Cavalier forecasts FY loss after charges - no dividend, shares tumble
BUSINESSDESK: Cavalier Corp, New Zealand’s only listed carpet maker, said it may post a full-year loss as it takes steps to restructure its broadloom carpet business, ruling out any dividend payment.
The shares fell 11% to a two-month low.
Underlying earnings will be in the range of $3 million to $5m this year, though the Auckland-based company anticipates “substantial one-off costs as it repositions the broadloom carpet businesses to cope with this difficult operating environment”.
Normalised earnings in 2011 were $17.3m.
The timing of the changes and associated costs is difficult to project but were they all to be taken in the current year, underlying earnings would turn to a loss of $1m to $3m, chief executive Colin McKenzie said.
“Broadloom carpet margins are particularly weak, as we are having to absorb high wool prices of recent times.”
Market conditions in Australia and New Zealand “remain very soft” with volumes and margins “under pressure”.
Cavalier said restructuring its carpet business should pay off by 2013, when it is anticipating a return to profit of $10m to $12m, based on a modest improvement in market conditions, cost cutting and lower prices for wool.
Shares of Cavalier fell 18 cents to $1.95 and have tumbled 44% in the past 12 months.
McKenzie took over as CEO on March 15 from Wayne Chung, who stepped down after eight years in the job.
Mr McKenzie also joined Mr Chung on the company’s board.