Cavalier shareholders voted with their cash yesterday after learning the company was suspending dividends and indicating a turnaround in fortunes for the carpet manufacturer.
Shares in Cavalier plunged by 11.5% after the company said it expected to report an underlying after-tax loss of $1 million to $3 million in the financial year to June 30.
The company said it would not pay a dividend in the current year, but intended to resume dividend payments in 2013.
Cavalier said market conditions for its businesses remained very soft on both sides of the Tasman. Volumes and margins were under pressure.
Craigs Investment Partners broker Chris Timms said: "Investors hold Cavalier for the income stream and they are clearly disappointed. But dividends will be reinstated next year."
The company had developed a business improvement plan but the implementation of the plan meant it had incurred and continued to incur, substantial one-off costs, he said.
Broadloom carpet margins were particularly weak because of high wool prices, Cavalier chairman Colin McKenzie said.
Cavalier's wool-scouring and wool-buying businesses were performing satisfactorily and returning profits at or close to budgeted levels.
"However, if the estimated costs of all contemplated initiatives were taken into the current year, they would have the effect of reducing underlying earnings for the year to a loss of $1 million to $3 million after tax," he said.
The company's initiatives would reduce operating costs significantly, and Cavalier expected to benefit from recent weakness in wool prices.
With the benefit of the repositioning, and with a modest improvement in market conditions, Cavalier said it would be looking at a tax-paid profit in the range of $10 million to $12 million for 2011-12, down from $18.2 million in 2010-11.
