Shermag 3Q revenues drop 31.9%
By Michael J. Knell -- Furniture Today, February 19, 2006
Sherbrooke, Quebec — Full-line manufacturer and importer Shermag posted a net loss of C$4.3 million, or 32 Canadian cents per share, in its third quarter ended Dec. 30 as net revenues plunged 31.9% to C$46.5 million from last year's comparable quarter.
Last year, the company had third-quarter earnings of C$2.3 million, or 17 Canadian cents per share.
President and CEO Jeff Casselman said performance was hurt by the strengthening Canadian dollar and by unusually high shipments in last year's quarter, including strong sales to a U.S. retailer that weren't repeated, and to generally higher shipments last year as Shermag worked off backlogs built up during labour disruptions.
The company budgeted for a 77-cent dollar against the U.S. greenback while reality produced an 81-cent dollar, he said. The U.S.-Canadian exchange rate had a negative impact on sales of about C$2.5 million during the quarter, the company said.
Shermag continues to implement its "business transformation plan," with lower-margin products such as glider rockers made in Asia while domestic manufacturing consolidates and shifts to a custom-order model. This resulted in after-tax restructuring charges of C$3.1 million, or 24 Canadian cents per share, in the third quarter.
Casselman said underlying operational performance improved in the third quarter versus this year's second quarter, with the net loss dropping from 12 cents to nine cents per share, excluding restructuring charges.
Export sales in the latest quarter were US$27.8 million, a drop of 29.9%. In Canadian dollars, exports fell 34.7% to C$33.6 million.
Casselman expects Shermag's U.S. business will improve once changes at department stores Macy's, The May Co. and Federated are completed. These retailers will represent about 26% of Shermag's business, he said.
Reflecting what it described as a soft retail scene in Canada, the company said domestic sales were down 25.6% to $15.4 million in the third quarter.
During the quarter, Shermag consolidated sawmill operations into a single plant, laying off about 45 workers. Its Sofas International factory soon will close and all upholstery operations will move to the Jaymar plant, with some 70 layoffs.
Asian imports should account for about 26% of Shermag's shipments by the end of the fiscal year on March 31, Casselman said.
| Shermag(a) | |||
|---|---|---|---|
| Owns Jaymar, Mobilier HPL, Mobilier Shermag, Nadeau, Scanway Chanderic and Sofas International | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/30 | 2005 | 2004 | Change |
| (a) In Canadian dollars. (b) Includes restructuring expenses of C$4.6 million in the 2005 quarter and C$6.3 million in the 2005 year. |
|||
| Revenues | $46,452,000 | $68,168,000 | (31.9%) |
| Operating income | 180,000 | 5,616,000 | (96.8%) |
| Net income (b) | (4,297,000) | 2,349,000 | (282.9%) |
| Earnings per share | (0.32) | 0.17 | (288.2%) |
| 9 months ended 12/30 | 2005 | 2004 | Change |
| Revenues | $142,739,000 | $168,202,000 | (15.1%) |
| Operating income | (238,000) | 12,222,000 | (101.9%) |
| Net income (b) | (7,894,000) | 3,763,000 | (309.8%) |
| Earnings per share | (0.59) | 0.28 | (310.7%) |
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Shermag posts 3Q loss as revenues drop 31.9%
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