F&P Appliances eyes $70m write-off

Photo / Richard Robinson

Fisher & Paykel Appliances plans to wipe more than half the value of some of its North American assets after plunging sales.

The whiteware maker yesterday said it expected to write down by between $70 million and $75 million the value of its DCS brand, plant and equipment, inventory and Barter credits in its half-year September 30 results. That would see the assets' value drop from $119.5 million to, at best, $49.5 million before tax.

Acting chief executive Stuart Broadhurst said the level of the write-down had been recommended by an independent review and was based on where the company believed the level of growth would be in that market.

"It has yet to be validated but that is the write-off we think is prudent."

Broadhurst could not give details of how much the $39.5 million DCS brand, which is Fisher & Paykel's high-end brand of cook-tops and ranges, would be hit.

But he said the brand had the potential to increase in value once the North American market picked up again.

The plant and equipment, presently valued at $56.9 million, included those at its new Mexican factory which was set up last year specifically to build dish-drawer models for the North American market.

The plant cost $15 million to build and was part of the company's strategy to move manufacturing out of New Zealand and into cheaper markets and meeting demand from a growing North American market.

But the factory has been hampered by higher than expected costs and a falling North American market hit by the global financial crisis.

The company said it had also decided to write down the value of $11.9 million in Barter credits - a non-cash exchange system used in the US.

Broadhurst said the company would no longer be using the credit system.

While yesterday saw the United States officially declare itself to be out of recession, Broadhurst said it had yet to see any sign of a pick-up in the appliance business.

"The high-end US market is down significantly. We don't see any recovery in the short term."

Broadhurst said the write-off was significant and would have an impact on the company's bottom line result.

North America is the company's second largest market by revenue after Australia for its appliance business.

In the year to March 31, 2008, Fisher & Paykel earned US$287 million in revenues from North America but that had dropped 16.7 per cent to US$239 million for the year to March 2009.

The company warned of problems in the North American market at its annual meeting in August and last month shocked the market by saying its predicted $11.7 million full-year profit was now likely to be a $2 million to $5 million loss because of the downturn in the US.

Meanwhile, Fisher & Paykel was still searching for a new chief executive after long-standing boss John Bongard resigned in August after a battle with prostate cancer.

Broadhurst said the company was still carrying out an international search but hoped to find someone before the end of the year.

Fisher & Paykel's share price yesterday closed up 2c at 65c.