Slow start mars Cavalier's interim results

By Phil Boeyen, ShareChat Business News Editor

Monday 18th February 2002

Cavalier Corp.'s (NZSE: CAV) carpet business has dragged down operating profit at the half-year, as flagged at last November's annual meeting.

The company says earnings before interest and tax from ongoing businesses were down by 13% on the previous year, principally because of weaker first half earnings in the carpet business.

"We foreshadowed this downturn at the annual meeting and said then that we expect the second half to be better. We still hold that view," Cavalier says.

Net profit for the six months ended December rose 24% to $5.75 million, although the previous year's result included $2 million in one-time closure costs of the Lichtenstein wool trading and wool scouring operations.

Cavalier says the carpet business performed strongly in the December quarter with sales volume at the same level as previously and revenue marginally ahead at $53 million.

"The recovery in demand has been strong on both sides of the Tasman and is continuing into the New Year. Strong building activity and higher levels of consumer spending are driving it. At the same time, our strategic initiatives have continued to produce gains.

"In contrast, business in the USA and in Asia remains relatively subdued. There, the effects of September 11th appear to have been more strongly felt. However, these markets represent a relatively small part of our business."

Earnings before corporate costs, interest and tax at the wool operation, comprising the wool procurement business Elco Direct and a 76% shareholding in Hawkes Bay Woolscourers Ltd, fell 13% to $595,000.

"However, that result has been affected by the delayed onset of the season and is not an indicator of the full year's result," the company notes. "Both businesses are in good shape, and we should catch up on last year as the months go by."

Cavalier says the outlook for the second half is reasonably positive and is aiming for a full-year net profit of $13 million, slightly higher than the $12 million figure forecast at the annual meeting.

The company pays dividends three times a year and has declared a fully imputed second interim dividend of 11.5 cents per share, an increase on the 10 cents payout for the previous comparable period.

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