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Shares in Fisher and Paykel Appliances have plunged nearly 40 per cent this morning after the company announced a huge drop in its profit forecast and said it needed to raise capital from its shareholders.
The shares have fallen to 61 cents each, a 39 cent fall.
F&P told investors this morning it expects profits to fall by as much as 54 per cent amid a drastic tightening of overseas markets.
Of particular concern to shareholders will be the news that a planned capital notes issued hasbeen canned and instead the company will be looking to raise capital through issuing new shares.
"If an equity raising is conducted, the company expects it would include a pro rata entitlement offer to eligible shareholders," says Fisher and Paykel.
Money raised from this would be used to repay debt, with the new shares having the same rights as existing shares.
The directors say they expect to give a further update on the timing of the offer to investors in early March.
The laundry and kitchen appliance maker is now expecting a normalised net profit of between $25 million and $30 million, announced in a trading update to the New Zealand stock exchange today.
That compared with a net profit for the year to March 2008 of $54.2 million.
Fisher & Paykel said sales for the nine months to January were down 13.1 per cent in New Zealand, 8.5 per cent in Australia, 12.9 per cent in the US and 19 per cent in Europe.
The North American market remained in severe decline. European sales suffered similarly, as sales slowed, particularly in Great Britain, said managing director John Bongard.
Sales of more expensive products had been hit hard and the company was introducing its less expensive Elba range to United States and Australian markets.
Cheaper to run factories in Thailand and Mexico were expected to boost the bottom line after Fisher & Paykel closed factories in New Zealand, Australia and the United States.
That was despite costs associated with global relocation of factories now expected to exceed the previous guidance by $5 million-$10 million, partly due to currency effects.
"We expect the factory efficiency gains from the increased production, combined with lower labour and material costs, will more than offset the increased cost of freight, duty and working capital," Mr Bongard said.
Fisher & Paykel had reduced the chief executive's salary by 7.5 per cent and executive staff by 5 per cent.
It was also finalising a scheme whereby staff would take one rostered day off a month, with the option to substitute this day with annual leave.
The rapid depreciation in the value of the New Zealand dollar meant foreign currency denominated debt has increased in New Zealand dollar terms by approximately $122 million since March last year.
In January 2009 total bank debt was $512 million and the deferred consideration for the Mexican factory was approximately $49 million.
Debt was projected to be about $570 million next month, after which levels would be progressively reduced by approximately $230 million over 9 months as stock was sold out, working capital levels realigned to current sales levels and properties sold.
As a result of the debt, the company was advancing the marketing of its 14.5 hectare site at East Tamaki, Auckland site as a sale and lease back arrangement.
There was some good news in lower prices for raw materials such as plastics, chemicals and copper.
Steel prices have also fallen recently and would be reflected in forward contracts.
- NZPA/ HERALD ONLINE
