Wellington, Feb 16 NZPA - Fisher and Paykel Appliances expects its net profit to fall by as much as 54 percent amid a drastic tightening of overseas markets.

The laundry and kitchen appliance maker now expects a normalised net profit of between $25 million and $30 million, announced in a trading update to the New Zealand stock exchange today.

That compared with a net profit for the year to March 2008 of $54.2 million.

Shares in Fisher & Paykel Appliances closed at $1 on Feb 13, a record low since the company was created through the split of Fisher & Paykel Holdings in 2001.

Fisher & Paykel said sales for the nine months to January were down 13.1 percent in New Zealand, 8.5 percent in Australia, 12.9 percent in the US and 19 percent in Europe.

The North American market remained in severe decline. European sales suffered similarly, as sales slowed, particularly in Great Britain, said managing director John Bongard.

Sales of more expensive products had been hit hard and the company was introducing its less expensive Elba range to United States and Australian markets.

Cheaper to run factories in Thailand and Mexico were expected to boost the bottom line after Fisher & Paykel closed factories in New Zealand, Australia and the United States.

That was despite costs associated with global relocation of factories now expected to exceed the previous guidance by $5 million-$10 million, partly due to currency effects.

"We expect the factory efficiency gains from the increased production, combined with lower labour and material costs, will more than offset the increased cost of freight, duty and working capital," Mr Bongard said.

Fisher & Paykel had reduced the chief executive's salary by 7.5 percent and executive staff by 5 percent.

It was also finalising a scheme whereby staff would take one rostered day off a month, with the option to substitute this day with annual leave.

The rapid depreciation in the value of the New Zealand dollar meant foreign currency denominated debt has increased in New Zealand dollar terms by approximately $122 million since March last year.

In January 2009 total bank debt was $512 million and the deferred consideration for the Mexican factory was approximately $49 million.

Debt was projected to be about $570 million next month, after which levels would be progressively reduced by approximately $230 million over 9 months as stock was sold out, working capital levels realigned to current sales levels and properties sold.

As a result of the debt, the company was advancing the marketing of its 14.5 hectare site at East Tamaki, Auckland site as a sale and lease back arrangement.

There was some good news in lower prices for raw materials such as plastics, chemicals and copper.

Steel prices have also fallen recently and would be reflected in forward contracts.

Adverse financial market conditions meant the company would not proceed with a Capital Note issue.

However, it was reviewing capital structure and examining alternative sources of capital.

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