Dorel’s 2015 Results Overshadowed by Challenging Currency Rates
MONTREAL, Canada – Dorel’s 2015 financial results are overshadowed by challenging currency rates. “The adverse exchange rates impacted our earnings by approximately US$ 43 million,” said Dorel President and CEO Martin Schwartz at the presentation of the 2015 results.
“Excluding this impact we would have exceeded prior year earnings for the year. Each of our foreign-based divisions responded to these currency challenges over the course of the year, as reflected in our fourth quarter results which exceeded last year,” explained Schwartz. “Especially in Brazil, Caloi faced challenging economy and local market conditions, including rising inflation and the devaluation of the Brazil real. This resulted in US$ 26.5 million impairment losses on goodwill and intangible assets for Caloi.”
Increased demand for MY 2016
In 2015 Dorel’s sports division, which includes Cannondale, Schwinn, Mongoose, GT, Caloi and Sugoi saw its revenue decrease by US$ 53.0 million or 5.0% to US$ 1.0 billion. Organic revenue increased by approximately 3%. This growth was primarily generated in the IBD channel due to increased demand of new model year 2016 bicycles.
The division’s operating profit was down US$ 45 million from US$ 55.9 million in 2014 to US$ 10.9 million in 2015. All major divisions were negatively affected throughout the year by the strong US dollar. The net negative impact on the segment’s operating profit was approximately US$ 29 million for the year.
The results include restructuring charges of US$ 4.6 million related to structural changes at Dorel Sports’ Cycling Sports Group and Sugoi divisions. As announced during the third quarter, the Sugoi and Cannondale apparel product lines are now consolidated into a single global apparel portfolio with Sugoi as the primary brand. The Sugoi centre of excellence has moved to a new location. The restructuring initiatives for Dorel Sports are completed and will deliver annual cost savings of an estimated US$ 4.0 million as of this year.
“Taking appropriate pricing measure on US market”
“Dorel Sports’ 2016 product line is exceptional,” stated Martin Schwartz. “We expect to expand our market share in the IBD sales channel by leveraging the early sell-in success of the model year 2016 bikes and the expansive and exciting upgrade of our product line in model year 2017. This should help fuel sales in the second half. In an attempt to clear excessive inventory, some of Dorel’s key IBD competitors have initiated early season discounting. We are taking the appropriate pricing measures. An early spring could also help mitigate the situation. Business is good in our mass and sporting goods channels and we anticipate surpassing last year’s results in these channels. Despite significant economic and political challenges in Brazil, Caloi should see some year-over-year improvement,” concluded Martin Schwartz.