Dorel Industries reported that revenues at its Recreational/Leisure segment edged up 1.1 percent in the second quarter to $251.9 million. Gross profit increased 4.3 percent to $63.2 million, or 25.1 percent or revenues, up 80 basis points. Operating profit rose 1.6 percent to $21.6 million.



The segment, which sells Cannondale, GT, Mongoose and Schwinn bicycles and Sugoi gear to the independent bike dealer (IBD) channel through its the Cycling Sports Group (CSG), and other brands to the mass channel through its Pacific Cycling unit, remains on track to exceed last year's record earnings.

 
“Recreational/Leisure's top line grew once again, though it was tempered by adverse foreign exchange rates,” stated Dorel President and CEO Martin Schwartz. “Profits in the quarter were flat as the negative impact of currency reduced earnings by approximately $2.5 million. Intense branding of the Cannondale line continues to drive results. The Liquigas Cannondale Pro-Cycling Team has performed well this year with various victories. In the recently completed Tour de France, Peter Sagan won the prestigious green jersey as well as three stages in the overall tour and Vincenzo Nibali placed third overall. We are pleased with the sponsorship of the team and intend to maintain Dorel's commitment to the promotion of our brands.”

Organic sales growth, excluding the impact of foreign exchange variations on the segment's non-US based businesses, was approximately 7 percent year-to-date. The increases are in the IBD channel in most of the segment's markets and are being driven by improved sales in several bike categories. 

 

The decline in the value of the Euro versus the US dollar negatively impacted revenues by approximately 2 percent and as a result the reported revenue increase in the quarter was only 1.1 percent.  Sales in June were also lower as certain mass market customers reduced orders in an attempt to reduce their in-stock inventory levels.
 
Earnings were negatively impacted by the decline in the value of the Euro and certain other currencies against the US dollar. Specifically, compared to the prior year, CSG gross margin dollars were reduced by approximately $2.5 million in the quarter. Approximately 50 percent of CSG's revenues are from markets outside of the United States and as such are affected by foreign currency more than the segment's mass market business which is mostly comprise of US-based customers. Progress continued to be made in returning to profitability at the segment's apparel division, which markets the Sugoi brand.
 


















































































Recreational/Leisure Segment

Second Quarters Ended June 30
2012 2011
$ % of rev. $ % of rev. Change
%
Total revenue 251,911 249,094 1.1%
Gross profit 63,183 25.1% 60,592 24.3% 4.3%
Operating profit 21,606 8.6% 21,274 8.5% 1.6%
Six Months ended June 30
2012 2011
$ % of rev. $ % of rev. Change
%
Total revenue 472,829 449,521 5.2%
Gross profit 121,623 25.7% 111,587 24.8% 9.0%
Operating profit 42,986 9.1% 39,045 8.7% 10.1%