Shermag Reports Another First Quarter Loss

Furniture World Magazine

Furniture maker Shermag Inc. announced that it has trimmed its first-quarter loss to $3.9 million from a year-earlier $4.4 million as cost cuts helped to offset a sharp revenue decline. More cost reductions will be necessary, the Sherbrooke-based company said today. The loss for the quarter ended June 30 amounted to 29 cents a share, compared with 33 cents per share a year earlier. Net revenue was $29.3 million, a 31 per cent reduction from a year ago. In a release, CEO Jeff Casselman said the reduced sales volume "was related to a challenging economic environment for furniture, combined with the company's decision to increase its selling prices in U.S. dollars to better reflect the costs of domestically manufactured products." Canadian sales fell 15.7 per cent to $12.9 million. In U.S. dollars, exports declined 39.3 per cent to $16.4 million. The decline in the Canadian-US exchange rate had a negative impact of about $300,000 on sales. During the quarter, the company reduced its inventories of finished products by $2.1 million (Canadian), raw materials by $1 million and work in progress by $500,000 for a total reduction of $3.6 million. "This reduction results from measures undertaken during the previous quarter to compensate for the decrease in demand," the firm said. Selling and administrative expenses were reduced from $7.3 million to $6.4 million. "The company's transformation plan, which includes consolidation of domestic manufacturing, increased use of global sourcing, and a move towards better quality and higher priced domestically made-to-order products, is improving our gross margins," Casselman said. "However, current unfavourable market and exchange rate conditions require additional initiatives to further reduce expenses to reflect the reality of our revenue and gross margin levels." Shermag makes residential furniture. The company employs about 1,200 people and is a manufacturer and importer with its own cutting rights, sawmill, veneer plant, manufacturing operations and global sourcing division.