Share this on

Shermag 2Q revenues decline

By Michael J. Knell -- Furniture Today, November 13, 2005

Sherbrooke, Quebec — Flat Canadian sales and unfavorable currency exchange rates continued to plague full-line producer Shermag in its second quarter as net revenues fell 4.4% to C$48.1 million from C$50.3 million in last year's comparable quarter.

The manufacturer and importer reported a net loss of C$2.1 million in the three months ended Sept. 30. In last year's second quarter, it posted profits of C$883,000.

The latest quarter included after-tax restructuring charges of C$500,000 linked to the closings of factories in Victoriaville and Scotstown, Quebec, earlier this year.

In a conference call with analysts, President and CEO Jeff Casselman said, "The decline in net earnings reflects additional weakness in the U.S. dollar and a continuing difficult competitive environment ... (and) inefficiencies in our operations as we execute our business transformation plan."

Shermag's sales to U.S. retailers rose 4.1% in the quarter to US$28 million. However, converted to Canadian dollars, the value of those shipments fell 5.7% to C$34.7 million. Domestic sales were flat at C$16.3 million.

"Strong Asian competition seriously limits the possibility of increasing prices to compensate for the weakness of the U.S. dollar," Casselman said.

He said upholstery continued to struggle in the quarter, with flat sales at Sofas International and falling sales at Jaymar. Both are Shermag divisions.

In the first half, net revenues were C$96.3 million, down 3.7% from C$100 million in last year's six months. The net loss came to C$3.6 million, compared to net earnings of C$1.4 million last year.

Export sales in the first half fell 7.5% to C$66.6 million.

Casselman said Shermag's business transformation is unfolding as planned, including plant closures and layoffs to better align capacity with demand. He said at least one more factory would be closed in the near future.

Remaining factories are being converted from mass-market to "made-to-order" production, he said, which "takes time and has a significant learning curve for all involved."

In the past 12 months, Shermag has signed long-term labor agreements with employees at eight facilities, with a ninth expected soon, Casselman said. Meanwhile, the company continues to shift production of low-margin products like glider rockers to Asia, he said, with imports now accounting for about 25% of shipments.

He said Shermag had an "exceptional" October market, with new placements for a number of new products, including an entertainment/wall system called Land.

The changes will begin to have a positive impact on performance over the coming year, Casselman said.

Shermag(a)
Owns Jaymar, Mobilier Shermag, Mobilier HPL, Nadeau, Sofas International and Scanway Chanderic
Earnings per share are fully diluted, and all figures in parentheses are losses or declines.
13 weeks ended 9/30	2005	2004	Change
(a) In Canadian dollars. (b) Includes pretax restructuring charges of C$706,000 in the 2005 13 weeks and C$1.8 million in the 2005 26 weeks and income tax benefits of C$848,000 in the 2005 13 weeks and C$1.4 million in the 2005 26 weeks. (c) Based on average shares outstanding of 13.3 million in the 2005 periods and 13.5 million in the 2004 periods.
Revenues	C$48,068,000	C$50,290,000	(4.4%)
Operating income	(578,000)	3,516,000	—
Net income	(b)(2,085,000)	883,000	—
Earnings per share (c)	(0.16)	0.07	—
26 weeks ended 9/30	2005	2004	Change
Revenues	C$96,287,000	C$100,034,000	(3.7%)
Operating income	(418,000)	6,606,000	—
Net income	(b)(3,597,000)	1,414,000	—
Earnings per share (c)	(0.27)	0.10	—

Share this on

Shermag 2Q net revenues down 4.4%

Nov 10, 2005

Shermag 3Q revenues drop 31.9%

Mar 5, 2006

Also by this author

Also by Michael J Knell

Featured Company

FurnitureCore.com

FurnitureCore.com is a dynamic web application aimed at the furniture industry. Retailers and manufacturers alike will find our deep reserve of tools to be exactly what their furniture business needs.www.furniturecore.com... more

Related Resources

Atlanta International Gift & Home Furnishings Market

Here is a selection of products shown at this month's International Gift & Home Furnishings Market here.

Networking at the 13th annual F/T Leadership Conference

NAPLES, Fla. — Industry executives and guests took the opportunity to network and play golf during down time at Furniture/Today's 13th annual Leadership Conference here this month.