“Investment in research and development and creating ranges that command a premium is a priority and critical for our success,” he said in notes for the company’s annual meeting.
“The awareness around plastics and its impact on the environment is becoming much more prominent.
“This anti-plastic sentiment is building strongly and we are experiencing a shift back to natural, wool textured products, something which we are well placed to take advantage of.”
The company’s shares rose 1.7% to 60 cents. They are up 46% this year.
Cavalier, which has sales offices throughout New Zealand and Australia, did a major consolidation of its manufacturing plants in 2016 to reduce over-capacity and improve profitability.
It has halved its debt in the past four years and last month agreed to sell its stake in the country’s sole remaining wool scourer to free up capital to reinvest in carpet making and marketing.
While the restructuring costs are behind it, efficiency will remain a focus this year, Alston said.
A lot of resource will go into the firm’s Napier site, where a new management team is in place, and the company will also invest in a new IT system this year.
New products developed by the firm’s Cavalier Bremworth arm in the past two years will be rolled out progressively during the coming year.
Some of them will shortly be presented to potential customers in the US and UK – where the company gets less than 3% of its sales but where the markets for wool carpet are estimated at US$513 million and US$498m, respectively.
The firm will also attend Domotex in Hanover, the world’s largest flooring trade show, for the first time in January.
Cavalier’s operating earnings climbed to $10.3m in the June year from a $2.2m loss the year before when the firm incurred $6.3m of restructuring costs.
Debt last month, after the scour stake sale, was down to $18m from $40.2m in June 2017.
Alston said the company expects another year of improving financial performance and is committed to resuming dividends as part of a long-term strategy.
While the market was quiet in the September quarter, low wool prices and a favourable NZ-Australia exchange rate had continued.
Improved free cashflow will continue to strengthen the firm’s balance despite a big year for operational investments, he said. – BusinessDesk
