Wellington, New Zealand, February 11--Cavalier Corp., a New Zealand carpet maker, Friday reported a net profit of NZ$10.7 million for the fiscal first half to December, up 4% from the year-ago period.
The company said in a statement that it had experienced good profit from its carpet operations during the period, but had lower earnings from its wool business.
Cavalier said it expects to report a full-year net profit of between NZ$21 million and NZ$22 million, slightly lower than the NZ$22.5 million the company said in August it had budgeted for.
Cavalier said revenue at its carpet operations grew 2% in the period compared with a year ago to NZ$82.8 million, while the division's earnings before interest and tax were up 9% year-on-year to NZ$18.1 million.
The company said it also managed to raise its operating profit margin in its carpet business to 21.9%, up from 20.5% in the previous period.
Cavalier noted that demand for residential carpet in Australia had slowed during the period, as new housing starts were subdued and house sales also fell, but New Zealand residential carpet demand was steady.
The commercial carpet sector was "very busy" in both New Zealand and Australia, Cavalier said, due to high business confidence and good economic growth.
"There was plenty of activity in commercial property leasing, which provided good levels of new and refurbishment work for us," the company said.
Cavalier's wool operations increased revenue by 4% to NZ$18.5 million from a year ago, but its operating earnings fell to NZ$800,000 from NZ$1.1 million, the company said.
While the wool buying business was "relatively busy," Cavalier said, difficult market conditions caused by the strength of the New Zealand dollar against its Australian counterpart made it difficult to make a profit from the wool purchases.
The company said the high New Zealand dollar has made wool expensive in foreign currency terms, and it has subsequently become difficult to match the expectations of farmers with wool buyers.
"In these situations, our margins tend to suffer," the company said.
Unseasonally wet weather during December also caused disruption to normal wool shearing patterns, the company said.
Looking ahead, Cavalier said it expects the second half of its fiscal year to bring similar market conditions to the first half, with strong commercial carpet demand offsetting weaker residential demand.
Exports to Australia are expected to return less in the second half because the company has "used up" most of its favorable hedges and there are no indications the New Zealand dollar will substantially weaken against its Australian counterpart, the company said.
Cavalier said it will pay an interim dividend of 8 New Zealand cents a share.
