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Haier New Zealand Says Rate Hikes Slow Appliance Sales
Apr 20, 2005
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Home appliance sales in New Zealand have weakened after the latest interest rate increase by the country's central bank, but the slowdown "is not massive," according to importer Haier New Zealand.

Ken Lilley, the company's executive director, said sales of appliances like refrigerators have been largely untouched by the slowing market because they are viewed as essential items.

But sales of products termed "wants instead of needs," such as dishwashers, have been affected by the higher interest rates.

"Whenever you get discretionary income drying up, mainly through mortgages and interest rates, we get a slowing," Mr. Lilley said in an interview with Dow Jones Newswires.

The Reserve Bank of New Zealand has lifted the Official Cash Rate seven times in an effort to stifle persistent inflation since its current tightening cycle began early last year. It last moved to increase the OCR by 25 basis points early last month to 6.75 percent.

Analysts have also pointed to New Zealand's slowing residential building sector as a risk for appliance sales.

Haier New Zealand is a unit of Chinese appliance maker Haier Electronics Group, and it competes with New Zealand's dominant appliance maker Fisher & Paykel Appliances Holdings Ltd.

Haier New Zealand has recently been hit by a decision by one of its major retailers, Noel Leeming, to sign an exclusive dealer agreement with Fisher & Paykel.

The agreement, which Fisher & Paykel has with several local stores, dictates that participating retailers won't sell, display, or stock any product other than Fisher & Paykel appliances.

Mr. Lilley said the loss of Noel Leeming's 45 stores will reduce his company's potential market by about 35 percent.

Fisher & Paykel targets a local market share of 55 to 60 percent, and has said recently that it hopes its new deal with Noel Leeming will help it reach that target, after briefly falling below it earlier. Mr. Lilley declined to give Haier's market share in the New Zealand home appliances market.

He said Haier New Zealand is currently putting together information about the issue for the New Zealand Commerce Commission and will ask it to determine whether competition has been limited.

The competition watchdog has confirmed it is looking into Fisher & Paykel's dealer arrangements, but isn't yet fully investigating the issue.

Mr. Lilley added that the Chinese government is likely to discuss the appliances issue during upcoming negotiations for a free-trade agreement with New Zealand.

"The embassy has already raised those issues with us, it's definitely going to be platform," he said.

Mr. Lilley said importers like Haier New Zealand have reduced Fisher & Paykel's market share in recent years because they offer cheaper prices and give consumers more choice.

He said Noel Leeming, which is owned by private Australian equity fund Gresham Partners, probably opted to sign up with Fisher & Paykel partly because its sales revenue per unit will be higher than if it sells imports.

"The retailer makes the same margin, but there's a cost to every sale," he said.

Fisher & Paykel Appliances chief executive John Bongard recently said he is closely watching Asian competitors because he finds it difficult to understand how they were absorbing higher raw material costs without raising their prices.

Fisher & Paykel tried to raise its product prices last year but failed because its Asian competitors didn't raise their own prices.

Mr. Lilley said his company is simply enjoying the benefits of a high New Zealand dollar against its major counterparts, and doesn't need to lift its prices.

"Unfortunately the best thing they can do in that case is stop us from finding distributors," he said.

Mr. Lilley added that Haier New Zealand's Chinese parent company probably buys 1,000 times more steel than Fisher & Paykel and, therefore, significant economies of scale also exist, and need to be taken into consideration. (Dow Jones)

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