KEY POINTS:
Fisher & Paykel Appliances chief executive John Bongard has given up forecasting the company's profit, saying the exchange rate has made a mockery of recent predictions.
Giving a net profit result yesterday for the year to March of $61.2 million - down from $63.9 million a year ago - Bongard refused to predict the year ahead.
Major trading banks were still expecting a collapse in the kiwi dollar this year, he said.
"I've been burnt two years in a row with that advice, and that's one reason we're not putting a forecast in."
The company's forecasting in the past couple of years had been poor, Bongard said.
"In the main, it's been because of our inaccurate forecast of where the dollar's going to go and what is going to happen to raw material prices and what's going to happen with interest rates," he said.
This time last year the company forecast net profit of up to $80 million. Then it predicted about $68.6 million.
Every 1c movement in the rate against the Australian dollar cost the company about $2 million of earnings before interest and tax, Bongard said.
"If the advice we were getting at the beginning of the year said that we would expect an exchange rate of sort of 75 to 78 [Australian cents] and we ended up at 90 [cents] or whatever it was, there's a big delta there."
The company's net exposure against the Australian dollar for the next year was 52 per cent, hedged at an average rate of A83.8c.
Revenue would grow this year but Bongard said he would watch external factors for the next few months before deciding whether to provide guidance.
F&P Appliances' share price closed down 3c yesterday at $3.77.
Forsyth Barr analyst Guy Hallwright said he was cautiously encouraged by the result "but they're obviously facing pretty flat and difficult markets in most places".
The management appeared to be taking the right actions with product innovation, and shifting the laundry production line to Thailand - announced in April - was seen as a good move.
"I think it's a sensible thing, especially if the dollar's going to stay high," he said. "Certainly if you're competing against a lot of other manufacturers that are manufacturing in Asia you need to get your cost base down and that is the way to do it."
The future of Fisher & Paykel Appliances' other New Zealand manufacturing operations seemed far from set in stone.
During a conference to discuss the financial results Bongard was asked whether there would be any manufacturing done locally in five years.
"I don't know - tell me what the exchange rate's going to be," he said.
The cost of some stainless steel products had risen by up to 80 per cent during the last year and the outlook for raw material prices was uncertain.
But at the operating margin level the appliance business had improved.
Operating profit before interest and taxation for appliances was up 4.7 per cent at $85.3 million, and the finance division was up 2.9 per cent at $29.2 million.
Interest costs of $20.7 million were up from $13.2 million a year earlier, reflecting the purchase of the Elba cookware business in Italy last June.
The appliances division had record sales of $1.3 billion, but had mixed trading conditions in its three major markets before and during the Christmas period.
The Australian market was expected to remain stable.
Increased competition, especially from Asian imports, would be partly offset by the introduction of new products.
Appliance sales in the US grew 5.2 per cent to US$298.2 million in a market which overall continued to decline, leading to more intense competitor activity.
The company was planning to increase its advertising expenditure substantially higher than the current US$1 million to US$2 million.
"I still think that that's our best growth opportunity in the short-term," Bongard said.
The New Zealand market was expected to contract as economic factors started to affect household spending, although the company expected to retain market share.
The European market was expected to grow as the Italian factory distributed Fisher & Paykel-branded products.
A cost-cutting programme would continue and benefits from a Chinese procurement office would be felt in the coming financial year.
