Dorel’s Results Overshadowed by Currency Issue
MONTREAL, Canada – “Dorel’s first quarter performance was significantly affected by the continued strength of the US dollar and resulted in a net negative impact on earnings,” stated Dorel President & CEO, Martin Schwartz. The owner of the Cannondale Sports Group generates almost half its revenue outside the US.
“This exchange rate issue is certainly not unique to Dorel and overshadows a number of first quarter’s positive results,” said Martin Schwartz. “Overall the foreign exchange reduced our operating profit in reported currency by approximately US$ 12 million (€ 10.7mn euro).
Dorel Sports which includes the Cannondale Sports Group and Brazilian Caloi, grew both its revenue and operating profit, excluding the impact of foreign exchange. To limit the effects of the currency issues Dorel implemented price increases in certain markets already in the first quarter. Other markets will see price increases beginning in the second quarter.
Strong IBD sales in Europe and Japan
In the first quarter Dorel Sports revenue decreased by US$ 11.4 million (€ 10.2 mn), or 4.8% to US$ 228.9 million (€ 203.7 mn). Organic revenue increased by approximately 3% after removing the impact of varying foreign exchange rates. Organic growth at Cannondale Sports Group (CSG) led the segment with particularly strong sales at independent bike dealers (IBD) in Europe and Japan.
Brazil’s Caloi saw its organic sales growing due to the increased demand of its opening price point products as well as the ongoing popularity of Cannondale, Schwinn, Mongoose and GT in the Brazilian market. The success overseas was tempered by the US., where Dorel reports a softer start of the year. January was slow, but sales improved throughout the quarter with March back on scheduled. This trend has continued into April.
Exchange rate fluctuations
Dorel Sports’ operating profit for the quarter was US$ 11.6 million (€ 10.3mn) versus US$ 16.3 million (€ 14.5mn) in the prior year, with the net negative impact of exchange rate fluctuations accounting for approximately US$ 7 million (€ 6 mn) in lower earnings. Excluding this impact of foreign exchange, operating profit for the quarter would have increased by approximately 12%. As in Juvenile, price increases have been implemented on a selective basis to mitigate the currency issues. In Brazil, Caloi has successfully implemented increases and has announced more to go into effect in the second quarter.
“At Dorel Sports the second quarter should again beat sales and earnings compared to the same period last year, excluding the impact of foreign exchange. As stated in our year-end release, we believe the second half will be strong, and will exceed the first half. Significant new product introductions should generate incremental volume and revised pricing will boost earnings,” said Martin Schwartz.