Cavalier 1H profit drops 59% as weak market means higher wool prices

Free audio stream, including stories that are padlocked on our site. Listen on any device, anywhere. Updated twice daily. The audio stream takes several seconds to start on Android devices.

Launch Radio player

Cavalier posted a 59 percent decline in first-half profit as weak demand forced it to absorb high wool prices from the previous year while competing with imported product benefiting from a high kiwi dollar.

The maker of Bremworth carpets said profit fell to $1.4 million in the six months ended December 31, from $3.5 million a year earlier. Sales declined 6 percent to about $101 million.

Profit and sales missed Forsyth Barr analyst John Cairns' forecasts of $2.6 million and $109 million, respectively.

Cavalier says it expects an improvement in trading in the second half of the year and reiterated it is the guidance it gave shareholders at their annual meeting in November of $6 million to $10 million in normalised full-year profit.

"We anticipate the demand for carpet to lift in New Zealand alongside increased building activity, helped by the Christchurch rebuild and a general uplift in real estate turnover, while we expect Australia to remain relatively flat," the company says.

"Now that the high stock value has run its course, we will benefit from increased margins over the next six months."

The shares fell 1.1 percent to $1.80 and are up about 8.3 percent this year. The company is not paying dividends.

Cavalier has long had to contend with cheaper, more durable synthetic carpets in world markets and a retailing landscape marked by consolidation "and direct importing helped by the ever increasing strength of the New Zealand dollar".

Earnings at Cavalier's wool buying business Elco Direct were little changed at $353,000, even as revenue fell 22 percent to $13.9 million.

Its half share of commission wool scourer Cavalier Wool Holdings yielded earnings of $2.1 million in the first half, up from $1.2 million a year earlier.

Cavalier Wool Holdings missed out on acquiring the wool scouring assets of rival Wool Services International, which has since been acquired by Australia's Lempriere Holdings.

Cavalier had wanted to halve the number of wool scours in New Zealand to make the industry more competitive with operations in China.

The Radford Yarn technologies business, which supplies felted woollen yarns for carpet making, posted a small loss in the first half.

(BusinessDesk)


3 · Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

3 Comments & Questions

Commenter icon key: Subscriber Verified

They and the Oamaru wool company just gone under needs Marketing 101 - why should I buy woollen carpets as the value seems better with synthetic - i.e., stain-resistant and guarantees.

Reply
Share
  • 0
  • 0

Because wool is real, it returns to nature naturally and is fire resistant?

Reply
Share
  • 0
  • 0

Wool has the infinity ability to absorb in gases unlike the plastic carpets that breath gas all the time. Think of your kids and their health. Also when you buy wool you are supporting our NZ farmers and manufacturers. Synthetic carpets in land fill take 15000 years to decompose. Next plane that you fly on,specify that you want Synthetic seats and carpets - you will have the plane to yourself!

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.6771 -0.0061 -0.89%
AUD 0.8789 -0.0117 -1.31%
EUR 0.6077 -0.0019 -0.31%
GBP 0.4310 -0.0037 -0.85%
HKD 5.2509 -0.0457 -0.86%
JPY 82.6910 -1.1630 -1.39%

Commods

Commodity Price Change Time
Gold Index 1178.5 4.430 2015-06-29T00:
Oil Brent 62.0 -0.800 2015-06-29T00:
Oil Nymex 58.3 -1.350 2015-06-29T00:
Silver Index 15.7 -0.080 2015-06-29T00:

Indices

Symbol Open High Last %
NZX 50 5705.8 5737.4 5705.8 0.37%
NASDAQ 5000.1 5000.1 4958.5 0.32%
DAX 11058.0 11137.1 11083.2 -1.25%
DJI 17600.0 17711.0 17596.3 0.08%
FTSE 6620.5 6620.8 6620.5 -1.50%
HKSE 25944.0 26470.4 25967.0 1.09%
NI225 20174.6 20243.2 20110.0 0.63%