F&P Appliances expects smaller profit

Whiteware maker Fisher & Paykel Appliances said today it expects an annual profit of between $60 million and 63 million - down on last year.

Last year its net profit fell 20 per cent to $68.6m.

For the 10 months ended January 31, 2006, Appliances said it experienced strong growth in appliance unit sales as it regained market share locally and continued its penetration in the North American markets.

The total New Zealand market for appliances declined but the company continued to show gains in sales volumes reflecting its market share increase.

The total market also fell in Australia where the company recently saw market share grow despite some initial decline in sales after prices were hiked in May.

Today's forecast was 4.6 per cent down on the previous guidance given of between $63-66m.

"For the 2006/07 financial year the directors are confident that the business is well positioned to withstand any further decline in trading in the New Zealand and Australian economies," managing director John Bongard said.

For the 10 months ended January 31, total appliances sales volumes, including those of DCS brand in the United States, were up by 7.1 per cent on the previous corresponding period.

New Zealand sales were up 7.8 per cent, Australian sales down 6.3 per cent, US sales up 43.5 per cent, Singapore up 64.3 per cent and the rest of the world down 14.1 per cent.

In the US, the company continued to trade strongly, the company said in today's disclosure statement ahead of briefing this afternoon.

Following the acquisition of Dynamic Cooking Systems (DCS) the distribution strategy for that brand was changed.

The US headquarters has moved to Huntington Beach, California, and DCS has been fully integrated into the US operations "and confidence in the brand has been restored".

Strong growth in the Fisher & Paykel brand continued to be led by DishDrawer dishwashers, Mr Bongard said.

Singapore's sales, with a more aggressive marketing approach and the addition of the Whirlpool brand, experienced strong growth.

In the rest of world markets the company's ability to compete was adversely affected by the high New Zealand dollar.

Prices unstable

While cost containment had been pursued, and gains made, commodity prices such as oil-based plastics and insulating foams remained unstable, he said.

Interest rates rises during the period increased the cost of funding the business.

One-off costs of approximately $1m were incurred for due diligence carried out on a discontinued acquisition opportunity, he said.

"The unexpectedly high value of the New Zealand dollar against the Australian dollar has impacted results."

The New Zealand-Australian dollar exchange rate has traded above the A90c average range projected in the previous guidance, the company said.

Establishment of Appliance's second US factory in Clyde, Ohio, was progressing well ahead of plan.

A washing machine plant in Australia was shut down in November and has since been recommissioned in Clyde.

The first clothes washing machine to be built in the US plant was made last week, two months ahead of schedule.

Increased revenues were expected from the North American markets and the new motor business.

Declining world steel prices, the projected easing of exchange rates, cost-cutting initiatives in component sourcing, reductions in freight and working capital costs are expected to combine to underpin the longer-term performance, Mr Bongard said.

Appliance shares closed yesterday on $3.52, having trading between $2.58 and $3.79 in the last year.

- NZPA