Investors give F&P a beating

Fisher & Paykel Appliances' plunging share price wiped $130 million from its market value yesterday after the company downgraded its profit forecast for the second time in three months.

Shares in the whiteware manufacturer fell 49c to close at $3.50 - their lowest in 18 months - after it said it expected a full year net profit of between $63 million and $68 million. This compares with the $75 million to $78 million previously forecast.

Some 7.8 million shares changed hands yesterday. On previous heavy trading days about 1.2 million shares have been traded.

Although the warning had been anticipated after F&P shares shed about 10 per cent of their value in the last month, investors were spooked that unit sales had taken a hit in its biggest market, Australia, dropping 3.1 per cent in the nine months to December 31.

Goldman Sachs JBWere institutional adviser Joe Gallagher said: "That's the reason the stock is being sold off so aggressively."

Chief executive John Bongard said higher steel costs were the biggest factor in the downgrade.

They came together in one hit with fierce competition from imports and changes in New Zealand distribution.

"It's most unusual to have so many factors in the business turning against us at a single point of time," he said.

Prices of some types of steel - one of its biggest raw materials - had more than doubled in the past nine months.

Prices were a "horror story" and Bongard did not see any relief in the short term.

"We're not on our own in this one, every appliance business is being hit by this."

To respond, the company would try to make its plants more efficient and several initiatives had been taken.

The company had seen tougher-than-expected conditions in Australia and New Zealand, the source of three-quarters of its sales.

Rivalry from low-priced imports from China and Thailand had increased, particularly in Australia, frustrating acceptance of its 5 per cent November price increase.

Bongard ruled out being more aggressive with pricing.

"We are fighting back a bit by using the price increase to fight with, so at this stage we're not intending to be more aggressive and adjust it."

Instead, new products would be its competitive focus.

"If we are to have a future we have to rely on a continuous stream of genuinely innovative products coming out of our factories that we can not only sell to Australians and New Zealanders, but that we can excite high-end markets in the US and Europe with."

Bongard said New Zealand sales were down 7.9 per cent compared with the same time last year after losing market share when some retailers had had changed their marketing strategy.

An analyst said that in July, Australia's biggest furniture retailer, Harvey Norman, had stopped stocking F&P appliances in its New Zealand stores and Farmers was now more focused on consumer products such as cosmetics rather than appliances in its department stores after a change of ownership in 2003.

Bongard said the company was reviewing its local distribution to address this.

The company's currency hedging had negated the favourable effects of the appreciating dollar its competing importers had enjoyed.

On the bright side, sales were up 50 per cent in America.