Third Quarter Ended September 30, 2017

Transcription

1 Third Quarter Ended September 30,

2 Except for historical information provided herein, this presentation may contain information and statements of a forward-looking nature concerning the future performance of Dorel Industries Inc. These statements are based on assumptions and uncertainties as well as on management's best possible evaluation of future events. The business of the Company and these forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ from expected results. Important factors which could cause such differences may include, without excluding other considerations, general economic conditions; changes in product costs and supply channels; foreign currency fluctuations; 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; continued access to capital resources and the related costs of borrowing; changes in assumptions in the valuation of goodwill and other intangible assets; and there being no certainty that Dorel s current dividend policy will be maintained. A description of the above mentioned items and certain additional risk factors are discussed in the Company s Annual MD&A and Annual Information Form, filed with the Canadian securities regulatory authorities. The risk factors outlined in the previously mentioned documents are specifically incorporated herein by reference. The Company s business, financial condition, or operating results could be materially adversely affected if any of these risks and uncertainties were to materialize. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Note: All figures are in US dollars. 2

3 As a result of impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt incurred in 2017 and 2016, the Company is including in this investor presentation the following non-gaap financial measures: adjusted cost of sales, adjusted gross profit, adjusted operating profit, adjusted finance expenses, adjusted income before income taxes, adjusted income taxes expense, adjusted tax rate, adjusted net income, adjusted earnings per basic and diluted share and adjusted diluted weighted average number of shares outstanding. The Company believes that this results in a more meaningful comparison of its core business performance between the periods presented. These non-gaap financial measures do not have a standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other issuers. Reconciliations of these non-gaap financial measures to the most directly comparable financial measures calculated in accordance with GAAP are included in the MD&A for the third quarter and nine months ended September 30,

4 TSX: DII.B DII.A 3 business segments Dorel Home Dorel Juvenile Dorel Sports $2.6 billion in sales annually Approximately 10,000 employees Sales to 100+ countries Facilities in over 25 countries (2016 revenue - $735 million) (2016 revenue - $929 million) (2016 revenue - $939 million) 4

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6 (in thousands, other than EPS) Total revenue $ 642,634 $ 671,273 Adjusted net income $ 14,538 $ 20,647 Adjusted EPS (diluted) $ 0.44 $

7 Third Quarters ended September 30 (in thousands) Restated* Total revenue $ 201,449 $ 198,856 Gross profit $ 35,408 $ 33,226 Operating profit $ 20,537 $ 18,005 * During the fourth quarter of 2016, the Company changed its internal organization and the composition of its reportable segments. The design, sourcing, manufacturing, distribution and retail of the children s furniture was transferred from Dorel Juvenile to Dorel Home. Accordingly, the Company has restated the segmented information for third quarter ended September 30,

8 Improvements were driven by increased sales in all divisions to online retailers. In Q3 and for the nine months, on-line sales represented 51% and 50% of total segment revenue respectively compared to 44% and 43% for the comparable periods last year. Brick and mortar sales were down due mainly to the planned reduced exposure to a major mass merchant customer. Improved margins from increased on-line sales were partly offset by slightly higher input and warehousing costs. Q3 saw strong progress in the outdoor furniture business and the trend is expected to continue through Q4. 8

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10 Third Quarters ended September 30 (in thousands) Restated* Total revenue $ 235,645 $ 221,706 Gross profit $ 69,601 $ 75,915 Adjusted operating profit $ 11,355 $ 12,249 * During the fourth quarter of 2016, the Company changed its internal organization and the composition of its reportable segments. The design, sourcing, manufacturing, distribution and retail of the children s furniture was transferred from Dorel Juvenile to Dorel Home. Accordingly, the Company has restated the segmented information for third quarter ended September 30,

11 Over-riding strategy: Diverse, known brands; exciting, quality products; Company-owned distribution. Adapting to changing consumer shopping behaviour by building and implementing omni-channel strategy. Dorel Juvenile re-aligning operations to be more agile and drive profitable sales growth with a more market-focused approach to better react to juvenile industry trends. Speeding meaningful products to market. Operations have been streamlined particularly in China, but at other facilities as well. New emphasis on product development to put more innovative products in pipeline. 11

12 Organic revenue increased by approximately 4%, the first growth quarter since Q Revenue increased in the U.S. by high single digits despite the Toys R Us disruption, driven by growing e-commerce sales. Dorel Juvenile China revenue increased due to improved delivery performance which resulted in higher intercompany sales of travel systems and to strong car seat sales to a third-party customer. Sales in Brazil increased significantly, while sales in Europe decreased slightly in Euro in the face of competitive pressure and the timing of new product launches. The revolutionary Maxi-Cosi AxissFix Air, the world s first child car seat with integrated airbags, was launched throughout Europe. The ground-breaking safety technology sets a new standard in child car seats and puts Dorel at the forefront of innovation. 12

13 The Zhongshan factory manufacturing process has been stabilized and capacity constraints have been minimized. Investments are being made in automation and quality control to further bolster efficiencies. Going forward, the facility will be more focused on building ahead, rather than dealing with backorders. Sewing capacity has been augmented at the Huangshi factory and there is a continuing focus on automation. The new China marketing team has taken full responsibility for brand communication, production development, digital support, fashion development and trade marketing. 13

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15 Safety 1 st brings together the latest pediatric knowledge and advanced engineering to create the new onboard 35 LT infant car seat. Superior fit, as advised by pediatricians, helps create a safer ride for children from 4 to 35lbs. Advanced engineering also helps control the weight of the seat, making it one of the lightest infant carriers in the world. Superior Fit for Superior Safety 15

16 Maxi-Cosi AxissFix Air The Maxi-Cosi AxissFix Air is the world s first car seat with built-in airbags. Built-in airbags will become the new standard for forward-facing child car seats. In the case of a collision, the Maxi-Cosi Axissfix Air with built-in airbags reduces the forces on a child s head and neck in a forward-facing position up to 55%*. * Compared to any other forward-facing child car seat of Maxi-Cosi 16

17 Third Quarters ended September 30 (in thousands) Total revenue $ 205,540 $ 250,711 Adjusted gross profit $ 46,076 $ 54,566 Adjusted operating profit $ 587 $ 10,923 17

18 Excluding the positive impact of FX rates, organic revenue declined by approximately 19%. The revenue decline is attributed mainly to continued weakness in the global bicycle market, disruption in the North American retail environment and persistent inclement weather in the U.S. Pacific Cycle affected by changing buying habits at certain major mass merchants, amidst a soft bicycle market and poor weather, contributing to reduced consumer demand. The September 2017 bankruptcy filing of Toys R Us halted shipments temporarily, pushing sales into Q4. Sales in CSG decreased on a continued reduction in discounted sales, as inventory management has improved significantly in CSG s closeout sales in the quarter represented 11.6% of sales volume in 2017 compared to 16.3% in the prior year s third quarter. 18

19 SuperX SE Synapse 19

20 Jekyll 2 Trigger 20

21 1) Cycling Sports Group (CSG) IBD Division Premium Brands Innovation continuing focus SUGOI world class cycling, run and triathlon apparel and outdoor gear. Incorporates Cannondale apparel. 21

22 2) Pacific Cycle Mass merchants/sporting goods channel Full service provider bikes, parts & accessories, branded apparel Brand building has enhanced Schwinn/Mongoose awareness Electric ride-on toys. 22

23 3) Caloi 100% interest (effective March 2017) Largest bicycle brand in LATAM and leader in Brazilian market Portfolio includes full range of bicycles, from highperformance to children s mountain bikes, urban, recreational and road bikes Caloi s factory in Manaus is largest bicycle manufacturing plant outside Southeast Asia Brazil is a Dorel production hub, assembling Caloi, Cannondale, Schwinn, Mongoose & GT brand bicycles for local and export markets. 23

24 Taxes During the third quarter and nine months ended September 30, 2017, the Company s effective tax rates were 21.3% and 27.6% respectively versus 18.7% and (35.5)% for the same periods in the prior year. Excluding income taxes on impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt, the Company s third quarter adjusted tax rate was 21.4% in 2017 compared to 20.4% in The adjusted tax rate for the nine months was 23.8% in 2017 versus 18.1% in The main cause of the variation year-over-year of the adjusted tax rate is due to changes in the jurisdictions in which the Company generated its income. The Company is stating that for the full year it expects its annual adjusted tax rate to be between 20% and 25%. However, variations in earnings across quarters mean that this rate may vary significantly between quarters. 24

25 We are expecting a very good fourth quarter with all segments delivering improved adjusted operating profit versus last year. Dorel Home s momentum is expected to continue with both higher sales and earnings expected, driven by on-line sales. Dorel Juvenile is introducing several significant new products in the fourth quarter and this should translate into improved earnings, which will be similar to our third quarter performance. Revenue for the quarter is expected to be flat compared to prior year as the benefit of our enhanced product pipeline will be seen mostly in Dorel Sports is expected to rebound from its disappointing third quarter and we believe at this point that fourth quarter adjusted operating profit should be in line with the fourth quarter of last year. Therefore, for the second half, adjusted operating profit for Dorel Sports will not exceed prior year as previously announced. 25

26 Sustained growth in Dorel Home with a proven e-commerce growth model. Strategically growing Dorel Juvenile and Dorel Sports in global markets. A diverse portfolio of known, premium brands. Product development that drives growth. Established customer relationships. Annual dividend of $1.20 per share. Consistent generator of cash flow to support acquisitions. Consolidation of Chinese manufacturing facilities to reinforce supply chain and increase competitiveness. 26

27 APPENDIX 27

28 (In thousands of U.S. dollars, except per share data) 28

29 1988 Cosco Inc (DJG) 1990 Charleswood Corporation 1994 Maxi-Miliaan B.V. (Maxi-Cosi) 1998 Ameriwood Industries 2000 Safety 1 st Inc Quint B.V. (Quinny) 2003 Ampa France (Dorel Europe) 2004 Pacific Cycle 2007 IGC Australia 2008 Cannondale/SUGOI 2008 PTI Sports 2009 Baby Art 29

30 2009 Dorel Brazil 2009 Iron Horse Bicycles 2009 Gemini Bicycles (Australia) 2009 Hot Wheels, Circle Bikes (UK) 2011 Silfa Group (Chile, Peru, Bolivia, Argentina) - 70% interest 2012 Poltrade (Poland) 2012 Best Brands Group SA (Panama) and Baby Universe SAS (Colombia) 70% interest 2013 Caloi (Brazil) 70% interest (now a 100% interest) 2014 Tiny Love Ltd. (Israel) 2014 Right to sell Infanti brand in Brazilian market 2014 Juvenile business of Lerado Group (Hong Kong) 2014 Intercycles (Chile) 30

31 % 36% 24% 39% 36% 37% DOREL JUVENILE DOREL SPORTS DOREL HOME 31

32 % 9% 2% 3% 9% 3% 21% 62% 21% 60% 3% 4% US Canada Europe Other Latin America Asia 32

33 Active in sustainability on several fronts throughout all three segments. Dorel Home Products facility is FSC certified. Cornwall RTA plant recycling for 10 years. 98% of materials are recycled or sold. DJG s sustainability initiatives include zero landfill, water usage reduced by 98%; high-efficiency lighting systems. Strict policy in place to ensure sustainable business practices of suppliers. 33

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