Shares in Cavalier plunged by 11.3 per cent after the carpet maker said it expected to report an underlying after tax loss of $1 million to $3m in the financial year to June 30.

The company said it would not pay a dividend in the current year, but intended to resume dividend payments in 2013.

Cavalier said market conditions for its businesses remained very soft on both sides of the Tasman, with both volumes and margins under pressure.

Broadloom carpet margins were particularly weak due to high wool prices, it said.


Cavalier's wool scouring and wool buying businesses were performing satisfactorily and returning profits at or close to budgeted levels.

The company said it had developed a business improvement plan, which would incur big one-off costs, as it repositioned the broadloom businesses.

It said the impact of the one-off costs, both cash and non-cash, on the current year's result were difficult to project.

"However, if the estimated cost of all contemplated initiatives were taken into the current year, they would have the effect of reducing underlying earnings for the year to a loss of $1m-$3m after tax," the company said.

The company's initiatives would reduce operating costs significantly, and Cavalier expected to benefit from recent weakness in wool prices.

With the benefit of the repositioning, and with a modest improvement in market conditions, Cavalier said it would be looking at a tax-paid profit in the range of $10m to $12m for 2011/12, down from $18.2m in 2010/11.

Cavalier shares last traded at $1.89, down 24c.