An impairment write-down of $26.5 million by Fisher and Paykel Appliances announced yesterday is not expected to affect the full-year profit-line when the company reports at the end of the month.
It is almost a year since Chinese appliance manufacturing giant Haier took a 20% stake in then debt-laden Appliances for more than $80 million, and yesterday's writedown and other downgrades were the third announcement in six months for investors to digest.
Appliances said in a statement to the market yesterday it was considering further non-cash charges for asset impairments; expected to be up to $15 million before tax for intangible assets and up to $11.5 million before tax for tangible assets, but no further details would be available until it reported.
Craigs Investment Partners broker Peter McIntyre said announcing the likelihood of a further writedown was further evidence of Appliances "shaking out its balance sheet" following repeat "disappointments" for the market last year.
Craigs maintained an earlier full-year forecast of an after-tax profit of $19.7 million, mid-way between earlier company guidance of $16 million-$23 million.
Mr McIntyre said Appliances' chairman Ralph Waters, in keeping with his management style while with Fletcher Building, wanted "no surprises for investors" when its full-year to March report was posted on May 28.
While the write-down would reduce overall asset values by 4.3%, 76-year-old Appliances' shares traded down only slightly yesterday, by 1.6% to around 62c.
Appliances' management yesterday said "these asset impairments, full details of which will be provided in the annual result, will not affect normalised earnings and will be reported as part of abnormals".
Last May, when the New Zealand whiteware manufacturer was shoring up its finances with about $201 million of capital raising, Haier took a 20% stake in then debt-laden Appliances for more than $80 million.
The deals were designed to pay down mounting debt of up to $459 million, partly from Appliances' relocation offshore during the past three years.
Mr McIntyre said yesterday the Haier cornerstone shareholding remained one of the strengths for maintaining Appliances shares, offering access to Asian markets and because of the possibility of a Haier takeover.
Appliances' full-year result to March 2009 last May drove home the cost of its global strategy to take its manufacturing offshore.
Cuts included almost 1000 jobs globally (430 of them in Dunedin) and the closure and $20 million sale of its 23-year-old Mosgiel plant.
For its full-year 2009 result, its pre-abnormals after-tax profit was $38.3 million, but with one-off costs of $66 million associated with implementing its global strategy, plus other impairment losses associated with goodwill.
Appliances booked a $95.3 million loss, compared with a $54.2 million profit at the corresponding time for the previous full-year to March 2008.
However, last November, Appliances delivered a double-whammy of downgrades, prompting an angry sell-down of its stock by disappointed investors.
Its shares opened at 63c, but after delivering an $84.2 million loss for the half-year to September, the stock traded 9% down at 59c during the day.
The downgrades lowered the range of expected profit for the full-year 2009 result from earlier guidance of $20 million to $23 million, to $16 million to $23 million.
However, guidance of a full-year 2010 loss of $55 million to $65 million would disappoint investors.
