Posted by Editoress on 03/16/20
Dorel Industries Inc. (TSX: DII.B, DII.A) announced on March 11th results for its fourth quarter and year ended December 30, 2019. Revenue for the fourth quarter was US$653.4 million, down 4.4% from US$683.5 million a year ago. Reported net loss for the quarter was US$0.6 million or US$0.02 per diluted share compared to US$443.9 million or US$13.68 per diluted share a year ago. One bright spot was the third consecutive quarter of revenue growth for the Cannondale brand, particularly e-bikes [see below, under Sports].
Revenue for the full year was flat at US$2.63 billion, compared to US$2.62 billion the previous year. Reported net loss was US$10.5 million or US$0.32 per diluted share, compared to US$444.3 million or US$13.70 per diluted share the previous year.
"Our teams have done an excellent job bringing inventory down to more traditional levels, with a reduction of US$80 million since the third quarter,"stated Dorel President & CEO, Martin Schwartz. "Dorel Sports revenue grew for the third consecutive quarter as our new models, particularly Cannondale, are selling well."
"Our China based suppliers delayed re-opening following the Chinese New Year due to the Coronavirus, with production delayed by two weeks in most cases. This temporary lack of manpower created several weeks of supply chain disruptions. Most factories in the country are now back in operation and are shipping, but not yet at normal levels. Operations at our main Juvenile factory in China are improving daily. We are now at 95% production capacity. Although production was slower than normal, we have not seen any significant impact on consumer spending at retail for Dorel products during the first two months of 2020 and our three segments continue to experience increased on-line shopping. Needless to say, we are closely monitoring the situation."
Fourth quarter revenue increased to US$233.2 million, up US$0.5 million, or 0.2%, from US$232.7 million last year. For the year, Dorel Sports' revenue increased to US$909.0 million, up US$26.0 million, or 2.9%, from US$883.0 million last year. Pacific Cycle Group (PCG) and Caloi posted growth in the quarter while the Cycling Sports Group's (CSG) revenue declined. PCG rose on the back of strong POS at key retailers and robust e-commerce sales. There has been tariff relief on children's bicycles and this mitigated the year's earlier impact at PCG. Caloi benefitted through the quarter from price increases on their models and improved mix on higher Cannondale sales. CSG organic revenue growth was in most geographies with increased sales of Cannondale e-bikes and model year '20 product launches.
In a move to support its next level of growth and to maintain the increasing momentum of the Cannondale brand, Dorel Sports is strengthening its European CSG operations, which will be centralized in the Netherlands. The existing assembly plant in Oldenzaal is being transformed into a state-of-the-art facility to more than double its current production capacity of Cannondale bicycles and e-bikes, and allow for an increase in focus on premium quality products. All production and supply related departments are being merged into the new facility.
In addition, CSG's European headquarters is being relocated to Woudenberg in a new, scenic campus, where an excellent working environment is being created in a setting that will bring CSG's brands to life. The offices in Oldenzaal and Basel, Switzerland have been closed. The reorganization is expected to be fully completed by year-end and will result in estimated restructuring costs of between US$8 million to US$10 million, of which US$3.8 million was recorded in the fourth quarter.
"This is a major step in implementing CSG Europe's strategic plan. We have had excellent results in Europe in 2019 and the exciting changes we are announcing today will enable us to better serve our customers, boost our brand presence, and further develop our culture," commented Dorel Sports President, Peter Woods.
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