Founded in 1989 by Australian health science entrepreneur Dr Peter C Farrell, ResMed develops, manufactures and exports products related to the screening, treatment and long-term management of obstructive sleep apnoea and other respiratory difficulties.
Since its inception, the company has expanded rapidly—as have global public and physician awareness of sleep disorders and breathing issues.
With direct operations and distributors in more than 70 countries, the company is an Australian success story, recently posting a record result in the most recent quarter. There are also strong prospects for future earnings, particularly in the US, but also in Europe, where growth has been slowing for some time.
Here Dr Farrell shares his expertise on meeting the current challenges of the export business.
TRADE EXPRESS: Congratulations on the recent high-profit quarter. To what do you attribute your success?
Our second quarter of the 2013 financial year marked our 72nd straight quarter of record revenue growth—that’s 18 straight years of growth. This growth has been built with a clear focus on sleep and respiratory medicine, a commitment to ongoing product innovation, global market development and a strong execution.
In this most recent quarter we grew our revenue by 13 per cent to $376.5 million and our net income grew by 24 per cent to $77.9 million. High-end devices in the flow generator business continue to drive growth. Mask sales growth was also robust. We continue to take the lion’s share of the market. We remain well positioned to capitalise on the rapid rise in home sleep diagnostic testing, patient monitoring, and compliance requirements in the US market.
TRADE EXPRESS: What are some of the challenges of exporting from Australia to the rest of the world?
The rise of the Australian dollar had the potential to significantly impact our profitability and competitive position given that, as recently as 2005, almost 100 per cent of our production was undertaken in Australia. When you look at the relatively high costs associated with conducting business in Australia—labour rates and overheads in Australia are now in the top echelon of global economies—you can see why the Australian manufacturing industry has been in decline for many years.
TRADE EXPRESS: How have you overcome these challenges and what mechanisms are in place to ensure continued growth in the future given the strong Australian economy?
We recognised this challenge back in the late 2000s and have actively pursued a diversification of our manufacturing base. Currently we conduct over 50 per cent of our production offshore and this has insulated ResMed from the full impact of the Australian dollar’s appreciation and levelled the competitive playing field.
Note though—and this is important—we remain committed to manufacturing in Australia. We have repositioned our business to build capability in our Australian manufacturing operation at what could be described as an advanced manufacturing site. Our manufacturing site in Sydney is an important part of the business—our Sydney-based innovation and product development engineering teams work closely together with the manufacturing team. We develop our designs and manufacturing processes in Sydney to ensure we efficiently and effectively introduce innovative and quality new products.
As well as introducing new products, over the years we have innovated on the manufacturing side through, for example, the introduction of robotics, multi-cavity tooling and automated testing into our manufacturing processes. All these developments are undertaken at our Sydney facility and help maintain our competitive edge.
However, incremental manufacturing volume growth will continue to be developed offshore.
TRADE EXPRESS: What are some of the benefits and challenges of export to the US, Europe and other parts of the world in the current climate?
The world economy remains weak but we continue to be successful by pursuing the strategy we outlined above. The company recognised early on that there was a huge opportunity to treat sleep disordered breathing and went about developing a presence in all significant global markets. Today, ResMed is extremely well diversified geographically and operates significant businesses in all major markets.