Results from Cavalier wool operations substantially down

22 Feb '11

5 min read

In the period under review, we experienced contrasting market conditions in our main markets in New Zealand and Australia.

In New Zealand, market conditions remained soft as households continued to adapt to the post global financial crisis era with concern and caution - with debt reduction the primary focus and very little discretionary spending coming through, particularly in the big-ticket consumer durables. Home refurbishments and new building starts were also at historical lows. All these combined reduced the demand for carpet in residential applications to the lowest level seen in recent years. Similarly, the commercial sector was also quiet.

However, we enjoyed much better market conditions in Australia where residential building activity levels remained high. Demand for residential carpet was strong, especially in the higher-end of the market where our premium brands are well represented. Commercial activity was also strong even though this was confined mainly to refurbishment work. Our carpet tile operation in Australia stood out in the six month period as it continued to perform very strongly on the back of its "design-led" focus and "solution-based" approach.

Australian-based sales were up 19% on the previous year during the six months, whilst New Zealand sales were down 15%, highlighting the extent of the underlying differences between the two markets at the present time.

Wool Business
Our wool business comprises the Elco Direct wool acquisition operation and our 50% interest in commission wool scourer, Cavalier Wool Holdings Limited (CWH).

EBIT for Elco Direct is $216,000 for the six months to 31 December 2010 on revenue of $13.4 million, compared with EBIT of $270,000 on revenue of $12.0 million the previous year.

Cavalier's share of the tax paid earnings of CWH for the six months to 31 December 2010 is $819,000, compared with $1.4 million the previous year.

Whilst the results from our wool operations are substantially down on the previous comparable period, much of that can be attributed to the very wet spring and the consequent disruption to shearing and the flow of wool from the farm gate to the scours.

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Cavalier Corporation