Crystal and porcelain manufacturer Waterford Wedgwood PLC posted a pretax loss for fiscal 2004, due to weak demand for luxury goods and a weak US dollar.
With little prospect of improvement in market…
Crystal and porcelain manufacturer Waterford Wedgwood PLC posted a pretax loss for fiscal 2004, due to weak demand for luxury goods and a weak US dollar. With little prospect of improvement in market conditions, analysts said investors would look at the ability of Waterford Wedgwood“s management team to improve margins and generate cash. In the twelve months to 31 March 2004, the company reported a pretax loss of EUR 44.9 million, against a pretax profit of EUR 7.2 million for fiscal 2003. Total sales were down 12.6% at EUR 831.9 million, with US sales, around half of the total, severely affected by the weak dollar. Net debt increased to EUR 383 million from EUR 357 million in fiscal 2003, but is expected to fall when the USD 250 million sale of its US kitchen equipment maker, All-Clad, is factored in. The company“s operating margin fell to 3.4% from 6.7%, with most of the blame falling on adverse currency exchange. Chief Executive Redmond O“Donoghue said, “We all recognize that these results are not satisfactory. We also recognize that our long-term success cannot be contingent on exchange rates or other external factors.” The company sees 1Q sales volumes about 2% ahead of the year-ago 1Q. But Joe Burnell, analyst at Davy Stockbrokers said, “This is measured against a weak base.” “Given that currency factors will again be negative in the current year, we don“t expect any improvement in EPS,” Burnell added. Full-year EBITDA was EUR 68.1 million against EUR 114.9 million in fiscal 2003, in line with company guidance, but excluding non-recurring items, EBITDA was just under EUR 54 million. “Stripping out All-Clad, pro-forma EBITDA shrinks to EUR 35.5 million,” Burnell said. Analysts say the All-Clad sale will increase cash reserves at the highly-indebted company, but also believe the sale of such a cash-generative unit is a high price to pay to bring down debt. “We remain cautious until there“s clear evidence of resumed sales growth and cash generation,” said John Sheehan, analyst at NCB Stockbrokers. Another analyst who asked not to be named was “concerned” at the fall in the working capital deficit to EUR 49.6 million against a deficit of EUR 1.4 million in fiscal 2003. But the company said 17 June 2004 it hopes to replenish this by EUR 40 million over the next 18 months. Goodbody Stockbrokers said 17 June 2004 it would lower its full-year 2005 forecasts. It said the shares are not being valued on an earnings multiple, but on the operational performance of individual divisions. Crystal sales fell 16.3% to EUR 263.2 million, ceramic sales fell 11.7% to EUR 356.6 million, while cookware sales decreased 17.8% to EUR 100.1 million. “High-end household products have not so far enjoyed the bounce that other luxury goods sectors such as leather or jewelry have experienced over the past few quarters,” said Joe Burnell, analyst at Davy Stockbrokers.