By Jenny Ruth
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Friday 10th June 2011 |
Text too small? |
Fisher & Paykel Appliance's finance company's earnings compensated for its weak appliances division's results for the year ended March, says Nachiket Moghe, an analyst at Aegis Equities Research which is owned by Morningstar.
"Underlying appliance margins decreased 80 basis points to 5.8% reflecting cost pressures and cutthroat pricing," Moghe says.
To some extent, this was offset by cost out measures stemming from the firm's global manufacturing strategy. "End markets remained challenging in New Zealand, US and Europe. Australia was the only bright spot," he says.
"For quite some time now the finance business has been underpinning group results and full-year 2011 was no different." The division's 20% rise in operating earnings (the appliance divisions' earnings fell 20%)were primarily driven by better margins.
"Earnings visibility remains low, given raw material cost volatility,demand issues and competitive pressures," he says.
He expects volumes to remain sluggish going forward and that raw material costs will rise in US dollar terms while the finance business could be impacted by higher interest rates.
"Given these uncertainties, we are sticking with our full-year 2012 net profit forecast of $36.3 million," Moghe says. That's up from the $33.5 million it reported for the year just gone.
Recommendation: Hold.
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