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Shermag loss grows in third quarter as revenues drop 17.3%

Manufacturer-importer remains focused on shifting more production to Asia

By Furniture Today Staff -- Furniture Today, February 12, 2007

SHERBROOKE, Quebec — Manufacturer and importer Shermag reported a net loss of C$7.7 million in its third quarter ended Dec. 29, compared with a C$4.3 million loss in the same period a year earlier. Gross revenue fell 17.3% to C$40.6 million.

For the first nine months, the company said it lost C$13.2 million, compared with a C$7.9 million loss a year ago, as gross revenue declined 1.3% to C$131.9 million.

“The third quarter was particularly affected by the sales shortfall, high domestic manufacturing costs, and higher than anticipated startup costs at the new Montreal distribution center,” said President and CEO Jeff Casselman.

He also confirmed the company will permanently close its Disraeli and St-Etienne-de-Lauzon, Quebec, plants, and recorded a C$3.5 million write-down of long-term assets in the latest quarter. The move is part of a plan to transfer more production to Asia and consolidate its Canadian facilities.

“We continue to pursue our strategy of global sourcing of mass-produced products, blended with the domestic production of choice-based products,” said Casselman. “This difficult transition has been amplified by the general softness in the home furnishings retail market, which has been underlined by first-half losses to bankruptcy of several customers.”

He said management remains focused on the transition plan and the launch of the Metropolitan Home Collection set for this spring.

Like other Canadian companies, Shermag also cited the weakening of the U.S. dollar against Canadian currency. For the third quarter, the average exchange rate was C$1.13 per U.S. dollar, compared with C$1.21 a year earlier.

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