Profits fall at homegrown whiteware maker

BUSINESSDESK: Fisher & Paykel Appliances Holdings beat its full-year guidance despite posting a decline in earnings, but warns the outlook for 2013 is for soft retail markets and weaker demand in Australia.

Net income dropped 45% to $18.4 million in the 12 months ended March 31, from $33.5m a year earlier, the Auckland-based manufacturer said in a statement. Sales fell 7.4% to $1.04 billion.

F&P Appliances flagged a weaker full-year result when it released its interim results in November, when profit tumbled on tough economic conditions, high raw material prices and depressed white goods spending in Australasia, North America and Europe.

The company singled out Australia as a particular concern because the market deteriorated in the second half and said there are signs the “slight improvement” in the US “might not be sustained”.

“Retail market conditions are expected to remain soft across all of the company’s key markets in the near term due to global economic uncertainty,” chief executive Stuart Broadhurst said.

Normalised earnings before interest and tax for the appliances division fell to $11.3m from $23.7m, beating the $10m EBIT forecast with the first-half results.

For the finance group, normalised EBIT rose to $37.8m from $34.7m, exceeding the guidance of $32m.

Full-year operating revenue from appliances fell 7.6% to $891m, which the company attributed to “weaker retail market conditions, rebalancing for profitable sales and unfavourable currency translation”.

The decline in net profit also reflected transactional hedging losses of $25.6m, and on-time charges for onerous contracts, litigation and fair value adjustments for non-current assets held for sale.

The company won’t pay a final dividend.

While directors intended to restore payments to shareholders “as soon as possible”, they have opted to take cautious approach given that “conditions in our key markets remain very uncertain”.

There were glimmers of hope in the outlook. Starting in 2013, the company will benefit from two contracts to supply motors, one for major shareholder Haier of China.

It also has a pipeline of new fridge, laundry and cooking products to release in the coming year.

Still, raw material prices have increased in recent months, it said.

The finance arm, which provides consumer credit to purchasers of its appliances and is now its biggest earnings generator, “should remain resilient in the coming year” reflecting increased promotional activity with retailer Farmers Trading and a broader uptake of its Q card.

The shares last traded at 54 cents and have climbed 53% this year.

The stock has fallen from about $2.70 in mid-2007 and is rated "outperform" based on the consensus of five analysts in a Reuters survey.