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Cavalier 1Q sales slump 20%, cans dividend reinvestment plan

Wednesday 12th October 2011

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Cavalier Corp., the carpet maker which is in the process of laying off some 42 staff at its nationwide yarn operations, has canned this year’s dividend reinvestment plan after the recent turbulence in financial markets saw its first-quarter sales slump by a fifth.

The Auckland-based company said the sales volume of broadloom carpet and carpet tiles dropped by about 20% in the three months ended Sept. 30, as the European debt crisis saps investor confidence and forced a number of major commercial projects in Australasian to be deferred.

On top of that, Australian carpet buyers have been reluctant to accept Cavalier’s higher prices after the company passed on increased costs of between 10% and 20% amid 20-year high wool prices.

Cavalier said because of the “unpredictable trading conditions” it can’t give any meaningful earnings guidance this year, and its board of directors has decided to cancel this year’s dividend reinvestment plan, and will instead pay the entire 11 cents per share final dividend in cash.

The weak trading update comes after Cavalier’s stock has been the worst performer on the NZX 50 Index this week, with the shares down 6.5% to $2.90 since the close on Friday.

In August, the carpet maker reported a net profit of $18.2 million in the 12 months ended June 30, up 60% from the previous year due to one-off adjustments.

Cavalier is seeking to buy the wool scouring assets of NZ Wool Services International in a bid to create a monopoly. The deal has been authorised by the Commerce Commission, though that’s currently subject to appeal in the High Court.

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