Waterford Wedgwood losses hit €45m

Poor sales and the weak dollar left luxury goods business Waterford Wedgwood with a pre-tax loss of €45 million in the year to the end of March, the company said yesterday.

Sales dropped 12.6 per cent to €831.9 million, although the company pointed out that, at constant exchange rates, this would have translated into a 3.3 per cent fall.

Earnings before interest, tax, depreciation and amortisation were down 40 per cent to €68.1 million from €115 million in 2003 - €16 million lower than brokers' forecasts.

Speaking at a press conference yesterday, Waterford chief executive Mr Redmond O'Donoghue said that the €30 million impact of adverse exchange rate movements partly accounted for the fall in earnings.

Lower sales volumes and a rise in costs also contributed to what he acknowledged was a poor performance. Pre-tax losses were €44.9 million compared with a profit of €7.2 million last year.

After goodwill and exceptional items, Waterford posted a loss per share of €5.63, compared with earnings per share of 22 cents last year. At the end of March, the company had debts of €382.9 million compared with €356.7 million 12 months earlier.

Mr O'Donoghue said yesterday that most of the debt was incurred through investing in its plants. Waterford intends to tackle this with the proceeds of from the $250 million (€207 million) sale of US cookware group All Clad to French company Groupe SEB, which it announced after its year-end. The company bought it five years ago for $110 million.

All Clad's chief executive, Mr Peter Cameron, will join Waterford as chief operations officer. Yesterday, he argued that the sale represented good value for the Irish company.

He pointed out that $250 million represented a multiple of 14 times earnings, while the norm for high-end businesses in its sector was eight times earnings.

According to Mr O'Donoghue, the sale will realise €205 million after expenses when it goes through in July.

Chief financial officer Mr Paul D'Alton, pointed out that the proceeds would result in an interest-payment saving of €10 million.

In a statement, the company's chairman and one of its biggest shareholders, Sir Anthony O'Reilly, said the company's balance sheet would be substantially improved by the sale, adding that interest savings would allow the firm to re-invest in marketing.

According to Mr D'Alton, a redundancy programme, aimed at cutting 1,100 people from its payroll, would save €30 million. The company said this had largely been achieved through outsourcing its Johnson Brothers' Earthenware business to China.

Mr O'Donoghue said that the company intended to save a further €40 million over the next 18 months by cutting inventories, a move that he acknowledged could result in some halts in production from time to time. Half of this money would then be spent on marketing its brands.