€45m losses at Waterford Wedgwood

A WEAKER dollar and lower demand for luxury goods were to blame for pre-tax losses of €45 million at Waterford Wedgwood, the company said yesterday.

The results disappointed the market after profits of €7.2 million the previous year and brought a 5% fall in the share price.

The company said currency effects wiped €30 million off the bottom line in the year to March. Sales fell 13% to €832 million, but were down 3.3% excluding the effects of the dollar. North America accounts for half of the group's total sales. Sales also suffered from weaker demand in the wake of a fall-off in tourism caused by the SARS virus and conflict in Iraq. Operating profits plunged from €64 million to €28 million.

Chief executive Redmond O'Donoghue said it had been a "challenging" year with "sluggish" demand in the group's core markets. "We all recognise that these results are not satisfactory," said Mr O'Donoghue, adding that the group could not allow its future to be determined by exchange rates or other factors outside its control.

He added that the company had too much money tied up in its stocks of goods made, but not yet sold, which stood at €320 million at year end.

Waterford has engaged external consultants to conduct a review of its business processes and identify ways to free-up working capital and prevent the company manufacturing goods for which there was no immediate demand.

Excluding currency effects, sales in crystal products tumbled 7% to €263 million, while ceramics revenues fell 5.5% to €366 million.

Chief financial officer Paul D'Alton said Waterford would use €190 million from the sale of American cookware subsidiary All Clad to pay down some of its €383 million debt.

This would cut the group's interest bill by up to €10 million in the coming year. The lower interest cost would allow the company to spend more on marketing to help reverse the decline in sales.

Chief operating officer Peter Cameron said the All Clad sale would be completed before the end of next month and that Waterford had extracted a price for the company that was well ahead of expectations.

Mr Cameron said the sale price valued All Clad at 14 times earnings, which compared favourably with the eight times multiple that was common in the sector, and was around €40 million higher than originally expected. The company hoped to benefit from a change in Irish law earlier this year, which is awaiting clearance at EU level, that would exempt Waterford from a €15 million capital gains tax charge on the sale.

The company also said it had suspended dividend payments to shareholders and gave no indication if or when they would be resumed.