Housewares International shares slashed after profit downgrade

By James Wells

SYDNEY: Shares in Breville and Kambrook’s parent company Housewares International fell to 32 per cent to $1.23 earlier this morning after the company issued a trading update which conceded that its ambitious profit forecasts in excess of $20 million won’t be met.

In the company’s half year report to 31 December, HWI forecast full year profit of between $20.5 million and $22.5 million. The company now expects full year net profit of between $16 million to $18 million. HWI reported a 42 per cent decline in net profit to $13.23 million last financial year.

“Australian and New Zealand market conditions weakened considerably during March and April 2006 and the trend is now expected to remain weak for the balance of the 2006 financial year,” the company said in its statement to the Australian Stock Exchange.

“Given that approximately 60 per cent of the company’s current global sales remain in Australia and New Zealand, the strong offshore growth will not be enough, in the short term, to offset the lower than expected Australian and New Zealand earnings. Accordingly, the company is revising its underlying PAT expectations for the financial year to June 2006,” the company said in its statement.

“The Australian and New Zealand consolidation and restructuring, together with focused working capital management in anticipation of a tough trading environment, has delivered a healthy balance sheet at the end of April 2006.

Several market analysts observed soft sales during April, which included three consecutive four-day working weeks. One senior industry spokesperson from the small appliance industry described April as a shocker.

HWI now expects mid single digit sales growth for Australia in the second half of this financial year after 12 per cent sales decline in the first half.

The key to full year profit growth was sales from overseas operations which grew by 36.9 per cent to $50 million in the six months to the end of December.

According to Housewares International chief executive officer, Joe Hersch, the overseas business remains a priority for the company which was highlighted by an exhibition in North America to major retail buyers.

“The 2006 Chicago Homewares Fair was an absolute highlight for our company.
Our innovative new products were well received by North American retailers and strong strategic alliances have been forged with some of the world’s leading retail chains,” Hersch said.

HWI recently hosted a buying team in Sydney from the high-profile North American retail chain Williams-Sonoma to discuss product portfolios and technology development.

“We will be expanding our new product development capability to meet increased demand for our products, and have already ramped up our USA sales structure. Whilst both the Australian and New Zealand trading environments are challenging, I remain confident that we are well poised to grow our business in the future,” Hersch said.

 

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