Fisher & Paykel Profits Slip 1.2%; Builds U.S. Presence By Buying DCS
By Alan Wolf On Nov 22 2004 - 7:00am
Despite a 28.5-percent surge in U.S. appliance sales, first-half profits for New Zealand majap maker Fisher & Paykel fell 1.5 percent to $24 million for the six months ended Sept. 30 due to higher raw materials costs and sluggish sales at home and in Australia, its two largest markets.
Indeed, those two countries represent some 73 percent of the company's white-goods revenue, while sales in the United States, its fastest growing market, stand at 22 percent, up from 17 percent a year earlier. U.S. revenue reached $61.5 million during the first six months of the year, while unit sales rose 35 percent to 97,700 units.
Fisher & Paykel attributes the U.S. sales spurt to its recent placement at No. 2 majaps retailer Lowe's, which dovetailed with its entry into select Home Depot locations; continued support from the independent dealer channel; and a strategic alliance forged last year with Whirlpool. Under terms of that deal, America's largest majap maker has begun selling a Whirlpool-branded version of Fisher & Paykel's ultrathin double DishDrawer dishwasher. The two companies extended their pact this month.
Fisher & Paykel's U.S. business also enjoyed success with the company's SmartLoad clothes dryer, introduced last year as the first full-sized top-loader dryer. The unit, which complements the company's EcoSmart top-loading washer, features reverse-tumble drying to reduce creasing and tangling, and a self-cleaning lint screen and reservoir that can go 30 cycles before changing.
CEO John Bongard is counting on increased U.S. sales volume to offset diminishing demand at home. To fill the pipeline, he is increasing capacity at the company's Dunedin dishwasher factory, expanding its U.S. regional warehouses, and last month acquired U.S.-based Dynamic Cooking Systems (DCS), which manufactures high-end indoor and outdoor cooking products.
The $33 million purchase, funded through debt, is expected to impact full-year earnings by $1.3 million. Fisher & Paykel will invest an additional $22 million in plant, equipment and working capital, while DCS is anticipated to contribute $3.3 million in after-tax profits next year.
“The acquisition of DCS will allow us to build on our existing U.S. sales and distribution infrastructure with a completely new cooking range which is complementary to our existing range of premium products,” Bongard said. “Furthermore, the acquisition will establish a manufacturing base in the U.S. for us. Over time, there is the potential to expand the DCS facilities to manufacture other products for the U.S. This acquisition clearly demonstrates our long-term commitment to the U.S. market, and we expect this will increase Fisher & Paykel's profile and brand value in this core market.”
Separately, Fisher & Paykel is planning to raise U.S. prices by 5 percent, effective Dec. 1, to compensate for rising raw materials costs, following similar price moves in New Zealand and Australia. “Raw materials prices, especially for steel and plastics, have continued to rise and are expected to remain at high levels for some time,” the company said. That, together with reduced domestic growth, could cause full-year profit to fall as much as 12 percent, the vendor warned.