WELLINGTON (Dow Jones)–Fisher & Paykel Appliances Holdings Ltd. (FPA.NZ), a New Zealand home appliance maker, Wednesday reported a slight rise in net profit for the first half as aggressive price cuts ate into margins.
The discounting limited the benefit from the rise in sales.
In the six months to Sept. 30, F&P Appliances made a net profit of NZ$34.9 million, 2.9% higher than NZ$34 million which was last year’s net profit and analysts’ median expectations for this half.
Total company revenue, including that of the consumer finance division, rose NZ$30.7 million, or 7.7%, to NZ$430.6 million from NZ$399.9 million the previous first half. The core appliance business accounted for NZ$29.5 million of the increase.
Profit after tax for the company’s appliance and consumer finance businesses totaled NZ$29.6 million, just up on the NZ$29 million the year before. The company also received a dividend of NZ$5.3 million from its 19% holding in Fisher & Paykel Healthcare Ltd. (FPH.NZ).
Looking ahead, the company said net profit for the full year would be little changed from last year.
Total sales of ovens, dishwashers, washing machines, dryers and other appliances rose 21% over the previous first half and revenue from appliance sales increased 7.9% to NZ$402.8 million from NZ$373.3 million.
The increased sales came from discounting.
“The appliances business, while operating in very competitive markets, minimized the impact of price reductions by increasing volumes and improving efficiencies,” the company said in a statement to the New Zealand Exchange.
“This volume growth enabled us to more fully utilize our factory capacities.”
The company said “buoyant trading conditions” continued in its domestic New Zealand and Australian markets.
New Zealand sales volume increased 16% to 154,200 units, but revenue grew just 6.7%. In Australia, sales volume rose 21% to 312,800 units, but revenue rose just 16% in Australian dollar terms.
The U.S. market showed strong growth, with sales increasing 42% to 72,400 units for a revenue rise of 36% in US dollar terms. The company is hoping that the U.S., along with Europe, will provide much of its future growth.
One analyst, who asked not to be named, said the discounting “wasn’t just a case of giving away margin for nothing.”
“The upside from those price decreases is extremely strong growth and market share gains,” he said.
The company, which was formed after the split of Fisher & Paykel Industries in November, 2001, said its consumer finance business “continued to perform steadily.”
Commenting on the outlook, the company said “market conditions are expected to continue at similar levels through the second half.”
In the last financial year, the company made a net profit of NZ$73.5 million.
Managing Director John Bongard said at an analysts’ briefing that the profit could be NZ$1 million either side of last year’s figure.
“It just wasn’t material enough to predict an increase,” he said of the difference.
“We didn’t want to over-promise on our forecasts and under-deliver.”
F&P Appliances declared an interim dividend of 8.8 NZ cents per share, which is equivalent to a dividend of 35.2 NZ cents per share before the four-for-one share split at the end of this week. In the previous period, the company paid an interim dividend of 34 NZ cents.
After the results, the stock slipped 9 cents, or 0.6%, to NZ$14.90 at 0315 GMT.
“It’s not an overwhelmingly bad result. But those margin pressures are foremost in people’s minds,” said First NZ Capital senior broker Malcolm Davie.
“I think they’ll be doing well to stand still this year.”
>From Yahoo