F&P Appliances posts interim loss

Whiteware maker Fisher & Paykel Appliances has posted a half-year loss of $7.3 million after one-off costs associated with relocating some of its manufacturing to Thailand and Mexico.

The after tax loss, in line with the company's forecast, compares to a profit of $29.3 million in the same period of last year.

F&P has shifted production from New Zealand, Australia and the United States to Thailand and Mexico in a move to reduce wage, freight and raw material costs and combat the impact of the volatile New Zealand dollar. One-off relocation costs amounted to $41.2 million during the first-half.

Managing director John Bongard told August's annual meeting this would see F&P post an interim loss of between $7 million and $10 million.

F&P will pay an interim dividend of 5 cents per share, down from 9 cents.

Total group revenue for the six months to September rose to $697 million from $693 million. However, increased raw material costs, volatile exchange rates and competition saw operating margins on sales of household appliances fall to 5.3 percent from 6.8 percent with operating revenue from appliances down $300,000 to $627.8 million.

Appliance sales fell in all the company’s major markets except Australia, where they rose 2.9 percent to a record A$189.9 million thanks to strong demand for high-end products such as F&P’s Ice and Water fridge range. However, the company cautioned that even in Australia market growth was not expected to continue in the second half-year.

F&P said its outlook for the rest of the 2008-09 year remained uncertain with none of its markets exempt from the global economic woes. It would continue to focus on cost savings and restructuring opportunities.

But F&P said there were strong indications that the price of its key raw materials such as steel, oil based plastics, chemicals and copper were falling due to the global economic slowdown.

"An expected decline in raw material pricing and the anticipated cost savings associated with the [company's] global manufacturing strategy will benefit earnings in the second half."

F&P said, however, it would not provide any specific full-year earnings guidance given the uncertainty in all its markets. At the annual meeting Bongard said profit for the year to March 2009 was likely to be at the low end of analysts’ expectations, or about $33 million. That is $21 million down on last year.

F&P generated operating profit before interest and tax of $33.2 million from sales of appliances, down from $42.8 million and $11.5 million from Fisher & Paykel Finance, down from $13.4 million.

Operating revenue from the finance arm climbed 15 percent to $68.3 million boosted by higher interest rates and the introduction of card fees. However, funding costs had “increased significantly.” Retail debenture rollover had averaged between 50 percent and 70 percent over the past six months with cash flow from customers exceeding $300 million.

F&P has applied to the Treasury for F&P Finance to participate in the Government Deposit Guarantee Scheme for retail deposits.