Shock warning on F&P Appliances' books

Shares in iconic Kiwi whiteware manufacturer Fisher & Paykel have been smashed to record low levels - losing as much as 40 percent in value - after the company said it was looking to raise cash after a sharp rise in its debt levels.

The company, which said that chief executive John Bongard had taken an immediate 7.5 percent pay cut, today forecast earnings of $25 million to $30 million for the year to March. However, one-off restructuring provisions would see the final figure be about break-even.

In the year to March 2008 Bongard was paid $1,142,593. Other executive staff are taking 5 per cent pay cuts, while the company is finalising a scheme that would see all salaried staff rostered off for one day a month. They can use annual leave for this.

Of immediate concern to a twitchy sharemarket was F&P's debt levels. The company said it may consider getting a cornerstone shareholder in - something that would have been unthinkable for the company even a year ago.

Bongard said the debt to debt-plus-equity ratio for the appliances business had increased to 43 per cent, which is outside its targeted range of 25 percent to 35 percent.

The company said that due to the rapid depreciation of the New Zealand dollar, foreign currency denominated debt had increased in Kiwi dollar terms by $122 million since March 2008. At the end of last month total bank debt was $512 million and it was expected to reach $570 million by the end of March 2009.

F&P said that levels were expected to be then progressively reduced by $230 million over the next nine months. The company said it would update the market about potential capital raising next month. It was possible it would have an issue of shares to existing shareholders in order to repay debt.

Shares in Fisher & Paykel Appliances closed at $1 on Friday, which at that point was a record low since the company was created through the split of Fisher & Paykel Holdings in 2001.

Bongard said that since reporting the interim result in November, a $7.3 million loss after one-off costs, the company had experienced "unprecedented and difficult" conditions in all its markets.

For the 10 months to January, sales were down 13.1 percent in New Zealand, 8.5 per cent in Australia, 12.9 percent in the US and 10 percent in Europe.

To fight the slowdown Fisher & Paykel said it would introduce its second tier Elba brand to new markets, starting with North America.

F&P Appliances has a global marketing, sales and product alliance with Whirlpool Corp, the world's No.1 appliance maker.

The company is a niche player catering for the top end of the market, as opposed to mass-market rivals such as Whirlpool's Maytag, Sweden's Electrolux and South Korea's LG Electronics.

Fisher & Paykel has been shifting manufacturing out of New Zealand to low cost markets in Mexico and Thailand. It said the costs associated with this strategy had increased by $5-10 million, partly due to a weaker New Zealand dollar.

- with Reuters

- © Fairfax NZ News