MONTRÉAL (BRAIN) — Dorel Industries reported a decline in fourth-quarter revenue in its cycling division Thursday. Revenue was down $18.4 million or 7.3 percent to $235.3 million, the company said. Organic revenue was down 14.6 percent when removing currency rate fluctuations and the revenue impact of the transition of CSG’s international business from a licensing model to a distribution platform.
The company attributed the revenue decline to the change in North American CSG dealers’ purchasing habits to reduce their inventory prior to the cycling season, which is expected to move fourth quarter orders to the first half of 2017.
For the full year, CSG’s revenue was down $61.2 million or 6.1 percent to $939 million and organic revenue was down 8.4 percent when removing currency rate fluctuations and the international business change. The company pointed to the change in dealers’ purchasing patterns, industrywide discounting due to excess inventories at suppliers and retailers in the first half of 2016 and a generally soft global bike market.
Fourth quarter operating profit declined $3.5 million to $5 million and adjusted operating profit increased $1 million, or 10.8 percent to $10.2 million when excluding restructuring and other costs. Margin improvements and cost controls offset the reduced sales impact to exceed the prior year’s fourth quarter.
Year-to-date operating loss was $33.9 million compared to an operating profit of $10.9 million in 2015.Excluding impairment losses, restructuring and other costs, adjusted operating profit declined $10.5 million, or 24.9 percent to $31.5 million mainly from lower demand and reduced margins from discounting during the first half of 2016.
Dorel said Pacific Cycle had a good year, in part, due to improved supply chain efficiencies. Strategic pricing, cost controls as well as a better product mix allowed Caloi to increase its profitability.
Starting this year, restructuring actions taken last fall are expected to result in annual savings of $5 million.
“Dorel Sports worked throughout 2016 to position itself for a rebound in earnings in 2017. Excess inventories in the industry have been reduced and thus rampant discounting should not be repeated. Improvements made in cost control and supply chain management are expected to contribute to the operating profit, helping to offset any sales softness, should this occur. It is early in the year and visibility for the full year is difficult, but we are confident in the direction of the segment,” said Martin Schwartz, Dorel president and CEO.
All figures are in U.S. dollars. Dorel’s fourth quarter and full-year earnings conference call is scheduled for Thursday afternoon EST. Check back here for updates following the call.
