DOREL INDUSTRIES $38.76 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 31.5 million; Market cap: $1.2 billion; Dividend yield: 3.4%) makes a range of items, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational goods, mainly bicycles.
In the three months ended December 31, 2013, Dorel’s sales rose 1.8%, to $633.5 million from $622.6 million a year earlier (all figures except share price and market cap in U.S. dollars). Higher sales at the recreational and home-furnishing segments offset lower demand for juvenile products.
Excluding one-time items, earnings per share fell 34.8%, to $0.60 from $0.92. The company’s bicycle sales rose in the latest quarter, but its competitors discounted their bikes heavily, forcing Dorel to sharply cut its prices—and its profit margins with them.
Even with the weaker profits, the company’s outlook is positive. Premium bicycle sales will likely rebound, and its competitors have slowed their discounting. As well, Dorel’s recent acquisition of 70% of Caloi is already adding to its profits.
Established in 1898, Caloi is one of the world’s oldest bike makers. It is also Latin America’s topselling bicycle brand and the leader in the Brazilian market. This purchase fits nicely with Dorel’s plan to focus on international expansion, as it can now use Caloi’s facilities to sell more of its other bikes and gear in South America.
The stock trades at 14.8 times Dorel’s forecast 2014 earnings of $2.62 a share.
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