Profit and revenue may have slumped, but Cavalier Corporation is confident the “worst turnaround in trading ever experienced” by the carpet business has bottomed out.
In its results released today, the carpet and wool company reported a 6% drop in after tax profit to $7.0 million for the six months ended December.
Operating revenue also dropped 14% to $112.8 million, while earnings per share fell 6% from 11.1c to 10.4c.
But the company has still kept its interim dividend levels stable, while also slightly raising its forecast for earnings after tax from the $13.5 million to $15.5 million previously indicated to a new range of between of $14.5 million to $15.5 million.
The company directors said the results were “more than reasonable” as they compared to a period when the effects of the New Zealand recession and the fallout from the global financial crisis were only just starting to be felt.
The lower results were primarily due to Cavalier Corporation’s carpet business, which saw its earnings drop 29% to $10.1 million, with revenue down 9% to $103.6 million.
The company said it was still being affected by the underlying concerns associated with the global economic slowdown, but that its carpet business had coped “remarkably well under the adverse conditions”.
It did note an upturn in trading conditions towards the end of the year – particularly with its Australian premium brands - but still warned any further improvement could only be gradual as the general market sentiment was still “very fragile and volatile”.
Comparing the performance of its wool business was hampered by a major rationalisation of the wool processing industry instigated by Cavalier last April which saw the acquisition of a competitors’ wool processing business and a reduction in its shareholding in Cavalier Wool Holdings from 92.5% to 50%.
But it said its share of tax paid earnings of Cavalier Wool Holdings for the six months was $1.4 million, “well ahead” of the earnings from this business in the previous year.
In making today’s announcement, the company was quick to point out that things were getting better.
“Indications are that the adverse market conditions for our carpet business have bottomed out, and we are cautiously optimistic that we will see a gradual lifting of revenue here. At the same time, our wool business is about to enter into the busy part of the season, and the volumes of wool coming onto the market and being sold are so far holding up well.”
Cavalier has declared an unchanged fully imputed second interim dividend for the year ending 30 June of 4 cents per share which, with the first interim dividend of 3 cents per share paid in December, brings the total interim dividend to the same as last year.
Mon, 22 Feb 2010