F&P Appliances year net profit falls 20pc to $68.6m

Fisher and Paykel Appliances Chairman Gary Paykel. Herald file picture

Fisher & Paykel Appliances today reported its net profit for the March year fell 20 per cent to $68.56 million reflecting tough competition in its main markets in New Zealand and Australia.

The company cut its final dividend to 9cps from 11.5c a year ago. It will be paid on June 13.

Operating revenue rose 10.7 per cent to $1.04 billion but the pre-tax operating surplus before unusuals fell 17.5 per cent to $101.0m.

Earnings per share fell 21 per cent to 26c and the tax provision fell 12.8 per cent to $32.46m.

Chairman Gary Paykel said high raw material prices and currency effects meant earnings in the 2005/06 first half were expected to be lower than the previous comparable period.

"The directors expect that after tax earnings for the full 2005/06 financial year will be similar to the previous year."

That news seemed to be welcomed by investors which sent the share price up 10c to $2.85.

He said it was expected that the business would continue to remain under pressure from high raw material prices and the effects of the high New Zealand dollar.

"Intense competition, especially in New Zealand and Australia, will limit the opportunities for further general price increases."

The continued high value of the New Zealand dollar would have an adverse effect on earnings. The company has a substantial exposure to the Australian dollar and a growing exposure against the US dollar.

Exports to Australia were converted to New Zealand dollars at an average hedged rate of A88c against the current rate of A93.75c.

Around half of Australian dollar net exposures were hedged at an average rate of A90c for 2005/06. The US dollar exposure had been hedged at an exchange rate of US68.3c against the current rate of US71.3c.

Mr Paykel said the company expected continued strong growth in the US.

The US business is expected to meet the profit targets as previously advised (US$7.7m) ($10.9m) Ebit (earnings before interest and tax) for the 2005 calendar year.

Notwithstanding some expected further softening in the markets in both Australia and New Zealand, the business is poised for volume growth, Mr Paykel said.

Recently announced distribution changes in New Zealand should result in a recovery of volumes in that market.

In Australia, planned new model introductions would provide the chance to lift prices. Overall volumes are expected to be lower in line with market conditions.

The company's appliances sales continued to grow, reaching a record of 1.27 million units compared with 1.20 million units for the previous year.

F&P Appliances' recent US acquisition Dynamic Cooking Systems (DCS) business had traded well ahead of expectations.

The company's Finance Group contributed $38m to earnings with its results including a full 12 months contribution from the Farmers Finance business, acquired in November 2003.

- NZPA