Dorel Industries reported sales of its Pacific Cycle division to mass merchants were stronger than expected in the third quarter, while sales at its Cannondale IBD business were up over last year, despite supply issues for some of Cannondale's carbon models. Sales of the company's Recreational/Leisure Segment doubled to $162.3 milion thanks to the acquisition of Cannondale, Sugoi and PTI Sports since February of last year.

 

Gross profit for the segment, which owns the  Cannondale, Sugoi, GT, Schwinn and Mongoose bike brands, rose 141.7% to $38.9 million. That represented 23.3% of revenues,  a jump of 400 basis points from the year earlier quarter that was attributed to the higher margins in the IBD channel served by the Cannondale division. Earnings from operations rose 23.6% to $7.4 million, or 4.5% of revenue.

  
“Over the past three months Dorel's businesses have performed well relative to the economy and other industries,” Dorel president and CEO Martin Schwartz said of the company's overall third-quarter performance, which included a 9% gain in organic sales. “Sales increased in each of our three segments at a time when consumers are being particularly careful about their purchases. This speaks to the recognition of our brands, the value in our product offerings and the variety of price points throughout our categories. The spiral in commodity prices has ended and we have been able to offset the majority of these increases.”

 

Outlook

“However, recent economic events have been particularly volatile. As such, going forward, it is difficult to provide clarity as to how consumers, retailers and suppliers are going to react. Obviously, we are not immune to the current situation and we have seen some retailers start to reduce inventories in some of our product lines. Therefore, we do anticipate an impact on our fourth quarter.

 

“In Recreational / Leisure, we sell bicycles across all price points and the bicycle/fitness industry as a whole is benefitting from recent attitudes towards the environment and personal health.  Our banking relationships are strong and our credit facilities are secured into 2010. As we look towards the longer term, recent declines in commodity prices and fuel costs, should help mitigate some of the economic uncertainties over the next few quarters.

 

“Our 2008 expected results remain on track to be our best year ever, exceeding our fiscal 2007's record year when, excluding restructuring charges, we recorded the highest net income in our history. Also, with the fall in the value of the Canadian dollar, we remind investors that while our shares trade in Canadian dollars, Dorel reports in U.S. dollars and this should have a positive impact on the company's Canadian dollar valuation,” concluded Mr. Schwartz.

 
                               Dorel Industries Inc.
                           Recreational/Leisure Segment

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	    ————————————————————————-
	                      Third Quarters Ended September 30
	    ————————————————————————-
	                               2008                  2007
	    ————————————————————————-
	                                                                      Change
	                           $       % of rev.     $       % of rev.       %
	    Revenues(x)         162,291                81,273                  99.7%
	    Gross profit         37,822       23.3%    15,647       19.3%     141.7%
	    Earnings from
	     operations           7,393        4.5%     5,979        7.4%      23.6%
	    ————————————————————————-
	    ————————————————————————-
	    (x) 2008 revenue figures exclude Inter-segment sales of US$ 0.2 million