KEY POINTS:
Fisher and Paykel Appliances has lowered its profit forecast by up to 20 per cent, saying trading in December and January was significantly softer than anticipated.
The company today said revenue was hit by tough competition, high raw material costs and flat conditions in some markets.
It said it now expected a full year profit of between $60 million and $65 million against its November forecast of $75 million to $80 million.
Since reporting its interim result on November 9, it had encountered difficult trading conditions in its three major markets of New Zealand, Australia and the United States, Appliances said.
Sales in December and January were significantly softer than expected.
In New Zealand, pricing competition had intensified as importers benefited from the strong dollar, Appliances said.
While it had retained market share, it had increased discounts on selected appliances, eroding margins.
The Australian market had softened and was very competitive, with the traditional appliance peak summer selling season, especially for refrigeration products, yet to eventuate.
As a result, sales over the Christmas-New Year period were down and suppliers had increased discounts to attract sales.
In response to severe drought conditions in Australia, all state governments were offering substantial incentives to consumers to buy water efficient washing machines, which used less water than traditional top loading washing machines.
To retain sales, the company had discounted its range of Smart Drive washing machines by offering cash backs on new purchases.
At the same time, the recent release of its large top loading, water efficient, AquaSmart washing machine in Australia had been well received.
AquaSmart was the only top loading washing machine in Australia that qualified for the state government incentives, Appliances said.
Sales in the first few weeks since release were encouraging, and a mid-size model was planned for release in the new financial year.
In the US, the market was in decline and major suppliers were offering substantial discounts and incentives to retain sales volumes.
As Appliances was a relatively new brand in the US, its sales had been affected.
To address the flat US market conditions, Appliances was widening its distribution.
Motor sales to company Whirlpool under a supplier agreement were at expected levels, with the two motor manufacturing lines fully operational after being relocated from Auckland to Clyde, Ohio, late last year.
Raw material prices remained at exceptionally high levels, although there was some stabilisation recently, Appliances said.
The recent and unexpected strengthening of the New Zealand dollar had reduced overseas earnings on translation to New Zealand dollars.
Due to those factors, group after tax result for the full year was now expected to be within the range of $60 million to $65 million, Appliances said.
The projected result was before restructuring costs and the estimated profit on the sale of surplus land.
Ongoing substantial cost savings on components and raw materials were expected in the coming months, with a procurement office recently opened in China.
During the next fiscal year, the company expected market conditions to improve in both the US and Australia along with growth in Europe.
Given increased distribution in the US and upcoming new product releases in all markets, the company expected to benefit in terms of both revenue and margin.
Around 10.30am today, Appliances shares were down 5.5 per cent or 21 cents to $3.59.
- NZPA
