Dorel Reports Solid Second Quarter Results

• Continued strong bike demand propels Dorel Sports to its ninth consecutive quarter of revenue growth
• Dorel Juvenile maintains improvement trend with revenue and adjusted operating profit gains
• Dorel Home impacted by substantial freight costs and COVID-related supplier closures

MONTRÉAL, Aug. 06, 2021 (GLOBE NEWSWIRE) -- Dorel Industries Inc. (TSX: DII.B, DII.A) today announced results for the second quarter and six months ended June 30, 2021. Second quarter revenue was US$765.0 million, compared to US$724.0 million, up 5.7% from the same period a year ago. Reported net income was US$22.2 million or US$0.67 per diluted share, compared to US$11.1 million or US$0.34 per diluted share last year.  Adjusted net income¹ was US$23.0 million or US$0.70 per diluted share, compared to US$15.6 million or US$0.48 per diluted share last year.

Revenue for the six months was US$1.5 billion compared to US$1.3 billion, up 13.0% from prior year. Reported net income was US$25.0 million or US$0.76 per diluted share, compared to a reported net loss of US$46.7 million or US$1.44 per diluted share a year ago. First half adjusted net income¹ rose sharply to US$35.2 million or US$1.07 per diluted share, compared to US$2.0 million or US$0.06 per diluted share last year.

“Given the continuing chaotic supply chain environment, we are very pleased with the second quarter performance of our businesses.  We are reporting substantially improved earnings while dealing with record increases in container freight rates and higher product costs in many categories.  Demand for our products remained robust, but we were not able to fully satisfy consumer needs due to inventory shortages from a lack of ocean container availability. Dorel Sports had a remarkable quarter, again achieving record sales and earnings.  Demand for bikes shows no signs of slowing and Cannondale’s models remain extremely popular in all markets.  There has been continued improvement at Dorel Juvenile with gains in all geographies as consumers responded well to new products. Europe’s progress was limited only by COVID-related issues. Dorel Home revenue was significantly reduced as container issues were compounded by COVID shutdowns at suppliers in Vietnam and Malaysia. The segment still promises to be a solid performer as these conditions ease,” commented Dorel President & CEO, Martin Schwartz.

¹ This is a non-GAAP financial measure. Please refer to the “Non-GAAP financial measures” section at the end of this press release.

The segment had a spectacular quarter, posting its ninth consecutive quarter of revenue growth as well as another record profit. Revenue was US$317.3 million, an increase of US$31.7 million, or 11.1%, from last year. Excluding the impact of varying foreign exchange rates, organic revenue¹ improved by 8.5%. Despite supply constraints and shortages of bike components, revenue at all three divisions increased with Cycling Sports Group (CSG) and Caloi making the greatest percentage gains.  Demand remains strong for high-end bicycles with Cannondale gravel and E-bikes being particularly popular.  Similarly, in the mass channel, demand was strong but was again limited by supply constraints and low retailer in-stock levels.  Six-month revenue increased to US$587.7 million, up US$113.8 million, or 24.0%, from prior year.

Second quarter gross margin improved due to pricing, limited discounting and a favourable foreign exchange rate impact. Operating profit, both reported and adjusted, was US$31.7 million compared to US$26.8 million and US$27.1 million respectively last year.  CSG and Caloi were the main drivers of the operating profit improvement with Caloi reversing last year’s high operating profit loss with a modest operating profit. Six-month operating profit, both reported and adjusted, was US$53.5 million compared to US$26.2 million and US$26.6 million respectively a year ago.

Revenue for the second quarter was US$236.8 million, a decrease of US$23.9 million, or 9.2%, versus last year’s second quarter, which was the best-ever for Dorel Home, caused by widespread COVID-19 lockdowns which prompted increased purchases for the home.  Beyond demand being more modest, constraints on supply were a significant limiting factor on sales.  Container scarcity, supplier shutdowns at certain Asian suppliers and raw material and component shortages for domestically manufactured items all had an impact on product availability.  Cosco Home & Office was a solid contributor with its new step stool and outdoor and indoor furniture categories.  Branded sales maintained their consistent growth and additional product is being developed to enhance the segment’s online offerings.  Six-month revenue totaled US$465.5 million, an increase of US$7.4 million, or 1.6%, from prior year.

Operating profit for the second quarter, both reported and adjusted, was US$14.3 million compared to US$18.6 million and US$21.4 million respectively last year.  Higher warehousing costs, less profitable product mix and a significant spike in freight costs squeezed margins and were responsible for the decline.  Operating profit for the six months, both reported and adjusted, was US$29.1 million, compared to last year’s US$28.9 million and US$31.7 million respectively, a year-over-year decrease of US$2.5 million, or 8.0%.

Second quarter revenue increased to US$210.9 million, up US$33.2 million, or 18.7%, from last year. After removing the impact of varying exchange rates year-over-year and 2020 third party sales from the Zhongshan, China manufacturing facility sold at the end of the first quarter of 2021, adjusted organic revenue¹ improved by approximately 18.1%. All Dorel Juvenile markets posted higher revenue, particularly the U.S., Brazil and Chile. The U.S. had a very strong quarter, driven by a recovery in sales of mobility products as well as government spending stimulus which helped push consumer demand. Brazil continued its leading market share expansion with its best-in-class E-commerce. Despite continuing pandemic-related restrictions in Chile, sales grew considerably as E-commerce helped offset lower retail channel sales. Europe also improved but gains were limited by continued COVID-19 restrictions, as well as some product availability issues out of Asia. Despite these constraints and store traffic remaining lower than pre-pandemic levels, there are encouraging signs with gradual re-openings and positive reaction to Juvenile’s product portfolio, notably the new Maxi-Cosi 360 Family of car seats. Six-month revenue for the segment was US$420.7 million, a US$47.9 million increase, up 12.9% from prior year. Adjusted organic revenue¹ improved by approximately 11.4%, after adjusting for foreign exchange rates and the disposition of the Zhongshan factory.

Improved year-over-year gross margins and the increase in sales again helped boost the bottom line for the quarter. Operating profit was US$2.1 million compared to an operating loss of US$1.2 million last year. Excluding restructuring costs, adjusted operating profit¹ was US$3.0 million, an increase of US$2.0 million, or 215.1%, from a year ago. Last year’s results included a positive contribution from the Zhongshan, China factory.

Six-month operating loss was US$5.5 million compared to an operating loss of US$47.4 million a year ago. Excluding impairment loss on goodwill and restructuring costs, six-month adjusted operating profit¹ was US$5.1 million, compared to an adjusted operating loss¹ of US$0.9 million, an improvement of US$6.0 million, or 659.6%, from last year. The first half included restructuring costs of US$10.6 million, primarily due to a US$8.6 million non-cash loss on the China factory sale.

Other

On June 11, 2021, Dorel entered into a two-year US$450 million ABL facility with institutional lenders led by Bank of Montreal as lead arranger, administrative agent and sole bookrunner. This ABL facility, which is guaranteed by certain of Dorel’s subsidiaries, will mature in two years from the date of the initial advance (June 11, 2021) and may be extended for additional one-year terms with the consent of the lenders.

Finance expenses decreased by US$2.8 million to US$9.3 million during the second quarter compared to US$12.2 million in 2020. The decrease is mainly explained by a decrease of US$2.7 million in interest on long-term debt due to lower average debt balances year over year, a decrease in other interest of US$1.4 million due to lower average bank indebtedness balances, partly offset by a gain of US$1.5 million recorded during the second quarter of 2020 in connection with the revision of estimated payments related to the senior unsecured notes agreement.

Outlook

“As in many industries, the uncertainty of supply is as acute as it has ever been.  The demand for container freight continues to push up costs and is hindering our ability to meet the continuing strong consumer demand for our products.  In addition, virus outbreaks in various parts of the world and even labour availability for Dorel and our stakeholders are risks with which we are contending.  Our ability to successfully manage these issues with our vendor and retailer partners will be vital to our ability to deliver a strong second half,” commented Dorel President & CEO, Martin Schwartz.

“This situation is especially true for our Sports segment as component availability and supply is preventing us from delivering even better earnings.  Our ability to exceed prior year second half earnings is only limited by supply issues as demand is expected to remain very strong throughout the balance of the year.

“In Home, demand is softening versus last year’s unprecedented performance that was driven by purchases for the home during the beginning of the pandemic. We are implementing strategic price increases, but higher costs will continue to negatively impact our margins going forward.  Despite this, we expect we can deliver earnings consistent with prior year.

“Finally in Juvenile, success in Europe remains critical to our continued turnaround. Consumer reaction has been positive to the innovation in our new products and our product pipeline remains robust.  The majority of our other Juvenile markets continue to do well, with North and South America in particular delivering improved earnings.  Barring significant product shortages due to a lack of supply or an inability to manage higher costs, overall for the segment, we expect our second half to be much better than the first half and in line with prior year,” concluded Mr. Schwartz.

Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, August 6, 2021 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialing 1-888-440-3307. The conference call can also be accessed via live webcast at http://www.dorel.com. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-800-770-2030 and entering the passcode 4231183 on your phone. This recording will be available on Friday, August 6, 2021 as of 4:00 P.M. until 11:59 P.M. on Friday, August 13, 2021.

Condensed consolidated interim financial statements as at June 30, 2021 will be available on the Company's website, www.dorel.com, and will be available through the SEDAR website.

Profile
Dorel Industries Inc. (TSX: DII.B, DII.A) is a global organization, operating three distinct businesses in juvenile products, bicycles and home products. Dorel's strength lies in the diversity, innovation and quality of its products as well as the superiority of its brands. Dorel Juvenile’s powerfully branded products include global brands Maxi-Cosi, Quinny and Tiny Love, complemented by regional brands such as Safety 1st, Bébé Confort, Cosco and Infanti. Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi and IronHorse. Dorel Home, with its comprehensive E-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of US$2.8 billion and employs approximately 8,200 people in facilities located in twenty-five countries worldwide.

Non-GAAP Financial Measures
Dorel is presenting in this press release certain non-GAAP financial measures, as described below. These non-GAAP financial measures do not have a standardized meaning prescribed by International Financial Reporting Standards (IFRS) and therefore are unlikely to be comparable to similar measures presented by other issuers. These non-GAAP financial measures should not be considered in isolation or as a substitute for a measure prepared in accordance with IFRS.

Contained within this press release are reconciliations of the non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with IFRS.

The terms and the definitions of the non-GAAP financial measures contained in this press release are as follows:

Organic revenue and adjusted organic revenue

Dorel believes that this measure provides investors with a better comparability of its revenue trends by providing revenue growth on a consistent basis between the periods presented.

Other financial information prepared under IFRS adjusted to exclude impairment loss on goodwill and restructuring costs

Dorel believes that the adjusted financial information provides investors with additional information to measure its financial performance by excluding certain items that Dorel believes do not reflect its core business performance and provides better comparability between the periods presented. Accordingly, Dorel believes that the adjusted financial information will assist investors in analyzing its financial results and performance. The adjusted financial information is also used by management to assess Dorel’s financial performance and to make operating and strategic decisions.

Caution Regarding Forward-Looking Statements
Certain statements included in this press release may constitute “forward-looking statements” within the meaning of applicable Canadian securities legislation. Except as may be required by Canadian securities laws, Dorel does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties, including statements regarding the impact of the COVID-19 pandemic on Dorel’s business, financial position and operations, and are based on several assumptions which give rise to the possibility that actual results could differ materially from Dorel’s expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, Dorel cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits Dorel will derive from them. Forward-looking statements are provided in this press release for the purpose of giving information about management’s current expectations and plans and allowing investors and others to get a better understanding of Dorel’s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this press release are based on a number of assumptions that Dorel believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from Dorel’s expectations expressed in or implied by the forward-looking statements include:

• general economic conditions;
• changes in product costs and supply channels, including disruption of Dorel’s supply chain resulting from the COVID-19 pandemic;
• foreign currency fluctuations, including high levels of volatility in foreign currencies with respect to the US dollar reflecting uncertainties related to the COVID-19 pandemic;
• customer and credit risk, including the concentration of revenues with a small number of customers;
• costs associated with product liability;
• changes in income tax legislation or the interpretation or application of those rules;
• the continued ability to develop products and support brand names;
• changes in the regulatory environment;
• outbreak of public health crises, such as the current COVID-19 pandemic, that could adversely affect global economies and financial markets, resulting in an economic downturn which could be for a prolonged period of time and have a material adverse effect on the demand for Dorel’s products and on its business, financial condition and results of operations;
• continued access to capital resources, including compliance by Dorel with financial covenants under its senior unsecured notes and with all of the terms and conditions under its ABL facility, and the related costs of borrowing, all of which may be adversely impacted by the COVID-19 pandemic;
• failures related to information technology systems;
• changes in assumptions in the valuation of goodwill and other intangible assets and future decline in market capitalization; and
• there being no certainty that Dorel will declare any dividend in the future.

These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in Dorel’s annual MD&A and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors set out in the previously-mentioned documents are expressly incorporated by reference herein in their entirety.

Dorel cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to Dorel or that Dorel currently deems to be immaterial may also have a material adverse effect on Dorel’s business, financial condition or results of operations. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

All figures in the tables below are in thousands of US $, except per share amounts

Reconciliation of non-GAAP financial measures

Organic revenue and adjusted organic revenue:

Other financial information prepared under IFRS adjusted to exclude impairment loss on goodwill and restructuring costs:

CONTACTS:
Saint Victor Investments Inc
Rick Leckner
(514) 245-9232

Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034