Dorel Reports Second Quarter Results
- Dorel Home e-commerce sales account for more than half of segment revenues - Dorel Sports improved sales mix results in earnings increase - Dorel Juvenile improvements to come in second half as new product launches roll-out
(firmenpresse) - MONTREAL, QUEBEC -- (Marketwired) -- 08/04/17 -- Dorel Industries Inc. (TSX: DII.B)(TSX: DII.A) today announced results for the second quarter and six months ended June 30, 2017. Second quarter revenue was US$611.3 million, down 4.1% from US$637.3 million recorded in the same period a year ago. Adjusted net income increased 22.1% to US$12.4 million or US$0.38 per diluted share, compared to adjusted net income of US$10.2 million or US$0.31 per diluted share last year. Reported net income was US$11.4 million or US$0.35 per diluted share, compared to reported net loss of US$38.6 million or US$1.19 per diluted share in the second quarter of 2016.
Revenue for the six months was US$1.26 billion, a decrease of 2.0% compared to US$1.28 billion last year. First half adjusted net income increased to US$35.1 million or US$1.08 per diluted share, compared to adjusted net income of US$29.9 million or US$0.92 per diluted share a year ago. Reported net income for the period was US$20.3 million or US$0.62 per diluted share, compared to a reported net loss of US$21.9 million or US$0.68 per diluted share in the first half a year ago.
"Dorel Home''s on-line sales exceeded 50% of segment revenue for the first time, resulting in another stellar performance for the quarter. The continued growth in e-commerce has allowed greater flexibility to expand the segment''s on-line offerings with additional excellent value products at higher price points. Disciplined cost management and better gross margins at Dorel Sports offset lower revenues, resulting in the fourth consecutive quarter of year-over-year earnings improvement. In Juvenile, we had a quarter that was below our expectations. We corrected many of our first quarter manufacturing issues in China in the past 60 days and our production levels have increased significantly. This did lead to higher costs, but as we enter the second half of the year, Dorel Juvenile is poised for a strong rebound from its second quarter. This will come from a robust product introduction execution across all of our operating businesses and with our most important retail customers; as well as additional factory improvements taking effect," commented Martin Schwartz, Dorel President & CEO.
The Company is presenting adjusted financial information, excluding impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt as it believes this provides a more meaningful comparison of its core business performance between the periods presented. These previously announced items are detailed in the attached tables of this press release. Contained within this press release are reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
Dorel Home
Second quarter revenue rose US$12.3 million, or 7.1%, to US$184.2 million compared with US$171.9 million a year ago. For the first six months, revenue grew US$28.9 million, or 8.0%, to US$388.2 million from US$359.3 million in 2016. These improvements were driven by increased sales in all divisions to on-line retailers. In the second quarter and for the six months, on-line sales represented 52% and 49% of total segment sales respectively compared to 43% and 42% for the comparable periods in 2016. This represents the highest percentage of on-line sales in Dorel Home''s history and exceeded reductions in sales to brick and mortar stores.
Gross profit, at 17.8% in the second quarter and 17.4% for the six months, improved by 90 and 50 basis points respectively over last year''s second quarter and year-to-date periods. The improved margins from increased on-line sales were partly offset by slightly higher input and warehousing costs.
Second quarter operating profit increased to US$16.7 million from US$14.8 million a year ago which was driven by higher sales volumes and slightly offset by increased selling and general and administrative expenses. For the first six months, operating profit increased US$4.1 million, or 12.6%, to US$36.5 million compared to US$32.4 million in the first six months of 2016.
Dorel Juvenile
Second quarter revenue decreased US$10.9 million, or 4.7%, to US$218.1 million. Organic revenue decreased by approximately 3.8%, primarily in the U.S. and European markets, after removing the impact of varying exchange rates year-over-year. Prior year operating profit included significant costs of US$7.0 million associated with product liability in the U.S. and the year-over-year reduction in these costs was US$5.8 million in the quarter. Revenues and earnings in our other markets were up overall, led by strong growth in Brazil and Australia.
In the U.S., point of sale at the segment''s largest customer increased versus prior year, but the customer limited orders to reduce their own in-stock inventory levels. Sales to several other brick and mortar customers were also lower, a reflection of challenges in this channel overall. E-commerce sales are increasing which partially offset these declines. In Europe, late product launches and manufacturing challenges in China delayed new product going into retail, negatively impacting sales.
Six months revenue decreased US$24.1 million, or 5.1%, to US$446.7 million. Organic revenue declined approximately 4.5% due mainly to challenges within the U.S. and European markets as well as to reduced Dorel Juvenile China sales to non-domestic third-party customers.
Production levels at the China based facilities increased by approximately 20% from the first quarter, however the recovery plan put into place resulted in higher costs in the short-term. This was the principal contributor to lower gross margins in the quarter. The lower sales and gross margins, partially offset by lower product liability and other operating costs, resulted in operating profit decreasing US$1.3 million, or 15.5%, to US$7.2 million during the second quarter. Excluding restructuring and other costs, adjusted operating profit decreased by US$0.7 million, or 8.1%, to US$8.1 million from US$8.8 million a year ago. Year-to-date operating profit declined US$6.2 million, or 26.9%, to US$16.8 million. Adjusted operating profit declined US$2.8 million, or 10.6%, to US$23.4 million from US$26.2 million principally for the same reasons as in the second quarter.
Dorel Sports
Second quarter revenue decreased US$27.5 million, or 11.6%, to US$209.1 million and by approximately 11.1% after removing the impact of varying exchange rates year-over-year. Six months revenue decreased US$29.9 million, or 6.6%, to US$423.1 million and by approximately 6.4% after removing the impact of varying exchange rates year-over-year. Organic revenue declined by approximately 13.4% and 11.7% for the quarter and six months respectively when removing foreign exchange fluctuations and the change in Cycling Sports Group (CSG) International''s business model for which the revenue recognition transitioned from a licensing model to a distribution platform.
Part of the revenue shortfall in the second quarter resulted from weakness in consumer demand in the mass bike channel due particularly to the prolonged unfavourable North American weather. CSG second quarter revenues declined due to lower discounted sales to the Independent Bike Dealer (IBD) channel when compared to prior year''s second quarter. CSG''s closeout sales in the quarter represented 7% of sales volume in 2017 compared to 21% in the prior year''s second quarter and excluding these closeout sales, revenues were flat for the second quarter year-over-year and as a result, gross margins were improved. In Brazil, Caloi''s top line was affected by weak consumer demand, amid ongoing political and economic turmoil, as well as increased competitive pressure as other key brands in the market began to reduce retail price points. This was true for both the quarter and year-to-date.
Second quarter operating profit was US$4.9 million compared to an operating loss of US$50.0 million a year ago. Excluding 2016''s impairment losses, restructuring and other costs, adjusted operating profit rose to US$5.7 million from US$5.2 million in 2016. For the first six months, operating profit was US$15.0 million compared to an operating loss of US$44.7 million in 2016. Excluding impairment losses, restructuring and other costs, adjusted operating profit was US$15.1 million compared to US$10.5 million a year ago. The improvement in adjusted operating profit for both periods was due to improved margins and a reduction in operating expenses.
Other
During the second quarter and six months ended June 30, 2017, the Company''s effective tax rates were 27.2% and 31.2% respectively versus 12.5% and 8.6% for the same periods in the prior year. Excluding income taxes on impairment losses, on restructuring and other costs, on remeasurement of forward purchase agreement liabilities and on loss on early extinguishment of long-term debt, the Company''s second quarter adjusted tax rate was 28.4% in 2017 and 15.4% in 2016. The adjusted tax rate for the first six months was 24.7% in 2017 versus 16.5% in 2016. The main cause of the variation year-over-year of the adjusted tax rate is due to changes in the jurisdictions in which the Company generated its income. The Company is stating that for the full year it expects its annual adjusted tax rate to be between 20% and 25%. However, variations in earnings across quarters mean that this rate may vary significantly between quarters.
Quarterly dividend
Dorel''s Board of Directors declared its regular quarterly dividend of US$0.30 per share on the outstanding number of the Company''s Class "A" Multiple Voting Shares, Class "B" Subordinate Voting Shares, Deferred Share Units, cash-settled Restricted Share Units and cash-settled Performance Share Units. The dividend is payable on September 1, 2017 to shareholders of record as at the close of business on August 18, 2017.
Outlook
"The strength and flexibility of Dorel Home''s e-commerce platform has allowed for an expansion of its on-line offerings with excellent value products at higher price points. E-commerce sales are expected to continue to drive the segment''s overall growth and profits, both above plan and prior year levels for the balance of the year", stated Dorel President & CEO, Martin Schwartz.
"At Dorel Juvenile, several factors support our confidence of a strong second half rebound. Many new products are currently entering the market, particularly in Europe and these launches will continue into 2018. In the U.S., there are several new placements at major retailers, and at Dorel''s largest customer, orders are in line with point-of-sale levels, which are up over last year. This was not the case in the second quarter as that customer reduced its in-stock levels. Further, Dorel Juvenile''s growth with e-commerce retailers is at a greater pace than budgeted. We also expect our smaller markets to continue their overall excellent performance. The China factory has successfully caught up on its order back-log and sales should be strong going forward. The focus in China will now turn to additional cost saving opportunities. Finally, the majority of our major currencies are trending favourably which will further help our various markets around the world.
"We anticipate that Dorel Sports overall will have a better second half than last year with an increased adjusted operating profit. We are currently seeing some weakness in the mass channel which means third quarter results are likely to be lower than last year, but expect that a solid fourth quarter performance should more than compensate for this," concluded Mr. Schwartz.
Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, August 4, 2017 at 11:00 A.M. Eastern Time. Interested parties can join the call by dialing 1-877-223-4471. The conference call can also be accessed via live webcast at . If you are unable to call in at this time, you may access a recording of the meeting by calling 1-800-585-8367 and entering the passcode 36916239 on your phone. This recording will be available on Friday, August 4, 2017 as of 2:00 P.M. until 11:59 P.M. on Friday, August 11, 2017.
Complete condensed consolidated interim financial statements as at June 30, 2017 will be available on the Company''s website, , and will be available through the SEDAR website.
Profile
Dorel Industries Inc. (TSX: DII.B)(TSX: DII.A) operates three distinct businesses in the juvenile products, bicycles and home products. The Company''s safety and lifestyle leadership is pronounced in both its Juvenile and Bicycle categories with an array of trend-setting, innovative products. Dorel Juvenile''s powerfully branded products include global juvenile brands Safety 1st, Quinny, Maxi-Cosi and Tiny Love, complemented by regional brands such as Cosco, Bebe Confort and Infanti. In Dorel Sports, brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and SUGOI. Dorel Home markets a wide assortment of both domestically produced and imported furniture, principally within North America. Dorel Industries Inc. has annual sales of US$2.6 billion and employs approximately 10,000 people in facilities located in twenty-five countries worldwide.
Caution Regarding Forward-Looking Statements
Certain statements included in this press release may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. Except as may be required by Canadian securities laws, Dorel does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from Dorel''s expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, Dorel cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits Dorel will derive from them. Forward-looking statements are provided in this press release for the purpose of giving information about Management''s current expectations and plans and allowing investors and others to get a better understanding of Dorel''s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Forward-looking statements made in this press release are based on a number of assumptions that Dorel believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from Dorel''s expectations expressed in or implied by the forward-looking statements include: general economic conditions; changes in product costs and supply channels; foreign currency fluctuations; customer and credit risk, including the concentration of revenues with small number of customers; costs associated with product liability; changes in income tax legislation or the interpretation or application of those rules; the continued ability to develop products and support brand names; changes in the regulatory environment; continued access to capital resources and the related costs of borrowing; changes in assumptions in the valuation of goodwill and other intangible assets; and there being no certainty that Dorel''s current dividend policy will be maintained. These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in Dorel''s annual Management Discussion and Analysis and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors outlined in the previously-mentioned documents are specifically incorporated herein by reference.
Dorel cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to Dorel or that Dorel currently deems to be immaterial may also have a material adverse effect on Dorel''s business, financial condition or results of operations. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Non-GAAP financial measures
As a result of impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt incurred in 2017 and 2016, the Company is including in this press release the following non-GAAP financial measures: "adjusted cost of sales", "adjusted gross profit", "adjusted operating profit", "adjusted finance expenses", "adjusted income before income taxes", "adjusted income taxes expense", "adjusted tax rate", "adjusted net income" and "adjusted earnings per basic and diluted share". The Company believes that this results in a more meaningful comparison of its core business performance between the periods presented. These non-GAAP financial measures do not have a standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other issuers. Contained within this press release are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
(All figures in the tables below are in thousands of US$, except per share amounts)
The details of impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt recorded are presented below:
Contacts:
MaisonBrison Communications
Rick Leckner
(514) 731-0000
Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034
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Datum: 04.08.2017 - 06:30 Uhr
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