Wednesday, 10 March 2021 08:25

Wool-only strategy paying off

Written by  Sudesh Kissun
Cavalier chief executive Paul Alston remains positive about future sales. Cavalier chief executive Paul Alston remains positive about future sales.

Carpet maker Cavalier Corporation says its revised strategy to trade in only woolen carpets is paying dividends.

The company’s half-year result, released last month, shows a $3 million lift in business performance. Net profit jumped $4.3 million over last year’s interim results to $5.5m.

Cavalier says the net profit included a $2.5m net gain on the sale and leaseback of an Auckland property. No interim dividend was declared.

The Australasian business reports that revenue was down 6% year on year to $60.3m. Australian carpet sales volumes were impacted by supply chain disruption and Covid lockdowns. It says sales are, however, expected to improve as supply chain disruptions and pandemic effects reduce.

Elco Direct, Cavalier’s wool buying business, was also impacted by subdued offshore demand for New Zealand wool and while volumes were up 12%, the average selling price was well down.

Cavalier’s transformation strategy is to become a global leader in natural interior solutions, in part by exiting the non-wool sector and ‘right sizing’ the organisational structure to meet future manufacturing needs.

Key initiatives during the first half of the financial year included the launch of the new Bremworth brand for Cavalier’s carpet business; the rollout of the Lifestyle (affordable wool) collection ranges and other uniquely designed products, providing greater choice for consumers; and an expansion of the retailer distribution networks in both New Zealand and Australia.

Cavalier’s decision to drop synthetic carpet altogether is being closely watched by NZ wool farmers struggling to survive with rock bottom wool prices. Farmers only get about $1/kg for greasy wool; between $4 and $5/kg is seen as a price that farmers could cover the cost of shearing, and the costs associated with wool.

 Cavalier chief executive Paul Alston says it has been an encouraging six months for the company with New Zealand trading recovering strongly post the April Covid lockdowns, and increasing sales of higher margin, more sustainable woollen carpets.

“Australia offers a significant growth opportunity with a market five to six times the size of New Zealand, and it will be a primary focus for our team,” says Alston.

“We have a strong pathway forward with a carefully considered strategy that takes advantage of Cavalier’s strengths and consumer trends, zero debt, a right sized organisational footprint and funding in place to execute our five-year plan to increasing value and profitability.

“We are excited about our future as we continue our journey towards becoming a more sustainable, design-led, wool and natural materials interior solutions business.”

The company remains positive about future sales, with indications of positive economic growth in both New Zealand and Australia, which will benefit Bremworth retail sales.

New Zealand woollen carpet sales volumes for FY21 are expected to be well up on prior year, with Australian woollen carpet sales volumes also expected to improve when current disruptions to the supply chain are resolved.

Recent initiatives, particularly in Australia, to expand the retailer networks, are expected to help drive a lift in sales once supply improves, the company says.

Modest plan for Cavalier

  • Launch of the new Bremworth marketing campaign
  • Continue to rollour Bremworth Lifestyle (affordable wool) collection ranges
  • Continue to expand retailer networks, particularly in Australia
  • Maintain focus on innovation and the launch of new beautifully designed carpets
  • Operational improvements including initiatives to reduce the cost base and mitigate supply chain disruptions.

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