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Dorel reports strong growth in bike revenue in 2014

Published March 16, 2015
Strong U.S. dollar cuts into profits from overseas markets.

MONTREAL (BRAIN) — The bike business continued to rebound through the final quarter of 2014 for Dorel Industries, the Canadian parent of Cannondale Sports Group and Pacific Cycle, which includes the Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse, Guru Fit and Sugoi brands.

Executives told financial analysts during an earnings call Monday that the company recovered from a disappointing 2013. But a strong U.S. dollar is cutting into revenue increases.

“During 2014 many changes have been made at Dorel Sports. New senior positions were added, other positions changed and strengthened with new managers. We’re seeing positive results across the board in the mass merchant and IBD channels,” Martin Schwartz, president and CEO of Dorel, told investors during the call.

The company reported that its bike segment saw a 6 percent increase in revenue or $14.6 million for the quarter, totaling $260 million, up from $245 million a year ago. The growth was led by Pacific Cycle in the mass market with sales of bikes and electric ride-ons, and by sales of Caloi in Brazil. Caloi introduced GT and Cannondale bikes in 2014 to the local market.

Organic sales were up 8 percent, excluding the impact of foreign exchange and acquisitions, for the quarter. For the full year, organic sales were up 8 percent as well, after removing the impact of foreign exchange and acquisitions.

Executives attributed the positive results to improved weather and a rebound in the global bike market compared to a year ago. IBD sales in overseas markets, particularly Asia and Europe, were up.

For the 12 months ending Dec. 30, Dorel reported revenues were up 14.6 percent or $134 million, totaling $1.053 billion. That’s up from $918.7 million in 2013.

Still, the appreciating U.S. dollar had a negative impact on Dorel Sports’ earnings, executives said. The net negative impact was approximately $4 million in the fourth quarter and $3 million for the full year. About half of Dorel’s net income for its bike business comes from outside of North America, and the rapid rise of the dollar has resulted in a significant reduction of margin in those markets.

Schwartz said the company has adjusted pricing on bikes selling in Australia, Canada and Latin America. And will look at adjusting prices in Europe in the second half of the year.

“As an international consumer products company, the increase in value of the U.S. dollar impacts the cost of sales when a company purchases in U.S. dollars and sells in local currencies,” Schwartz said. “And as you know, we report in U.S. dollars. Each division (aside from bike, Dorel also has home furnishing and juvenile divisions) is developing a strategy to deal with currency issues.

“We’re working to adjust [prices] to new exchange rates, but rates keep fluctuating,” he added.

Schwartz said that Dorel doesn’t expect revenue growth in the first quarter of 2015 because of currency fluctuations and foreign exchange losses.

“Currency translation is a big deal,” he added. “If we’re going to make 10 million euros in profit last year, that was $12.5 to $13 million in profit. If we get to parity, 10 million euros is 10 million in U.S. dollars, that’s $2.5 to $3 million just in translation,” he added.

Overall revenue at Dorel, including its home furnishings and juvenile businesses, totaled $701.6 million in the fourth quarter, up from $633.5 million for the fourth quarter of 2013. For the full year, it reported $2.6 billion in revenue, up from 2013’s $2.4 billion. 

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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