Investors applaud F&P's cookware buy

By GEORGINA BOND

The sharemarket liked Fisher & Paykel Appliances' $50 million purchase of United States appliance company Dynamic Cooking Systems.

Shares in the company rose 14c yesterday, or 3.5 per cent, to close at $4.17 - the biggest one-day gain in almost six months.

Chief executive John Bongard said the acquisition of the premium cookware manufacturer would almost double Fisher & Paykel's US revenue, making it the company's second-largest market after Australia.

He said it also provided a US manufacturing base for its laundry and kitchenware range, sales of which had been growing 44 per cent annually since 2000.

The company has been trying to build a market in the United States to cut reliance on Australia and New Zealand, which account for 76 per cent of sales.

"DCS is a well-respected brand that will lift F&P's profile and sales in the United States," said Bongard.

The DCS range complemented the F&P brand and enabled the company to offer a full suite of appliances to US consumers, he said.

Initial integration costs were expected to reduce F&P's net profit for the year to March by about $1.9 million, but Bongard said DCS should contribute $4.9 million to net profit in the year to December 2005.

F&P's sales and distribution operations in California would be merged with DCS' Los Angeles factory to streamline sales and marketing, distribution, customer services, and to provide better margins.

Three F&P senior executives will lead the integration of the two businesses in the United States.

The company expected to invest a further $14.5 million on new equipment at the DCS factory and $17.9 million to boost its working capital through to December next year.

An expansion of DCS' indoor product range was also planned, and the products would be marketed as "DCS by Fisher & Paykel".

Part of the DCS plant would be equipped to manufacture an expanded Fisher & Paykel product range, and Bongard said there was potential to rationalise both product ranges over time.

DCS was acquired on a debt-free basis from a private equity investor and the original founders of the business.

Bongard said F&P directors had decided to cancel its share buyback of up to $85 million of stock as they believed the acquisition would provide better returns to shareholders in the medium term.

DCS started making cooking appliances in 1987. In 1991, it began making premium outdoor cookware, and now leads the market.

It employs 750 staff and has a dealership network of 1200 stores throughout the US. It sells internationally through distributors.

Sales of $153.6 million were recorded for the year to last December, and sales for the eight months to last August were $113.1 million.

Forsyth Barr research analyst Greg Main said DCS was a "good strategic fit" for F&P, and gave the company a number of future options.