F&P plan to get Europe bubbling

Fisher & Paykel Appliances turned up the heat in its European market yesterday with the $158 million purchase of Italian stove-maker Elba boosting sales in that region to 10 per cent of its total business.

The whiteware manufacturer has had ambitions to expand in Europe and the UK but, until yesterday, drew less than 1 per cent of its sales from that region.

Chief executive John Bongard said the acquisition from De'Longhi provided "a bit of momentum up there", with Elba expected to boost sales by about $142 million in the year to March and contribute $4.7 million to net profit after debt funding costs.

He said that figure was expected to grow to $11.4 million over the next few years and it would not be long before Europe overtook Australia and New Zealand in sales.

But whether Europe could eclipse its largest United States market was hard to know at this stage. "I just hope they both end up being really big."

F&P Appliance shares were on a trading halt yesterday as the company issues $66 million worth of new shares to part-fund the acquisition. The remainder will be funded by debt.

The manufacturer has been expanding in larger overseas markets to reduce its reliance on Australasia.

Its expansion into Europe follows the same strategy as the US where it bought California-based premium cookware manufacturer Dynamic Cooking Systems for $50 million in 2004.

Since then, US sales have grown to 38 per cent of total sales, with Australia following second at 30 per cent.

F&P Appliances has also been broadening its manufacturing base away from Australasia, relocating a washer plant to Clyde in the US. The motor plant and Smart Load dryer manufacturing lines, now in Auckland, will also move to Clyde this year.

Bongard said Elba would provide further geographical diversification for the company, balancing its exposures to the US and Australasian markets.

Elba, based near Treviso, Italy, makes freestanding cookers, built-in ovens and cooktops, which it exports to more than 54 countries, with the UK its largest market. F&P Appliances will continue to sell its products under the Elba brand in Europe.

The range complements F&P Appliances' products sold in Europe and Bongard saw "piggy-back " opportunities to sell more of those - particularly the DishDrawer which had so far been "a bit of an orphan" without a truly complementary European cooking offer.

He hoped that would boost production of DishDrawers at the company's Mosgiel factory.

Forsyth Barr analyst Greg Main said Elba would provide another leg for the company's growth which would be important as its rapid growth in North America tapered off.

As well as owning the Elba brand, the purchase gives F&P Appliances a 20-year licence for European cooking product brands De Longhi and Kenwood.

A range of F&P Appliances-branded Elba products will be introduced to Australasia.

Bongard said the addition of Elba's product range would provide economies of scale to F&P Appliances' European and British distribution which would flow through over the next one to two years.

It also expected to save manufacturing costs between its three cookware plants in New Zealand, the US and Italy and boost purchasing power for steel, plastic and glass.

The company was not actively in negotiations for any more acquisitions.

De'Longhi said it wanted to focus on growing its key product categories of heating, air conditioning, food preparation, cleaning and ironing.

However, it would remain the exclusive distributor of De'Longhi-branded cookers in New Zealand, Australia and Italy.

Shares in F&P Appliances closed at $4.50 on Wednesday and are due to resume trading today.