Michael Knell
Higher particleboard costs hurt margins

MONTREAL — Lower home furnishings shipments and the rising cost of particleboard helped drag down sales and earnings for Dorel Inds. in the first quarter.

The consumer goods giant’s revenue of $451 million was down 4.4% from the same period last year and earnings fell 11.1% to $24.2 million.

Revenue in the home furnishings segment was down 8% to $133.7 million while earnings from operations decreased 57.3% to $4.6 million. Sales declined by 7% in Dorel’s recreational and leisure segment and by 1.4% in the juvenile segment.

“The aggressive plan announced last year to revitalize Dorel’s ready-to-assemble furniture division is on track and important progress has been made on several fronts,”
said Martin Schwartz, Dorel president and CEO.

“A greatly enhanced new product development capability has resulted in an exciting flow of new products; Ameriwood has a wider positioning in its markets and has added new customers; sourcing has increased significantly from China and overheads have been reduced due to operational improvements at the division’s domestic factories,” he said.

Sales of RTA furniture, however, declined by $20 million or 27.6% because of lower shipments to mass merchants. Substantial new orders came in but not all could be filled, Schwartz said.

“This demand was above expectations and beyond the immediate capabilities of the three remaining RTA furniture plants. An insufficient level of finished goods inventory coupled with the ongoing integration of the closed Wright City (Mo.) plant resulted in orders being either cancelled or delayed into the second quarter,” he said.

The situation “substantially improved near the end of March,” he added.

Dorel’s Cosco Home & Office division had a sales decline of 8% but a better mix of products resulted in higher gross margins. “Business in this division is robust and a solid year is expected,” Schwartz said.

He added that because of a continued rise in the price of particleboard, Dorel plans to raise its prices later this year. But until those increases take effect, he said, the company doesn’t expect any material improvement in RTA furniture margins.