Victoria, Australia, June 30--Feltex Carpets' claim that a sharp slowdown in the Australian market is to blame for its profits collapse has been challenged by rival Godfrey Hirst, according to the Dominion Post.
Australian-based Godfrey Hirst says it is exposed to broadly the same market niches and conditions there as Feltex Carpets but is seeing only a slight reduction in its profits.
Feltex Carpets shocked its mainly small New Zealand investors last week when it warned them profits would be much lower than expected because of a sharp deterioration in the Australian home renovation and building markets.
Feltex Carpets chairman Tim Saunders cited weak market conditions in Australia and the high Kiwi dollar when he said last week that the company was barely breaking even in current trading.
Its shares slumped to $0.39 last week after the warning, the second in less than three months. Godfrey Hirst grabbed a $5.83 per cent stake in Feltex Carpets this week to make it the biggest shareholder and said it wanted to talk about a merger.
Godfrey Hirst finance director Jim Walsh said the two companies overlapped in many different areas of the carpet markets in Australia and New Zealand but his company was not seeing the same drastic slump that Feltex Carpets was seeing.
Asked if the same forces were affecting Godfrey Hirst, he said: "Not to the same extent. They have not had a significant impact on our profitability. It's been a bit patchy, but satisfactory."
Privately owned, Godfrey Hirst has annual sales of about NZ$350 million and earnings before interest, tax, depreciation and amortisation of about $NZ55 million to $60 million.
This compares with Feltex revenues of about $NZ300 million and pre-tax and interest earnings of $NZ30 million.
Godfrey Hirst has ruled out a bid for the remaining shares in Feltex Carpets, but investors remain hopeful an offer might emerge. Cavalier Carpets has also ruled out a takeover.
Feltex shares rose 4.9 per cent to $0.64 yesterday but remain 62 per cent below their $1.70 float price.
A reverse takeover of Godfrey Hirst by Feltex Carpets was shaping up as the most likely option, market sources said. This would allow Feltex to stay on the market while dashing investors' hopes of a takeover with a cash
Also this morning UBS brokerage of New Zealand said it was standing in the market on behalf of an unnamed investor for 10 per cent of Feltex at $0.58 per share.
The bid will open at 10am and is due to close at 5pm today unless terminated earlier, UBS said.
The bid is conditional on winning 5 per cent of Feltex although the bidder may waive that condition as well.
Feltex shares closed yesterday at $0.51.
