F&P Appliances posts first-half loss on costs to move plants

Thursday 13th November 2008

Shares of Fisher and Paykel Appliances Holdings, New Zealand's largest maker of home appliances, posted a first-half loss on costs to relocate factories overseas and waning sales in the US and at home.

The net loss was $7.3 million in the six months ended September 30, from a profit of $29.3 million a year earlier, the company said in a statement. In August, F&P Appliance said the loss could be as much as $10 million.

The manufacturer incurred one-time costs of $41 million in the first half after shifting its laundry plant to Thailand and most of its DCS lines to Mexico. The move was part of the 'Global Manufacturing Strategy' to locate factories nearer to major markets and reduce the impact of what had been a soaring New Zealand dollar.

"No market (is) exempt from the global economic fallout," the company said. "The group continues to focus on cost efficiencies and restructuring opportunities."

The company cut its dividend to 5 cents a share from 9 cents. Shares of F&P Appliances fell 2.9% to $1.33 today and have tumbled 60% this year. The stock is rated a 'buy' by two analysts who follow the company. One rates it 'outperform' and three have a 'hold' rating, according to estimates compiled by Reuters.

The company declined to give a full-year forecast, noting that it should benefit from declining prices of raw materials and cheaper labour costs after relocating factories. Annual cost savings from the global strategy were estimated at $71 million, according to a company statement in August.

In the first half, the operating margin on appliance sales shrank to 5.3% from 6.8%.

Appliance sales in New Zealand fell to $112 million from $122 million and in the US declined to $191 million from about $206 million. Rest-of-the-world sales weakened to about $35 million from $37 million.

Australia was the bright spot for appliance sales, rising to $233.8 million in the first half, from $208.8 million.

Revenue from the company's finance unit rose to $68.3 million from $59 million.

By Jonathan Underhill

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