F&P Appliances profit to miss prospectus forecasts

Friday 25th September 2009

Fisher & Paykel Appliances, which was forced to sell shares at a deep discount and bring in China’s Haier Group as a cornerstone investor this year, said earnings will miss its prospectus forecasts and be outside the terms of a bank covenant.

The trading performance in the six months ending September 30 is expected to be “outside the 20% permitted adverse variance under the budget performance covenant agreed with its banking syndicate,” the company said today. It is in talks with lenders and is confident they will agree to the revised forecasts and covenant terms.

The company, which is losing long-serving chief executive John Bongard to health-related retirement at the end of the month, said higher-than-expected competition and depressed trading conditions in the US mean first-half sales and earnings will be below the forecast in its prospectus in May.

North American sales revenue in US dollars will be about 12% below levels assumed in the prospectus. Normalised EBIT for the full-year will be $19 million to $24 million below the $87.7 million forecast.

Including one-time items, the company now expects a net loss of $2 million to $5 million in the year ending March 31, 2010, compared with its prospectus forecast for a $11.7 million profit, according to a statement from acting CEO Stuart Broadhurst .

The under-performance in North America has prompted directors to review the carrying value of assets “for any possible impairment.”

The shares fell 1 cent to 74 cents yesterday and have tumbled 55% in the past year.

Sales in New Zealand will be “comfortably ahead” of forecast this year and in Australia, revenue would “slightly exceed” its estimate in local currency terms.

Still, competition in both markets “remains intense and the pricing for some appliance models has been reduced as market price points have declined,” the company said.

“The sales mix has also been unfavourable relative to PFI as cooking and DishDrawer sales have slowed further in the current economic conditions and this trend is expected to continue for the remainder of the fiscal year,” it said. “The price reductions and unfavourable sales mix variances have impacted margins.”

F&P Appliances plans to spend $3.5 million more on marketing in Australia and New Zealand than its prospectus envisaged.The depressed North American market has bumped up costs at its manufacturing plant in Reynosa, Mexico, it said.One-time costs associated with its Global Manufacturing Strategy will exceed forecast by about $4.5 million.

Broadhurst said projected earnings over the second half “indicate a significant recovery, relative to the first half, as the benefits of the Global Manufacturing Strategy and cost down are fully realised.”

Businesswire.co.nz

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