Bestar revenues slide 14.2% in 1Q
By Michael J. Knell -- Furniture Today, June 5, 2006
Lac-Mégantic, Quebec — Ready-to-assemble specialist Bestar struggled in the first quarter as orders from a key retail customer continued to sag.
Gross revenues of C$8.5 million were down 14.2% from the same period a year ago. The company posted net earnings of C$3,000, compared with a net loss of C$52,000 a year earlier.
"This situation related to a substantial decrease in sales of one of our major accounts," said Bestar CEO Jacques Hétu. "As previously mentioned in our annual report, this major account has been using floor space, usually reserved for Bestar furniture to test different products. Contrarily to what we expected at the time of the annual report writing, this situation may last beyond the end of the second quarter, even though upon the client's request, new Bestar products will be submitted. We also remain present on the client's Web site."
Earnings were boosted by a reversal of C$440,000 in restructuring costs after the settlement of a grievance with the union representing Bestar production workers.
Hétu said the first quarter brought into focus several continuing challenges.
"The increasing presence of imports from emerging countries and the strength in the Canadian dollar versus its U.S. counterpart continue to put pressure on the entire furniture industry. This situation will weaken any company that does not react promptly," he said.
As part of a continuing effort to find new business opportunities in the wake of its reorganization, Bestar has begun fabricating components for other large manufacturers. "We hope to become an important player in this new venture as well as maintaining our presence in our traditional markets," Hétu said.
He also cautioned that results for the rest of the year could be negatively impacted as a recent fire caused considerable damage to one of Bestar's major suppliers.
"A plan for alternative sources is presently underway, but temporary raw material shortages are a possibility. We are analyzing every possible solution. Our main objective is to continue to serve our clients. We also expect a cost increase in particleboard and this will likely have an impact on our next quarter results," Hétu said.
