Daily ShareChat: Fisher & Paykel Appliances

By Jenny Ruth

Friday 11th February 2011

Following earnings releases from international giants Whirlpool and Electrolux, which highlighted the impact of increasing raw materials costs and a relatively subdued outlook for developed markets, he has downgraded his rating of Fisher & Paykel Appliances, says Greg Main at First NZ Capital.

While both Electrolux and Whirlpool are seeing price increases, history, the subdued outlook and the fact Korean competitors are yet to move "highlights the earnings and margin risk facing Fisher & Paykel (and the industry) at present," Main says.

"It is unclear if Fisher & Paykel has much capacity to offset higher raw material costs through cost efficiencies elsewhere and it seems unlikely to materially benefit from improved operating leverage if demand stays subdued," he says.

While Fisher & Paykel is launching some new products this year, any major new initiatives appear several years away, Main says. Any potential benefit from the Haier motor agreement, the linear compressor and benefits from sales into China are also several years away.

"We expect Fisher & Paykel to trade sideways until evidence of a consumer recovery in key markets emerges and clarification of the impact of higher raw material prices is disclosed,” Main says.

"Downside may be relatively limited with the potential for corporate activity from 20% shareholder Haier Group."

Rating: Underperform (from Outperform).

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