F&P Appliances reports drop in profit

Whiteware manufacturer Fisher & Paykel Appliances today reported its net profit for the year to March 31 fell 6.7 per cent to $63.9 million.

The company declared an unchanged, fully imputed dividend of 9c per share to be paid on June 20.

The result was marginally above guidance provided to the markets in February.

The lower profit was on operating turnover 16.4 per cent above last year's at $1.21 billion.

The pre-tax operating surplus fell 4.3 per cent to $96.7m.

The company said it had record appliance sales in New Zealand, the US and Singapore. Appliance sales lifted 5 per cent to 1.3m units reflecting strong growth offshore, particularly in the US where the company established a headquarters in Huntington Beach, California.

US revenue grew 58 per cent. F&P's Australian washing machine plant was relocated to Clyde, Ohio, during the year.

The company said although its finance group faced difficult trading conditions throughout the year, it contributed $36.4m before interest, taxation and amortisation.

The company's second half net profit of $37.7m was much improved from $26.2m for the first half.

Cash flow from operations was $109.9 million.

Chairman Gary Paykel said solid growth in the US was expected to continue.

He said relocation of the washer plant to Clyde would result in a reduction in working capital, lower freight costs and a more timely supply chain to customers.

The motor plant and dryer manufacturing lines, both located in Auckland, would also be moved to Clyde in the middle of this financial year.

On completion of the plant transfers, annual working capital savings of $23m would be made with an operating earnings improvement of $5.8m, Mr Paykel said.

The New Zealand market was expected to weaken, but market share gains made in New Zealand last year were expected to be retained.

The Australian market was likely to remain flat in the next 12 months.

Mr Paykel said new products coming on-stream would offer sales opportunities.

The fall of the New Zealand dollar against the US and Australian dollars had eased some of the exchange rate pressures experienced over the past 18 months.

Raw material prices remained high, although slight price reductions for plastics and steel had been negotiated for the first half of the year.

The company expects to maintain capital expenditure in 2006/7 at $55m.

The finance group would still meet strong competition and margins would remain tight, Mr Paykel said.

He expressed pleasure in the result given the "unprecedented" business conditions including extraordinarily high key raw materials costs and the effects of the high New Zealand dollar.

These were offset by an ongoing, aggressive and effective cost reduction programme and small price increases, he said.

The operating margin improved from 6.1 per cent in the first half to 8.8 per cent in the second, giving an overall margin of 7.5 per cent.

In a contracting market, New Zealand sales volume was up by 4.6 per cent over the previous year, thanks to aggressive marketing and changes in distribution.

Australian sales declined 5.8 per cent as tougher market conditions prevailed, although the fall eased in the second half.

Growth in the US continued apace with unit sales up 33 per cent to 337,800. The US is now the largest revenue generator for the group.

Unit sales in Singapore rose 61 per cent and European markets remained steady, with sales of 17,300 units, while Rest of the World unit sales fell 10.2 per cent to 38,800 units.

Appliance shares rose 8c to $4.13 shortly after the result. They have traded between $3.01 and $4.75 in the last year.

- NZPA