Fisher & Paykel Factory Relocation to Thailand

Laundry Factory Relocation to Thailand

Fisher & Paykel Appliances Holdings Limited
FPA Stock Exchange Release ASX/NZX 26 April 2007
Laundry Factory Relocation to Thailand for Fisher & Paykel
Appliances

Fisher & Paykel Appliances (FPA) today announced plans to relocate part of its manufacturing operations to Thailand.

Production facilities for the Smart Drive® and AquaSmart® washing machines and clothes dryers, both currently located in Auckland, New Zealand, are to be moved to a purpose built facility in Thailand.

A number of factors have contributed to this decision. Competitors are already supplying laundry products to the Australasian market from low cost countries like China, Thailand and South Korea. The recent announcement by a major competitor in Australia that they will be moving their Laundry production facility to Asia, will eliminate the CER duty preference that FPA currently enjoy. Margins for Laundry products have been under increasing pressure for a number of years. The relocation of facilities will take place over the next 12 months. Additional inventory will be manufactured in order to cover the lead times for the transfer and re-commissioning of the plants. The move will involve shifting plastic injection moulding machines and dies, fabrication equipment, assembly equipment and metal pressing facilities. Initial production is expected to commence in Thailand by March, 2008.

Once the lines are fully operational, the expected financial benefits are in the vicinity of $10-$15 million per annum, at a one-off cost in the order of $20-$25 million, both at a pre-tax level. Additional cost savings are also expected from the sourcing of some raw materials and purchased parts from local vendors in Thailand. These overall savings will be offset partially with a small increase in working capital. Capital expenditure is estimated at $13.0 million.

The relocation will lead to an estimated reduction in the Auckland based work force of approximately 350 positions. While the Company regrets the loss of these jobs, which are unlikely to occur before December 2007, it will endeavour to accommodate as many staff as possible elsewhere in the organisation as vacancies arise.

“The decision to move the Laundry plant out of New Zealand wasn’t one that was taken lightly,” said John Bongard, Chief Executive Officer and Managing Director. “Most of our competitors supplying the Australasian market do so from facilities in low cost Asian countries which offer generous manufacturing incentives. Also the environment in New Zealand for our type of manufacturing operation has deteriorated due to a combination of factors, such as high interest rates, persistently high exchange rates and some trade and tariff policies. Our laundry margins have suffered considerably over the past 4-5 years. Without this relocation to Thailand our continued future in Laundry design and manufacture would be doubtful.”

“The ongoing research and development for these products will continue to be based in New Zealand,” says John. “We must persist in pushing the innovative envelope for our products in order to stay ahead of the game. We cannot afford to be a me-too company. If we don’t continue to innovate, we won’t survive, but in order to do this, we also need competitive manufacturing facilities. This is what this move is addressing.”

The Thailand plant continues Fisher & Paykel Appliances push for international expansion, being the fourth offshore manufacturing facility in recent years. It follows the acquisitions of DCS Inc in the USA and Elba SpA in Italy, and the relocation of the in-house laundry and motor production facility to Clyde, USA.

EMDS

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