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Cavalier's sharply lower first half profit

NZ Newswire logoNZ Newswire 17/02/2017 Rebecca Howard

Cavalier posted a sharply lower first-half profit and the carpet maker and wool scourer continues to forecast no earnings growth for the full year, although it expects improvement further down the track.

The Auckland-based company said its net profit for the six months to December 31 was $31,000 versus $3.5 million in the same period a year earlier. It noted that the cost of work to reduce debt, rationalise inventory and restructure had impacted the first half, as had the increased wool price and strong US dollar.

Revenue fell to $84.3m from $98.4m in the prior period.

Regarding the carpet business, it said the New Zealand market has remained reasonably buoyant but Australia has been much softer than anticipated, particularly in the past two months.

The company said it has now closed its Christchurch plant and moved the felting operating to Whanganui. Woollen yarn spinning is now conducted entirely out of the Napier plant. The significant restructuring costs, higher wool prices, the higher US dollar and increased manufacturing costs "have negatively impacted the six months" in the carpet business and won't have any benefits until 2017-18, it said.

The six-month lag between the purchase of wool and the manufacture and sale of carpet also means there won't be any benefit from a current drop in wool prices until 2017-18. Rather, the high wool price from the previous year is having an adverse impact, it said.

Within the wool business it said its wool buying businesses had been hard hit by a dramatic drop in wool prices, due almost entirely to a lack of demand out of China.

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