Dorel Reports Q4 and 2020 Year-End Results
Dorel Industries Inc. (“Dorel”) announced results for the fourth quarter and year ended December 30, 2020. Revenue for the fourth quarter was US$704.4 million, up 7.8% from US$653.4 million a year ago. Reported net loss for the quarter was US$22.9 million or US$0.70 per diluted share compared to US$0.6 million or US$0.02 per diluted share a year ago. Adjusted net loss1 was US$18.0 million or US$0.55 per diluted share compared to an adjusted net income1 of US$2.3 million or US$0.07 per diluted share in the fourth quarter a year ago. The net loss for the quarter was impacted by the reversal of an accrued tax benefit.
Revenue for the full year was US$2.76 billion, up 4.9% from US$2.63 billion the previous year. Reported net loss was US$43.4 million or US$1.34 per diluted share, compared to US$10.5 million or US$0.32 per diluted share the previous year. Adjusted net income1 for the year was US$12.8 million or US$0.38 per diluted share, compared to US$16.8 million or US$0.51 per diluted share last year.
“Our segments’ performance for the quarter was in line with our prior guidance, with overall adjusted operating profit similar to prior year. Strong demand for Dorel Sports product offering continued throughout the quarter with supply chain constraints being a significant limitation on our performance. Similarly, in Home a lack of product availability meant lost sales opportunities, particularly in e-commerce. Dorel Juvenile continued its improvement from the first half; however, the second wave of COVID-19 in most markets slowed sales and earnings momentum, particularly in Europe. Results for the fourth quarter include US$7.5 million of costs incurred in connection with the Company’s privatization process that was terminated by mutual agreement of Dorel and the buyer group in February. Its rejection by a majority of our independent shareholders sent a clear message of their belief in the long-term potential for the Company as a public entity. As a management team, we are committed to rewarding our shareholders for their confidence in Dorel,” commented Dorel President & CEO, Martin Schwartz.
Fourth quarter revenue increased to US$265.3 million, an increase of US$32.2 million, or 13.8%, from last year. Excluding the impact of foreign exchange rates year-over-year, organic revenue1 improved by approximately 15.9%. Segment revenue grew for the seventh consecutive quarter with improvement in all divisions. Consumer demand for all bicycles remained high. Both the Cycling Sports Group (CSG) and Pacific Cycle posted gains, which would have been even greater, however supply constraints resulted in inventory shortages, limiting growth and creating significant backlog heading into 2021. The change in CSG’s model year to the fiscal year also impacted the quarter, thus shifting orders from the fall-winter period to spring-summer. Caloi recorded a record volume of orders, driven by the loosening of COVID-19 restrictions and Caloi’s revenue increased double digits in local currency. For the year, Dorel Sports’ revenue rose to US$1.04 billion, up US$135.8 million, or 14.9%, from US$909.0 million last year.
Fourth quarter operating profit was US$1.9 million, compared with US$9.8 million last year. Operating profit was impacted by product mix, limited container and component availability, higher container costs and the inability to fill all orders, all of which combined to pressure margins. As well, last year’s fourth quarter included a significant adjustment on import costs of bicycles. Excluding restructuring costs, adjusted operating profit1 was US$3.4 million, down US$10.2 million, or 75.3%, compared to US$13.6 million a year ago. For the year, operating profit increased to US$52.3 million compared to US$30.3 million in 2019. Adjusted operating profit1 was US$57.7 million, up US$24.0 million, or 70.9% from last year.
Fourth quarter revenue was US$234.1 million, up US$22.7 million, or 10.7%, from US$211.4 million last year. Demand for Dorel Home products remained high, with a double-digit increase in brick-and-mortar sales in the majority of categories at major mass merchants. Due to lack of product availability online created by disruptions to the supply chain of imported product, this was partially offset by lower e-commerce sales. As a result, e-commerce sales as a proportion of total revenue were 57.5% of the segment’s total gross sales, lower than the 70% in the prior year’s fourth quarter. For the full year, revenue was US$934.4 million, up US$92.3 million, or 11.0%, from US$842.1 million in 2019.
Fourth quarter operating profit was US$17.8 million, an increase from an operating profit of US$11.9 million last year. Adjusted operating profit1 was US$17.7 million, up US$5.8 million, or 48.7%, compared to US$11.9 million a year ago. The increase in sales, combined with better gross margins from improved domestic production as well as lower inventory levels and warehouse costs, were the major contributors to the increase. For the full year, operating profit was US$67.6 million, up from US$56.1 million a year ago. Adjusted operating profit1 was US$70.2 million, up US$14.2 million, or 25.2%, from last year.
Fourth quarter revenue was US$204.9 million, down US$3.9 million, or 1.9%, from last year. Excluding the impact of foreign exchange rates, year-over-year organic revenue1 decreased by 2.4%. Juvenile segment was significantly impacted by the COVID-19 pandemic in 2020. This especially slowed the momentum in Europe as e-commerce sales resulted in modest year-over-year improvement. Sales decreased in the U.S. partly due to the ongoing impact of the pandemic on sales in mobility categories, such as car seats, partially offset by increases in products for the home.
Despite the environment, several new products were launched during the quarter in Europe and North America. Brazil and Chile both increased revenue in local currency as e-commerce sales continue to benefit their markets. Full year revenue for the segment was US$783.3 million, down US$100.2 million, or 11.3%, from US$883.5 million the prior year.
Fourth quarter operating profit was US$1.9 million, compared to last year’s operating loss of US$4.1 million. Excluding restructuring costs, adjusted operating profit1 was US$5.6 million, an improvement of US$7.9 million when compared to an adjusted operating loss1 of US$2.3 million a year ago. The majority of Dorel Juvenile’s markets performed better than prior year with the largest improvement at Dorel Juvenile Europe where, despite COVID-19 related limitations, the benefits of the ongoing transformation program resulted in increased sales and margins. Dorel Juvenile Chile was a significant contributor to the earnings improvement as that business is also seeing the results of its focused product line and improved e-commerce capabilities. For the full year, the operating loss was US$37.9 million compared to US$13.5 million in 2019. Despite a revenue decline of US$100.2 million, adjusted operating profit1 for the year was US$12.2 million, a decrease of only US$2.0 million, or 14.0%, from US$14.2 million a year ago.
For the year, cash flow provided by operating activities increased by $48.7 million to $134.5 million compared to $85.8 million reported in 2019. The increase in the cash flow provided by operating activities was mainly due to the inventory reduction and the stronger than anticipated demand for bikes and home products since the outbreak of COVID-19, partly offset by an increase in trade accounts receivable due to the higher sales.
“As we enter a new fiscal year, the conditions of 2020 are continuing into 2021 in many respects. COVID-19 continues to have an impact on consumer behaviour and while our Sports and Home segments are benefitting from higher demand, container availability and cost, increasing commodity costs, and a stronger Chinese Yuan (RMB) are combining to disrupt our supply chain and increase the costs of our products. At Juvenile, we are poised to deliver adjusted earnings improvements versus the past several years, but store closures in some markets, lower demand in mobility categories and recent evidence of lowering birth rates mean that this segment is the one being most negatively affected by the pandemic in the short-term,” commented Dorel President & CEO, Martin Schwartz.
“Specifically, regarding our segments, in Sports, demand continues to be very strong in all markets, and despite the industry-wide reality of component availability limiting production and higher costs, the year is starting very strongly. For the quarter, expectations are for revenue to increase significantly versus prior year first quarter and for adjusted operating profit to be much better than both prior year and the fourth quarter of 2020.
“Dorel Home continues to benefit from the heightened demand for products for the home, with branded sales such as Little Seeds, Cosmo and Novogratz expected to continue to grow in popularity through 2021. However, similar to Sports, supply is challenged by a lack of container availability and a spike in cost. Overall, we expect the Home segment to continue to deliver revenue growth, but with some volatility in operating earnings.”
“Dorel Juvenile was hampered by COVID-19 in 2020 and as we enter 2021, the situation remains difficult. We remain positive about our longer-term prospects based on our strategic direction, our best ever product portfolio, advanced e-commerce capabilities and a return to more normal shopping conditions. However, the first quarter will be difficult due to a number of short-term challenges described above. This, coupled with increased input costs, is expected to decrease adjusted operating profit from the fourth quarter and be more in line with last year’s first quarter comparative.
“As always, I want to thank all of our employees worldwide for their contributions in 2020. We recognize that our success of the past year is directly attributable to all of your hard work and we all look forward to even better days ahead,” concluded Mr. Schwartz.
For the full fourth quarter results, click here.
About Dorel Industries
Dorel Industries Inc. (TSX: DII.B, DII.A) is a global organization, operating three distinct businesses in juvenile products, bicycles and home products. Dorel’s strength lies in the diversity, innovation and quality of its products as well as the superiority of its brands. Dorel Juvenile’s powerfully branded products include global brands Maxi-Cosi, Quinny and Tiny Love, complemented by regional brands such as Safety 1st, Bébé Confort, Cosco and Infanti. Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi and IronHorse. Dorel Home, with its comprehensive e-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of US$2.7 billion and employs approximately 8,200 people in facilities located in twenty-five countries worldwide.
Jeffrey Schwartz – Media Contact – (514) 934-3034
Source: Dorel Industries Inc.