Wellington, New Zealand, November 4--Carpet maker Cavalier Corp. Ltd. said Thursday that its tax paid earnings for the four months to October are up 4% on the same period a year ago, but behind the budgeted increase of 7%.
The New Zealand-based company said at its annual shareholders meeting that the New Zealand dollar's strength against the Australian dollar "is a concern," according to speech notes.
The company didn't reveal the actual four-month profit figures.
According to speech notes, Cavalier Corp's managing director Wayne Chung said the company's budgeted net profit of NZ$22.5 million for the current financial year to June 20, 2005 allows for some downturn in the carpet market, but also for gains in market share to offset that.
"It is much too early to predict how the rest of the year will finish up, as much will depend on the market conditions, which for now are being constrained by recent interest rate increases," Chung said.
He added that while there had been a "minor slowdown" in residential carpet sales recently, that is being offset by a busy commercial carpet market.
Chung said the strength of the New Zealand dollar against its Australian counterpart will hurt earnings in the second half of the fiscal year, if it stays at its current high levels.
Cavalier is hedged at a "favorable" exchange rate of A$0.8600, Chung said, while the New Zealand dollar was trading at A$0.9133 at 2221 GMT.
The strong currency also carried some positive effects for the company, because it lowered the costs of imported materials and put downward pressure on wool prices, Chung said.
He added that the Cavalier will give "a better indication" of its outlook when its half-year results are announced in February next year.
Chung told shareholders that they needed to be patient and take a long-term view with their Cavalier investment.
While the company had posted a good long-term rate of return on its shares, the gain was "disappointing" in the near-term, Chung said.
"The main reason for this has been the change in market sentiments towards companies like Cavalier who are associated with the building and housing sectors," Chung said.
"Currently, the market sees both these sectors to be at the top of their business cycles and expects them to come under pressure from the recent interest rate increases."
