Shermag earnings tumble 98% as sales decline in 1Q
By Furniture Today Staff -- Furniture Today, September 3, 2001
SHERBROOKE, Quebec — The loss of its largest U.S. account, a labor dispute and problems in its sawmill sector helped drag down sales and earnings in Shermag's first quarter, although furniture sales suffered only slightly.
Net revenues, including sawmill sales to other companies, were C$33.3 million for the three months ended June 29, a drop of 5.8% from the year before. Net earnings plummeted to C$74,000 from C$3.6 million in the previous period.
Gross furniture revenues dipped 1.2% from last year's C$35 million to C$34.5 million in the latest quarter.
Jeff Casselman, president and chief executive officer, said furniture sales might have been up slightly if not for a strike at the Scotstown division plant in Disraeli, Quebec. He told analysts in a conference call the plant accounted for about C$105,000 in daily sales. The 14 days lost in the quarter meant a revenue loss of about C$1.47 million, he said.
Shermag was hurt by the demise of HomeLife, its biggest U.S. account at annual sales of C$13 million, Casselman said. In addition to C$2.1 million in unrecoverable receivables, HomeLife's downfall created operational inefficiencies in several factories, he said.
"Margins suffered in these factories as we spent much of the quarter stopping and starting shipments and production in an effort to reduce exposure to what was one of our most important customers," Casselman said.
Shermag already has replaced much of the lost revenue from HomeLife. "Our backlog is higher now than it was a year ago," he said.
The company's overall business in Canada is up, as are the North American sales of its glider rocker division, Chanderic/Conant Ball, Casselman said. The only area in which business is down is case goods sales in the United States, which he said were off about 4.5% in the first quarter.
Casselman believes Shermag will come close this year to the C$165 million in sales generated in the past fiscal year ended April 30, aided by the launching of an imports division and improvements in its sawmill operations.
| Shermag(a) | |||
|---|---|---|---|
| Owns Mobilier Shermag, Mobilier HPL, Nadeau and Scanway Chanderic | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 6/29 | 2001 | 2000 | Change |
| (a) In Canadian dollars. | |||
| Revenues | C$33,324,000 | C$35,371,000 | (5.8%) |
| Operating income | 2,999,000 | 6,664,000 | (55.0%) |
| Net income | 74,000 | 3,595,000 | (97.9%) |
| Earnings per share | 0.01 | 0.27 | (96.3%) |
