Fisher & Paykel Appliances Managing Director, John Bongard

Friday 16th August 2002

Following is a ShareChat Investor Interview with John Bongard, Managing Director of Fisher & Paykel Appliances Holdings Ltd. This interview was conducted during July 2002 and published on ShareChat on August 16, 2002.

SC Investor: Please explain your approach to foreign exchange hedging & trading; and describe the measure of financial success, or failure, achieved by this activity over the past 12 months.
John Bongard: Foreign currency exposures are hedged in accordance with a policy approved by the Board of directors. This requires net current and anticipated cash flows to be hedged with options and forward exchange contracts.
The cost effectiveness of hedging arrangements is measured against spot currency exchange rates and reported to the Board monthly.
SC Investor: Does F&P Appliances have hedging in place for foreign exchange exposure, given that the New Zealand dollar has strengthened by 20% since February 2002. How will a strengthening $NZ affect next years result?
John Bongard: We have hedging in place that will protect the business from exchange rate movements through to March 2003.
The main currency exposures are USD/NZD and AUD/NZD.
We have a natural hedge for the USD/NZD component of our business and we have a policy of covering only our nett exposure, therefore we are taking no cover against USD/NZD.
For AUD/NZD we have forward cover in place for approximately 50% of our export exposure through to March 2003 at rates between A$0.81 and A$0.82.
SC Investor: Does FPA have any intentions of disposing of their FPH holdings in the near to medium future?
John Bongard: We have no intention of disposing of this investment in the immediate future as the Directors believe shareholder value will be maximised by taking a longer term view.
SC Investor: I am slightly bemused that you are using the Dish Drawer as a beachhead to push other Fisher and Paykel Appliances in the US, yet in Europe the same product has been subsumed under a competitors label ('Whirlpool'). Can you reconcile to me the different approaches used in the different markets? Do you see Fisher and Paykel as a viable global brand in its own right, or is the future of F&P as a boutique manufacturer for other global brands?
John Bongard: Our OEM agreement with Whirlpool does not preclude us from entering the European market with our own brand. In fact, we have appointed distributors for the Fisher & Paykel brand in Scandinavia, Germany, Austria , Switzerland, Holland and Greece.
We do follow different distribution strategies in different countries all over the world. These strategies vary according to language requirements and logistical efficiencies.
We definitely see Fisher & Paykel as a viable global brand in its own right but we also see OEM relationships as an efficient way to utilise spare capacity in our plants.
SC Investor: What impact are you targeting (on the bottom line) for the recent agreement with Whirlpool for EU sales?
John Bongard: The full impact of our arrangement with Whirlpool will not be obvious until our next fiscal year.
SC Investor: Can you please give an update on your inroads into the Japanese market following the appointment of the new distributor.
John Bongard: Our first shipment of Dishdrawers did not reach Japan until last month so it is too early to make any accurate predictions. None the less we would be very happy if the arrangement resulted in 4-5,000 pieces per year.
SC Investor: How would you summarise the first six months of Fisher & Paykel Appliances being a standalone company? Are you glad the split occurred? Looking in retrospect and facing a share price that has dropped, do you believe the split provided value for shareholders?
John Bongard: We are very happy with the progress of the Company since the split. We believe that shareholder value has indeed been enhanced and we are confident that the split was the right course of action.
SC Investor: There was some publicity a couple of years ago, about a certain retail chain bringing in Korean whiteware and selling it on the NZ market at dumped prices. Looking back with hindsight, do you consider that New Zealand has the best regulations possible to allow fair trade in whiteware? If not, how would you (hypothetically assuming you were in government) modify the regulations themselves or their enforcement? In what way do you see your preference for exclusive retail agencies tying into this 'fair market' question?
John Bongard: New Zealand very closely follows the WTO guide lines for dumping and as such we believe the regulations are fair. Our Exclusive Dealing Arrangement in New Zealand is not linked in any way to the issue of dumping.
SC Investor: How badly did the fallout from September 11th affect your company in the United States?
John Bongard: Like all businesses the initial reaction was negative as quite naturally peoples focus went to the tragic events of the day. This sentiment was obvious for about 3 weeks then we all started to regain our normal day to day routines. Since about mid October we noticed trade returning to a more normal level and since has come away well.
SC Investor: I have always believed that the market does not really understand the finance business and its contribution to the overall strength of F&P. Have you considered an education or publicity campaign to help raise the profile of the finance division?
John Bongard: We have not in the past but I think your suggestion is a good one. Alastair MacFarlane the MD of our finance operation did make a presentation at our recent AGM so maybe that is a good start.
SC Investor: I have noticed your website is very much out of date - is still makes mention to Fisher & Paykel Industries and old financials. Are you going to update and change the content?
John Bongard: Your comments have been passed on to our web master. The confusion is in the Corporate area of the site and this is being fixed now. As far as product and other information on the site this is up to date. Thanks for your help.
SC Investor: Congratulations on your first result as a standalone company. However I am somewhat concerned by the current state of the share price. What steps are Fisher and Paykel Appliances taking to ensure continued investor support?
John Bongard: We are working very hard to continue our run of good results.
SC Investor: With a strong emphasis on international growth do you think F&P Appliances will ever shift its head office to an overseas country like Australia or the United States?
John Bongard: We would never say never but in the foreseeable future the answer to your question is no.
SC Investor: I have a Dish Drawer which is fantastic - it makes me proud to be a shareholder in F&PA. From my limited experience of the market it would appear that F&PA's products are some of the best on offer with a superior technological advantage over competitors - I've read that the Dish Drawer has won quite a few accolades. Is F&PA emphasising your superior product capabilities in marketing and advertising in your overseas markets? Do you see this as a "point of differentiation" that should be capitalised on?
John Bongard: We do use the fact that we have won many awards in our off shore advertising and it is a point that we do capitalise on. As a point of interest Dishdrawer is not the only award winner. we have won many awards for Active Smart refrigerators, Smart Drive Washers, Built in wallovens and most recently in the USA Gas cooktops.

SC Investor: What do you think is the biggest challenge Fisher & Paykel Appliances will face over the next twelve months? Are you optimistic or pessimistic about the future?

John Bongard: Our biggest challenge is to maintain the sales growth momentum we have in Australia, USA and Europe.

We are optimistic about the future of our business.

ShareChat thanks John Bongard for taking part in this Investor Interview.

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