Dorel Industries Inc. said total revenue rose 54.9% at its Recreational/Leisure division to $136 million for the first quarter ended March 31. Gross profits and earnings from operations at the division more than doubled. While newly acquired Cannondale Bicycle Corp. accounted for much of the growth, Dorel said its lower priced bikes sold well as weary American consumers returned to the mass merchant channel to look for bargains.


Companywide net income rose 25.7% to $35.1 million on a 22% increase in revenues to $556 million.

 

“The first-quarter performance clearly indicates that Dorel has the right
combination of products and price points for consumers at the right time,” said Dorel CEO and President Martin Schwartz. “In light of the difficult economy in the United States, we are seeing consumers shopping more at mass merchants where Dorel has traditionally been strong. In Europe, where conditions remain better, consumers continue to seek higher-end products, and Dorel's European operations enjoy a solid position in this market. ”

The Recreation/Liesure segment experienced strong sell-through in advance of the busy spring season, particularly at the Pacific Cycle division with its mass merchant customers.


The addition of Cannondale and SUGOi in Dorel's new Independent Bicycle Dealers (IBD) division contributed significantly to first quarter results. The significant gross margin increase was due mainly to the contribution of higher margins on Cannondale bicycles and SUGOi clothing.

 

However, the improved earnings percentage of 10.7% versus 8.2% in the prior year was not due solely to Cannondale, but rather resulted from both Pacific and the newly acquired businesses.
                       Dorel Industries – Recreational Leisure Segment
                                                 First Quarters Ended March 31
    ————————————————————————-
                                     2008                2007
    ————————————————————————-
                                                 % of                  % of    Change
                                   $              rev.        $         rev.        %
    Revenues(*)             136,144     100.0%   87,889   100.0%     54.9%
    Gross Profit                34,626      24.9%    17,070    19.4%    102.8%
    Earnings from 
    operations                 14,909       10.7%    7,227      8.2%    106.3%
    ————————————————————————-
    ————————————————————————-
    (*) – 2008 revenue figure excludes Inter-segment sales of US$2.7 million
              
Outlook

Rising commodity prices are affecting the majority of the company's
operating divisions. In particular high crude oil prices, and their impact on freight and resin costs, as well as increases in steel and other metals, both domestically and in the Orient, are challenges to the company maintaining the same level of profitability. In addition, the costs of finished goods sourced in China are being affected by the weakening of the U.S. dollar versus the Chinese RMB.


“To offset these increases we are taking action on pricing, but there is a timing lag that is unavoidable,” said Schwartz. “In addition to pricing opportunities, the focus remains on improving productivity, containing costs and developing new products that improve margins. Our diversity of product and price points should help to position the company well within our segments in the current environment. However, these economic and cost uncertainties will likely continue through the balance of 2008 and may mitigate the strong start to the year.”