Bestar posts 2Q loss as sales decline 16.3%

Stronger Canadian dollar dampens U.S. sales

Michael Knell -- Furniture Today, August 19, 2010

LAC-MEGANTIC, Quebec — A strong Canadian dollar continues to hamper ready-to-assemble home office furniture specialist Bestar, whose second-quarter sales fell 16.3% as the company fell back into the red.

The company reported sales of C$7.2 million for the period and a loss of C$738,000 or 6 cents per share, compared with a net profit of C$1,000 or 0 cents per share for the second quarter of 2009.

First-half sales of C$17.3 million were down 13.8% year-over-year. The company posted a net loss of C$851,000 or 7 cents per share for the year to date, reversing a net profit of C$207,000 or 2 cents per share for the comparable period.

Bestar management attributed the reversal to the stronger Canadian dollar, which drove down sales to its U.S. customers. The U.S. dollar has been valued at about C$1.03 Canadian this year, down from about C$1.21 last year.
Also negatively impacting results were changes to the company's forward exchange contracts, which only contributed C$22,000 to the company's bottom line during the first half, as opposed to C$401,000 during the same period last year.

"Our results continue to be negatively affected by sluggish sales and the increased value of our Canadian dollar," Bestar Chairman and CEO Paulin Tardif said in a statement.

Tardif also announced that at the end of the quarter, Bestar was not in compliance with certain covenants imposed by its lenders, prompting the company to reclassify C$3 million of its long term debt as a current liability. However, he noted the lenders haven't demanded accelerated repayment of the debt.

He also said, "As management does not foresee any significant improvement in sales before a few months, an action plan to improve profitability is underway."

Earlier this month, Bestar's unionized employees agreed to reopen their contract to make changes in working conditions that would help the company's short-term profitability. Non-union workers also agreed to the changes.

"This measure and several others are part of a vast restructuring plan which (is) necessary to cut costs and increase competitiveness," Tardif said.

Bestar also announced that Roger Charbonneau has returned as vice president of finance, replacing Eric Menard, who left the company at the end of June. Charbonneau held the position between 2000 and 2004.

The company also named a new president, Daniel Mercier, at the end of the second quarter.