Fisher & Paykel Appliances Profit Drops as Steel Prices Gain
May 19, 2005
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Fisher & Paykel Appliances Holdings Ltd., New Zealand's biggest home appliance maker, reported a 32-percent decrease in second-half profit.

Net income in the 6 months ended March 31, 2005 fell to NZ $34.1 million (approx. U.S. $24.3 million), from NZ $50.4 million (approx. U.S. $35.8 million) a year earlier. Analysts surveyed by Bloomberg News were expecting profit of NZ $31.2 million (approx. U.S. $22.2 million).

Fisher & Paykel forecast profit for the current year will be "similar" to last year as rising raw material costs and a high local currency crimp earnings. Rivalry from lower-cost Asian producers such as LG Electronics Inc., Samsung Electronics Co., and Haier Group has thwarted Fisher & Paykel from raising prices in Australia and New Zealand, where it makes 67 percent of appliance sales.

"Price increases for raw materials such as steel and plastics, which were apparent in the first half of the year, intensified during the second half," the company said in a statement to the New Zealand stock exchange. "Intense competition, especially in New Zealand and Australia, will limit the opportunities for further general price increases."

The appliance maker's second-half sales rose 12 percent to NZ $570 million (approx. U.S. $405.6 million).

For the group, full-year net income fell to NZ $68.6 million (approx. U.S. $48.9 million) in the 12 months ended March 31, from NZ $85.3 million (approx. U.S. $60.7 million) a year earlier. Sales rose 11 percent to NZ $1.04 billion (approx. U.S. $740.1 million). Full-year profit beat the company's Feb. 2 forecast of NZ $63 million (approx. U.S. $44.8 million) by reaching NZ $68 million (approx. U.S. $48.4 million).

In the full-year, earnings before interest and tax at the company's appliance unit, which generates 72 percent of profit, fell 24 percent to NZ $77.2 million (approx. U.S. $54.9 million). Appliance revenue rose 7.2 percent to NZ $914 million (approx. U.S. $650.3 million).

The appliance unit's margin before interest and tax fell to 7.4 percent in the second half, from 9.6 percent in the first half, reflecting increased raw material costs, a higher New Zealand dollar and a slowdown in production because of the slower New Zealand and Australian economies, the company said. (Bloomberg)

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