Posted at 2:16 p.m.
(Montreal) Dorel Industries can’t escape the “storm” as the furniture and juvenile products maker is hit hard by supply chain disruptions and soaring costs.
The Montreal company revealed on Friday that its net loss more than doubled in the fourth quarter. “Demand was good, but we were unable to secure the resources or parts to fully meet it,” President and CEO Martin Schwartz said in a call with analysts. financial.
Rising costs resulting from supply chain disruptions have eroded the manufacturer’s profitability. “For a company that relies entirely on containers to deliver its products, the cost pressure is extreme,” said financial analyst Derek Lessard of TD Securities.
Chief Financial Officer Jeffrey Schwartz cited rising container prices as an example of the hurdles that stand in his way.
When the price of a container goes from $2,000 to $15,000 in just eight months and it contains between 300 and 400 bunk beds or sofas, the increase is significant.
Jeffrey Schwartz, CFO of Dorel Industries
While revenue from continuing operations remained relatively stable with a decline of 0.9% to US$435.3 million, the increase in costs had a “severe” impact on the net loss from continuing operations (the sale of the sports division was concluded at the beginning of January). It reached 29.6 million US, against 13.3 million US in the same period last year.
A bad surprise
Although Dorel reports that the supply chain situation has been disrupting its business for several quarters, the extent of the difficulties has surprised investors.
Around noon, Dorel shares lost $1.10, or 9.39%, to $10.62 on the Toronto Stock Exchange on Friday. “Combining the challenges of a supply chain bottleneck, tough labor market, inflation, geopolitical tensions and a global health crisis, Dorel’s near-term earnings visibility is almost nil,” summarizes Mr. Lessard.
Jeffrey Schwartz recognizes that it is difficult to say what the next quarters will be made of. “We feel like we’re in a storm right now,” says the CFO. We want to make it to the other end and hope that what we are doing today will allow us to bounce back from the storm. »
While waiting for the clearing, the management is carrying out various projects to strengthen the company. It sold its sports division behind bicycle brands Cannondale, Mongoose and Schwinn for US$810 million last January.
Dorel also wants to transfer part of its production made in Asia to Western countries. It is also about to complete work at its Montreal plant to start producing coil spring mattresses.
Despite Dorel’s misfortunes, Mr. Lessard, one of only two analysts monitoring the company, maintains his buy recommendation. “We continue to believe that possible asset sales and measures to return cash to shareholders [dividende ou rachat d’action] will be determining factors of the share price for the next 12 to 18 months. »
Martin Schwartz wanted to be reassuring as the bad news accumulates. “Two years of pandemic and now a senseless war [l’invasion russe en Ukraine], deplores the President and Chief Executive Officer. Who would have predicted this? Many challenges remain, but Dorel will overcome. »