Posted by Editoress on 11/8/19
On Friday, Dorel Industries Inc. (TSX: DII.B, DII.A) announced results for the third quarter and nine months ended September 30, 2019. The Cycling Sports Group (CSG) reported adjusted organic revenue grew 15.7% for the Quarter and 3.9% for the first nine months of the year. A doubling of E-bike sales led the growth in Europe. More detailed information is below:
Third quarter revenue was US$685.7 million, up 2.3% from US$670.4 million. Reported net loss was US$4.3 million or US$0.13 per diluted share, compared to net income of US$9.6 million or US$0.29 per diluted share last year. Adjusted net income was US$2.4 million or US$0.07 per diluted share, compared to US$11.0 million or US$0.34 per diluted share a year ago.
Nine-month revenue was US$1.98 billion, an increase of 2.3% compared to US$1.94 billion last year. Reported net loss year-to-date was US$9.8 million or US$0.30 per diluted share, compared to US$0.4 million or US$0.01 per diluted share in 2018. Year-to-date adjusted net income was US$14.5 million or US$0.44 per diluted share, compared to US$29.2 million or US$0.89 per diluted share a year ago.
"As expected and previously communicated, the third quarter was a difficult one primarily due to various issues related to U.S. imposed tariffs,"stated Dorel President and CEO, Martin Schwartz. "We raised prices in the quarter and this has had several negative consequences. Retailers altered their purchasing decisions, which resulted in a considerable product mix imbalance. In addition, some of our large U.S. customers delayed holiday orders from September to October."
Third quarter revenue increased US$31.2 million, or 14.2%, to US$250.3 million, with revenue growth across all three divisions, driven by strong performances at the Cycling Sports Group (CSG). Excluding foreign exchange rate fluctuations year-over-year and the impact of the divestment of the performance apparel line of business (SUGOI), adjusted organic revenue increased 15.7%. Nine-month revenue increased US$25.5 million, or 3.9%, to US$675.9 million.
"All Dorel segments have done an excellent job of holding the line on most expenses and creative product development has resulted in many new exciting introductions. Cannondale's new line-up is driving Cycling Sports Group success. Dorel Sports' sales were very strong despite some orders being pushed back to the fourth quarter. Margins in mass were affected by tariffs, but revenue grew double digits for the first time in five years. Our bikes are selling well across all channels," concluded Mr. Schwartz.
CSG's third quarter growth was driven by continued excitement and increased sales of the model year '20 lineup. CSG margins remained strong as a result of increased in-line, full margin sales and solid retail POS levels continue to trend upwards. Year-to-date CSG's independent bike dealer (IBD) business continued to outpace the rest of the industry. Growth in Europe was primarily driven by the e-bike category which doubled sales with e-mountain bike launches such as the Moterra and Habit Neo. Caloi delivered strong double-digit revenue growth with increased volume due to success with Brazil's Yellow Bike Sharing program and a better mix. Caloi is also experiencing improved results from increased Cannondale brand marketing efforts. POS levels were solid at Pacific Cycle, however the division was negatively impacted by margin compression. In addition, key retailers delayed holiday pipeline shipments to the current fourth quarter.
Operating profit for the quarter was US$6.0 million compared to US$7.0 million a year ago. Adjusted operating profit was US$5.6 million compared US$7.5 million last year. The Pacific Cycle issues described above plus related additional warehouse storage were solely responsible for the decreased operating profit. Nine-month operating profit was US$20.6 million compared to US$2.9 million in 2018. Adjusted operating profit was US$20.2 million versus US$14.7 million.
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