Waterford Wedgwood has sold its US cookware business, All-Clad, for $250 million (€205 million) but has also warned that profits for last year will fall 15 per cent short of expectations.
The luxury goods company said earnings before interest, taxation, depreciation and amortisation (EBITDA) for the year ended March 31st, 2004 were around €68 million, about €12 million less than expected.
Shares in the company fell by one cent or 5 per cent to 18 cents, having earlier touched a multi-year low of 17.5 cents, as analysts downgraded their forecasts for the company.
The shortfall in profits was blamed on tighter margins and higher-than-anticipated pension costs at the company's German porcelain business, Rosenthal.
Waterford Wedgwood expects to report its financial results for 2003-04 on June 17th.
The group also said it had embarked on an 18-month project with management consultants Accenture to reduce its working capital requirements and simplify its manufacturing processes.
"This exercise should free up cash in fiscal 2005 and 2006," Waterford Wedgwood chief executive Mr Redmond O'Donoghue said. The company said the commercial and accounting implications of the project would be assessed over the coming months but analysts fear it could lead to a raft of further write-downs.
Meanwhile, the company said it had sold All-Clad to France's Groupe SEB for $250 million in cash, ahead of expectations of around $200 million. The company is retaining its European cookware brand, Spring.
The cash proceeds from the disposal will be used to reduce group debt to around €200 million and to support marketing investment in the group's three main brands - Waterford, Wedgwood and Rosenthal.
The sale is expected to close within 60 days, subject to approval by Waterford Wedgwood shareholders and by the US Federal Trade Commission.
"This transaction transforms our balance sheet," said Waterford chairman Sir Anthony O'Reilly. "The proceeds will put us in a position to take control of the future direction of the company, to reduce debt dramatically and to post a substantial capital gain while simultaneously investing to support the sales of Waterford, Wedgwood and Rosenthal without sacrificing margin."
Waterford Wedgwood bought All-Clad, based in Pennsylvania, for $110 million five years ago. All-Clad reported a profit after tax of around $11 million in the year to March 2004 on sales of around $105 million. Waterford Wedgwood also said that All-Clad chief executive Mr Peter Cameron was to remain with the group as chief operating officer.
While analysts said the price achieved for All-Clad was attractive, the rest of yesterday's news was less welcome.
NCB noted that the All-Clad sale "removes the most attractive and highest margin product from the group's portfolio.
"It also represents a major change in strategy outlined until recently, when the focus was to dilute tableware in favour of lifestyle brands."
