New Zealand-based Fisher & Paykel Appliances expects its net profit for 2004/2005 to be about $NZ5 million (approx. U.S. $3.31 million) less than last year's record result, after warning of potential cost pressures over the coming year.
The company said it expected to post a full year net profit of about $NZ80 million, compared to last year's record $NZ85.31 million, announced in May.
Speaking at the company's annual shareholder meeting in Auckland, New Zealand, the newly appointed chief executive John Bongard said the appliance maker had continued to trade at a similar level to that of last year. However, he warned that increases in cost for steel, plastics, copper, and other raw materials had "adversely impacted margins."
"Steel prices have not abated since we released our annual result," Mr. Bongard said. "Plastic continues to follow the price of oil, which is at a record high...(and) we have sought to ease pressure on margins by putting price increases in place in the New Zealand and Australian markets."
Mr. Bongard said despite the potential cost pressures, the overall group net profit after tax was expected to be around $NZ80 million, which was close to last year's record level. "This result is strong given that the previous result included dividends from Fisher & Paykel Healthcare," he said.
Mr. Bongard said despite predicted softening in both the New Zealand and Australian markets, the company's appliance business would achieve sales growth on last year, thanks to expansion in the U.S.
"Although some effective work is being done in realizing cost reductions, the pace and extent of changes in raw materials costs has meant there will be some erosion in margins," Mr. Bongard said.
He also said the New Zealand market had remained buoyant in the face of tough competition, but added that there were signs of weakening in the Australian market.
"Australia continues to provide an environment of extremely intense competition and there are signs of some weakening in that market," he said. "Some of this is due to the very dry autumn and winter experienced in all parts of the country."
He said dryer sales had particularly been affected, with price increases announced in the market from October 1.
"The market environment will test our ability to achieve higher prices in the short term, but we are confident that there will be a positive outcome moving forward."
Mr. Bongard said U.S. sales since balance date were stronger, while sales growth in Europe was steady, and satisfactory in the Singapore market. "Overall, our sales volumes are at a similar level to those at the same time last year," he said.
The company also said the better-than-expected performance of the company's finance arm for the period to March 2004 had continued. The recent acquisition of the Farmers Finance business had changed the Finance Group to a "recognized leader in providing retail point of sale consumer credit services," according to Mr. Bongard.
"Strong levels of consumer spending within New Zealand are contributing to our current performance," he added.
However, he warned the recent interest rate hikes in New Zealand was expected to soften demand. "Credit quality will continue to play an important role in managing our receivables as household debt services is affected by these changes in interest rates," Mr. Bongard said.
The company said over the next 12 months it would continue to integrate the two finance companies as well as continue to develop additional consumer credit products. (ASIA PULSE)
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