Cavalier profit up 14 pc

By AARON LIM - BusinessDay.co.nz | Friday, 29 August 2008

Carpet manufacturer Cavalier Corporation posted a 14 per cent rise in profit for the June year to $17.9 million, with earnings and revenue being significantly boosted by the $26 million purchase of Norman Ellison Carpets in February.

 Cavalier's revenues surged 22 per cent to $250.06 million.

Reporting for the first time under International Financial Reporting Standards, Cavalier said the 2008 profit included $24 million of revenue from Norman Ellison and $2 million in earnings before interest and tax.

Managing director Wayne Chung said without the Ellison acquisition, Cavalier's revenues would have risen just 9 per cent and profits only 1 per cent.

Despite demand for its broadloom products in Australia remaining strong, sales in New Zealand had been hit by the reduced level of discretional spending, he said.

Revenue from the company's wool operation, which accounts for 76 per cent of sales revenue, was $57 million - a 17 per cent increase.

Chung warned however that low returns for wool growers and the subsequent increase in conversion of farm land towards dairy would pose "challenges".

While he expected favourable conditions for the carpet tile sector, he anticipated tougher conditions for the residential carpet business in Australia and New Zealand for the 2009 financial year.

"Our budget for the 2008/09 financial year shows a modest increase in earnings, but these could dissipate if there were to be any further softening in the residential carpet markets in New Zealand and Australia. It is too early to provide an outlook to shareholders at this stage, given the high degree of volatility in the market place" Chung said. Shareholders would be updated at the annual meeting in November.

The company declared a final, fully imputed dividend of 11 cents a share, taking the total dividend for the year to 20c a share, compared with 19c a share in 2007.