Dorel sales, earnings decline in fourth quarter
Ameriwood restructuring costs hurt bottom line
Michael J. Knell -- Furniture Today, March 2, 2006
MONTREAL — Furniture, juvenile products and bicycle maker Dorel Inds. said its total revenue fell 8.3% in the fourth quarter, mainly because of a sharp sales decline in its Sting-Ray bicycles, and despite modest upticks in home furnishings and juvenile products.
Meanwhile, restructuring costs of just under $7 million incurred in the shutdown of Ameriwood ready-to-assemble factory in Wright City, Mo., helped drive down the company’s bottom line.
Net income in the quarter was $22.5 million, down 35.1% from the same period a year earlier, on revenues of $430.3 million.
Dorel, which reports in US dollars, said its annual revenue of $1.76 billion was up 3% from 2004. Net earnings, however, fell 8.7% to $91.3 million or $2.77 per share.
Dorel’s home furnishings segment saw its revenue climb by 2% in the quarter, to $148.8 million, and by 4.8% for the full year, to $569.3 million. But the segment’s contribution to earnings fell by nearly half for both periods, to $7.6 million in the fourth quarter and $23.7 million for the year.
“Our RTA furniture business continues to be in a turn-around phase. Significant improvements were made in sales and marketing, as well as new product development, but necessary factory improvements remain to be achieved,” Martin Schwartz, president and CEO, told analysts in a conference call.
Schwartz said Dorel Asia — the company’s import division — continued to enjoy growth during the quarter, offsetting declines of 5.5% in Cosco Home & Office and 13% in RTA furniture and futons at Ameriwood.
For the year, all home furnishings operations had revenue increases except Ameriwood’s RTA. Cosco Home & Office sales of folding furniture and other imported home furnishings increased by 7% over 2004.
“Successful new product placements in several categories by Dorel Asia at new and existing customers helped revenues reach $133 million, a 65% increase from 2004. Ameriwood futon sales also rose, increasing by 28% over the prior year. However, ready-to-assemble sales declined by 17% from the prior year due to declines at mass merchant customers,” Schwartz said.
The stronger Canadian dollar also hurt earnings as two of Ameriwood’s five remaining factories are in Canada and both have substantial sales into the U.S.
Schwartz said returning the RTA furniture division to acceptable levels of profitability remains a priority.
“During the year (the division) successfully broadened its customer base from the traditional mass merchants and implemented an increasingly successful import program,” he said. Planned improvements in factory operations haven’t taken effect has quickly as anticipated but should beginning helping the bottom line as the year progresses, he added.
Schwartz said, however, that higher prices for particleboard early in 2006 might put additional pressure on margins.
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