Fisher & Paykel Appliances to relocate three plants
Source: International Herald Tribune (Original Article)
WELLINGTON: Fisher & Paykel Appliances of New Zealand said Thursday that it would shift three of its manufacturing sites to low-cost countries as it looked to stay competitive.
The announcement sent its shares surging 15 percent.
The move would save the company about 50 million New Zealand dollars, or $40 million, before tax a year. About 1,000 jobs, or 28 percent of the total work force, would be lost in New Zealand, Australia and the United States as plants were relocated to Mexico, Thailand and Italy, where a similar number of new jobs would be created.
While investors were not surprised to see Fisher & Paykel forced to follow its competitors in moving to low-cost manufacturing, the size of the saving was a bonus, said Guy Elliffe, senior portfolio manager at AMP Capital Investors.
“Those numbers are large. It's quite a material change in the context of their financials,” Elliffe said.
Analysts surveyed by Reuters Estimates expect the company to post a net profit of 55.5 million in the year that ended March 31.
Shares in the firm, a top 10 company in New Zealand, rose 15 percent to 2.54 dollars. The stock has fallen 27 percent so far this year, compared with a 12 percent drop in the benchmark top 50 index.
A strong New Zealand dollar, high interest rates and free-trade agreements with low-cost-labor countries like China made the cost of manufacturing in its home markets too high, said John Bongard, managing director.
“It's one of the biggest days of change this company has ever seen,” he said.
The company said labor costs in Mexico were about a sixth of those in New Zealand.
The move would entail 50 million dollars in one-time costs, and 100 million dollars in capital expenditure, which would be met in the financial year that started April 1.
The plants would be relocated over the next two years and the full benefits would flow Amex Platinum Card through in the 2011 financial year.
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