Canadians make money in '03
By Michael J. Knell -- Furniture Today, May 31, 2004
TORONTO — TORONTO — Six of the nine publicly traded Canadian furniture companies saw stock values increase in 2003. Three recorded drops in revenues for the year, but none reported a net loss.
The nine are a diverse lot. Five are manufacturers, including Dorel Inds., the nation's largest furniture maker, and No. 3 Shermag. Seven offer common shares while two are income trusts, whose unitholders receive monthly cash distributions rather than dividends.
Bestar, Amisco and SCI Income Trust, parent of Simmons Canada, saw revenues slip in 2003, albeit marginally for the latter two. Even Bestar, the only one of the nine to report a net loss in 2002, was able to eke out a C$254,000 net gain in 2003.
There's a consensus among financial analysts that all nine companies are well managed and operationally sound, and perhaps undervalued to some degree.
Direct comparisons among the nine are difficult. Even among the five manufacturers, the differences are so significant that analysts typically look to U.S. companies to benchmark their performance.
Dorel, for example, is highly diversified. While furniture is a major component, juvenile and leisure products are bigger parts of its overall business. This means a company such as Rubbermaid is a better comparison.
Shermag, easily the top performer among the nine last year, is the group's only full-line furniture producer. Much of its sales and earnings gains are due to its acquisition of upholstery maker Jaymar.
As a manufacturer with several divisions, Shermag often is benchmarked against companies such as Furniture Brands International and La-Z-Boy. While the latter two are substantially larger, Shermag's performance was more impressive in 2003, since both FBI and La-Z-Boy posted sales declines.
Dorel's growth wasn't as spectacular — its furniture business competes mainly in the difficult ready-to-assemble furniture arena — but analysts tend to rate its stock higher than Shermag's. This likely is in recognition of its long-term record of steady growth in sales and earnings, and its ability to weather such storms as the bankruptcy of one of its major retailers.
Dorel posted a 4.7% revenue growth in 2003 over 2002 to C$1.6 billion, with profits increasing 8.7% to C105.1 million from C$96.7 million a year ago.
For the past couple of years, Dorel's net earnings have grown faster than its sales. In September 2003, it acquired RTA manufacturer Carina.
Manufacturers Amisco and Bestar are specialists.
Amisco makes metal furniture and has struggled against cheaper imports. But after improving operations and dropping its office furniture line, it saw upticks in net earnings in 2003, and management believes it's back on a growth track. Revenues slipped 1.8% to C$46.8 million in 2003, but profits surged 20.1% to C3.4 million.
RTA specialist Bestar saw sales fall 15.5% last year, reflecting the tough sledding in that segment. However, management has been streamlining and investing heavily in new products, and recently hired a new senior management team.
Bedding maker Simmons Canada posted a 1.4% revenue dip and an 18% decline in net profits last year. Management attributed much of the declines to the general business environment, which saw total Canadian mattress industry shipments decline for the first time in a number of years. According to preliminary data from Statistics Canada, bedding shipments fell from C$795.3 million in 2002 to C$781.4 million last year.
However, Simmons said it saw the beginnings of a turnaround in the fourth quarter.
Public Canadian retailers also can't be compared easily.
Leon's, for example, has a record of steady top- and bottom-line growth, and is growing its network of stores across the country, backed by its own cash reserves, which have averaged between C$80 million and C$100 million over the past few years.
Its shares are tightly held by the Leon family and a few institutional investors, and aren't widely traded.
BMTC Group has no stores outside Quebec. Its 23 units, under the Brault & Martineau and Ameublements Tanguay banners, dominate the market, although it now faces a challenge from privately held retailer The Brick.
Although BMTC saw a 3.8% dip in net earnings last year, its revenues were up 6.6% to C$802.9 million. Its stock price rose 83.5%, the largest percentage gain of any of the Canadian companies.
Easyhome, formerly RTO Enterprises, is the smallest of the publicly held retailers and the only rent-to-own merchant in the group. Its performance has improved dramatically over the past few years, with new senior managers tightening the merchandise mix, overhauling operations and adding stores.
Net earnings and earnings per share have been moving upward, pushing Easyhome's year-end stock price to C$8.75 from C$6.55 the year before.
The newest publicly held Canadian furniture company is Sleep Country Canada Income Trust, parent of sleep shop chain Sleep Country Canada. Since it went public in April 2003, its opening unit price of C$10 leaped to C$13.50 at year's end.
SCC's revenues rose 9.4% to C$165.5 million for all of 2003. From April 15 to Dec. 31, 2003, it reported net earnings of C$10.6 million. According to its initial public offering filing, net earnings were C$300,000 for all of 2002.
| 2003 Canadian public company results | |||||||
|---|---|---|---|---|---|---|---|
| In millions of Canadian dollars, except stock prices | |||||||
| Company | Fiscal year ended | 2003 revenue | 2003-02 % revenue change | 2003 net earnings | 2003-02 % net earnings change | Stock price 12/31/03 | Stock price 12/31/02 |
| Dorel1 | 12/30/03 | C$1,630.4 | 4.7% | C$105.1 | 8.7% | C$38.50 | C$35.75 |
| BMTC | 12/31/03 | 802.9 | 6.6 | 37.0 | -3.8 | 13.10 | 7.14 |
| Leon's | 12/31/03 | 456.4 | 1.5 | 38.9 | 0.9 | 27.87 | 30.33 |
| Shermag2 | 1/2/04 | 214.5 | 23.0 | 17.8 | 26.0 | 13.96 | 11.70 |
| Easyhome | 12/31/03 | 78.7 | 8.7 | 3.8 | 45.5 | 8.75 | 6.55 |
| Amisco | 11/30/03 | 46.8 | -1.8 | 3.4 | 20.1 | 6.40 | 5.80 |
| Bestar | 12/31/03 | 42.6 | -15.5 | 0.3 | — | 0.68 | 0.75 |
| Due to the unavailability of historical share price information, neither SCI Income Trust or Sleep Country Canada Income Trust is listed. 1 Converted at the Revenue Canada exchange rate of US$1 = C$1.4010 for 2003 and US$1 = C$1.5703 for 2002. 2 For the trailing 12 months ended 1/2/04. Source: Company reports and Revenue Canada. |
|||||||
