Dorel Registers Rebound in Third Quarter
MONTREAL, Canada – Dorel had good news for shareholders on Nov. 7, after a disappointing second quarter. The company, whose cycling-related holdings include Cannondale, Schwinn, GT, and Sugoi, and now Brazilian bicycle company Caloi, announced that revenue for the quarter was US$607.3 million compared to US$613.3 million a year ago and Net income for the period was US$11.1 million or US$0.34 per diluted share compared to US$20.0 million or US$0.63 per diluted share in 2012.
However, third quarter results include one-time charges totaling US$9.4 million, after tax, including the purchase of Caloi, which incurred after tax costs of US$4.5 million in the quarter and US$5.6 million year-to-date, due to foreign exchange losses on the put option liability associated with the transaction. Putting aside those expenses, third quarter net income would have been US$20.5 million or US$0.64 per diluted share.
“2013 has been a challenging year in our core businesses and we have been focused on making the required adjustments including rigorous concentration on new product development. Furthermore we have seen an improvement since the second quarter in Recreational/Leisure’s operating profit. We are taking measures to improve this business,” stated Dorel President and CEO Martin Schwartz.
Discounting 2013 models
Dorel has also taken a majority stake in the Cannondale Pro Cycling team and Brixia Sports, announced on Oct. 22. The purchase of a 70% stake in Caloi took place in late August. The company’s Recreational segment, which encompasses its cycling brands, grew during the third quarter. Revenue was up 1.2% and operating profit increased 12.7% compared to the third quarter of 2012. Organic revenue decreased by approximately 6% in the quarter as well as year-to-date, which the company ascribes to poor weather in the spring and discounting 2013 models.
Stabilization in bicycle market
According to the company’s press release announcing the results, despite a global decrease in the bicycle market compared to 2012, some market indicators suggest stabilization in the bicycle market could be coming in the near future. The company also pointed to favorable feedback on the new products it featured at Eurobike including the Cannondale Tramount, the first E-Mountain bike in the successful Cannondale E-series. The GT Sensor won a Eurobike Gold award in the mountain bike category.
“As expected, Recreational/Leisure rebounded from a disappointing second quarter, and with the contribution of Caloi, exceeded prior year results in the third quarter,” commented Schwartz. “It is anticipated that the operating profit for the fourth quarter will substantially be higher than the third quarter and will set the stage for an improved 2014.”
Dorel is listed on the Toronto Stock Exchange (TSX: DII.B, DII.A)