The European financial crisis and the high cost of wool are being blamed for carpet maker Cavalier Corporation's significant drop in sales for the first quarter of its financial year.
Sales volumes of broadloom carpet and carpet tiles to September 30 were down about 20% on the previous year.
The concerns and uncertainties resulting from the financial crisis in Europe had seen the deferral of a large number of major commercial projects, particularly in Australia, but also in New Zealand, managing director Wayne Chung said.
At the same time, the flow-on effects of "significantly increased" wool costs into the prices of the company's woollen carpets were having an adverse impact on sales, especially given the already subdued retail environment in both Australia and New Zealand.
Given the difficult and unpredictable trading conditions, the directors believed it was no longer appropriate to proceed with the issue of shares under the Cavalier Corporation dividend reinvestment plan in respect of the final dividend for the year ended June 30.
As a result, the whole of the final dividend due tomorrow would now be paid in cash, Mr Chung said.
Last week, First Union (formerly NDU) announced Cavalier had made 22 workers and some management redundant across its Wiri, Napier and Wanganui mills, while Norman Ellison Carpets, which is 70% owned by Cavalier, made 20 workers redundant at its Onehunga yarn mill this week.
The union, which attributed a combination of a high wool price, lack of new housing starts and the lack of progress on the Canterbury rebuild, said it would not be surprised to see further job losses at other mills.
When Cavalier released its annual report in August, the company said wool prices increased by an unprecedented 80% over the year. The increase led to a 10% to 20% lift in the prices of Cavalier's woollen carpets.
Cavalier shares closed last night at $2.75, down 15c on double a normal day's trading.