Consolidation costs will hit Cavalier hard

  • 02/11/2016
Consolidation costs will hit Cavalier hard

Cavalier Corp said 2017 earnings may fall as much as 52 percent as the carpet maker incurs one-time costs to consolidate its manufacturing operations.

Normalised profit is expected to be $3 million to $5m in the year ending June 30, 2017, from $6.3m a year earlier, the Auckland-based company said in a statement.

In April, Cavalier said it would consolidate its woollen yarn spinning operations in Napier and Whanganui to a single hub in Napier, and scale back its semi-worsted yarn spinning operation in Whanganui.

It would also relocate its felted yarn operation from Christchurch to Whanganui and close the Christchurch plant as part of the plan to slash costs and lift profitability.

"Aligning yarn spinning capacity with demand releases considerable upside in future years," chief executive Paul Alston said on Wednesday.

"However, consolidating three manufacturing operations is a massive undertaking, with temporary operating inefficiencies and disruptions arising during the transition to the new model and as a result, the company is incurring additional one-off costs. We expect to complete this phase before the end of 2016."

Cavalier shares tumbled 10 percent to 70 cents, capping a 75 percent surge in the past 12 months.