Dorel worries about second wave of pandemic

(Montreal) Dorel Industries took advantage of the summer season, when consumer enthusiasm for bicycles and residential furniture was at the rendezvous, but the second wave of COVID-19 infections and the shortages observed at some suppliers will give them a hard time by the end of the year.

Julien arsenault
The Canadian Press

After unveiling its third quarter results on Friday, where it returned to profitability, the Montreal company declined to give more details about the privatization agreement that should allow it to withdraw from the Toronto Stock Exchange. which was featured earlier this week.

In a conference call with financial analysts, Dorel President and CEO Martin Schwartz instead provided a portrait of the obstacles facing the company over the last three months of the fiscal year.

New containment measures decreed in several European countries due to the health crisis, increased shipping expenses caused by the rise of e-commerce and shortages among bicycle parts suppliers may have an impact on the results.

“Global demand for bicycles has caused parts shortages among suppliers and they are having difficulty ramping up their production rates,” President and CEO Martin Schwartz said on a conference call. with analysts. They raise their prices when demand goes up. ”

The health crisis has prompted many consumers eager to spend time outdoors while respecting the rules of physical distancing to opt for cycling. This has boosted demand for steel, aluminum and rubber, also driving up costs. Dorel manufactures a variety of consumer goods such as Cosco and Safety 1st child car seats, Cannondale and Schwinn bikes, and home furnishings under brands such as Dorel Living and DHP.

In the green

Meanwhile, in the third quarter ended September 30, Dorel posted net profits of US 26.2 million, or US $ 80 cents per share, while it lost US $ 4.3 million, or US $ 13 cents per share. action, a year ago.

Its revenues increased 9.9% to US $ 753.4 million as demand exceeded supply for many products offered by its sports and home divisions. This more than offset the decline in revenue in the children’s product segment. The sports division posted revenue of US $ 305.6 million, up 22.1%, while adjusted operating profit increased five-fold to $ 27.8 million.

“The trend of increasing demand for bicycles has continued and demand has outstripped availability,” said Schwartz. Despite this, the division still managed to record the highest results in its history. ”

Stockouts were also observed in the home segment, where sales stood at US 242 million, up 14%. For children’s products, revenue was US $ 205.6 million, down 7.8% from the third quarter last year.

Announced Monday, the privatization deal between Dorel and a group led by Cerberus Capital Management and the Schwartz family, which controls its multiple voting shares, values ​​the company at around 470 million, or $ 14.50 per share. Offer must be finalized by November 10. However, it will have to obtain the majority support of minority and independent shareholders. Letko, Brosseau & Associés, Dorel’s main minority shareholder with a stake of around 13.1%, has already expressed its opposition.

On the Toronto Stock Exchange on Friday, Dorel’s Class B share closed at $ 15.43, down 26 cents, or $ 1.65 – a price above the proposed repurchase price.