Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Cavalier turns profit in 2018, sees continuing improvement

Cavalier turns to profit in 2018, sees continuing improvements in future years

By Tina Morrison

Aug. 22 (BusinessDesk) - Carpet-maker Cavalier Corp turned to an annual profit and improved its debt and cash balances as it benefits from the previous year's restructuring.

The Papatoetoe-based company posted a net profit of $4.1 million in the year ended June 30, from a loss of $2.1 million a year earlier. That's above the top end of its forecast range of $3.7 million to $4 million.

Cavalier, whose heritage is steeped in woollen carpets, has had to restructure its business to cope with increased rivalry from cheaper synthetics. To better compete, it began manufacturing its own synthetic range, sold uncompetitive assets like its carpet tile business in Australia, and consolidated its woollen felting and yarn spinning operations. In the past year, those changes have helped it turn around its operating cash flow to a positive $12.1 million from negative $5.4 million and reduce its net debt by $10.8 million to $29.4 million.

“We are very focused on returning Cavalier to sustainable and profitable growth," said chief executive Paul Alston. "Our internal transformation, including the consolidation of our manufacturing operations in FY17, and focus on cost management have enabled us to reduce debt and improve profitability. We are back on the right track and expect to see continuing improvements being delivered in future years."

Alston said lifting volumes and revenue will be a focus for the business in the 2019 financial year and beyond, after sales in the latest year fell 5.1 percent to $148.1 million.

“While FY18 sales were affected by softer market conditions in both New Zealand and Australia and a short-term impact on supply to Australian customers as a result of Cavalier’s consolidation programme, an uplift in sales is expected in FY19 as we implement our new strategy," Alston said.

Cavalier said it's working closely with its trade customers to support their sales efforts, with a new sales strategy being rolled out in New Zealand and Australia.

The company said manufacturing and operating efficiencies have already improved significantly and planning is under way for a new IT platform to further help operational efficiency. It noted wool prices were at historic lows, while a stronger US dollar was making imports more expensive and the US market more attractive while a stronger Australian dollar was boosting its Australian returns.

Cavalier is increasing its focus on its higher end, high-margin products and is seeking to benefit from rising demand for environmentally sustainable products, which is helping boost the fortunes of companies such as shoe brand Allbirds and outdoor clothing company Icebreaker.

While its home markets of New Zealand and Australia remain a priority, Cavalier is eyeing expansion into other markets with large populations of high socio-economic consumers such as the US, where the wool carpet market is worth an estimated US$513 million, and the UK, where it's worth about US$498 million.

Still, the improvements to date haven't prompted the company to resume paying dividends. A dividend was last paid to shareholders for the first half of the 2014 financial year and Cavalier has previously signalled it needs to see consistency in earnings before resuming the payments.

"Whilst FY18 delivered a strong improvement in results, dividend payments will remain suspended as the company establishes sustainable earnings growth and performance," the company said today.

Cavalier shares opened this morning on the NZX at 60 cents, unchanged from yesterday's close, having risen 98.4 percent over the last year.

(BusinessDesk)


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Ground Rules: Government Moves To Protect Best Growing Land

“Continuing to grow food in the volumes and quality we have come to expect depends on the availability of land and the quality of the soil. Once productive land is built on, we can’t use it for food production, which is why we need to act now.” More>>

ALSO:

Royal Society: Calls For Overhaul Of Gene-Technology Regulations

An expert panel considering the implications of new technologies that allow much more controlled and precise ‘editing’ of genes, has concluded it’s time for an overhaul of the regulations and that there’s an urgent need for wide discussion and debate about gene editing... More>>

ALSO:

Retail: Card Spending Dips In July

Seasonally-adjusted electronic card spending dipped in July by 0.1 percent after being flat in June, according to Stats NZ. Economists had expected a 0.5 percent lift, according to the median in a Bloomberg poll. More>>

ALSO:

Product Stewardship: Govt Takes More Action To Reduce Waste

The Government is proposing a new way to deal with environmentally harmful products before they become waste, including plastic packing and bottles, as part of a wider plan to reduce the amount of rubbish ending up in landfills. More>>

ALSO:

Earnings Update: Fonterra Sees Up To $675m Loss On Writedowns

“While the Co-op’s FY19 underlying earnings range is within the current guidance of 10-15 cents per share, when you take into consideration these likely write-downs, we expect to make a reported loss of $590-675 million this year, which is a 37 to 42 cent loss per share." More>>

ALSO: