Cavalier says earnings at risk from strong Kiwi

Carpet manufacture Cavalier Corp today said the strong New Zealand dollar poses a threat to its full year outlook.

This year in its annual report, the company budgeted for tax paid earnings of $22.5 million for the 2005 year, an increase of 7 per cent on the previous year.

However, managing director Wayne Chung told shareholders at the company's annual meeting today in Auckland that earnings for the the first four months of the year were tracking just 4 per cent above last year.

"It is much too early to predict how the rest of the year will finish up as much will depend on the market conditions," Mr Chung said.

"Of late, there has been some minor slowdown in residential carpet sales, but the commercial carpet sector is still very busy," he said.

But Mr Chung said the current high kiwi/aussie cross rate was a concern for the company.

The kiwi was buying A91.27c this morning. Cavalier currently had the first half of the financial year hedged at a favourable exchange rate of A86c.

But Mr Chung said: " If the current high exchange rate remains, it will negatively impact on our earnings in the second half of the financial year".

However, there were some offsetting gains.

"A higher NZ dollar lowers our imported material costs and puts downward pressure on wool prices."

The company would give shareholders a better indication of the company's earnings outlook at its half year result announcement in February next year, Mr Chung said.

Meanwhile, the company announced a fully imputed first interim dividend of 4.5 cents per share with a record date of December 3.

Cavalier shares were 2c higher at $4.70 this morning, having traded between $4.64 and $5.70 over the past year.

- NZPA