DOREL INDUSTRIES $24.54 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com;Shares outstanding: 32.6 million; Market cap: $800.0 million; Dividend yield: 2.4%) makes a wide range of products, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; home furnishings, and recreational products, including bicycles. It has 4,700 employees and plants in 19 countries.
In the three months ended September 30, 2011, Dorel’s sales rose 1.1%, to $575.8 million from $569.5 million a year earlier (all figures except share price in U.S. dollars). The recreational/leisure division’s sales rose 21.6%, mainly on strong demand for bicycles. That offset lower sales at the other divisions.
Still, earnings per share fell 24.7%, to $0.71 from $0.93 a year earlier, mostly due to rising shipping and raw-material costs. The company didn’t pass on all of these price increases to its customers due to continuing economic weakness in the U.S. and Europe.
Dorel has just completed the purchase of a 70% interest in Silfa, which operates 40 Baby Infanti stores in Chile and 12 in Peru. Silfa has annual sales of about $58 million, and should immediately add to Dorel’s earnings. The move is part of Dorel’s plan to expand further in the fast-growing South American market.
Dorel holds cash of $25.8 million, or $0.79 a share. Its long-term debt of $292.0 million is a manageable 36.5% of market cap. The stock trades at a low 6.8 times forecast 2012 earnings of $3.60 a share.
Dorel Industries is a buy.
