Friday, March 29, 2024

Low wool prices boost Cavalier

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Low wool prices and a renewed focus on high-quality, high-margin wool carpets are boosting Cavalier Corporation earnings. The company expects a higher after-tax trading profit for the six months ended December 31, despite softer markets in both New Zealand and Australia.
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A more efficient operating structure, after the years of reorganisation, is also helping, chief executive Paul Alston said.

Cavalier will make an overall loss for the half-year, because of an $11.8 million write-down on its stake in the Cavalier scour business, which was sold in September. The bottom-line loss will be between $9.8m and $10.2m, the company told NZX.

However, the normalised after-tax trading from operations is expected to be between $1.6m and $2m, up from $1.1m for the same period last year.

Excluding the non-cash scour write-down, Cavalier is expecting operating earnings (Ebitda) of between $4.2m and $4.7m, compared with $4.4m last year. 

Earnings for wool carpets will be higher while earnings in the Elco Direct wool-buying business will be lower.

Alston said the carpet business is helped by the lower wool prices caused by decreased Chinese demand for coarser carpet wool but that situation works against the smaller Elco Direct business.

Cavalier now has a more efficient manufacturing base and strong financial position to build on its wool carpet business, he said. 

That is expected to offset the weaker market conditions resulting from reduced consumer confidence in both countries.

While wool sale sales are improving, group revenues are expected to be down 7% on the same time last year because of weaker sales of lower-margin synthetic carpets.

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