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Carpet manufacturer Cavalier has cut its full-year earnings guidance after a slow start in the first quarter and demand in the Australian market that did not recover as expected. The shares (NZX: CAV) dropped almost 12%.
Normalised earnings are likely to be between $6 million and $10 million this financial year compared to previous guidance of a net profit of $10 million to $12 million, managing director Colin McKenzie told shareholders at their annual meeting in Auckland today.
It posted a net loss of $1.6 million last year – a period it described as the worst it has ever experienced – forcing the company to take $8.2 million of charges to restructure its business, closing a spinning plant and consolidating warehousing and distribution.
Wool prices soared during the period.
"We have had a slow start to the new financial year, which is disappointing given all the changes we have implemented and the expectation that the worst was finally behind us," McKenzie says.
"We were predicting that the Australia market suffered a temporary setback, and that we would experience gradually improving conditions throughout the year. Unfortunately, there was no improvement during the first quarter."
Cavalier shares fell 21 cents to $1.55 on the NZX and have shed almost 20% this year. The stock is rated "outperform" based on the consensus of three recommendations compiled by Reuters, with a price target of $2.16.
Chairman Alan James told shareholders there would be no interim dividends paid by the company for now.
"We will be hoping to declare a final dividend, the quantum of which will depend on the full-year's earnings," he said.
Cavalier cut inventory by 14% to $62.9 million in the year ended June 30 and said today it is forecasting "further sizeable inventory and debt reduction" during the remainder of this financial year