Monday, February 16, 2009

Fisher & Paykel Appliance's profit downgrade continues fine tradition

Today's poor trading update announcement for Fisher & Paykel Appliances [FPA.NZ] was really of no surprise to the market as a whole and to those insiders who traded the stock down over the last week because they knew this announcement was due soon.

There will be more bad sales updates to follow methinks because today's indication only covers the last few months of trading since the previous profit announcement at the end of 2008.

I wrote back in May 2007 the main reason why I see the company having problems and it ain't the recession or the exchange rate:

While the left of Lenin media and every two-bit polly and union rep have a go with their own wide of the mark opinion, blaming the F & P move on a high dollar and high costs the fact is that F & P have never been competitive but are now being forced to by the market reality of cheap well constructed and better designed appliances coming from the very places that Fishers are now moving to...Share Investor Blog 2007

I see today that John Bongard, Company CEO, is still blaming outside influences beyond his control. Sales are down but that shouldn't account for a halving in profit.

It is bad management of costs, poor product at high costs and a siege mentality to selling that still lingers from the days when the company wouldn't allow any other brands in a store if they sold their product.

Bongard continues that tradition accepting today that he wouldn't say no to a taxpayer handout if it was offered one.

Bongard needs to fall on his sword for poor management over his tenure and now would be a good time.

I wrote on January 21 that the company was "looking fair value" at $1.32 but countered that with a warning that appliance makers were going to be hit hard.

This is clearly going to continue for sometime and likely to get worse before it gets better and there could be another profit downgrade before the company profit announcement in May.

The opportunity presents itself now for savvy investors to buy a stake in the company for less than half the price it was less than a month ago.

Fisher & Paykel are contemplating a capital raising on a pro-rata basis which means that any existing shareholder will have a right to purchase x amount of securities when it begins so if you are looking to get a stake a dilutionary effect on the share price will likely happen so you could well get shares for less than today's closing price of NZ $0.65c , down 35c on the day.

Fisher & Paykel Appliances @ Share Investor

Fisher & Paykel Appliances looking fair value
Fisher & Paykel: A Tale of Two Companies
Fisher & Paykel Appliances: In a spin over nothing

Fisher & Paykel Appliances Financial data

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c Share Investor 2009