F&P trims earnings forecast

Photo / Richard Robinson

Whiteware maker Fisher & Paykel Appliances has sliced the top off its forecast earnings amid what it calls an unpredictable and challenging market.

The NZX-listed company yesterday posted net profit of $976,000 for the six months ended September 30, down from $11.3 million the previous year.

"The board remains concerned about macroeconomic conditions in our key markets, in particular Australia, and it is unclear how the volatile conditions in Europe will impact Australasia," the company said.

The company's finance business was expected to continue to experience soft retail conditions in New Zealand but with only a marginal impact on normalised earnings.

Full-year normalised operating earnings before interest and tax were expected to be about $42 million - with about $10 million from appliances and $32 million from finance - compared with a previously forecast range of $42-$52 million.

Chief executive Stuart Broadhurst said the half-year result was far from satisfactory.

"It reflects tough economic conditions," he said. "I think the underlying part of the business has had many improvements from margin to overhead and product, and focusing on future profitable growth.

"We've been broadsided by a hedging policy that was put in a number of years ago from our lenders to protect their downside ... that was inappropriate and has subsequently been changed."

Total debt was $94 million as at September 30, compared with $500 million in 2009.

The company's appliance business result had been negatively impacted by $20.3 million of currency hedging losses.

At a group level, had the current hedging policy been in place, normalised earnings before interest and tax would have been about $12 million higher, Broadhurst said.

The new hedging policy was far more responsive to market conditions, he said.

Appliance business capital expenditure during the period was $22 million, compared with $10 million the previous year.

"We are investing for the future of our core appliances business in the form of several new product ranges, some of which have been launched, with further developments in the pipeline," Broadhurst said.

"In addition, we are diversifying our earnings with investment in new component and technology agreements with major global appliance manufacturers."

The company's finance business had a strong result in soft New Zealand retail market conditions, with normalised earnings of $18.4 million, compared with $18.9 million the previous year, Broadhurst said.

The majority of the fall in revenue was attributed to a stronger New Zealand dollar and a drop in the United States as the company moved away from high-volume, low-profit sales, he said.

"That has meant while revenue is lower our margins are higher and we've turned a profit in the US for the first time in some years."

The group result included two one-off items - $2.5 million relating to the cancellation of an onerous lease and litigation costs of $5.9 million, both before tax.

Fisher & Paykel shares closed down 3c yesterday at 36c.