Whiteware maker's half-year profits plummet

Fisher & Paykel’s lacklustre half-year result reflects the reality of tough economic conditions, the whiteware manufacturer says.

Blame for the $10.3 million drop in net profit to $976,000 for the six months to September, from $11.3 million during the same period last year, has been pinned on high raw material prices and depressed white goods spending, especially in Australasia, North America and Europe.

Revenue fell $36 million to $514 million.

Net profit was also erroded by a $5.9 million legal bill to fight an intellectual property battle in Auckland's High Court involving allegations of software theft at Fisher & Paykel Finance.

Another $2.5 million one-off item related to cancellation of an onerous lease for the appliance business.

Currency hedging losses of $20.3 million also weighed down the result and were due to the rapid appreciation of the Australian dollar relative to the US dollar.

Fisher & Paykel chief executive Steve Broadhurst said market conditions were expected to remain challenging and unpredictable for the next six months -- traditionally the firm’s stronger half, and the board remained concerned about macro economic conditions in its key markets, particularly Australia.

The finance business, which saw earnings fall slightly to $18.4 million from $18.9 million, was expected to keep experiencing soft retail conditions in New Zealand but that was only expected to have a marginal impact on normalised earnings.

Looking to the full-year, normalised, pre-tax earnings are forecast to be about $42 million, comprising about $10 million from the appliances business and about $32 million from the finance business.

No half-year dividend will be paid.

Shares in Fisher & Paykel Appliances have fallen almost 9% this morning and are trading at 35c.

Despite improved gross martins in the appliance business, up $900,000 to $140 million on lower revenue, transactional hedging losses had flowed through to a normalised operating loss before interest and tax of $2.4 million (compared with a profit of $6.8 million last year).

"The fact we are maintaining our gross margin in this environment bodes well for the second half of the year, which is traditionally when we generate the majority of our full-year Appliances earnings," said Mr Broadhurst.

A $6 million reduction in net debt had been made since March 31, falling to to $94 million.

Capital expenditure was higher at $22 million, compared with $10 million for the same time last year.

"We are investing for the future of our core Appliances business in the form of several new product ranges, some of which have been launched, with further developments in the pipeline.

"And we are diversifying our earnings with investment in new component and technology agreements with major global appliance manufacturers."