Wellington, New Zealand, August 19--Cavalier has reported a 35% fall in its June bottom line net profit to $13.7 million and said it would struggle to match the 2005 result in the current year, according to ShareChat.
As signalled earlier this month, the result was affected by the $5.8m write-off development costs associated with the bio-remedy project Microbial Technologies.
Without the write-down, the operating surplus would have been down 7% to $19.5m.
The result was on operating revenue of $207.8m, up from $198.6m.
Operating surplus before interest, tax and minority interests for operating activities fell 4% to $33m.
Earnings per share fell to 21.0c from 32.7c.
Managing director Wayne Chung described it as a "difficult year" after three years of record earnings.
Fellow carpet maker, Feltex, due to report its result on Wednesday, has had to downgrade forecasts three times.
"It was the result of a slowing down in residential carpet sales, particularly in Australia, and by the difficult trading environment for our wools operations," Chung said.
He said the tightening cycle in Australia and New Zealand was well underway -- driven by interest rate increases designed to slow the domestic economies and reduce inflationary pressures.
This had slowed the residential carpet market in Australia and, lately, in New Zealand.
"The extent to which our carpet business is affected will depend on the length of this cycle and the extent of the economic slow-down that results," Chung said.
"There are some signs that we could be nearing the end of this cycle -- certainly in Australia and perhaps New Zealand as well, but only time will tell."
Chung said Cavalier was looking forward to the start of the easing of the monetary cycle, which could result in a lower exchange rate.
"For the time being, the business environment is looking tougher, and we will do well to match the 2004/05 earnings."
The company declared a final, fully imputed dividend of 14.5c bringing the total dividend to an unchanged 27cps. Shareholders' funds, net of minority interest, fell from $62.8m to $66.6m while assets increased $18m to $147.8m.
The debt to equity ratio rose 49.5% against 37.6 a year ago.
Net cash flow from operating activities was $13.4m for the year and was affected by increases in trade debtors and stocks.
The carpet business operating surplus rose 1% to $32.6m. The commercial sector remained strong, and the commercial carpet business had been largely unaffected.
Sales revenues for the wool operations rose 14% to $49m.
Chung said Microbial Technologies had been written down even through the technology was promising.
Cavalier shares closed up 5c on $4.00.
The rising share price reflected an essentially good result in Cavalier's core business, one broker observed.
"They wrote off the costs they had accumulated on their flystrike project so the actual profit reported is down but that's just a one-off write-off."
