Martin Schwartz. President and Chief Executive Officer. Dorel Industries Inc Annual Meeting of Shareholders. Montreal

Transcription

1 Check against delivery Martin Schwartz President and Chief Executive Officer Dorel Industries Inc Annual Meeting of Shareholders Montreal May 26,

2 Let me first direct your attention to the forward looking statements on the screens and remind you that all figures mentioned today are in U.S. dollars. With operations around the world, foreign exchange weighed heavily on Dorel last year. Currency variations cost the Company an unprecedented net negative impact of approximately $49 million in our Sports and Juvenile businesses 2015 operating profit compared to That amount would have been even greater had it not been for concerted mitigation measures and strategic price increases. I m pleased to say that 2016 is off to a much better start and FX had no net material effect on our Q1 earnings. Jeffrey will cover that shortly. There were bright spots in Our Home Furnishings segment contributed handsomely to Dorel s bottom line. We ve been in furniture for a long time, in fact that s where Alan, Jeff and I first started back in the late 60 s. While the business has always been profitable, it hadn t been on the radar of investors. But that started to change a few years ago, and this past year Home Furnishings really took off. The segment has matured and has seen remarkable growth through an excellent business model. Another great achievement last year was winning the Walmart Supplier of the year award for Omni Channel, for both Walmart in-store and Walmart.com. In case you re not aware, Omni channel retailing involves reaching consumers wherever and however they choose to shop. That means everything from initial promotional messages to final ordering must be aligned seamlessly on-line, across digital devices and in store. Adapting to this rapidly changing shopping behaviour is not an option, and our divisions are consistently active in keeping up with the latest trends. This is a significant award for Dorel as it is for our Walmart business with all 3 segments. 2

3 Dorel has consistently worked hard to build and maintain solid customer relationships, particularly with our major accounts. An important strategy has been to have dedicated teams located in close proximity to each of our large customers, the major mass merchants, working exclusively with them to ensure superior service and to fully understand their needs. This has served us very well over the years and this latest recognition is proof positive. Product Showcase Now as is the custom at these meetings, I will now highlight a few of our exciting offerings, with the help of my executive assistant, Sandra Gargiulo. Maxi Cosi Pebble Plus Rated as Europe s best Baby Car Seat of the year for 2015, in both safety and ease of use, this Maxi Cosi Pebble Plus from Dorel Juvenile is the latest addition to Dorel Juvenile s baby car seat portfolio. As a forerunner in the latest European safety standards and legislation, the Pebble Plus features a convenient click-and-go system when used with a base unit, and sets off an alarm if installed incorrectly. As a travel system, the Pebble Plus includes memory buttons to facilitate the detachment from the stroller without exertion. The baby-hug inlay operates as a soft shell for the baby, while the special side wings protect it from side impact collisions. Maxi Cosi Stella stroller Small but sturdy, this Maxi Cosi/Bebe Confort Stella stroller has been created for active parents. This stroller, with a geometric limited edition design by Amsterdam-based designer, Edward van Vliet, is versatile for all journeys, starting at birth. Its slim line and all-terrain wheels make it highly maneuverable on any surface, whether it s in the city or along bumpy country roads. 3

4 Grow and Go car seat Here s an excellent innovation from Safety 1 st that gives parents the car seat that s built to grow. Starting with the first ride home from hospital to school-day car pools, the Grow and Go 3-in-1 car seat gives children a safer and more comfortable ride. Featuring extended use in each mode, from rear facing to forward to booster, the Grow and Go has been designed for children from 5 to 100 pounds. Cannondale CAAD12 From Dorel Sports, the Cannondale CAAD is the winner of the prestigious 2016 Bike of the Year award from UK s Cycling Plus Magazine. Costing less than $1700 US, it beat out every bicycle they tested, including many $10,000 plus carbon bikes. It s the most sophisticated aluminum road bike ever made and is the product of over 30 years of Cannondale s pioneering innovation and dominance in aluminum frames. Ram 3500 brush fire truck ride-on Our electric ride-ons continue to sell very well, particularly with additions such as this brush fire truck. This hot, Kid Trax model, sold in the States, features a 180 degree rotating and detachable water gun; flashing emergency lights and authentic sounding sirens. The 12V battery and charger included features exclusive direct connect technology. Cannondale Slate Force CX1 This Cannondale Slate Force CX1, which retails for $4260 US, is an all-new kind of road bike that has the industry abuzz. It won the 2015 Eurobike Gold Award for Best Road Bike. Using smaller diameter wheels with high-volume tires, and a special road-version of the Lefty suspension fork, the Slate is incredibly comfortable, fast and fun on any road 4

5 surface, and super capable and composed off-road, expanding the definition of roadriding beyond anything seen before. Paris Futon This DHP Paris Futon is fully upholstered in beautiful linen fabric with a button tufted design on the back cushions. A sturdy frame with seating made of foam and independently encased coils provide ample comfort and support. Disguised as a sofa, it has spacious seating room while offering the functional features of a futon and can easily convert from seating to lounging or sleeping positions. The futon also features a split-back to accommodate the different preferences of users. Cosco Outdoor Furniture This Lakewood Ranch conversation set, including 2 chairs and a loveseat with a tempered glass topped coffee table, is part of COSCO s new SOLID VALUE SMART DESIGN collection. It is constructed with a strong steel frame for extra support and durability, wrapped in a resilient classic woven resin wicker design. The removable plush set and back cushions are covered in a woven breathable fabric, which makes it easy to clean and maintain. This has been a great online product. Dorel Juvenile Looking now at each of our businesses, foreign exchange took approximately a net $20 million toll on the operating profit of our Juvenile segment last year. However the situation has begun on a brighter tone this year as improved pricing and production efficiencies has resulted in better gross margins. This had a most positive effect on first quarter operating profit. In local currencies, many of our divisions in Europe and Latin America actually did better in 2015 than the previous year, underlining the progress we re making in these markets due to our innovative product and marketing initiatives. 5

6 Juvenile is in the midst of an extensive plan to maximize its structure and leverage its key assets, adapting to a consolidating Juvenile industry. Three principal priorities are enhancing time-to-market for new product development, driving improvements in operations and procurement, and establishing a roadmap for the on-going digitalization of the business. A revamped organizational framework empowers Juvenile to work on a global scale while retaining a distinctive local flavour, focused on consumers regional needs. Our extensive product portfolio features both global and regional brands and covers all price points to provide this flexibility. With four global R&D centres of excellence to drive innovation and synergies, we invest consistently in product development and enhancing quality control. We also operate five manufacturing centres of excellence, located in the U.S., Europe and China for both car seats and strollers. It s all about the consumer. Today, they want to be seamlessly connected anytime, anywhere and want instant information and service. Dorel Juvenile s Omni channel strategy was accelerated through 2015 and is being further developed this year. On-line presence was expanded to 61 countries with increased digital exposure and increased use of social media with close to 40% growth in traffic. Based on our findings we have enhanced the in store shop-in-shop concept with a focus on brand image to stimulate sales. Quinny is developing a digital tool to allow consumers in Europe to customize their own Zapp X stroller when the model is launched later this year. It will be integrated in selected Quinny websites and will also be available through an instore digital tool in selected premium boutiques and premium chains. 6

7 Important progress continues at our factories in China which have added to both our manufacturing and R&D centres of excellence. A comparison of how the facilities looked when we purchased them in November 2014 and how they appear today is definitely night and day. The operating structure has been optimized by shutting two factories, reducing headcount, introducing revamped quality control procedures and outsourcing low value activities. Products are increasingly being transferred from other Dorel suppliers to our own factories in China as we exit manufacturing in China for some third parties. Both factories were modestly profitable this past quarter. Here in North America, the new Safety 1 st Grow and Go car seat you saw is a tremendous hit. Our US division focused on shoring up its market position in the convertible car seat category and developed this seat which has become the top selling convertible at major US retailers and is expected to be introduced globally by the end of the year. While a combination of a weak Latin America economy and a chaotic political situation in Brazil are creating headwinds, Dorel Juvenile Latin America is doing relatively well. Our extensive brand portfolio with various price points, strong local management and domestic manufacturing capability are allowing us to gain market share from the competition in Chile, Peru and even in Brazil. Dorel has the flexibility to react swiftly to market conditions in these regions, better than anyone else. We are gaining relevance with consumers in Latin America due to our strong retail store presence and a push toward digital which is allowing us to engage consumers at multiple touch points. 7

8 Dorel Sports While foreign exchange created a net negative impact of approximately $29 million on Dorel Sports operating profit last year, inroads were achieved in several key areas through 2015, developing its powerful bicycle brand portfolio across channels and geographies. A major push in innovation and product development resulted in the introduction of an unprecedented 13 new Cannondale platforms. In addition to the models I showcased, a number of others have been launched in recent weeks including the Scalpel-Si, the lightest and stiffest dual suspension cross country race bike and the Quick, a new urban bike for the millennial lifestyle. There is also an expanded line of our Fabric brand of parts and accessories with lights, pumps, seats and grips as well as the most significant update to Cannondale s helmets which will include multi-directional Impact protection. Indeed, there is a lot going on with all our bicycle brands. Recognition has been abundant for Cannondale. A key example is Cycling Plus Magazine and BikeRadar Online s naming the CAAD12 Bike of the Year It s no wonder that Q NPD data shows Cannondale growing share and growing faster than its key competitors, unfortunately this hasn t translated into shipment growth for CSG thus far due to retailer inventory work-down. To counter this, Cycling Sports Group is driving cost savings on its model year 17 product line and is upgrading parts and accessories and apparel offerings to drive growth in these categories. The market in Europe has been a bit soft but is thought to be picking up in recent weeks. There has been considerably less discounting abroad. 8

9 Ebikes and mountain bikes are fast growing categories in many European centres and a new line of e-mountain bikes and the Scalpel launch will help stimulate CSG sales. Last year Pacific Cycle, our mass merchant division, grew with key customers, doing especially well with its popular electric ride-on toys. PCG also increased its ecommerce business. For Q1 this year they delivered a very strong quarter with solid growth from Schwinn and Mongoose, helped by the early onset of Spring in the U.S. and an early Easter which drove both bike and parts & accessories sales in March. The strengthening of the Schwinn brand has been particularly noteworthy Sales of our Kid Trax line of electric ride-ons have grown each year and we anticipate this trend will continue this year. Just launched is Disney s only custom designed ride-on toy for the highly anticipated Finding Dory movie, in theatres mid-june. Additional new products are being developed and there will be expansion in the 24 volt category. In Latin America, despite concerns about the health of the region s economy, and the volatile political situation in Brazil, our Sports business is more than holding its own. The mass channel is a bit of a struggle but the 5 retail bike stores we opened in Chile are operating well with year-over-year growth. Next week will see the opening of our first retail outlet in Lima, Peru and this will be a flagship store. Caloi remains a very strong brand in Brazil and we are pleased with this business. In local currency, revenue was up high single digits in Q1 2016, driven by price increases which more than offset unit declines. Dorel s overall focus in Brazil has been to concentrate on working capital, inventory and cash management all of which are strong. 9

10 A final comment on Dorel Sports for some perspective. The segment, and in particular our Cycling Sports Group, had a weaker Q1 due in part to industry discounting initiated by competitors in the independent bike dealer sector. IBD is important for Dorel, it carries great brand equity with Cannondale and attracts a lot of attention, but it is only one component of our total bicycle business and contributes the smaller part Dorel Sports profit. Pacific Cycle on the other hand delivers much more to the segment s operating profit. Taken company wide, our IBD bicycle business is one of the smallest pieces of the corporate pie and is one of multiple brands we have across our business platforms. Overall, we expect to have a decent year overall in bikes. Home Furnishings Home Furnishings had an exceptional 2015 and is on track to maintain its momentum this year. We own four factories in Canada and the States producing ready-to-assemble furniture and futons. Our other furniture divisions offer a variety of domestic or imported products such as folding furniture, step stools, futons, as well as upholstered and wood furniture. Our furniture business is successful as it carries low overheads and requires little in the way of major capital expenditures. As volumes increase, we generally become more profitable. The segment has matured in the past few years and ecommerce has led to significant growth with a proven model of advanced logistics and speed to-market. One thing that has changed is that on-line consumers look for a wider choice, and the competition from countless new sources means we have to offer a much larger variety. So, for example, instead of offering 10 choices of futons we now offer multiple selections. Home Furnishings has done an excellent job of managing the production of all these additional SKUs to meet the ecommerce requirements. Ecommerce is an increasingly important sales channel and we ve invested in enhanced technology and infrastructure, such as logistics and warehousing, to ensure superior customer service. 10

11 Home Furnishings was also recognized by Walmart for its Omni channel expertise, and with good reason it has long been an ecommerce model for Dorel s other operations. We are delighted with the performance of this business and foresee continued progress. Before turning things over to Jeffrey, my sincere thanks to all of Dorel s employees around the globe. It was a tough year and management is grateful for the commitment and performance of all. To you our shareholders, we thank you for your patience and as you see, things are looking better this year. Finally, my gratitude to our Board for their consistent and helpful support. I would like to express my sincere thanks to long-time Board member Sonny Gordon for his years of unwavering service to Dorel. Sonny is moving on and we wish him continued success and good health. And now I ll ask Jeffrey to continue. 11