Healthcare star shines brighter at F&P

By Phil Boeyen, ShareChat Business News Editor

Wednesday 6th June 2001

Fisher & Paykel's (NZSE: FAP) net profit has been thumped by foreign exchange losses although its operating figures are looking good.

In the year ended March the appliance and healthcare manufacturer recorded an after-tax profit of $11 million, a plunge of 80% on last year's $54.36 million.

Included in the result are foreign exchange losses of $64.2 million, which the company says relates almost entirely to the US dollar rate of $0.403 at year's end.

"The directors have adopted new foreign currency hedging policies, whereby in future only net currency exposures will be hedged forward," it says in a statement.

F&P has also been hit by $5.5 million charge relating to its carrying value in Auckland-based independent retailer Hill & Stewart.

"Our investment in retailers has never been part of our core business but one of providing transitional short term support. Disposal of our investment in Hill & Stewart is intended within 12 months."

Other charges have come from restructuring the company's appliance division, which cost $4.5 million, $200,000 to restructure its NZ finance arm, and a writeback of $1.4 million on the Australian finance business.

In terms of growth the company's healthcare business has once again been the standout performer. Its operating profit before tax grew 30% to $66.6 million.

Revenue in the division grew by 34% to $193 million and sales of healthcare's own products, as opposed to distributing other manufacturer's goods, increased 39% to $177 million.

Operating profit before tax in the appliances division was a letdown in comparison, dropping 19% to $31.3 million despite revenue growth of 22% to $693 million.

Most of that growth came from international markets, up 44% to $128 million on stronger sales in the US of the company's DishDrawer and Eco Smart washing machine.

In Australia revenue rose 10% to $355 million but revenue grew by only 2% in New Zealand and unit sales fell.

"In New Zealand, Appliances faced severe competition from quite unrealistic pricing of Korean imported washing machines and refrigerators," the company says.

Earnings from the company's local finance business, Finance New Zealand, fell 7.5% to $6.3 million.

As promised earlier F&P has provided further details of its planned split into two separate companies -Appliances and Finance, and Healthcare.

It says internal reorganisation for the split is substantially complete, with a shareholder vote on the issue expected in September or October.

"Completion of the separation arrangement and the closing of the U.S. Healthcare offer is expected prior to the end of the calendar year 2001."

F&P says the outlook for its healthcare business is good, with ongoing growth expected for the major product groups.

In the appliances division the company says it is strongly positioned to capitalise on its innovative product platforms and will focus on adapting the products to particularly grow the US and Australian markets.

A final fully imputed dividend of 18 cents per share has been declared taking the year's total to 30 cents, a 20% increase on the previous year's 25 cents per share total.

Despite the lower net profit figure the market seemed to approve of the continuing strong growth from the company's health division which should augur well for the US offer of healthcare shares. FAP closed up 50 cents Wednesday at $10.45.

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