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Dorel Sports saw modest growth in 2019, announces European restructuring plan to support Cannondale

Published March 11, 2020
The company said COVID-19 will likely affect its first quarter performance.

MONTRÉAL (BRAIN) — Dorel Sports is reporting flat revenues in the fourth quarter and 2.9% growth for the full year 2019. Dorel Sports is the parent of Cycling Sports Group, Pacific Cycle Group and Caloi.

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In announcing its financials Wednesday, the company did not break out specific figures for the bike divisions but said CSG revenue declined in the final quarter even as it saw organic growth in most parts of the world thanks to e-bikes and model year 2020 introductions.

Dorel Sports' bike brands include Cannondale, GT, Fabric and Guru Cycling in the CSG division and Schwinn, Mongoose, IronHorse and other brands in the Pacific Cycle division. Caloi is based in Brazil.

Dorel Sports operating income for the quarter was $9.8 million, an improvement from the $232 million loss recorded in the fourth quarter of 2018.

For the full-year, the Sports division saw revenue of $909 million, up from $883 million in 2018. Full-year operating profit was $30.3 million, up from a $232 million loss for the full 2018.

Dorel said it is strengthening its European CSG operations to support Cannondale's growth there. CSG's European operations are being centralized in Woudenberg, Netherlands, while offices in Oldenzaal, Netherlands, and Basel, Switzerland, have been closed.

"The existing assembly plant in Oldenzaal is being transformed into a state-of-the-art facility to more than double its current production capacity of Cannondale bicycles and e-bikes, and allow for an increase in focus on premium quality products. All production and supply related departments are being merged into the new facility," the company said.

"This is a major step in implementing CSG Europe's strategic plan. We have had excellent results in Europe in 2019 and the exciting changes we are announcing today will enable us to better serve our customers, boost our brand presence, and further develop our culture," said Dorel Sports' president, Peter Woods, referring to the restructing changes in Europe. 

The company said the reorganization is expected to be fully completed by year-end and will result in estimated restructuring costs of between $8 million to $10 million, of which $3.8 million was recorded in the fourth quarter. 

Dorel Industries, which is the parent of the Sports group as well Dorel Juvenile and Dorel Home, saw a 4.4% decline in fourth quarter revenue and reported a net loss for the quarter of $0.6 million. Full year revenue was flat at $2.63 billion with a full year net loss of $10.5 million. Compared to a loss of $444.3 million last year.

Martin Schwartz, Dorel Industries' president and CEO, said, "Our China based suppliers delayed re-opening following the Chinese New Year due to the Coronavirus, with production delayed by two weeks in most cases. This temporary lack of manpower created several weeks of supply chain disruptions. Most factories in the country are now back in operation and are shipping, but not yet at normal levels. Operations at our main Juvenile factory in China are improving daily. We are now at 95% production capacity. Although production was slower than normal, we have not seen any significant impact on consumer spending at retail for Dorel products during the first two months of 2020 and our three segments continue to experience increased on-line shopping. Needless to say, we are closely monitoring the situation."

Schwartz concluded with more information on the affect of the COVID-19 outbreak.

"The world economy is in uncharted waters due to the ongoing Coronavirus, the full impact of which is difficult to predict at this time. Historically, people have purchased juvenile products and personal recreation items such as bicycles during disruptions in the market and are likely to continue to do so. Supply chain interruptions in China will impact the delivery of orders in the first quarter and possibly into the second quarter. Despite overall business improvement, the Coronavirus and related foreign exchange impacts will likely affect the first quarter," he said.

The company will hold a conference call with analysts Thursday morning. Dorel is traded on the Toronto stock exchange under the TSX: DII.B and DII.A symbols. The figures in its release were all U.S. dollars.

The cover of Dorel Sports' 2019 Product Portfolio
Topics associated with this article: Earnings/Financial Reports

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