Cavalier confirms 1H earnings slump in ‘difficult, challenging’ carpet markets

Feb. 17 (BusinessDesk) - Cavalier Corp, New Zealand’s only listed carpet maker, confirmed a 58 percent slump in first-half earnings, saying the slump largely reflects “very difficult and challenging” conditions in Australia and New Zealand.

Profit more than halved to $3.5 million while sales declined 7 percent to $108 million, the company said. Revenue in Australia fell “a significant 14 percent” while sales growth stalled in New Zealand.

“We were faced with some of the most difficult trading conditions ever experienced by the business during the period,” the company said in a statement today.

“New housing and commercial building activity levels in New Zealand remained soft,” it said. “They were also in the process of slowing down in Australia heading into the 2011/12 financial year, but these were hastened by the European sovereign debt crisis that unfolded and the fear that another global recession would soon follow.

Cavalier, which is part of a group bidding for the scouring assets of Wool Services International in a move that would leave it with a monopoly on such plants, said its scour volumes fell 13 percent in the first six months of the year.

Earnings before interest and tax from its Elco Direct wool buying unit rose to $359,000 from $216,000 while the contribution from its 50 percent-owned scouring operation Cavalier Wool Holdings, rose to $1.2 million from $819,000.

EBIT from carpets tumbled to $5.6 million from $13.4 million in the face of weak demand. The company was also forced to push through a 10 percent to 20 percent price increase on its carpets as the price of wool soared 80 percent, it said

Cavalier first flagged the drop in earnings on Feb. 15, adding that it wouldn’t meet full-year guidance of $8.5 million to $10.5 million.

Today it said “difficult and unpredictable trading” meant it can’t update full-year guidance yet. It did hold out hope of a pickup in demand when the rebuild of quake-damaged Christchurch picks up pace.

The company won’t pay an interim dividend. The shares ended the day unchanged at $1.98. They have fallen from more than $2.30 before last week’s initial announcement.

(BusinessDesk)

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