Carpet manufacturer Cavalier Corp has reported a tax-paid loss for the year to June 30 of $1.6 million after experiencing its worst operating conditions during 2011-12.
The loss, which compared with an $18.2 million profit the previous year, was signalled in April when the company advised earnings would be affected by substantial restructuring costs as it repositioned the broadloom carpet business to cope with the difficult operating environment.
In a statement to the markets, managing director Colin McKenzie said "virtually every variable" within the company's businesses worked against it, with many outside its control.
That included the global financial crisis, the European sovereign debt crisis and the flow-on into the company's markets, an 80% spike in wool prices in the preceding 2010-11 season and depressed residential and contract building activity in New Zealand and Australia.
Further compounding issues were the strong New Zealand dollar and Australian dollar exchange rates, favouring imports into New Zealand and Australia while penalising exports into some of the company's long-standing markets in North America, Europe and Asia, and the business disruptions in Christchurch, followed by delays to its rebuilding programme.
In June, Cavalier-owned Norman Ellison Carpets announced the closure of its Onehunga spinning plant, and there was also consolidation of the company's two New Zealand-based warehousing and distribution operations.
That was on top of other measures taken earlier in the 2011-12 year to realign production capacity with reduced demand.
It was those initiatives that had given rise to the $5.9 million tax-paid restructuring costs that had affected the 2011-12 results, Mr McKenzie said.
Market conditions in New Zealand for both residential and commercial carpets were "extremely soft" throughout the year.
The company had been expecting conditions to improve in the second half but, if anything, they had deteriorated further. It did not expect any real improvement until the second half of the 2012-13 year.
The company fared no better in the Australian market, but it viewed that situation as short term and expected conditions to improve throughout 2012-13.
While wool prices had declined significantly since the peak last December, it would take at least another four months before the company would start to experience the benefits of lower prices in the cost of goods sold.
Cavalier saw the first half of the new financial year remaining tough in New Zealand. However, it could see some upside in the second half as demand from new home building and real estate-related refurbishment work improved.
The company has previously indicated a turnaround in earnings to $10 million to $12 million profit after tax for the 2012-13 year.
