Slow sales prompt Cavalier profit warning
Carpet maker Cavalier Corporation has lowered its full-year profit forecast due to a slow first quarter and poor sales in Australia.
The NZX-listed company had predicted a tax-paid profit of $10 million to $12m for the year ending June 30 2013.
Managing director Colin McKenzie told shareholders at its annual general meeting this morning that earnings were difficult to predict but profit would now likely fall between $6m and $10m.
The slow start to the financial year had been disappointing, with the company announcing the worst was behind it after reporting a $1.6m loss for the last financial year.
Cavalier had predicted the Australian market would gradually improve but there was no sign of that during the first quarter, he said.
It now expected improved performance in Australia in both its broadloom carpet and tiles business in the second half of the financial year, although that would be due to customer and product initiatives rather than market growth, he said.
"Conversely, carpet sales in New Zealand and rest of world have held up reasonably well and we are predicting a further lift in the second half of the year. It is particularly pleasing to see new customers and sustainable growth with high-end residential sales in rest of world markets."
The wool scouring business had started the year strongly, with better than expected volumes and margins.
"We believe wool prices, sheep numbers and wool production have now plateaued providing a more stable operating environment for the wool acquisition and wool scouring operations."
McKenzie said the company had taken a "cold hard look in the mirror" and developed further business improvement initiatives for the next six to 12 months.
The company booked a $5.9m after tax restructuring charge last financial year, when it closed its Onehunga yarn-spinning plant and cut 88 jobs.
He told shareholders that "the sun is certainly not setting on Cavalier. We know the landscape has changed substantially. Continual cost cutting is simply not sustainable so we are compelled to reinvent ourselves to some degree. But we also need to remind ourselves that we are probably at the trough of what has been the most severe contraction phase in the building cycle."
Chairman Alan James said its Cavalier Bremworth brand was synonymous with wool carpets, but part of the reinvention process would be to build a strong presence in synthetic carpets, as that market was growing in New Zealand.
The company did not declare a dividend with its full-year results. James said it hoped to declare a final dividend at the end of this financial year.
Cavalier's shares were down 3.4 per cent to $1.70 on the NZX this morning.