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

Good morning. I'm Norm Steinberg, the Co-Chair of the Board of Directors of Dorel Industries. Welcome to our Dorel's 2024 Annual Meeting. [Foreign Language] Again, this year, we thought it was prudent and cost-effective to hold this meeting online and have therefore asked all shareholders to vote by proxy prior to the meeting, which many of you have done and to participate in this meeting by audio webcast. [Foreign Language] We will first conduct the official business of the meeting, after which we will ask Martin Schwartz, Dorel's President and Chief Executive Officer, to discuss recent developments at Dorel. We asked our shareholders to submit your questions prior to the meeting. After the official business of the meeting, Martin and Jeffrey Schwartz will be pleased to respond to your questions. [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 held by ballot. All other votes will be conducted by voice vote unless a ballot is requested by a registered shareholders or proxy holder. [Foreign Language] Lesley Anne?

Good morning. Mr. Chairman, we, the undersigned scrutineer from Computer Investor Services Inc., hereby report that there are at least 2 shareholders or proxy holders present at this meeting representing in person or by proxy, 86.65% of the total votes attached to all outstanding shares of Dorel Industries, Inc. Thank you.

[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 and the meetings of the -- and the minutes of the meeting of last year, May 24, 2023. And I direct that the minutes be taken as read and approved and that they be signed as being correct. Now the first item of business is the presentation of the annual report, financial statements and the auditor's report thereon. I now present to the meeting the annual report to consolidated financial statements of the company for the fiscal year ended December 30, 2023, and the auditor's report. Copies of such documents have been made available to shareholders. [Foreign Language]

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.

Thank you, John. Are there any other nominations? Hearing none, I declare the nominations closed. As Dorel has a 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 the ballots have been submitted and tabulated, I now again call on our scrutineer to present the results of the vote on the election of the directors. Lesley Anne?

Mr. Chairman, I report that each of the 9 nominees has received a goal of at least 75.25% of all votes attached to shares voted or withheld from voting.

Thank you, Lesley Anne. Based on these results, I declare 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, of course, issue a press release announcing the results and file a detailed report of voting results on SEDAR shortly after this meeting. Next item of business. [Foreign Language] John?

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

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

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

Thank you, Norm, and good morning to all. I thank all of you for your interest in Dorel and for taking the time to be with us this morning. We recently released our first quarter results. We showed improvements in both our businesses, particularly at Dorel Juvenile, which is making progress in all areas. A steady launch of new products last year and into this year have been very well received and have translated into material improvements. Dorel Juvenile posted quarter-over-quarter earnings improvement throughout 2023 and in Q4 had its best quarter in 5 years. We are excited that we are moving in the right direction as the segment is capitalizing on its new products, which are stronger than ever. We have the best product team we have ever had. Each new item designed with differentiation and value, which continues to set us apart from the competition. As an example, last week, the Maxi-Cosi Kindred collection was unveiled at the Dorel booth during the important ABC Kids Expo in Las Vegas. This new line blends comfort and exquisitive style with cutting-edge technology. From a rotating car seat, stroller, high chair to bassinets that translates babies cry with artificial intelligence and more, these future forward products will bring convenience to parents' daily lives. The Kindred collection received an extension media coverage, including USA TODAY and multiple hits on social media. The Starling bassinet with Cry Assist part of the line won an Editor's Choice award with the editors commenting that Maxi-Cosi is always on the cutting edge of baby gear. Customer sentiment at the show was very high with strong recognition and appreciation of the effort Maxi-Cosi is delivering to support the growth of the brand within the premium retail sector. There is a large specialty store attendance at the booth underlying the success of the commitment Dorel Juvenile has made to building strong partnerships between the brands and the retailers. Our retail partners and consumers have reacted well to our introductions and Juvenile's market share continues to grow. Brick-and-mortar sales have rebounded sharply. The U.S. division had an exceptionally good first quarter with car seat sales leading the increase in the division's various product categories. Our Juvenile brands are very strong. Maxi-Cosi is our global flagship brand. It carries high margins and performed exceptionally well. In addition to developing and marketing quality products, it is doing its part for the environment. Recently, it joined forces with ForestNation, an organization that encourages environmental sustainability and reforestation. This partnership follows the launch of Maxi-Cosi Expo Care, a new premium future-friendly 100% recycled fabric made from plastic bottles. It is also planting more than 10,000 trees in Tanzania, a region battling deforestation. Safety 1st is another very strong brand for us. We have been successful in moving up the Safety 1st price points from opening to midpoint, an important achievement. It has done well year-to-date, the result of new product placements and a refreshed branding program, which is now hitting stores. Product development is also a central focus in Europe. We recently unveiled a game changing for our European customers at our sales event in Portugal. The new Maxi-Cosi Fame stroller is the future of family travel and has numerous special features. The Fame is a bold step for us. It is our most advanced stroller ever and is the first step of a new generation of premium travel systems by Maxi-Cosi. It is a highly strategic entry for Maxi-Cosi, which has proven reputation in car seats. The objective is to replicate this with strollers and we see the introduction of the Fame line as the perfect opportunity to accomplish that. Recently, stroller sales have been the best in years after lagging for a while, and we view Fame as the perfect catalyst to keep the momentum going. In late 2023, a new President and CEO was named to lead Dorel Juvenile. Rafael Camarano is certainly no stranger to us, having joined Dorel 15 years ago when we established Dorel Brazil. Now as President of the segment and with a strong entrepreneurial posture, Rafael is leveraging the segment's assets to benefit the business globally. Maxi-Cosi's product range will be rolled out across all geographies. Collections will have the same fashion look for instant recognition of the brand. Technology is at the forefront of every project, whether it's a new product line such as the new Kindred collections or using AI to determine the best pricing for the maximum return. Supplier relationships are also being strengthened to develop meaningful partnerships. Juvenile's costs and capital allocations are being reviewed at all levels. We are more comfortable than ever that this business is in a good place. Moving to Dorel Home. The environment has been tough as the furniture industry faces high interest and mortgage rates. Furniture sales lag all consumer products. Year-to-date, they are down about 7%, well below other consumer goods categories, which are flat. Despite this, Dorel Home posted a significant improvement during the first quarter, reducing its operating loss by over $10 million. Growth in brick-and-mortar has been solid. Consumers are returning to stores, shopping more in person than online. It is gratifying that Dorel Homes customers rely on us as a highly valued supplier among the best in the industry. They know we have a varied innovative product line, the infrastructure to get product to them quickly and the right pricing. Like us, retailers have reduced their prices now and expensive inventories created during the supply chain chaos have been cleared. They are more focused on volume, a much healthier situation for the industry. Inventories are under control as orders are being matched to POS. Our sales department is doing an excellent job with listings, including many new ones. However, the brick-and-mortar cycle is slower to evolve in e-commerce. So while we are following the market trend with more orders, the benefits will only be evident in the second half of this year and into 2025. We are more hopeful now with Dorel Home as many things are falling into place and many more are planned. They have introduced several new products, which we expect will keep us ahead in the competition. New customers are also being added in Europe as Dorel Home is branching out across the continent. While we are making headway, our objective is to do better. We are not waiting for the furniture market to come back and are developing a plan to structure Dorel Home that will ensure it is profitable, even under the current weak conditions. This involves an extensive cost-cutting exercise, which will result in a more streamlined low-cost operations. Decisions have yet to be finalized regarding the scope of the changes, but we intend to release some details when Q2 results are announced in early August. Some restructuring has already been implemented by simplifying and combining certain areas such as Ameriwood and Dorel Home products. The merger of the 2 divisions in January is already bringing results. Everyone is working well together, focusing on the entire business with one product team, one marketing team and one purchasing team for the combined divisions. Savings from this initial rule will be approximately $4 million annually. And with the additional measures, we will soon make -- we expect to considerably increase that number. On the environment, social and governance, or ESG front, Home is committed to promoting responsible forest management practices and safeguarding the environment for the future generations. We are confident that even with a diminished furniture industry, should that be the case, Dorel Home will be able to serve our customers well and be profitable. We've also initiated several measures at Dorel's head office to reduce costs and be more effective. Frank Rana, formerly VP of Finance, has been promoted to Executive VP and Chief Strategy Officer. Frank has been an integral part of the senior management since the company's IPO, and this appointment recognizes his contribution in driving Dorel's growth. As CSO, he will ensure that many changes we are making to streamline the company's operations are implemented efficiently to maximize the benefits. Jayson Kwasnik, a 20-year veteran of Dorel, has been appointed VP of Finance who will also be key in overseeing the changes. Ongoing corporate ESG projects to comply with new rules include the following: European Union Corporate Sustainability Reporting directive at California Senate Bill 253 and 261 collectively, forwarding the climate accountability package. On behalf of senior management, sincere thanks to all our employees who have truly stepped up to the plate. We have made good progress over the past 12 months into their efforts, and I know we can continue to count on them to reward our shareholders. Our Board of Directors have been there every step of the way and it is reassuring to know they are always there with their collective expertise. And of course, we are grateful to our suppliers and customers. We strive to ensure that the relationships are win-win. I recently traveled to meet several of our Dorel Home suppliers. We all came away with a positive feeling and are eager to continue working together.

We have received just one question from a shareholder who asks, what is the succession plan for me, Martin Schwartz, and for the Board of Directors? As far as me, I am not planning to go anywhere in the near future, and there are other executives who could step up if the need arises. Norman?

Sure. On behalf of the Board of Directors and my Co-Chair, Maurice Tousson, let me say that at this point, there's no changes contemplated for the Board, but we review the Board of the matrix of expertise and responsibilities every year. We have a lot of interest in people joining the Board, so we maintain an ongoing list of possible candidates. But for now, there is no contemplated changes to the Board, Martin. So that concludes the question period. Are there any further business? If not, I will ask John Paikopoulos to present the motion to terminate the meeting. John?

Thanks, Norman. I move that the meeting be terminated.

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

I second the motion.

Thank you, Claudie. All those in favor, please say aye. Aye. Any against? Not hearing, I declare the motion carried and this meeting is terminated. Thank you very much for participating in Dorel's Annual Meeting. [Foreign Language]