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Cavalier sees 2014 earnings growth of up to 51 percent

Tuesday 19th November 2013

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Cavalier Corp, the listed carpet-maker, is forecasting annual earnings growth of up to 51 percent after the company overhauled its business in the face of stiff competition from synthetic carpet manufacturers.

The company forecasts normalised earnings of between $8 million and $10 million in the year ending June 30, 2014, managing director Colin McKenzie told shareholders at today's annual meeting in Auckland. That's up from $6.6 million in 2013, and comes after Cavalier clamped down on costs as it reduced brands, added a synthetic range, cut debt and inventory, closed and consolidated operations, and laid-off staff.

"While we have been through two difficult years, and profits have fallen well below traditional levels, they have forced the company to take a close look at itself and change many aspects of the business so that we are better-placed to improve Cavalier's performance," McKenzie said in speech notes published on the stock exchange.

"We have reduced the cost base to more appropriate levels, streamlined the business, developed and introduced new products and channels and formalised strategic plans for the main businesses," he said.

Cavalier's margins came under pressure during the 2011 peak in wool prices when it was unable to raise prices enough to cover the increased cost of the wool.

McKenzie said the 2014 financial year has started slower than they wanted, but is "significantly ahead" of the same period a year earlier.

"The main shortfall has been in the carpet business where margins and volumes have been below expectations," he said. "However, confidence does appear to be improving in both New Zealand and Australia, so at this stage, we are reasonably comfortable that we will meet targets for the remainder of the year."

Chairman Alan Jackson said the company's board has decided to move to a twice-yearly dividend policy, from its previous practice of three payments a year.

The company's shares were unchanged at $1.94, and have climbed 15 percent, just below the 17 percent gain in the NZX All Index, a capital measure of all domestic stocks, over the same period.

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