Feltex 2006 result will be hit by one-offs

Troubled carpet maker Feltex said today its 2006 result would be significantly affected by one-off writedowns and it would not be paying a dividend.

Chairman Tim Saunders told shareholders at the annual meeting in Auckland that trading conditions continued to be difficult.

Ignoring the one-off restructuring costs, Mr Saunders said the first half result was likely to be an improvement on the last six months of the 2005 financial year, but significantly down on the result achieved in the first half of 2005.

In the first six months of 2005, Feltex reported a net profit of $12.2 million but the second half collapsed to a profit of just $807,000.

"For the 2006 financial year, the trading conditions for the first four months continue to be difficult, particularly in Australia," he said.

"On present indications, these conditions will continue for the remainder of the year," Mr Saunders said.

He said "we will begin to see the benefits of the changes we have made coming through in the second half of this financial year."

Mr Saunders gave a long and detailed explanation of what went wrong this year and the pricing of last year's IPO was arrived at where shares were sold at $1.70 compared with 50c at present.

Mr Saunders said the continued strength of the NZ dollar, currently at around 95 cents against the Australian dollar, was adversely affecting profitability.

He noted competitors such as Cavalier Carpets, which has most of its sales in New Zealand, and Victoria Carpets - which has most of its sales in Australia - had also reported significant decreases in profit and now assessed market conditions as poor.

"Given these conditions, and the continuing restructuring, it is too early to provide an outlook statement for the full year."

He said the decision to suspend dividends would be reviewed in the 2007 year.

Mr Saunders said Feltex continued to have "a good relationship" with its bankers, ANZ National.

"We are working closely as we consider our various options. The bank has supported us and is cooperating to enable us to meet the one-off costs required to restructure the company."

New chief executive Peter Thomas, replacement for Sam Magill who was attempting to stay on the board as a director against company wishes, said the company's strategic review of total operations was in the final stages.

He promised there would be no plant closures of the magnitude of the shutdown of the Braybrook Yarn plant in Melbourne, whose operations were transferred to New Zealand.

"While there will be further changes at Feltex to improve our performance, we are not planning any changes of the magnitude of the closure of Braybrook."

- NZPA