Dorel Industries Inc. (TSX: DII.B, DII.A) today stated that the surge in the value of the U.S. dollar versus the majority of the Company’s other operating currencies is expected to have a significant negative effect on Dorel’s earnings through 2015.
As an international consumer products company, the increase in the value of the U.S. dollar impacts both cost of sales for Dorel’s international divisions that purchase in U.S. dollars and sell in local currencies, as well as Dorel’s reported earnings translated into U.S. dollars.
“Dorel has pursued an aggressive strategy of expanding our juvenile and bicycle businesses to markets around the world, notably into Europe, South America and Asia. This has greatly benefited us over several years and continues to do so as we are consistently building market share. Just over half of our net income is derived from these regions. Since November, when we reported our third quarter results, the U.S. dollar has continued to strengthen to its highest level in many years versus several major currencies and we expect this to impact us through the current year,” stated Dorel President & CEO, Martin Schwartz.
In 2014, the Euro was an exception to most other currencies against the U.S. dollar with a significant decline in value only occurring in December. However, this decline has continued into 2015. The Euro is currently at its lowest level in five years and therefore is expected to depress Dorel’s 2015 results.
Mr. Schwartz explained that while it is too early in the year to quantify the impact of foreign exchange, there are mitigating factors which are expected to ease the situation somewhat. “New products currently being launched reflect the currency factor and are priced accordingly; further, we are working with many of our retail partners on implementing suitable price increases. Recent reductions in oil prices and many commodities will help offset the higher U.S. dollar as will the strength of the U.S. economy, where all three of our segments have a significant presence. Our Home Furnishings segment will benefit from the strong U.S. dollar as a portion of our products are manufactured in Canada and sold in the U.S.,” concluded Mr. Schwartz.
Dorel will announce full-year 2014 results on March 16, 2015.