Dorel surges despite RTA troubles
By Michael J. Knell -- Furniture Today, March 13, 2005
Montreal — Despite a disappointing performance in its home furnishings segment, consumer products giant Dorel Inds. posted revenue gains of 42.7% and 44.8% in the fourth quarter and year, respectively, as net income surged 69.6% and 34.9% in the respective periods.
In the fourth quarter, revenues came to $462 million, compared with $323.7 million in the prior year. Net income was $34.7 million, versus $20.5 million in 2003's final period.
For 2004, revenues were $1.7 billion, up from $1.2 billion in 2003, with net income amounting to $100.1 million, compared with 2003's $74.2 million.
Dorel reports in U.S. dollars.
In a conference call with analysts, President and CEO Martin Schwartz attributed the gains to both internal growth and acquisitions, particularly in the new bicycle-based recreation and leisure unit.
High oil costs and mounting raw materials prices for steel, plastic resin and particleboard hurt gross margins, particularly in the home furnishings segment, which operates as Ameriwood Inds. in the United States and markets such brands as Ameriwood, Ridgewood/Charleswood, Cosco Home & Office, Carina, SystemBuild, Altra Furniture and California Closets. Dorel Asia is the import arm.
Home furnishings revenues for 2004 rose 9.5% to $540.6 million, but earnings from operations fell 35% to $43.4 million from $66.7 million in 2003. In the fourth quarter, revenues for the segment sagged 5.1% to $144.9 million, while earnings slumped 30% to $14.2 million.
Overall earnings from operations were 10.7% of sales in 2004's second half versus 8% in the first half, Schwartz said.
He said price increases in the second half did not fully offset higher costs, but declines were offset partially by record performances at Dorel Asia and Cosco Home & Office. Schwartz said Dorel Asia's sales and earnings were up 70% year over year, while Cosco Home & Office saw a 6% sales rise.
He anticipates improved profits in the home furnishings segment in 2005 despite increasing competition from Asia. "Home furnishings were a disappointment in 2004," Schwartz said, "but board prices have stabilized and we have started to see some improvement in this area."
He told analysts the pending merger of Kmart, one of the company's most important retailers, and Sears will be good for Dorel. Schwartz also noted that consumer confidence rose in late 2004 as consumers expect the economy to improve.
| Dorel Inds. | |||
|---|---|---|---|
| Owns Ameriwood, Charleswood, Cosco and Ridgewood | |||
| Earnings per share are fully diluted. | |||
| Quarter ended 12/30 | 2004 | (a)2003 | Change |
| (a) Restated. (b) Includes licensing and commission income of $4.6 million in the 2004 quarter, $1.6 million in the 2003 quarter, $18.1 million in the 2004 year and $5.1 million in the 2003 year. |
|||
| Revenues (b) | $461,958,000 | $323,677,000 | 42.7% |
| Operating income | 53,013,000 | 37,997,000 | 39.5% |
| Net income | 34,721,000 | 20,478,000 | 69.6% |
| Earnings per share | 1.05 | 0.63 | 66.7% |
| Year ended 12/30 | 2004 | (a)2003 | Change |
| Revenues (b) | $1,684,870,000 | $1,163,766,000 | 44.8% |
| Operating income | 182,086,000 | 152,419,0001 | 9.5% |
| Net income | 100,076,000 | 74,200,000 | 34.9% |
| Earnings per share | 3.04 | 2.29 | 32.8% |
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