Dorel Industries Inc. (DIIB) Earnings Call Transcript & Summary

Good morning. I'm Norm Steinberg, Co-Chair of the Board of Directors of Dorel Industries. Welcome to Dorel's 2023 Annual Meeting. [Foreign Language] Again, this year, we felt it was prudent and cost effective to hold the meeting online and have, therefore, asked all shareholders to vote by proxy prior to the meeting, which many of you have and to participate in this meeting by audio webcast. [Foreign Language] We will first conduct the official business of the meeting, after which, I will ask Martin Schwartz, Dorel's President and CEO, to discuss recent developments. We ask shareholders to submit their questions prior to the meeting, and there is one question which Mr. Schwartz will reply to. [Foreign Language] Based on proxy forms and voting information form submitted prior to the meeting, I can report that all matters to be considered today will be adopted. The election of directors will be by ballot. All other votes will be conducted by voice vote unless a ballot is requested by a registered shareholder or proxy holder. [Foreign Language]

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[Foreign Language] The notice calling this meeting, together with the proxy form, management proxy circular and related documents have been made available to our Dorel shareholders and mailed to Dorel's auditors. With the consent of the meeting, we will dispense with the reading of the notice of the minutes of the last meeting held on May 25, 2022, and I direct that the minutes be taken as read and approved and they be signed as being correct. Now on to the financial statements. The first item of business is the presentation of the annual report and the financial statements and the auditor's report thereon. I now present to the meeting the annual report and the consolidated financial statements of the company for the fiscal year ended December 30, 2022, and the auditors report thereon. Copies of such documents have been made available to shareholders. The next item of business, election of directors. [Foreign Language] John?

Thank you, Norman. Mr. Chairman, I'm John Paikopoulos, Vice President and Corporate Controller of Dorel Industries, Inc. and a proxy holder. I nominate Martin Schwartz, Alan Schwartz, Jeff Segel, Jeffrey Schwartz, Alain Benedetti, Brad A. Johnson, Sharon Ranson, Norman M. Steinberg and Maurice Tousson as Directors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Are there any further nominations? Hearing none, I declare the nominations closed. As Dorel has the majority voting policy for the election of directors, we will vote by ballot in order for the votes to be accurately compiled. Martin Schwartz has already signed and submitted a ballot in his capacity as proxy holder, as did other proxy holders. As all of the ballots have been submitted and tabulated, I now call upon the scrutineer again to present the results of the vote on the election of the directors. Leslie Ann?

Yes. Mr. Chairman, I report that each of the 9 nominees have received a vote of at least 80% of all votes attached to shares voted or withheld from voting.

Thank you very much. Based on those results, I declare that the 9 nominees have been elected as directors of Dorel Industries, Inc. to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. Dorel will issue a press release announcing the results and file a detailed report of voting results on SEDAR shortly after the meeting. The next item is appointment of auditors. [Foreign Language]

It is resolved that KPMG LLP chartered professional accountants be and they are hereby appointed auditors of the company to hold office until the next Annual Meeting of Shareholders at such remuneration as may be fixed by the directors and the directors be and they are hereby authorized to fix such remuneration.

Thank you. May I ask Claudie Lauzon to second the motion.

Mr. Chairman, I'm Claudie Lauzon, Director of Finance of Dorel Industries, Inc. and a proxy holder. I second the motion.

Thank you. All those in favor, please say, aye. All those against, please say, no. [Foreign Language] I will now turn to Mr. Martin Schwartz, our President and CEO, to say a few words about recent developments at Dorel. Martin?

Good morning all, and thank you, Norm. I appreciate this opportunity of updating you again. We have chosen to continue this online format, both as a cost-saving measure and to permit the most convenient access to the meeting. We have addressed the market a few times in recent months, most recently last week when we released our first quarter results. It's nice not to have to talk about supply chain challenges, although there are still some lingering effects. This morning rather than go through the numbers again, I will summarize where things currently stand and then spend a good part of the time discussing one of our most comprehensive launches ever of new Juvenile products. In a nutshell, things at Juvenile are looking good. And the reaction from our customers to our introductions has been universally excellent. There is most definitely a good feeling these days at Dorel Juvenile. It's been a long time since our people have been this enthusiastic. It is worth noting that general market conditions for Juvenile products are still not great. However, Dorel Juvenile is taking existing market share, making gains at the expense of our competition. We have been aggressively moving ahead in product development with a series of new items collectively known in the industry as Hero products. Innovation is at the heart of everything we do, and we are immensely proud of Dorel's in-house development of 2 new breakthrough technologies, the SlideTech in Europe and the SafetySwivel in the United States. These 2 revolutionary features are literally the backbone of a series of new car seats, which maximize convenience and ease of installation for parents and caregivers. In Europe, Maxi-Cosi has incredible 360 Pro Family of car seats, one of Dorel's most important introductions in a long time, is getting rave reviews. Maxi-Cosi is the premium brand parents have come to love. The new series includes the Pebble 360 Pro, a new infant car seat; the FamilyFix 360 Pro, a new rotative ISOFIX base, and the Pebble 360 Pro, a new toddler seat. Dorel's new SlideTech technology is a new era of design and safety. This world's first comfortable ergonomic car seat family features the only base that can both rotate and slide towards parents. This greatly simplifies both the car seat and the toddler installation in the car and creates more space for parents, allowing them to stand up straight when getting their child in and out of the car. By making it easier than ever to secure children safely and comfortably, the 360 ProFamily sets a new standard in car seat innovation. The 360 Pro also has full lie-flat position for both the car and the stroller. This specific category is huge in Europe with an estimated EUR 390 million market, and all car seats are in an EUR 800 million market. Clearly, the potential is extremely meaningful for Dorel. Still in Europe, there is also new offerings under the Maxi-Cosi brand. The compact collection is a range of compact, stylish and lightweight products for families who simply lack space at home. The collection includes a foldable high chair, a bassinet or co-sleeper as it's known in Europe, and a rocker. Both Safety 1st and Maxi-Cosi have introduced new car seats here in Canada and the U.S. The Safety 1st's Turn and Go as well as Maxi-Cosi Emme 360, all-in-one convertible car seat and the Peri 180 infant carrier feature Dorel's innovative rotational technology. This allows the car seat to swivel easily, bringing parents and caregivers face-to-face with their children, thus getting them in and out of the car much more easy and with considerable lack of back straining. The seats expected to prove quite popular are now available in store and online. Dorel Juvenile has been holding numerous sales meetings and attending Juvenile product shows, all of which have produced great customer feedback and many orders. North America's premiere show, ABC Kids Expo, took place earlier this month in Las Vegas. The Dorel Juvenile booth was the busiest packed through up to 2 days. Many in attendance commented that it was the best new product lineup they have seen in many years. Other products slated to be introduced this year were shown privately at the show. And if the reaction from customers to those is any indication, Dorel Juvenile is certainly on a roll. This round of new product is hitting the mark with customers, much better than we have seen in a long time. We're definitely starting to see the needle move at Juvenile, and expect this to transfer into profits as soon as this quarter. Things are not yet quite as rosy at Dorel Home although there are encouraging signs that things are starting to turn. Consumer demand for furniture had been soft and retailers have remained cautious on order replenishments due to their high in-stock levels and a little bit of perspective here. During most of COVID, retailers were desperate to find goods. They looked everywhere for new sources of merchandise. Then last year, as the supply chain started to recover and things opened up, the goods flooded in at very high prices, I should add, because of the inflated cost of transportation. Retailers and Dorel Home have spent the last several months trying to move things, having to resort to discounting to do so. Finally, inventory levels appear to be bottoming out. Buyers are now sounding more positive talking about merchandising concepts and asking about new products. They are even starting to slowly reorder, bringing sales volumes back up as a major preoccupation for us and no effort is being spared to do so, which will also improve our poor factory overhead absorption over the past couple of quarters. Progress has been made bringing operating costs down with continued headcount reductions and expense controls, as well as our own inventory reductions. We are seeing a number of opportunities for increased business by the second half of this year. Fresh looks and new advertising strategies are also being introduced to invigorate the segment's many brands, which have done well in recent years. So yes, the signs at Dorel Home are better, and therefore, we are cautiously optimistic for return to operating profit later this year. At the corporate level, we are working on a couple of projects to strengthen our balance sheet and things are going well. We will know more in the next few months. Inventory reductions in both our segments during Q1 generated over $50 million in cash. Going forward, we have newer, lower-cost inventory, and our gross margins are expected to improve. Q1's positive currency and cost environment is expected to remain unchanged. This will also contribute to improved earnings. On behalf of senior management, I wish to sincerely thank our employees worldwide for their efforts during what has been some pretty difficult times. There has been no shortage of challenges and our people have responded well to them. I know they care about Dorel, and it's shows. As always, our Board of Directors has been extremely helpful in guiding us through the year. Their insight and collective expertise have contributed to getting us through the rough patches and are providing for better times ahead. We have asked anybody who wanted to ask -- to send in a question to do so, and we have 1 question from a shareholder.

The question is, there are concerns that Dorel could look to increase liquidity by issuing stock even through an equity offering or a rights offering. Could you say if the company has any plans to do this? And our answer is, Dorel is looking at various ways to increase liquidity. However, liquidity or a rights offering is not one of them. I want to pass it back to Norm. Go ahead, Norm.

Yes, Martin, thank you very much for your insightful presentation and giving us a good view as to where we're headed. As there's no further business, I will ask John Paikopoulos to present his motion to terminate the meeting. John?

Thanks, Norm, and I move that the meeting be terminated.

Thank you, John. I'll ask Claudie Lauzon to second the motion.

I second the motion.

All those in favor, please say, aye.

Aye.

Against, please say, no. I declare the motion carried and that the meeting is terminated. Thank you all for participating in Dorel's Annual Meeting. [Foreign Language]