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Dorel: Strength of U.S. dollar will hurt earnings

Published January 29, 2015
New products to reflect currency changes with higher prices.

MONTREAL (BRAIN) —  Dorel Industries, parent of Cycling Sports Group and its stable of brands, including Cannondale, GT, Schwinn, Caloi and Sugoi, expects the surge in value of the U.S. dollar to have a “significant negative effect” on its earnings through 2015. The Canadian company said Thursday that the surging dollar impacts cost of sales at its international divisions, which purchase in U.S. dollars and sell in local currencies.

“Dorel has pursued an aggressive strategy of expanding our juvenile and bicycle businesses to markets around the world, notably into Europe, South America and Asia,” said Martin Schwartz, Dorel’s president and CEO. “This has greatly benefited us over several years and continues to do so as we are consistently building market share. Just over half of our net income is derived from these regions. Since November, when we reported our third quarter results, the U.S. dollar has continued to strengthen to its highest level in many years versus several major currencies and we expect this to impact us through the current year.”

In 2014, the euro was an exception to most other currencies against the U.S. dollar with a significant decline in value only occurring in December. However, its decline has continued. With the euro at its lowest level in five years, Dorel expects that too will impact its 2015 earnings.  

Schwartz said that while it is too early in the year to quantify the impact of foreign exchange, there are mitigating factors, which are expected to ease the situation somewhat.

“New products currently being launched reflect the currency factor and are priced accordingly; further, we are working with many of our retail partners on implementing suitable price increases,” he said. “Recent reductions in oil prices and many commodities will help offset the higher U.S. dollar as will the strength of the U.S. economy, where all three of our segments have a significant presence. Our home furnishings segment will benefit from the strong U.S. dollar as a portion of our products are manufactured in Canada and sold in the U.S."

Dorel will announce full-year 2014 earnings March 16.

Dorel is traded on the Toronto Stock Exchange under the symbols DII.B and DII.A. Its stock performance is tracked on BRAIN’s Industry Stock chart.

 

 

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