Cavalier shares drop 10% after profit warning

Friday 24th October 2014

Shares of Cavalier Corp dropped 10 percent after the carpet maker warned it will probably miss earnings guidance due to a strong kiwi dollar against its Australian counterpart and a high price of wool.

The stock fell 10 cents to 90 cents after the Auckland-based company said 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. First-quarter trading volumes were consistent with the same period a year earlier, though margins were under pressure, it said.

"The expectation reflects the current high price of wool on the manufactured cost of carpet and the ongoing strength of the New Zealand dollar exchange rate on our Australian dollar-denominated sales and receivables," chief executive Colin McKenzie said in a statement. While Cavalier had managed to shelter its Australian business from the high cross rate in 2014 with forward cover, most of that had been used and the company "is subject to a much less favourable cross rate in the current 2015 financial year."

This week Cavalier 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.

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 crimped by a strong New Zealand dollar.

BusinessDesk.co.nz

Comments from our readers

No comments yet