Dorel reports record profits for third quarter

Home furnishings' performance helps bottom line

Michael J. Knell -- Furniture Today, November 6, 2009

MONTREAL — Consumer goods giant Dorel Inds. earned record profits of $30.2 million or 91 cents per diluted share for the period ending Sept. 30, 2009, although revenue fell 6.1% to $552.2 million.

"In terms of profitability, the third quarter of 2009 is the best ever recorded by Dorel," the company said.

Net income for the nine months ended Sept. 30 was $83.0 million or $2.49 per diluted share, an 11.4% decline from last year's $93.7 million or $2.81 per diluted share. Revenue for the nine months was $1.6 billion, down 6.3% from $1.7 billion a year ago.

"The fact that we have exceeded last year's earnings for the quarter despite a difficult economic period is a tribute to the quality and value of our products and our focus on maximizing margins through cost containment, a more stable cost environment and our disciplined minimum margin requirement program," said President and CEO Martin Schwartz in a conference call.

"Dorel's multi-national operations, diverse operating segments and broad product lines have traditionally compensated for earnings variations within the company's various operating divisions," he added. "This is the case in 2009 as strong results within North America in the juvenile and home furnishing segments are offsetting less profitable results at other divisions."

Although a Canadian company, Dorel reports in U.S. dollars because it operates in a number of currencies.

Dorel said third-quarter sales for its home furnishings segment were $125.4 million, off slightly from the same period of 2008. However, earnings from the segment's operations were $12.5 million, five-and-half times greater than the comparable period last year.

For the first nine months, home furnishings had total revenues of $342.6 million, down 1.9% year-over-year. However earnings from operations were $24.6 million, almost three times greater than the $6.4 million reported for the first nine months of 2008.

Schwartz attributed the segment's earnings improvement to "lower material costs, a favorable currency environment, as well as increased operational efficiencies."

Dorel reported that its overall 2009 earnings are being negatively impacted by the reversal of a $10.5 million gain on its 2008 foreign currency exchange contracts, of which $1.8 million was charged against the third quarter.

The company also said that going forward, recent trends in the value of the U.S. dollar against other currencies mean that earnings will be dampened within home furnishings. The segment has two large manufacturing facilities in Canada and their products are sold primarily within the United States.

"We believe we are well-positioned as we head into the fourth quarter and look forward to an encouraging 2010," Schwartz said. "The turnaround in home furnishings has materialized as we expected, and while currency rates do pose a challenge, our belief in that segment has been validated by its greatly improved performance."