Cavalier’s bottom line profit for the year ended June 30, at $5.79 million, was ahead of the $3.03m achieved a year earlier. But when adjusted for restructuring costs of $3.6m in 2013, the ongoing trading result is lower – $5.79m against $6.6m.
Its return from the 50%-owned Cavalier Wool Holdings scour business fell to $2m from a record $5m figure a year earlier.
As managing director Colin McKenzie warned earlier, this was mainly because of a sharp fall in the wool grease price. It has been down about 60% since the start of 2013 because of disease in the Asian shrimp industry, where it is a major ingredient in the manufacture of shrimp feed.
The disease is now largely under control and a recovery in demand and gradual increase in the wool grease price is expected over the current year, he said.
Wool scouring continued to be affected by lower wool volumes because of reducing sheep numbers. Cavalier remained committed to the need for further rationalisation in the NZ scour industry so that it remains competitive, he said.
The group carpet business improved on a year earlier, with an operating profit of $8.4m on the comparable $6.4m a year earlier. This was helped by efficiency gains from the consolidation of the tufting operations on to one site during 2013.
Volumes sold in the trans-Tasman market were pretty much steady but revenues were lower because of the effect of the stronger NZ dollar on Australian sales.
In Australia, the commercial market is difficult but residential is quite strong in the mid-to-upper price market.
Australia should be the bigger part of the business and the company has some hope from work by independent analysts showing there is a significant shortfall of housing to accommodate the strong migration numbers, McKenzie said.
The lower-priced segment of the NZ market was very competitive but overall the market improved on the back of the strengthening economy. Margins and profits had improved. The Norman Ellison Carpets subsidiary now sold a mix of 70% synthetics to 30% wool, with the prime Cavalier Bremworth brand being about 70% of wool sales.
Cavalier has ambitions to markedly lift carpet sales to the rest of the world from the current low base. These sales rose to $6.5m from $5.7m a year earlier.
Cavalier has ambitions to markedly lift carpet sales to the rest of the world from the current low base. These sales rose to $6.5m from $5.7m a year earlier. The company was working with big-scale customers and believed it was close to some good market gains.
The group also has the Elco Direct wool-buying business, which had higher revenues because of the lift in wool prices. However, volumes and trading profit were similar to the previous year.
With the cost of inventory for the push into the synthetic market, Cavalier’s debt levels were slightly higher than a year earlier. Operating cash flows fell to $615,000 for the year from $11.6m previously.
The 2015 year budget allows for a modest lift in earnings, with more meaningful guidance to be provided at the annual meeting on November 25, McKenzie said.
