F&P Appliances returns to profit, conditions still tough

Appliance maker Fisher & Paykel Appliances has returned to profit but said it would not reinstate dividend payments to shareholders as it strives for more growth in markets where demand conditions are expected to remain fragile.

The company reported a net profit of $33.5 million for the year to March 31, turning around last year’s $83.3 million loss, which was hammered by impairments and other one-off items.

Normalised profit came in at $30.04 million, up 67% on last year’s $17.9 million.Group earnings were flat with earnings before interest and tax (ebit) equal to last year’s $58.39 million.

In a stock exchange filing the company said it was dealing with continued difficult trading conditions in the US particularly, and sales were also lower in New Zealand due to a transition to new distribution arrangements.

This offset an improved performance in Australia.

Overall group operating revenue was down 5% at $965 million.

Appliances’ normalised earnings of $23.7 million were at the upper end of the forecast range of $15 to $25 million with 71% achieved in the second half, but down 19% on last year’s $29.4 million.

Earnings from the company’s finance division were up 20% on the previous year at $34.7 million.

The company said it had not declared a dividend for the 2011 financial year due to an increase in growth related capital expenditure for the coming year and a cautious approach to credit markets.

The company expects to spend approximately $44 million in the coming year on pursing growth in component and technology areas.

Net debt was reduced by $73 million to $100 million, due to strong operating cashflows and property sales.

Interest costs were down 46% to $15.4 million as a result.

Outlook mixed
The company said it continued to make good progress in strengthening its relationship with cornerstone shareholder Haier, including the signing of a long-term technology supply agreement in February 2011.

“This contract will generate revenues of between $20 million and $35 million per annum. Earnings are expected to commence in the first quarter of the 2013 financial year.”

Meanwhile, sales of Fisher & Paykel branded products in China are underway, but with delays in product approvals for certain products including gas cooktops, sales were slower than expected.

“In addition, the full range of Fisher & Paykel branded products for China will not be completed until December 2011,” the company said.

Dividends would be resumed as soon as financial and operating conditions permitted, it said.

“The business has laid the foundation for future growth and we continue to explore further opportunities to leverage our technology capabilities.

“This includes the development of our new compressor technology, which is 35% more energy efficient than existing technology.”

The company will give an update on trading and market conditions the annual shareholders meeting in August.

FPA shares closed yesterday at 55c.