GUD Holdings shares slump after flat forecast

By James Wells

MELBOURNE: GUD Holdings, the parent company of Sunbeam and Victa branded products has received a negative response from the share market, despite today reporting a 32 per cent increase in profit to $40.2 million up from $30.2 million.

Sales for the company increased 17.2 per cent to $462.4 million following contributions from the Oates acquisition which includes the Bissell floorcare business, a recovery in sales of Victa products after the previous year’s drought conditions and Sunbeam which has maintained its market leadership in the small appliance category.

“The Sunbeam business remains a robust performer,” said GUD managing director, Ian Campbell.

“[Sunbeam] held its price points in a competitive domestic market, but did suffer margin pressure due to higher supplier costs out of China due to increased freight, plastic and metal costs. In a period of weaker consumer sentiment, the Sunbeam brand is proving its strength. We expect new categories such as gas barbeques to contribute positively in FY07,” he said.

“The Victa business improved in a stronger mower market. Victa increased market share and commenced its lower cost offshore sourcing program during the year. Although it suffered cost increases in plastics, steel, aluminium and four stroke engines, margins improved and the outlook is for further improvements in profit contribution in FY07.”

Campbell said the contribution by the Oates business was lower than expected due to delays in new Bissell products and one-off costs associated with the integration and transition of the business.

Shares in the company fell by almost 50 cents today, after the company reported a flat forecast for the retail environment and increased raw materials costs over the next financial year.

“The profit and dividend increases are very pleasing given the tough trading conditions,” said Campbell.

“This is a solid result given price increases from suppliers have put downward pressure on our margins.

Campbell said he expects an increase in unemployment as the competitive environment and inflationary pressures take their toll.

“I don’t see that the operating environment in ‘07 is going to be any easier than ’06 – in fact, probably worse," Campbell told AAP.

He also said that higher raw material prices, particularly metals and plastics and higher freight costs are a significant challenge given flat consumer sentiment in Australia

"We’re a rubber, metals, plastics-type business, and the rise in prices for commodity metals like brass and copper has had a huge impact. There’s no question the fuel price has had a double whammy because it flows on to plastics and it also hits discretionary spending."

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