. Yes.
Okay, thanks. Just the second question on the ERP upgrade. Thanks for giving details around that. Could you put any numbers around the kind of benefits that we might see? Just to clarify with the timing there, it seems like the benefits might flow through more towards that FY 2028, that back end of that period. Would that be correct there?
Yeah. I'm going to duck your question, but then bring in Deanna to provide some color to those benefits. Internally we have a business case right now. Frankly, I think there's more opportunity than the numbers that have been presented to me internally. Brian also is challenging this. Our goal is to work on that further in the next 12 months. We also want to see the results of the first go line. Rather than give you a number, Craig, let me bring in Deanna who will say where we see the opportunity and what should lead to those benefits. We expect to give you a more specific answer 12 months from now. Deanna,
Hi.
Saul Hadassin from Barrenj oey, please go ahead.
Thanks. Good morning, Neil. Good morning, Brian. Can you hear me?
We can hear you.
Yeah. First question from me, Neil, just on tariff, obviously a lot of questions around potential impact of volume and demand. Is a way to think about the price increases that you effectively need to put through, you've talked at total cost around $80 million on an annualized basis. If we take that cost and just divide it simply by your U.S. revenues and you get to about 7%, is that the magnitude of price increases that you effectively be looking to put through or does it vary by product? Could it be more than that? Could it be less than that?
I mean, yes. I mean the average. That's good math. There's some variation that we've decided to take within getting to that overall goal. We don't actually see a big variation now by product because the drivers of that cost increase are fairly consistent. Each product is largely tariffed at the same rate, and there's not a big variation in sourcing anymore in tariff rates as the picture that it is today. That being said, we of course take account of market situations, and we have adopted some flex within our plans in order to improve that overall equation. We've been discussing price achievement and volume retention. Yeah, you're still broadly right in your math as to the average increase needed to offset the cost.
That's very clear, Neil. My second question relates to the slide. We talk about the ERP system upgrades, and I'm interested in your comments around the manufacturing systems being extended to customer-facing entities. I know in the past the difficulty with Ansell has been seeing forward orders from customers and then balancing inventory and hence the implications for cash flow. As you look through to now 2027 and particularly 2028, I'm keen to get a sense of to what extent across the whole business you will have, you know, line of sight on forward orders both in healthcare and industrial, to the extent that you'll be managing this business far more effectively from a working capital position once we get the systems implemented, assuming they're implemented on time and that they are effective. Thank you.
Yes, so the ERP itself will not actually create further connections into our distributor systems, which is where that information sits. Yes, this is one of the first issues that I tackled with on becoming CEO, and we couldn't wait for one ERP to get that insight that, as you rightly say, is so critical to our business. In parallel, on another project that Deanna successfully led, we put in place an end-to-end demand and supply planning system. Not only is it a system, but it's also a very structured process with customers where we do collaborative forecasting. Only a few customers are willing to give us full transparency on the levels of inventory that they hold. You can triangulate over time based on various trends that you see to give you a reasonably good view of distributor inventory levels.
That's already in place, and further improving it is not so much a systems issue as that customer collaboration issue, but also improving our ability to gather data. It's a classic big data problem. Getting insights from multiple areas and then extract, transform, and load is the jargon to get that data then clean so that you can really use it for decision-making purposes. The overall data lake and BI strategy that Deanna has adopted has also been effective there. Deanna, would you add anything to that question around that customer visibility? Question.
Thank you. The next question comes from Andrew Paine from CLSA. Please go ahead.
Yeah, morning. Thanks for taking on the questions. Just looking at your net debt to EBITDA, you've got 1.6 x, and you know, strong performance versus your targeted 2 times. Just looking at FY 2026 target of 1.5 to 2.5, just wondering, is that the upper end of the indication of M&A capacity that you have baked into that target, whereas the other capital allocation priorities may be putting you towards more of the middle to lower end of that range?
Let me hand over to Brian Montgomery to comment on that.
We think about the 1.5 to 2.5 range as really being our target leverage. I think as demonstrated with the KBU acquisition, we were able to raise debt as well as equity to stay within that range and then, of course, bring that back down as we go forward over time. As we look to be below that range, 1.5, you know, we have the opportunity to resume our on-market buyback as we discussed today. I think we think about that really as kind of our target leverage that we'll work within to be most effective in that range. Does that answer your question?
Yeah, probably just to tack onto that, I guess in terms of M&A, what type of opportunities or gaps are you seeing that you could kind of pull the trigger on at some stage?
Right. I would say that this is something you have to be in the markets all the time and looking at the opportunities as they come. I would say as well that we've got a strong strategic lens that we apply to all of our acquisitions, and things that you saw in KBU such as exposure to faster growing end markets, exposure to deeper profit pools are things that we think about as being in that strategic lens for us as we go forward. We apply, of course, the financial criteria to that, driving strong returns on capital over time with those acquisitions, as we've been able to demonstrate with KBU. As we're evaluating those, that's kind of the frame in which we put within it. I think the other side of this is being opportunistic and being able to respond if and when those situations arise.
I think staying within our target leverage allows us that flexibility to be able to respond as and when those opportunities occur. I think it is a key part of our strategy as discussed, that we have a strong platform for M&A. I think we have demonstrated strength in terms of integrating that M&A successfully. This is one that we're excited to continue to pursue. Neil, anything you could add.
No, I think a good summary. It's always, I mean the availability is the other question, and it's always hard to predict that. It generally is subject to decision making by other companies or financial sponsors, and so we just don't know. To Brian's point, we don't know when attractive targets will become available. We don't know if pricing will be reasonable. Will we be ready to act should both those conditions be met? Yeah.
That's great, thanks. I don't know if that counts as two, but I might just throw one else in. Just backing out the APIP savings, just looking at your EBIT margins. If I take that out, the benefit you got year over year, it's about 13.1% EBIT margin if I'm correct. About half of the 200 basis point EBIT margin uplift in 2025. You're obviously doing a great job there pulling through those APIP savings. Just looking forward, that 100 basis points underlying x APIP, is that what we're still expecting as a growth target in terms of EBIT margin uplift in the near or medium term?
I think the other big factor to note is we went from a below target incentive outcome last year and also the last two or three years in fact. Now with the results we've reported to you today, I hope you would expect that indeed our incentive plans have delivered above target outcome. The incentive costs in FY 2025 was up. We gave the number quite a bit on FY 2024, but also above. If you assume the future at a target rate, then we had more expense in FY 2025 than an ongoing target assumption for incentive outcomes would deliver for you. About halfway in between those two year numbers that we've given you a directional sense of. That's perhaps the other factor to consider as you look at that.
Okay, that's great. Thanks for taking that question.
No problem.
Thank you. The next question comes from David L. Bailey from Morgan Stanley. Please go ahead.
Yeah, thanks. Good morning. Just one from me, just in terms of guidance just on the sales piece. I suppose I'm just wondering what you're assuming top end and bottom there from a revenue and sales perspective and whether it's, you know, more response to pricing changes to offset the tariff impacts or there's macro considerations factored in there as well. Just kind of what you're doing at top and bottom end would be great.
Yeah, so we don't guide with quantification to top line growth. We remain directional in our comments. I think we've covered the tariff pricing piece already sufficiently as I consider macro trends. First of all, let's be clear, it's only the U.S. that is directly affected by the tariff consequences, and then we do see some second order consequences, Mexico the most prominent, where there's a reduction in activity because of lower exports to the U.S., but really I'd say Mexico is the only country that we see that meaningfully at this stage. Commenting more on macros, I think many of the leading indicators of activity actually improved through the fourth quarter. If you look at forward indicators of orders, industrial production activity, and from most of the half they were indicating declines and now they're indicating neutral or positive.
If that's sustained, then that's actually quite a positive macro environment to be in. You've heard our comments are a little more cautious than that because it's hard to predict exactly what the economic consequences will be of changes in trade policy. I think stepping back from macro, that point of focus on verticals is key. There are major parts of the world economy that are attracting significant investments, and I talked about energy and defense, and our portfolio is readily suited and unique in many aspects in being able to provide a portfolio solution to both those in the production of defense or energy, but also the supply chains behind them that need to ramp up quickly in support of that. Similarly, in the U.S., some sectors will be affected by tariff rates, but other sectors may be stimulated, and of course that's the overall strategy here.
We're looking to be in the right spots in the U.S. to grow. As I said, also emerging markets we still see offering plenty of opportunity. Less perhaps about the general macro, more about our ability to pick the spots in which we can grow. That's a key focus for us as a team. To repeat some of my comments from the presentation.
Thanks for the follow up. I mean, what would be the biggest swing factor then? It is just, you know, I'm guessing the EPS range is going to be a function of the top line. If you're stripping out some of those factors, what's going to be the one thing that's going to move you most substantially, top end or bottom end?
Certainly, always the broader economic environment is one, the extent to which we've given you our central target for price versus volume outcomes and tariff. Clearly, there's some range, potential range of outcomes there, and then overall delivery of cost savings, always piece of piece there. We're assuming no disruption from our ERP go live. We've got a pretty good track record there. That gives me confidence in that statement. Any sensible CEO or CFO would always allow a little bit of contingency there just in case. I think those are some of the other factors. Yes, the principal ones are related to those top line drivers that we've discussed here in answering your question.
Thank you. Thank you. At this time we're showing no further questions. I'll hand the conference back to Neil for any closing remarks.
Thank you all for your continued interest in Ansell and thank you especially to the Ansell team. It's a year of very strong delivery. I believe these results were made at Ansell. Not a lot of external factors supported our delivery and we had to get it done ourselves. I'm very proud of our ability to execute consistently against ambitious goals that we set as an organization. That clearly puts us in great stead for the future. We look forward to commenting on our F2026 success as we go through the year. Bye for now.