F&P to launch as luxury brand in China

Monday 17th August 2009

Fisher & Paykel, the appliance maker, is to be launched in China as a luxury brand by its new cornerstone shareholder, Haier Corporation, F&P's chief executive, John Bongard, told shareholders at the company's annual meeting today.

He also sought to assure shareholders that, after a very difficult 75^th year of operations, the company's earnings were tracking within $1 million of earnings forecasts for the current financial year.

The fourth largest appliance maker in the world, Haier acquired a 20% shareholding in F&P in May in a rescue deal that has allowed the once Dunedin-based company to continue a programme of global manufacturing rationalisation and market expansion.

Initial releases of the F&P brand to Chinese consumers will occur in Shanghai, Guangzhou, Hangzhou and Beijing before Christmas, and some 30 models will be launched into the Chinese market by mid-2010.

"The Chinese economy continues to grow at a spectacular rate compared to other economies" and has one of the fastest-growing luxury markets globally, Paykel said. "Without a partner of such high status as Haier, a successful entry into the Chinese market would be almost impossible for F&P Appliances."

Paykel outlined a range of other ventures occurring in partnership with Haier, including leveraging Haier's huge supply chain to lower input costs, with NZ$3 million in annualised cost savings already identified.

There was potential for F&P's Auckland-based Production Machinery Company to supply components to Haier, and opportunities for Haier-made products to be marketed in the US under the F&P and Elba brands.

A range of Haier fridges would be for sale under F&P branding in Europe by Christmas. F&P may also manufacture Haier-branded cooking products for the European market.

Both companies are collaborating on new products, to make "leading the market in new product concepts and delivering consumer solutions quickly ... a major competitive advantage".

Haier leads globally in front-loading washing machines, while F&P has a global edge in drawer technology for dishwashers and fridges.

Bongard also reported that manufacturing had now shifted successfully from Brisbane and Dunedin to Mexico and Thailand, and that the Thai plant was already delivering higher cost savings than forecast, with the Mexican plant close to completion and already partially operational.

The company would temporarily close its washer line in Clyde, Ohio, from October, reflecting tough trading conditions in North America, with required volumes of product coming from the Thailand plant instead.

The relocation to Thailand and Mexico had had an impact on sales and marketing activity, because the company had to draw on built-up stocks of product, leading to some loss of market share in affected product categories during the transition, at a time when sales were falling anyway because of the global recession.

"With production commencement dates now finalised, normal sales and marketing activity has recently resumed and sales are expected to return to normal levels," Bongard said. July market share statistics were already bearing this out.

European markets were experiencing difficult conditions, with reductions in market size of up to 30% not uncommon, but "the F&P brand continues to outperform the market, assisted by product and distribution expansion".

Indirect staffing levels had been reduced by 13% since last October, and there was ongoing focus on cost containment, with wage freeze and salary cuts implemented last July still in place.

Bongard also reported on the F&P Finance company's progress, saying the Crown Deposit Guarantee Scheme and lending focused on core business had shored up both deposit-taking and commercial performance, although bad debt provisioning had grown by $6.7 million.

He confirmed that the company was required to pay down a special $235 million Amortising Debt Facility before resuming dividends, and would pay none in the 2010 financial year. However, debt repayments were ahead of schedule, with net debt at $308 million on July 31, some $30 million ahead of forecast.

Businesswire.co.nz

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