Dorel sales, net income up in second quarter
Consumer goods source gets boosts from home furnishings segment
Michael J. Knell -- Furniture Today, August 5, 2010
Total revenue for the three months ending Jun. 30, 2010, was US$607.7 million, up 10.3% from the US$551.1 million for the comparable period a year ago. Net income was US$35.1 million or US$1.05 per dilute share, compared to US$24.8 million or 74 U.S. cents per share the year prior.
Year-to-date revenue was US$1.2 billion, up 11.9% from US$1.08 billion last year. Net income rose to US$72.5 million or US$2.18 per diluted share from US$52.8 million or US$1.58 per diluted share.
Dorel said organic revenue growth for both the second quarter and the year-to-date was approximately 9.5%.
Revenues for the home furnishings segment increased 23.9% to US$133.0 million and by 20.6% to US$261.9 million for the second quarter and first half respectively. The segment includes ready-to-assemble specialist Ameriwood as well as Cosco Home & Office, Altra Furniture, Dorel Home Products and Dorel Asia.
In a statement, the company said all of the segment's divisions contributed to the gains as their value-oriented furniture offerings sustains good point of sale levels at retail. The segment's earnings improved to US$11.3 million, up 46.4% over the prior year. Year-to-date earnings were up a rocket-fuelled 82.0% to US$22.0 million.
"These gains were led by the turnaround at Cosco Home & Office, which has produced solid earnings improvement," the company said. "The progress was achieved despite a higher cost environment and a much stronger Canadian dollar, which reduces the segment's earnings as two of its plants are located in Canada and the majority of their production is shipped to the U.S."
Dorel President and CEO Martin Schwartz noted that Dorel incurred significant "mark-to-market" losses on foreign exchange hedging in 2009, which haven't happened in 2010. However, currency fluctuations reduced earnings throughout all three of Dorel's segments by a total of about US$11 million to date this year.
Sales of Dorel's juvenile segment - the company's largest - were up 6.2% to US$259.8 million during the second quarter and up 9.4% to US$545.6 million for the year-to-date. This segment product assortment includes car seats and other baby and youth furniture and equipment.
The recreation/leisure segment has second-quarter sales of US$214.9 million, a gain of 7.9%. Sales for the first half were up 10.0% to US$396.6 million. The segment's major product offerings include bicycles and sport equipment.
"Dorel's record results for the first six months have set the stage for a solid year," Schwartz said. "Revenues are expected to continue to exceed prior year levels. However, the pace of earnings established during the first half will not be maintained in the third quarter, due principally to challenges in the juvenile segment."
The company noted during the first half exchange rates negatively impacted earnings and that margins were eroded by rising commodity and freight costs.
"We expect to see an easing of these headwinds in the fourth quarter," Schwartz said, adding new product introductions should provide a better mix of sales for the juvenile segment.
"Our recreational/leisure and home furnishings segments are poised to perform well during the second half," he added.
Although a Canadian company, Dorel Industries reports its sales and earnings in U.S. dollars because it operates in several different currencies including the Canadian and U.S. dollar, the Euro and the British pound.