Following Appliances' decision to exit New Zealand in preferance for manufacturing overseas, it appears shareholders, locally and internationally, are similarly abandoning the stock.
Appliances share price has slumped almost 50% from $3.50 in December to $1.80 yesterday, close to its all-time low of $1.78, dumping it from seventh place on the New Zealand Stock Exchange Top 10 list to 10th - potentially which cold further undercut its flagging share price.
During the past nine months its market capitalisation has slipped from more than $1 billion to $512 million yesterday.
For more than two years Appliances has been battling the strength of the New Zealand dollar and last year lost almost $75 million in sales revenue because of it.
It has been hurt by spiralling metals and energy prices and increasing competition in the sector from emerging low-wage economies.
Since early 2007, Appliances has shed more than 1600 jobs; a total 530 from its Mosgiel plant near Dunedin, 450 from Tamaki in Auckland and more than 600 in Australia and California, in preferance to manufacturing in Mexico, Thailand and Italy, where products are closer to market.
The first round of Mosgiel redundancies will begin in December and be completed by May next year.
ABN Amro Craigs broker Peter McIntyre said yesterday the share price fall was attributable not only to fleeing investors, but deteriorating market conditions in the United States, Australia and New Zealand, inflation and rising production costs.
In a surprise move at Appliances' annual general meeting last week, chief executive John Bongard issued financial guidance to shareholders, for the first time in about two years.
He expected first-half after-tax profit to be slashed by 50% compared to the previous year and the offshore relocations would further erode the bottom-line to post a loss of $7 million to $10 million.
However, he remained upbeat about production from the new foreign sites and a bottom-line boost coming from trading in the second half of the financial year.
He said investors initially rallied to the Appliances' announcement in mid-April it was restructuring its manufacturing offshore, believing it was addressing rising overhead costs and increasing profit margins in turn for shareholder benefit.
However, since then the deteriorating market conditions prompted investors to flee the stock and institutional parties also sold out, due to the falling New Zealand dollar and wanted to leave in the face of predictions it was headed for a range of US57c-US63c, Mr McIntyre said.
While the remaining nine companies in the Top 10 share index had faced similar difficult and deteriorating trading conditions, few of them were exposed to the combined myriad pressures Appliances was coming under, he said.
However, Appliances demise down the Top 10 list was problematic for the future share price in that the Top 10 list was used extensively by institutional stock as a guide.
"Companies which come off the Top 10 tend to lose the institutional support, which can further effect their share price," he said.
"Appliances is exposed to too many external factors which are beyond its control," Mr McIntyre said.
Peter McIntyre's financial disclosure document is available on request.
