21 Aug 2012

Cavalier blames loss on perfect storm of bad news

5:37 am on 21 August 2012

Cavalier Corporation has reported a loss of $1.6 million in the year to June and blames the the worst trading conditions it has experienced in its 28 years as a listed carpet company.

The result compares with an $18.2 million profit the previous year and includes the impact of an $8 million restructuring.

Cavalier's share price fell 9 cents on Monday to $1.66, a drop of 5.14%.

Managing director Colin McKenzie says a number of factors contributed to a difficult year, including soaring wool prices, the eurozone debt crisis, weak building activity, a slowdown in China and delays to the Canterbury rebuild.

The normalised profit was $4.3 million, 75% lower than the previous year, while revenue fell 5% to $217 million.

In April, the company warned of a $1 - $3 million loss due to deteriorating trading conditions.

Two months later, it closed one of its three spinning mills, axing 70-odd jobs, and it consolidated its warehousing and distribution as the restructuring.

"We had the flow-on from the global financial crisis, the European sovereign debt crisis, (economic) softening in China, an 80% spike in wool prices, building activity very flat on both sides of the Tasman, the exchange rate working against us, and then ... no real traction with the re-build of Christchurch," says Cavalier managing director Colin McKenzie.

The company expects a turnaround in profit of $10 - $12 million next year, with a pickup in New Zealand in the second half and a gradual improvement in Australia, he says.