By GEORGINA BOND
Cavalier yesterday warned that the soaring dollar will crimp its full-year earnings.
The carpet-maker had forecast that 2005 full-year earnings would rise 7 per cent to $22.5 million.
It told shareholders at its annual meeting that earnings in the first four months to October were running below this - at
only 4 per cent.
Cavalier managing director Wayne Chung said it was too early to predict how the year would finish up.
"Much will depend on the market conditions which, for now, are being constrained by recent interest rate increases."
Residential carpet sales had slowed slightly, but the commercial sector was still busy.
The high kiwi dollar, which Cavalier had hedged against the aussie at a favourable exchange rate of 86Ac for the first half of this financial year, concerned the company. The NZ dollar bought 91.10Ac last night.
"If the high exchange rate remains, it will negatively impact on our earnings," Chung said.
But the higher NZ dollar brought some benefits as it lowered the costs of imported materials and put pressure on wool prices.
Chung asked for patience from shareholders, in light of a "disappointing" 6 per cent rate of return on investment for the past year, and the 15c drop in the share price on Tuesday.
He said this was driven by a change in market sentiments towards firms associated with the building and housing sectors.
"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.
"For the Cavalier shareholder who has supported us for some time, your patience has been well-rewarded. And for the recent Cavalier shareholder, your patience is required."
Weaker weave
* Cavalier's first-quarter earnings are 4 per cent higher than last year.
* This is below the 7 per cent growth rate forecast for the 2005 year.
* A strong dollar poses a threat to the full-year outlook.
* Rising interest rates are constraining the market.
