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F&P Appliances' new whiteware hope

Fisher & Paykel Appliances is banking on fresh innovation to boost its flagging global sales, which continue to be hurt by the global financial crisis.Today the company unveiled a refrigerator compressor it claims is 30% more energy efficient than cur

Liam Baldwin
Wed, 15 Sep 2010

Fisher & Paykel Appliances is banking on fresh innovation to boost its flagging global sales, which continue to be hurt by the global financial crisis.

Today the company unveiled a refrigerator compressor it claims is 30% more energy efficient than current technology.

Use of the compressor would also increase fridge capacity by 15 litres and increase design options.

The new technology, billed as revolutionary, is the result of 17 years of research followed by a joint development agreement with Brazilian compressor manufacturer Embraco, owned by Whirlpool Corporation.

Embraco has been licensed to make the compressor but F&P will get the first run at introducing the concept to market, followed by Whirlpool, before it would be sold to other manufacturers.

F&P today said the next stage of development was field trials beginning in the next few months, followed by mass production in two years.

Over the last month, the company’s share price has edged up about 10% to sit at 57c before today’s announcement, although this is about 16% down on a surge in late April to 67c (NZX:FPA).

Last month chairman Ralph Waters sounded a note of caution about the appliance manufacturer’s full year results linked to worries about deteriorating economic conditions across all key markets.

Mr Waters told shareholders late last month the board was increasingly concerned about the risk.

“If these concerns are realised, achieving the full year forecast will be challenging.”

However, with increasing pressure in all economies across the globe and greenhouse gas reduction plans, the energy efficiency of household appliances is an important factor.

Chief executive Stuart Broadhurst said a fridge is one of the larger appliance power users and reducing energy consumption was a consistent goal of the company’s product development team with this particular development costing “many millions of dollars.”

He stopped short of putting a final figure on development costs but said up to 15 people at a time had worked on the project during the near two-decade process and a $4 million grant from Tech New Zealand was a small component of the total.

Mr Broadhurst put a line between today’s announcement and the market signals discussed last month and saying the long timeline of the project showed the commitment the company had to making a better product rather than just what it would add to the bottom line.

And with gloomy financial expectations for the rest of its financial year, F&P will be hoping for an edge in an increasingly competitive consumer market.

Mr Broadhurst said while F&P would have a window of opportunity to exploit that edge, the world was heading toward increased energy efficiency, which put pressure on manufacturers to provide the right products.

Last month Mr Waters stopped short of offering a profit warning but said the company was forecasting full year earnings before interest and tax at the lower end of analysts guidance range between $45-$52 million.

Soaring debt attributed to the company’s global manufacturing strategy combined with a dramatic drop in demand as a result of the global financial crisis last year put the company in a precarious position, partially resolved when Chinese appliance company Haier took a 20% stake for $58 million in May, 2009.

Net debt approached half a billion dollars in March last year but last month the company reported a much improved position at $173 million following the completion of manufacturing facilities in Thailand and Mexico and the sale of transitional stock.

Mr Broadhurst would not be drawn on what the new compressor could mean to F&P’s continued global push and the resulting returns.

Liam Baldwin
Wed, 15 Sep 2010
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F&P Appliances' new whiteware hope
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