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Cavalier forecasts FY loss after charges, no dividend; shares tumble

Friday 20th April 2012

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Cavalier Corp, New Zealand’s only listed carpet maker, said it may post a full-year loss as it takes steps to restructure its broadloom carpet business, ruling out any dividend payment. The shares fell 11 percent to a two-month low.

Underlying earnings will be in the range of $3 million to $5 million this year though the Auckland-based company anticipates “substantial one-off costs as it repositions the broadloom carpet businesses to cope with this difficult operating environment.” Normalised earnings in 2011 were $17.3 million.

The timing of the changes and associated costs is difficult to project but were they all to be taken in the current year, underlying earnings would turn to a loss of $1 million to $3 million, chief executive Colin McKenzie said in a statement.

“Broadloom carpet margins are particularly weak, as we are having to absorb high wool prices of recent times,” he said. Market conditions in Australia and New Zealand “remain very soft” with volumes and margins “under pressure.”

Cavalier said restructuring its carpet business should pay off by 2013, when it is anticipating a return to profit of $10 million to $12 million, based on a modest improvement in market conditions, cost cutting and lower prices for wool.

Shares of Cavalier fell 18 cents to $1.95 and have tumbled 44 percent in the past 12 months.

McKenzie took over as CEO on March 15 from Wayne Chung, who stepped down after eight years in the job. McKenzie also joined Chung on the company’s board.

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