Dorel Industries Inc. Class A · TSX:DII.A
Dorel Industries Inc. Class A — Investor Day (October 2012)
55 slides from Dorel Industries Inc. Class A's investor day presentation, Oct 9, 2012
Slide 1: Home Furnishings Investor Relations Day
HOME FURNISHINGS INVESTOR RELATIONS DAY — OCTOBER 9, 2012 een . Tm, ~
Slide 2: Dorel Home Furnishings
Dorel Home Furnishings • Norman Braunstein ‐ President, Dorel Home Furnishings • Our vision: To be the product, innovation, and volume market leaders in the supply of Home Furnishings to the major North American retailers • Five individual business units – Great product diversity – Currently take ad
Slide 3: Today's agenda
Today’s agenda • Overview of the furniture industryy • Dorel Home Furnishings Divisions – Cosco Home and Office – Ameriwood A i d – Altra – DHP – Dorel Asia • E‐Commerce • Conclusion C l i Note: amounts are in US$ $ 3
Slide 4: Overview of US Furniture Market
Overview of US Furniture Market • After ttwo years off decline, Aft d li the th US ffurniture it market k t grew 4% iin 2010 and d 2.4% in 2011. • Furniture demand is strongly tied to new home and home sale increases. Both of these data points have been fairly stagnant in the US., but are now showin
Slide 5: $ Value of US Home Furniture Sales
$ Value of US Home Furniture Sales After a decline in 2008 and 2009 the furniture market has shown growth in 2010 and 2011. Furniture is expected to grow byy 18% from 2011 to 2016. ($billions) $100.0 $90.0 $80.0 $70.0 $60.0 Reasons for Industry Growth $50.0 • Improved housing market $40.0 $30 0 $30.
Slide 6: Where do people buy furniture?
Where do people buy furniture? Dorel HF sales via Internet 70 presents a big Dorel well positioned 2004 opportunity To take advantage in 60 2007 these three categories 2011 50 ent 40 Perce 30 20 10 0 Internet Furniture Mass Home* Club Department store t Based on a survey of 1000 people who have boug
Slide 7: US Distribution of Retail Furniture
US Distribution of Retail Furniture People are buying furniture outside of the traditional channels (in billions) $50 $40 $30 2008 2009 $20 2010 $10 2011 $0 Furniture Stores Mass Merc. All Other* * All other includes Internet, catalogue, office superstores, home centers and specialty stores Source:
Slide 8: Have you Purchased Furniture in the last 24 months?
“Have you Purchased Furniture in the last 24 months?” Age of Furniture Buyer Income of Furniture Buyer 60% 60% 40% 40% 20% 20% 0% 0% Furniture Buying by Ethnicity 60% 40% 20% 0% Caucasian African Asian Hispanic Other American Source: Mintel Intl. Group, August 2012 8
Slide 9: Leading US Furniture Retailers
Leading US Furniture Retailers 2011 (in billions) $3.0 $2.5 $2.0 $1 5 $1.5 $1.0 $0.5 $0.0 = Current Dorel HF Customer Source: Furniture Today, Aug 2012 9
Slide 10: Manufacturer Sales of Furniture into the US
Manufacturer Sales of Furniture into the US 2009‐2010 (in billions) $3.5 $ $3.0 $2.5 $2.0 $ $1.5 2009 $1.0 2010 $0.5 $0 0 $0.0 Source: Furniture Today: November, 2011 10
Slide 11: Dorel Home Furnishings
Dorel Home Furnishings 11
Slide 12: Dorel Home Furnishings Sources
Dorel Home Furnishings Sources Canada 26% Import 50% US 24% Dorel is well‐ positioned to capitalize on the growth of imported furniture while having a substantial North American presence in RTA and low‐cost futon manufacturing. g 12
Slide 13: Home Furnishings Segment Asia Operations
Home Furnishings Segment Asia Operations Asia: —Investment in “on the ground” resources —Product Development —Engineering —Quality Control Order Flow and Logistics —Order —Sourcing —60 Employees Kunshan Xiamen Ho Chi Minh Dongguan 13
Slide 14: Home Furnishings Geographic Strategy
Home Furnishings Geographic Strategy • Canada – Reorganized our Canadian Home Furnishings organization in 2009 – Substantial growth in the last three years – Sell product from all Dorel Home Furnishings divisions – Target Canada opportunity • Exploring sales opportunities outside North America – Sou
Slide 15: Large Breadth of Product Category
Large Breadth of Product Category Division Ameriwood Altra DHP Dorel Asia Cosco Foldingg Steel/wood / Step Stools\Ladders Steel/alum. Bedroom RTA RTA Metal Wood/Metal Office RTA RTA Wood Storage RTA RTA Entertainment RTA RTA Hollow Core Wood Accents Futons Metal\wood Upholstered Sofas Fabric\PU Leat
Slide 16: Cosco Home & Office
Cosco Home & Office • Location ‐ Columbus,, IN • Imports – folding furniture, step stools, hand trucks and specialty ladders • Import distribution facilities – Ontario, California and Savannah, Georgia • Main customers‐ Mass merchants, merchants clubs, clubs home centers, centers commercial office s
Slide 17: Folding Furniture
Folding Furniture: |COSCO Home & Office Products “ars DOREL dp
Slide 18: Folding Furniture Market
Folding Furniture Market ldi ffurniture Folding i iis a $$465M market k averaging 3% historical growth (in millions) 500 $481.0 0 $465.00 $460.33 $451.0 400 $440.5 $421.4 $405.2 $385.9 $367.5 300 200 100 0 002 003 004 005 006 007 008 009 010 20 20 20 20 20 20 20 20 20 Cosco has a 40% share at retail
Slide 19: Step Stools and Ladders
Step Stools and Ladders: 19
Slide 20: Step Stool Market
Step Stool Market Retail Dollar Sales of Step Stools ( in millions) 250 211 199 200 187 179 178 167 164 166 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 Source: 2010 HomeWorld Business and Cosco Home and Office 20
Slide 21: Product Line Expansions
Product Line Expansions: : 21
Slide 22: Ameriwood
Ameriwood • Location ‐ Wright City City, MO • Domestic manufacturer of RTA. Main categories include home office, entertainment, bedroom, garage and multi‐ purpose storage • Manufacturing and distribution facilities– Cornwall, ON, Tiffin OH and Dowagiac, Tiffin, Dowagiac MI • Main customers‐ mass mer
Slide 23: $ Sales of Ready to Assemble Furniture
$ Sales of Ready to Assemble Furniture • Consumer spending on RTA furniture ended the year 5% ahead of last year, totaling over $3.3 billion in 2011 (Dollars - Thousands) $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 , , $1,000,000 $500,000 $0 2007 2008 2009 2010 2011 Dollars 3,4
Slide 24: Most Important Factor When Purchasing RTA Furniture
Which of the Following is the Most Important Factor to You When Purchasing RTA Furniture? Style/Color, Brand, 1.40% 10.40% Quality/Perf., 28.40% Ease of Assembly, 12 80% 12.80% Made from Solid Wood, 20.80% Price, 26.30% Source: Key Stat Marketing, Q4 2011 24
Slide 25: Market Share of RTA Furniture Sold In USA
Market Share of RTA Furniture Sold In USA Market Share Q4 2011 17% IKEA Dorel 9% Wal‐mart Sauder 53% Bush h 8% Target 7% Other 1% 2% Source: KeyStat Marketing, Q4 2011 25
Slide 26: RTA-Storage: Ameriwood
RTA‐Storage: Ameriwood 26
Slide 27: RTA-Bedroom/Office: Ameriwood
RTA‐Bedroom/Office: Ameriwood 27
Slide 28: Dorel has the Advantage of Domestically Produced RTA
Dorel has the Advantage of Domestically Produced RTA • Ameriwood, through its domestic manufacturing facilities, is a significant source of cash generation and revenue for Dorel Home Furnishings. Furnishings • Ameriwood operates three highly efficient/low CAPEX manufacturing and distribution facilit
Slide 29: Altra Furniture
Altra Furniture • Location ‐ Wright g City,y, MO • Importer of RTA with concentration in home entertainment, home office, commercial office, and storage furniture • Importer of case pieces for home office and home entertainment • Import distribution facilities facilities– Ontario, Ontario California
Slide 30: RTA - Ready to Assemble: Altra
RTA – Ready to Assemble: Altra 30
Slide 31: Case Pieces: Altra
Case Pieces: Altra 31
Slide 32: RTA/Back to College: Altra
RTA/Back to College: Altra 32
Slide 33: Dorel Home Products
Dorel Home Products • Location ‐ Montreal, QC • Manufacturer and importer of futons, mattresses, baby mattresses • Importer of futons, futons accent tables tables, leisure seating and metal bunk and loft beds • Import distribution facility– Ontario, California, Savannah, Georgia • Domestic distribut
Slide 34: Futons
Futons Mass Retailers and Clubs Source: Internal Analysis , 2012 34
Slide 35: Futons: DHP
Futons: DHP 35
Slide 36: Mattresses: DHP
Men keep calm and dream on 1oir 6 FURNITURE Mattresses: DHP 36
Slide 37: Mattress Sales Starting to Rebound
Mattress Sales Starting to Rebound $17 Sales of Mattresses & Other Sleep es $billionss $ $16 Environments $15 US Maattress Sale $14 $13 $12 Dorell Mattress $19 Sales $ millions $11 $16 $10 $3 $10 2007 2008 2009 2010 2011 2012 est Source: Mintel International, Oct 2011 & Internal 37
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Slide 39: Metal Bunk Beds: DHP
Metal Bunk Beds: DHP 39
Slide 40: Dorel Asia
Dorel Asia • Importer – Upholstery – Bedroom – Dining and Kitchen – Youth – Accent • Import distribution facility– Ontario, California, Savannah, Georgia • Main customers‐ mass merchants, clubs, Internet 40
Slide 41: Upholstery: Dorel Asia
Upholstery: Dorel Asia 41
Slide 42: Bedroom Furniture: Dorel Asia
Bedroom Furniture: Dorel Asia 42
Slide 43: Dining/Accent: Dorel Asia
Dining/ Accent: Dorel Asia 43
Slide 44: E-Commerce
E‐Commerce • On‐line research now very important for comparison shopping • “Free Ship” sights or “free pick‐up at store” driving on‐line purchases • Importance of on‐line reviews in buying decision • Physical footprint of furniture at “brick and mortar” retailers is d driving on‐line l line l extens
Slide 45: Growth of Dorel HF Online Business
Growth of Dorel HF Online Business $ millions $100 $90 $80 $70 $60 $50 $ USD $40 $30 $20 $10 $0 2009 2010 2011 2012* *Projected 45
Slide 46: Home Furnishings Online Strategy
Home Furnishings Online Strategy “To deliver to the front door of the consumer the best value in furniture” New online distribution Existing West f l in facility Coast Savannah, Distribution Georgia 46
Slide 47: Online Allows Product Extensions Beyond the In-store Purchase
Online Allows Product Extensions Beyond the In‐store Purchase 47
Slide 48: Online Allows Product Extensions Beyond the In-store Purchase
Online Allows Product Extensions Beyond the In‐store Purchase In‐store Nolan Item at Target Nolan Extensions offered on Target.com 48
Slide 49: Online Allows Product Extensions Beyond the In-store Purchase
Online Allows Product Extensions Beyond the In‐store Purchase In‐store desk at Office Depot Line extensions at Officedepot.com 49
Slide 50: Home Furnishings Consolidated Financials
Home Furnishings Consolidated Financials (in thousands) H Home Furnishings F i hi 2007(1) 2008(1) 2009(1) 2010 2011 Sales $422,244 $451,545 $463,734 $507,790 $522,278 Gross Profit(2) ( ) $ $56,070 $ $50,915 $ $77,308 $ $69,083 $ $65,589 Operating Profit $10,083 $7,964 $36,696 $34,587 $29,251 (1) Fin
Slide 51: Dorel Poised for Turnaround in Housing
Dorel Poised for Turnaround in Housing 800 $508 $522 $463 Dorel Sales 700 $422 w Home Saales (000’s) $428 $ millions 600 500 400 300 US New 200 100 0 2007 2008 2009 2010 2011 51
Slide 52: Comparison to Furniture Industry: SG&A % of Revenue
52 2009 2010 2011 Dorel HF Comparison to Furniture Industry Natuzzzi Basseett Steelccase Bestar SGA % of Revenue Flexstteel Stanleey Hookeer FBI Ethan n Allen La‐Z‐B Boy 60% 50% 40% 30% 20% 10% 0%
Slide 53: Comparison to Furniture Industry: Operating Return on Revenue
Comparison to Furniture Industry 10% Operating Return on Revenue 5% 0% La‐Z‐Bo Steelcase FBI Hookerr Stanleyy Flexsteeel Bestar Dorel HF Ethan Allen Bassettt Natuzzii ‐5% H oy A ‐10% 2009 2010 ‐15% 2011 ‐20% ‐25% ‐30% ‐35% 53
Slide 54: The Next Three Years
The Next Three Years • Continue to generate significant cash flow for Dorel Industries • Revenue growth through the development of value‐ oriented, well‐designed ell designed product prod ct • Increased penetration: additional customers and channels Strong effort to increase on‐line sales • Possible
Slide 55: In Conclusion: The Dorel Advantage
In Conclusion: The Dorel Advantage • Diversification • Domestic manufacturing and import distribution footprint • Industry leaders in folding furniture, step stools, futons, and among the leaders in RTA • Customer Base: Focus on big box retailers‐ fastest growing furniture segment. Provide product,