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Cavalier Bullish On Wool Market

Fuseworks Media
Fuseworks Media

Wellington, Feb 22 NZPA - Half year profits for wool company Cavalier Corporation have dropped 6 percent to $7 million but the company believes the worst market it has ever seen has bottomed out and full year profits will be up on last year.

Operating revenue for the half year to December was 14 percent down to $112.8m and earnings before interest and tax were down 31 percent to $9.69m, the company announced today.

It will pay a unchanged dividend of 4c per share, an imputed 1.97c per share and said earnings for the 2009/10 financial year should be between of $14.5 million to $15.5 million, up from last year's $13.7 million

The effects of global economic slowdown and financial crisis first emerged in the last quarter of 2008 and caused the worst turnaround in trading ever experienced by the business, said managing director Wayne Chung.

In April last year, Cavalier instigated a major rationalisation of the wool processing industry, he said.

This eventually led to the acquisition of the wool processing business of a competitor, Godfrey Hirst, and the removal of about 77 percent of the industry's excess capacity.

"Indications are that the adverse market conditions for our carpet business have bottomed out, and we are cautiously optimistic that we will see a gradual lifting of revenue here.

"At the same time, our wool business is about to enter into the busy part of the season, and the volumes of wool coming onto the market and being sold are so far holding up well."

Shareholders' equity increased $6.7m to $89.2m and at the same time, total assets dropped to $188m, compared with $227m a year ago. As a result, shareholders' equity accounted for 48 percent of total assets employed at balance date, compared with just 36 percent a year ago and 45 percent at 30 June 2009.

Cavalier improved its net debt to $57.3m, net debt to equity ratio 39:61, from $92.9m and 53:47 respectively the previous year and $64.6 million and 42:58 respectively six months ago.

Shares in Cavalier were unchanged today at $2.58.

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