Daily ShareChat: Fisher & Paykel Appliances Holdings

By Jenny Ruth

Tuesday 25th August 2009

Fisher & Paykel Appliances Holdings guidance for current year's profits was disappointing and the imminent departure of long-serving chief executive John Bongard creates increased uncertainty, according to Morningstar.

At the company's annual shareholders' meeting last week the company reaffirmed its earlier guidance of a normalised net profit of $33 million and earnings before interest and tax (EBIT) of $87.7 million and that Bongard was resigning because he has prostate cancer.

"We were expecting a lift in profit estimates on the back of a falling US dollar," Morningstar says. "Effectively, Fisher & Paykel has downgraded earnings by approximately $35 million, assuming an exchange rate of 61.5 US cents, which was the average for the first four months" of the current financial year. The company's earlier guidance had been based on an expected exchange rate of 51 US cents.

"Management noted that appliance EBIT was tracking slightly below expectations due to margin pressure and increased product costs in the US. We believe that this might have prompted management to take a more cautious view, given North America's significant contribution to earnings."

The company also maintained its debt targets which was another disappointment. "We also anticipated year-end debt estimates to be lowered given Fisher & Paykel is already ahead of its target and the exchange rate remains favourable."

BROKER CALL: Morningstar rate Fisher & Paykel Appliances Holdings (NZX: FPA ) as hold (downgraded from accumulate).

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