F & P Appliances to reveal all Wednesday

Photo / Richard Robinson

Fisher & Paykel Appliances, one of the country's most respected and oldest manufacturers, will reveal if it has dug itself out of a debt hole on Wednesday.

Appliances was granted a trading halt on its shares today, saying capital management initiatives "in their totality" were incomplete and the company was not yet in a position to announce them.

The company is expected to reveal on Wednesday both how it has been travelling in the global economic slowdown in its full-year profit and how it is going to sort out its balance sheet.

The appliance manufacturer's debt has swelled to $570 million to finance a shift of manufacturing to lower cost countries and because a lower NZ dollar increased the size of foreign debt.

The increase in debt has occurred at a time when consumers are rethinking big purchases and are buying cheaper brands, especially in North America where appliances has expanded.

The company has signalled that it has been looking for a new cornerstone shareholder but few candidates have popped up in speculation.

The company is expected to ask shareholders for money in a capital raising of as much as $200m.

Brokers said they do not expect the company to fail, but it has been caught with bad timing of its global manufacturing strategy.

The company needs to sell its manufacturing site at Cleveland in Australia. It has said the sale of its site in Mosgiel to Fonterra and deals done on its East Tamaki site so far will raise $34.7m after costs.

Appliances had been reviewing its capital structure and examining alternative sources of capital, chief executive John Bongard said today.

The company had been working with its banking syndicate with a view to refinancing the total bank debt by May 29.

Investors are also worried about the performance of the company's finance subsidiary, which is expected to need $50m of new capital by early 2010 to meet regulatory requirements.

In February, appliances predicted a normalised group profit after tax between $20m and $30m for the year. After abnormals and a sale of the Cleveland plant the company expected to break even.

Guy Hallwright at Forsyth Barr is predicting a bottom line loss of $15m to $20m assuming Cleveland has not sold.

He said the ability of the market to absorb the capital raising depended on how it was priced.

"I'm sure the capacity is there to raise money," he said. "There is probably support for the company," he said.

The news from appliances will be on the eve of the Government's budget, in which debt levels are also being scruntised by investors and ratings agencies.

Appliances' shares touched a year low of 36 cents on March 23 and were 66 cents on Friday. This is well below the $4.89 reached in 2006.

- NZPA