Investor Presentation Second Quarter Ended June 30, 2015

Transcription

1 Investor Presentation Second Quarter Ended June 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 few 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 the restructuring and other costs incurred in both 2015 and 2014, as well as impairment losses on goodwill and trademarks, the Company is including in this investor presentation the following non- GAAP financial measures: adjusted gross profit, adjusted operating profit, adjusted net income, and adjusted earnings per diluted share. 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 second quarter and six months ended June 30,

4 3 major segments Dorel Juvenile Dorel Sports Dorel Home furnishings $2.7 billion in sales annually Approximately 11,200 employees Sales to 100+ countries Facilities located in 25 countries (2014 revenue - $1.07 billion) (2014 revenue - $1.05 billion) (2014 revenue - $554 million) 4

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6 (in thousands, other than EPS) Total revenue $ 669,643 $ 655,831 Adjusted net income $ 16,622 $ 19,769 Adjusted EPS (diluted) $ 0.51 $

7 Second Quarters Ended June 30 (in thousands) Total revenue $ 264,919 $ 251,322 Gross profit $ 72,989 $ 72,777 Adjusted operating profit $ 15,353 $ 16,331 7

8 Revenue increased US$13.6M or 5.4% to US$264.9M. Q2 adjusted operating profit was US$15.4M, including a full quarter of results from Dorel Juvenile China, and declined 6.0% from $16.3M a year ago. Organic revenue growth was in all major regions and increased by approximately 7%. Operating profit was impacted by a net negative impact of FX rates of approximately US$5M in Q2. In Europe, improved car seat sales in most Northern markets drove the growth with US sales increases coming from juvenile wooden furniture. In local currencies, sales in Latin America continued to increase in the low double digits. 8

9 Dorel Juvenile China update The integration process is ahead of plan with all operational areas being addressed. As part of the change management process, particular emphasis is being placed on operational improvements at the Zhongshan factory, staffing capabilities and growing the domestic sales business. The research and development groups based in Taiwan and China are now aligned with the segment s global teams based in the US, Europe and Israel. Management teams, such as Finance, IT and HR, will continue to be further supported and skill sets in sales are being strengthened. There is a plan to consolidate factory space to further cut costs and become more efficient. Dorel Juvenile China did better in Q2 than had been anticipated. 9

10 Company owned factories in China to optimize supply chain Global brand presence with global, regional and local brands around the world Leading brands in multiple categories Global leadership in Car Seat Safety Extensive product development and local adaptation to fit consumers needs Strong social media presence E- tailing market expansion 10

11 Dorel Juvenile has created a way to make mobility a little easier, innovative travel system solution for modern day parents and caregivers: the Safety 1 st Step and Go Travel System, featuring the onboard 35 infant car seat. A first-of-its-kind stroller that features the only step-to-open design on the market, allowing for hands-free setup and easy on-the-go travel. The only stroller to offer a machine-washable and dryer-safe stroller seat pad. 11

12 The new Maxi-Cosi AxissFix is the first swiveling child seat to meet, and exceed, the latest EU child car seat regulation. Not only is it extremely safe, but it's easy for parents to use without straining their backs or necks. The AxissFix is able to swivel a full 360 degrees Parents can strap babies in facing forward, and then easily rotate them into the rearfacing position without unnecessary lifting. This also means the seat can simply be rotated forward, without the need to reinstall it, once a child is older than 15 months and taller than 76cm winner of the Red Dot Award 12

13 Quinny further builds global consumer brand presence Global Website launches Social networks New Limited Edition Collections and expansion of in-store Shop-in-Shops, elevates brand recognition and supports strong sales growth 13

14 Second Quarters Ended June 30 (in thousands) Total revenue $ 251,087 $ 286,249 Adjusted gross profit $ 56,627 $ 67,839 Adjusted operating profit $ 10,655 $ 18,399 14

15 Revenue decreased US$35.2M, or 12.3% to US$251.1M compared to last year s US$286.2M. Caloi had double digit organic revenue growth in local currency as it rebounded from last year s soft second quarter due to the negative impact of World Cup events. Sales also increased organically in Japan and the UK. Offsetting this, was an organic sales decline in Europe as dealers purchased inventory in Q1 ahead of price increases implemented in April and in anticipation of the Q3 launch of new modelyear 2016 products. Overall, organic revenue declined by approximately 5%. Q2 adjusted operating profit, excluding restructuring and other costs, decreased US$7.7M, or 42.1% to US$10.7M, compared to US$18.4M. FX had a net negative impact on the segment s Q2 operating profit of approximately US$7M. New pricing on model year 2016 bicycles is being announced and the new product launches have received excellent reviews from retailers and media. Sales decline in North America was due partly to a wet month of May as well as to mass customers reducing inventory levels in the sporting goods category. 15

16 Four distinct operating divisions 1) Cycling Sports Group (CSG) IBD Division Premium Brands Growing dealer network CSG sales growing rapidly outside North America Innovation continuing focus Building Dorel s bike business to # 1 position 16

17 2) Pacific Cycle Mass merchants/sporting goods chains Bicycle parts/accessories Full service provider bikes, parts and accessories, branded apparel Brand building has enhanced Schwinn s awareness 17

18 3) Caloi Acquired 70% interest in Q Established in 1898 in Brazil, Caloi is one of the world s oldest and most established bike brands It is the largest bicycle brand in Latin America and the leader in the Brazilian market Caloi s portfolio includes a full range of bicycles, from high-performance to children s; mountain bikes, urban, recreational and road bikes Caloi s factory in Manaus is the largest bicycle manufacturing plant outside Southeast Asia Brazil is a Dorel production hub, assembling Caloi, Cannondale, Schwinn, Mongoose & GT brands bicycles for local and export markets 18

19 4) Apparel Footwear Group (AFG) Performance apparel division comprised of the SUGOI, Sombrio, Cannondale and Schwinn brands Award-winning manufacturer and distributor of world class cycling, run and triathlon apparel and outdoor gear Products sold globally 19

20 Second Quarters Ended June 30 (in thousands) Total revenue $ 153,637 $ 118,260 Gross profit $ 20,621 $ 15,812 Operating profit $ 8,685 $ 5,254 20

21 Revenue increased by US$35.4M or 29.9% to US$153.6M from US$118.3M. Driven by an expanded product line that resonates with consumers, the segment s sales to Internet retailers continued to drive revenue, representing over 34% of total segment sales in the quarter. Operating profit rose US$3.4M or 65.3% to US$8.7M from US$5.3M. Sales to brick and mortar stores were up for the third consecutive quarter, increasing significantly leading to double digit growth. 21

22 General Since the end of the quarter, most currencies have further declined against the US dollar. We therefore remain cautious in our outlook through 2015 for our Sports and Juvenile segments. Dorel Juvenile The segment is ahead of plan to be breakeven by Q4 at Dorel Juvenile China and we see further upside as we near the end of the year. Q3 will not be as strong as Q2 due to the timing of sales and additional spending to support several new product launches and marketing initiatives. Dorel Sports New product launches are expected to deliver better results in H2 versus last year, driven by the Cycling Sports Group and Pacific Cycle. Most of the benefit will be in Q4 due to the seasonality of the business and the positive impact of the Christmas shopping season. Dorel Home Furnishings With substantial momentum established in H1, we are bullish on the outlook for the balance of the year. Our strength in e-commerce sales in our categories is a reflection of the investments made over the past several years. We are now consistently benefiting from the product development and logistics initiatives put in place as our retail partners have come to rely on us for e-commerce solutions to service consumers. Even brick and mortar sales are 22 benefiting from strong POS at major retailers.

23 A record of successfully integrated acquisitions A focus on Juvenile and bicycles where Dorel is a key player Strategically growing Dorel Juvenile and Dorel Sports segments in global markets A portfolio of known, premium brands Product development capabilities that drive growth Established customer relationships Strong annual dividend of US$1.20 per share Consistent generator of cash flow to support acquisitions Acquired and integrating new Asian manufacturing facilities to reinforce supply chain and increase competitiveness 23

24 APPENDIX 24

25 (In thousands of U.S dollars, except per share amounts) 25

26 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 26

27 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 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) 27

28 % 21% 40% 41% 39% 38% DOREL JUVENILE DOREL SPORTS DOREL HOME FURNISHINGS 28

29 % 10% 6% 8% 24% 54% 24% 56% 5% 6% US Canada Europe Other Latin America 29

30 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 30