Dorel bike division down but operating profits surge after restructuring

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Dorel has posted its first quarter financials within which the group’s operating profit surged by almost double to $10.1 million.

Having undertaken a restructuring, within which the workforce slimmed by four percent, the firm offset a bike division revenue dip. Despite the first quarter bicycle division drop there were positives to be taken, including cited progress on discounting in the marketplace on Cycling Sports Group brands like GT and Cannondale.

Other pros for trade were Pacific Cycle’s improved product mix contributing to the improvement. Caloi achieved higher margins with improved pricing and product mix, as well as from the strengthening of the Brazilian Real.

Dorel Sports restructuring is expected to result in annual savings of US$5.0 million. First quarter operating profit rose by US$4.9 million, or 92.5% to US$10.1 million as a result of the restructuring plan, improved margins and cost.

“In the outlook provided with our year end results, we stated that for 2017 all three of our business segments were positioned to improve earnings. In the first quarter, both Dorel Home and Dorel Sports delivered on that expectation. Dorel Juvenile had a slower than anticipated start to the year as our factory in China faced challenges on new product launches, but we are proactively managing this and will see improvements through the year,” stated Martin Schwartz, Dorel President & CEO.

“We still expect all three segments to exceed prior year earnings. Dorel Home again demonstrated its ability to deliver an expanded product range to consumers with its industry leading e-commerce platform. This will continue to drive sales and earnings improvements for the balance of the year. We expect a strong second half at Dorel Juvenile due to multiple new product introductions and new local management in China delivering on needed improvements in operations. In addition, 2016’s abnormally high product liability costs will return to normal levels, contributing to the segment’s substantial earnings improvement. The bicycle industry is currently facing short term challenges, therefore sales growth opportunities in 2017 could be limited. Dorel Sports has re-structured itself to increase earnings this year through improved margins and lower operating expenses, and we expect this to more than offset sales challenges.

“In addition, we made the strategic decision to amend the Company’s Credit Agreement and the related costs impacted the quarter, but this will lower our finance expenses through the rest of the year,” concluded Mr. Schwartz.