Cavalier shares tumble to more than 20 year low, as wool trade woes continue
Shares of Cavalier fell to the lowest in more than two decades as the carpet maker fails to lift earnings.
Shares of Cavalier Corp [NZX: CAV] fell to the lowest in more than two decades as the carpet maker fails to lift earnings in a competitive market against cheaper overseas imports as high wool prices crimp margins.
Late last month the Auckland-based company flagged normalised annual profit in the 2015 financial year will probably fall short of its forecast for a "modest increase" to the $5.8 million result it posted in 2014, citing a strong kiwi dollar against its Australian counterpart and high wool prices. See NBR's coverage of the latest downgrade in the Print Archive here.
Cavalier has restructured its businesses and introduced a synthetic carpet range as it battles to retain market share against increased competition from cheaper synthetic imports, while margins are being squeezed by rising wool prices and lower sheep numbers, and export earnings are crimped by a strong New Zealand dollar.
The stock fell as low as 73 cents in morning trading, its lowest since April 1991, according to Reuters' data. The shares recently traded at 75 cents, and have tumbled 55 percent since the start of the year, underperforming the NZX All Index's 11 percent gain in the same period, which is trading at the highest it has been since 2007, before the global financial crisis.
"Investors will be pretty disappointed given the market is making record highs and Cavalier is making record lows," said Grant Williamson, director at Hamilton Hindin Greene. "The cheaper imported carpets are really playing a major part in why Cavalier are struggling at the moment. They are certainly finding it very difficult to compete."
In October the company agreed to water down its stake in subsidiary Cavalier Wool Holdings as part of a merger with New Zealand Wool Services International to create a national scouring monopoly, in a bid to insulate the sector from the threat of overseas scourers, particularly those in China.
(BusinessDesk)
Suze Metherell
Tue, 11 Nov 2014
Tue, 11 Nov 2014
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Cavalier shares tumble to more than 20 year low, as wool trade woes continue
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