I N V E S T O R P R E S E N T A T I O N T H I R D Q U A R T E R E n d e d S e p t e m b e r 3 0,

Transcription

1 I N V E S T O R P R E S E N T A T I O N T H I R D Q U A R T E R E n d e d S e p t e m b e r 3 0,

2 Forward-Looking Statement 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 suppositions 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 Dorel Overview 3 major segments Juvenile products (2013 revenue - $993 million) Bicycles/recreational products (2013 revenue - $919 million) Home furnishings $2.4 billion in sales annually Approximately 10,500 employees Sales to 100+ countries Facilities located in 25 countries (2013 revenue - $524 million) 3

4 Dorel s Key Brands 4

5 Third Quarters Ended September 30 Consolidated (in thousands, other than EPS) Total revenue $ 673,020 $ 607,298 Net income $ 19,480 $ 11,105 EPS (diluted) $ 0.60 $

6 Juvenile Segment Third Quarters Ended September 30 (in thousands) Total revenue $ 260,723 $ 238,983 Gross profit $ 73,165 $ 64,911 Operating profit $ 16,112 $ 5,027 6

7 Third Quarter Juvenile Highlights Year-over-year revenue increased 9.1%, operating profit grew 220.5%. Q operating profit included a pre-tax charge of $8M related to a US car seat product liability case With the exception of Dorel Juvenile USA, operating profits in all juvenile divisions were impacted negatively by strength of USD Dorel Juvenile Europe was the most significant contributor to Q3 operating profit Intensive activity underway to integrate Lerado operations in Asia First shipments made from Dorel s start-up in Mexico 7

8 Third Quarter Juvenile Highlights Lerado Acquisition: On November 3, 2014 Dorel acquired juvenile business of HK-based Lerado Group for $120 million Provides Dorel with first company-owned factories in Asia, including 2.5 million sq. ft. of modern production, R&D and testing resources, three facilities in China, one in Taiwan Transition team in place. Senior industry veteran hired by Dorel to manage operations. Existing Lerado management expected to remain Acquisition expected to accelerate Dorel s plans to grow in the Asian domestic market, opportunity thus far under exploited Dorel issued extendible convertible unsecured subordinated debentures of $120 million to fund the purchase 8

9 A World Leader in Juvenile Global Brand presence with global, regional and local brands around the world Leading brands in multiple categories Global leadership in Car Safety Extensive product development and local adaptation to fit consumers needs Strong social media presence E- tailing market expansion 9

10 Innovation - Dorel Juvenile USA Cosco heritage brand relaunches icon product and further extends car seat range Cosco - Scenera NEXT Convertible Car Seat, Side Impact Protection Able to fit 3 children in the back seat, available in 13 colors and fashions 10

11 Innovation Dorel Juvenile Europe Consolidate Dorel Juvenile Car seat leadership in Europe thanks to new car seat regulation R129 (I-size ) enforcement - I-Size: Enhanced Safety - Rearward facing until 15 months and lateral impact protection - Maxi-Cosi leads the market and is the 1st brand to launch an i-size solution from new born to toddler - Several innovation and consumer awards across Europe in 2014 Child rearward facing until 15 months, then forward facing until 4 years with increased side impact protection. 11

12 Dorel Juvenile : Accelerating Quinny s Global Brand Presence Quinny further builds global consumer brand presence Global Website launches Social networks Core product line revamping Zapp, Buzz and Mood relaunch with global roll out in 2014 Spring limited editions 12

13 Tiny Love : Expanding Global Brand Footprint Leveraging Dorel Juvenile global distribution channels Tiny Love contributes to building profitable business opportunities in new developmental play category Launching further innovation in core categories Tiny Love wins innovation award crib mobile at September 2014 COLOGNE, GERMANY JUVENILE SHOW 13

14 Recreational/Leisure Segment Third Quarters Ended September 30 (in thousands) Total revenue $ 266,503 $ 231,591 Gross profit $ 62,052 $ 54,185 Operating profit $ 14,769 $ 14,105 14

15 Third Quarter Recreational/Leisure Highlights Year-over-year revenue up 15.1%, operating profit increased 4.7% Overseas markets in IBD channel, particularly Europe and Japan, as well as sales to the North American mass merchant distribution channels contributed to quarter and year-to-date organic growth Despite overall weak economy in Brazil, Caloi contributed to operating profits after two consecutive quarters of losses Bicycle sales in Brazil are starting to benefit from the successful introduction of Cannondale, GT and Schwinn which has led to gains in domestic market share. Caloi is poised for strong Q4 Q3 operating expenses include costs related to changes in Cannondale Pro Cycling team. New Slipstream Racing agreement led to one-time write-off of Cannondale Sports Group s equity investment in Brixia associated team of $3.4M. Additional $1.1M expensed for funding to bridge shortfall in sponsorship income Restructuring costs of $0.9M for the quarter and $3.1M year-to-date related mainly to closure of Bedford, PA assembly operation 15

16 Recreational/Leisure Segment Three 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 Recreational/Leisure Segment 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 Recreational/Leisure Segment 3) Apparel Footwear Group (AFG) Performance apparel division incorporates strong SUGOI brand New branding opportunities include Technical Sponsor for Cannondale Pro Cycling Team and partnership with Ironman triathlons 18

19 Home Furnishings Segment Third Quarters Ended September 30 (in thousands) Total revenue $ 145,794 $ 136,724 Gross profit $ 16,277 $ 15,528 Operating profit $ 5,473 $ 5,839 19

20 Third Quarter Home Furnishings Highlights The majority of the segment s divisions posted improved Q3 operating results, offset somewhat by lower results at Ameriwood due principally to higher particle board prices. Operating expenses for the segment remained well-contained Year-over-year revenue up 6.6%, operating profit decreased 6.3% Sales to drop ship vendor and on-line customers again increased in the quarter and represent a growing percentage of overall revenue, partly offset by declines in sales to brickand-mortar stores Dorel Home Products (DHP) and Cosco Home & Office both had another good quarter. Sales of Ameriwood domesticallyproduced RTA furniture also grew 20

21 Outlook Recreational/Leisure We remain on-track for a much improved year. Thanks to improved earnings at all three of our major divisions, CSG, Pacific Cycle and Caloi, we fully expect to deliver much better results for the fourth quarter versus last year. Both CSG and Pacific Cycle will build on 2014 s solid year-to-date gains while Caloi will benefit from the addition of the Cannondale, GT and Schwinn brands in the Brazil market Juvenile The strength of US dollar against operating currencies in all other geographies had a material impact on Q3 and based on current levels, will impact Q4. Despite this and though Q4 results will be below last year s, full year earnings are expected to exceed prior year in line with outlook issued at the end of Q2 Excluded from this outlook is the impact of the costs associated with integrating the Lerado operations and transitioning supply to Dorel s newly owned Asian-based facilities Home Furnishings Should maintain its steady performance of this year and anticipate Q4 will be better than last year General Dorel is conscious of macro challenges faced, such as uncertain economy and fluctuating exchange rates in many of our markets, but with our broadened geographic footprint and diversified product line, we remain confident about

22 Why Invest in Dorel A record of successfully integrated acquisitions A focus on Juvenile and bicycles where Dorel is a key player Strategically growing Juvenile and Recreational/Leisure in Latin America A portfolio of known, premium brands Product development capabilities that drive growth Established customer relationships Strong annual dividend of $1.20 per share Consistent generator of cash flow to support acquisitions Acquiring one of the largest juvenile product manufacturers in China to reinforce supply chain and increase competitiveness 22

23 APPENDIX 23

24 Financial Performance 5 Years (In thousands, except per share amounts) 24

25 Growth Through Acquisitions 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) 25

26 Growth Through Acquisitions Ampa France (Dorel Europe) Pacific Cycle IGC Australia Cannondale/SUGOI PTI Sports Baby Art 26

27 Growth Through Acquisitions 2009 Dorel Brazil - 70% interest 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) 27

28 Growth Through Acquisitions Best Brands Group SA (Panama) and Baby Universe SAS (Colombia) 70% interest Caloi (Brazil) 70% interest Tiny Love Ltd. Right to sell Infanti brand in Brazilian market Juvenile business of Hong Kong-based Lerado Group 28

29 Total Revenue by Segment % 41% 21% 42% 38% 37% JUVENILE RECREATIONAL/LEISURE HOME FURNISHINGS 29

30 Geographical Distribution of Total Revenue (by customer) % 8% 11% 24% 56% 25% 58% 6% 6% US Canada Europe Other Latin America 30

31 Sustainability Philosophy 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 31