Market applauds strong F&P Appliances result

By NZPA

Friday 7th June 2002

Strong sales in all its main markets drove Fisher & Paykel Appliances to a healthy 40 percent rise in its pro-forma profit for the March year.

The appliance maker, which split from its healthcare cousin in November last year, said today it had achieved an operating profit before interest, tax, and abnormals of $69.8 million, from $50.2 million the year before.

Heavy separation costs of $36 million ($26.2 million after tax) weighed on the result, leaving the surplus at $40.5 million.

Even so, the result reflected a 10 percent growth in revenue to $803 million. Analysts applauded and the market rewarded the company with an immediate 3.7 percent rise in share price.

Essentially, said one analyst, the company was up $30 million, including foreign exchange gains and reduced abnormal costs.

"I think it's an all round, very good result and well done," said Campbell Stuart, managing director of UBS Warburg.

"I believe the result was around 5 percent ahead of our expectations."

Market expectations for the company's operating profit ranged from $57 million by Multex Global Estimates to UBS Warburg's $63 million.

There was confusion when, according to its rules, the stock exchange results focused on the company's $1.15 million net profit from November to March, reflecting the company's existence as a stand-alone company.

Chief executive John Bongard pointed instead to the pro-forma figures which included its sales from within the unsplit Fisher & Paykel entity.

He said he was very pleased with the results. "I think our general strategy ... is beginning to pay off."

Fisher & Paykel's strategy is to grow its exports to the US, Britain and Europe off the solid base of its New Zealand and Australia markets.

This year, the strong spending power of Australasian consumers meant 3 and 2 percent increases in income from Australian and New Zealand respectively.

Offshore, revenue grew by 62 percent in United States, 12 percent in Singapore and 380 percent in the fledgling British market.

Looking ahead, Mr Bongard said stiff pricing competition was dogging its market share in Australia and there were population constraints in New Zealand.

But he expected to see a big increase in volumes to Britain and the US, especially as the company rolled out a luxury cooker.

"We think New Zealand will be pretty much the same as we've seen this year, we're still looking for some growth in Australia, and certainly continued growth in the US market, and obviously a big improvement in the UK, along with our entry into Europe."

Margins were a high 8.3 in 2002 compared with 6.3 the previous year, and he did not see margins slipping below the company's 7.5 target.

Mr Bongard said it had been a fantastic year in the US, and showed no sign of slowing down . "Although I guess realistically over the next year, to repeat the sort of growth we've got this year would be a little unlikely, but we'll certainly be in double digit growth, without a doubt."

Currency-wise, Mr Bongard said Appliances was hedged well against the US dollar but still fairly sensitive to the kiwi's rise against the aussie dollar, with hedging around A81c to A82c.

Around $8 million of the operating profit had been earned by Fisher & Paykel's finance unit which had had a fairly flat performance.

The company will pay a final dividend of 25 cents per share and a special dividend of 7.5 cents on June 28.

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