F&P Appliances cuts forecast

Stuart Broadhurst says F&P Appliances' new refrigerator compressor has attracted interest from appliance-makers overseas. Photo / Paul Estcourt

Fisher & Paykel Appliances cut its earnings forecast yesterday, saying it expects difficult trading conditions in the near-term.

Analysts and the company say a general pickup in the global economy will be needed before demand for the company's products improves.

At its annual meeting in August, the listed whiteware maker estimated group earnings before interest and tax, for the coming full-year, to be about $78 million.

But releasing its six-month result yesterday, the firm lowered that forecast to the range of $63 million to $70 million.

F&P Appliances reported a net profit after tax of $11.3 million for the six months to September 30, compared with an $82 million loss in the same period last year, when it had $170 million in abnormal costs.

Group revenue fell 6 per cent to $549.9 million, while the company's finance arm increased earnings before interest and tax by 52 per cent to $18.9 million.

F&P Appliances share price closed down 4c at 56c yesterday.

Chief executive Stuart Broadhurst said the firm's balance sheet had strengthened, with its debt falling by $23.9 million to $149.2 million. The company's debt peaked at $502 million in May last year. But Broadhurst said continuing volatility in its markets had led to a downgrading of its earnings forecast.

"We've looked at what our actual results have been and tried to project as best we can," he said.

"But we're just finding it very hard to forecast demand and understand what consumers are going to do between now and the end of March."

First NZ Capital analyst Greg Main said the earnings downgrade highlighted how difficult the global appliance market was at present, with sluggish demand.

Sales were likely to be dominated by the "replacement market" at the moment - people buying appliances out of necessity when their old ones broke down, he said.

Broadhurst said that in local currency terms sales were down 1 per cent in North America for the six months to September, while in New Zealand they had fallen by 9 per cent.

New Zealand was currently the most volatile of F&P Appliances' markets. "I don't think anybody wants to spend any money. We've seen demand [in New Zealand] down in June, July and August [by] 10 per cent on the year before."

He said there had been a buy-up of appliances in this country before the GST increase on October 1.

"But most of that, from what retailers tell me, has been given away already," Broadhurst said. Australian sales were up 5 per cent, where the firm had grown market share.

Forsyth Barr analyst Andrew Harvey-Green said the growth in Australia was coming off a low base in the previous comparable period.

"The market overall hasn't been great in Australia," he said.

Main said F&P Appliances had placed a lot of reliance on the Australian market for the past year or two.

"If that market tanked with the other ones that would be an obvious risk [for the company]," he said.

F&P Appliances margins were up 4 per cent - a result of cost savings gained through the firm shifting manufacturing locations to low-cost countries, as well as favourable foreign exchange movements.

Main said more spending on R&D was a positive sign for the company.

The firm unveiled new refrigerator compressor technology in September, which it says has the potential to improve the energy efficiency of appliances by up to 30 per cent.

Broadhurst said Brazil's Embraco, which has been licensed by F&P Appliances to manufacture and sell the compressor, had received expressions of interest from other appliance firms that would consider using the new technology.

"Many [manufacturers] are after a sample [compressor] so they can co-ordinate their own product development to ensure their products are ready to use that compressor when it's available for commercial use."