Big carpet makers strike gold

By LIAM DANN

Carpet companies Feltex and Cavalier have both cashed in on the transtasman building boom to produce strong results for the six months to December 31.

Feltex, which has previously struggled - with losses in 2001 and 2002 - reported a much improved performance with a profit of $11.4 million, compared with just $1.2 million in the same period in 2002.

Revenue was up 4 per cent for the period.

Cavalier continued a run of solid results with a profit of $10.3 million - up 12 per cent on the same period last year.


Despite the massive profit increase, Feltex management announced a restructuring of the company's Christchurch operation, with up to 70 jobs likely to go.

Chief executive Sam Magill blamed the high dollar for the layoffs.

The kiwi's increasing value against the US dollar had particularly affected the performance of woven exports - the segment the Christchurch operation was focused on, he said.

In other areas, said Magill, the economic outlook was still good.

He expected buoyancy in the residential building sector to remain until at least the end of the year.

The commercial building sector looked stable for the next two to three years in Australia.

The profit turnaround was also driven by an approach of looking more closely at which segments of the business were most profitable and focusing on those, he said.

Feltex had dramatically increased its spinning capacity in New Zealand and reduced capacity in Australia and that was paying off.

There had been some exchange rate gains on the cost of importing raw material for synthetic products.

Feltex- which is unlisted but reports to the stock exchange because of its bonds issue - had not ruled out the possibility of a float but no formal decision had been made, Magill said.

Cavalier directors reported that company was on track to record a full-year profit of $20 million - a 10 per cent improvement on last year.

The business was operating at the limit of its capacity and was struggling to keep pace with market demands, the directors' report said.

While the immediate outlook was for more of the same, a slowdown was expected which would allow the company to catch up with the market and resume expansion strategies.

The high dollar had reduced returns in markets outside Australasia, the report said, but this was offset as the strong currency helped to reduce manufacturing costs.

Cavalier - which pays three dividends a year - reported a second interim dividend of 8c a share. It paid 7.5c for the same dividend last year.