Shares in Fisher & Paykel Appliances Holdings Ltd., New Zealand’s biggest home appliance maker, fell 6.4 percent after it said rising raw material costs and slowing sales in Australia and New Zealand may crimp profit this year.
Net income in the year ending March 31, 2005, will probably fall 5.9 percent to NZ$80 million ($53 million), from NZ$85.3 million in 2004, Chief Executive John Bongard said in a statement to the stock exchange, prepared for the company’s annual meeting in Auckland.
Fisher & Paykel makes three-quarters of its sale sin Australia and New Zealand where it competes with Qingdao Haier Co., China’s biggest appliance maker, and South Korea’s LG Group. Soaring demand from China is pushing up the price of nickel and other metals that the company uses to make SmartDrive washing machines and DishDrawer dish washers.
“The pace and extent of changes in raw material costs has meant there will be some erosion in margins,” Bongard said. “We have sought to ease pressure on margins by putting price increases in place in the New Zealand and Australian markets.”
Shares of Fisher & Paykel Appliances shed 30 cents to NZ$4.38 at 4:20 p.m. in Wellington trading, their biggest one day drop since Feb. 14, 2002.
About half of the stainless steel used by Fisher & Paykel is nickel-based `300 grade.’ Nickel futures in London last traded at $13,350 a metric ton Friday, up 46 percent from $9,125 a year ago. Copper last traded at $2,855, up from $1,736 a year ago.
China’s economy grew 9.6 percent in the second quarter, slowing from 9.8 percent in the prior three months. The government targets annual growth of 7 percent.
Australian Market
Fisher & Paykel said in May that it expected 2005 profit to be in line with its 2004 earnings. Profit last year included NZ$10 million in dividends from its stake in Fisher & Paykel Healthcare Corp., which it sold in February.
Australia, the company’s largest market, is showing some signs of weakening amid “extremely intense competition”, Bongard said. Warm weather over winter has crimped sales of clothes dryers, he said.
Sales volumes so far this financial year, which started April 1, are at a similar level to the same period last year, he said.
Fisher & Paykel has forged agreements with Whirlpool Corp. and Lowe’s Cos. in the U.S. to increase sales in the world’s largest economy and reduce its reliance on sales in New Zealand and Australia.
“Due to the expansion in the U.S., the appliances business expects to achieve sales growth on last year,” he said.
The company expects to start an NZ$85 million on-market share buyback after it releases its first-half earnings on Nov. 11, according to the statement. It delayed plans for the buyback in May, citing a lack of liquidity in the stock.
From Bloomberg