Cavalier Corp expects to break-even in the second half, meaning annual normalised profit will remain around $1.9 million as market conditions remain tough.

"The challenging market conditions noted in February 2019, particularly in Australia, have continued into the second half of the financial year, with slowing demand also being seen in the New Zealand market in recent months," it said in a statement. Normalised net profit was $4 million in the prior year.

Cavalier reported first-half normalised profit of $1.9 million, which included a $600,000 contribution from its stake in a wool scouring business. That was sold in September 2018 so it won't make a contribution to second-half earnings.

"Current market conditions are challenging and our trading is below where we would like it to be. We remain focused on the areas that will drive our performance and remain positive about our long-term future as a manufacturer and marketer of high end, predominantly wool, carpets," said chief executive officer Paul Alston.

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It said demand for the company's top-end Bremworth Collection wool carpets continues to grow. While volumes are small, these high quality, higher margin carpets provide a significant contribution to group profits, it said. Demand for lower margin synthetic carpets continues to trend downwards.

Wool prices have continued to be impacted by decreased Chinese demand for coarser carpet wool, adversely affecting sales and margins for Cavalier's wool buying business, Elco Direct.

Cavalier shares last traded at 40.5 cents and are down 19 per cent over the past 12 months.

- BusinessDesk