Earnings sluggish in tough US market, says F&P

Fisher & Paykel Appliances says tougher than expected trading conditions in North America are weighing on its appliance division but the company is within $1 million of its profit targets.

Chief executive John Bongard yesterday told shareholders at the annual general meeting the appliance business was behind the earnings before interest and tax (ebit) target set in its prospectus statement released earlier this year.

Bongard said the lag was because of margin pressure and increased costs in America but the company remained on track with its appliance revenue target.

"Sales in the North American market have been slower than expected, but this has been offset by increased revenue in other markets."

Bongard said the North American market continued to be severely affected by the global slowdown and trading conditions were very difficult.

The market had declined 15 to 20 per cent on last year and the company had decided to temporarily close its washer factory in Ohio in October.

Its European markets were also facing similar economic problems with reductions of 30 per cent on the previous year not uncommon in some markets.

Bongard said the New Zealand appliance market had also continued to decline and strong competition had intensified with aggressive pricing.

In Australia the business remained relatively resilient but had been hindered by lack of supply due to the factory relocations.

But the finance company business was doing better than expected because of efforts put in to contain bad debt expenses and reduce costs.

"The finance business has maintained a sound level of retail debenture investment with reinvestment rates averaging in excess of 70 per cent in the past four months."

Bongard said overall the business was within $1 million of the $32.8 million forecast earlier this year.

The company had also managed to reduce its debt levels to $308 million, which was $30 million better than expected.

But it did not expect to be able to pay shareholders a dividend in the 2010 year because it had to pay back a $235 million amortising facility by April 2010 first.

However, Bongard said he was excited by the prospects of the new association with Haier, the Chinese appliance manufacturer which bought a 20 per cent stake in the business this year as part of a capital raising.

"China offers fantastic growth opportunities for appliances. The additional synergies that Haier and Fisher & Paykel Appliances continue to co-develop will bring further favourable results."