Cavalier boosts first-half profit on benefits from restructuring

Chief executive Paul Alston says the significantly lower wool price is now starting to flow through to raw material costs.

(BusinessDesk) - Carpet maker Cavalier Corp [NZX:CAV] reported an improved first-half net profit on better margins, after restructuring the business to reduce costs and introduce a more efficient manufacturing system.

Net profit rose to $1 million, or 1.5 cents per share, in the six months ended Dec. 31, from $31,000 in the prior period. Revenue fell to $75.3 million from $84.3 million, reflecting reduced carpet sales in the first half due to market conditions as well as the materially lower wood prices which impacted the revenue of its wool buying business Elco Direct. 

Earnings after adjusting for abnormal gains and transition costs were $1.15 million versus a normalised loss of $1.9 million in the same period a year ago.

Chief executive Paul Alston said the company's improved performance reflected the "significantly reduced cost base" and was assisted by more favourable external macroeconomic factors. 

“We are now seeing early benefits from the activity undertaken in the last year. In FY17 we undertook extensive manufacturing plant closures and relocations. However, this cost us more than we had planned with the expected gains taking longer to be realised," said Alston. 

He also said the significantly lower wool price is now starting to flow through to raw material costs and the result has improved manufacturing margins.

"Along with strong cash flow management, this has allowed us to reduce our bank debt position by $7 million to $33 million. We have also reduced our yarn and carpet stock holding by almost $5 million," Alston said. 

Looking ahead, he said the company is seeing good demand and a sustained lift in its high end, high margin Cavalier Bremworth woollen products. Cavalier did not provide any full year guidance.

The stock gained 7 percent to 45 cents and has dropped 30 percent over the past 12 months.


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That’s a very good result compared to where they were a year ago...

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