Mega cools on Rose Art sale

A sale of Rose Art now looks less likely, after Mega Brands expressed doubts over the deal.
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The firm says it may no longer sell its stationery and activities business to pay off mounting debts, even though it expects sales to decrease again in 2009 as a result of the recession.

"At the beginning that was the option, now we're looking at all different options to improve the financial position," CEO Marc Bertrand (pictured) said.

Mega Brands initially decided to sell the crafts and puzzles business several months ago, but shelved that plan last fall after the financial markets crashed.

But Bertrand said the sale of the segment, which has annual revenues of US$200 million, is not part of the debt plan with its banks.

As of March 31st, Mega had $524m in liabilities, including $387m in long-term debt. And the firm is not expecting to turn around its fortunes quickly.

"We're going to have good support to our new initiatives starting in the third quarter and we'll see how Christmas will pan out," Bertrand said after warning shareholders that 2009 sales will decrease.

The company has tried to adjust to the global recession by identifying about US$40 million in cost savings and by reducing the price of its products to meet the demands of more frugal consumers.

Much is riding on Battle Strikers, its new take on classic spinning tops, along with the redesigned MagNext product, which had disappointing sales last year, Bertrand said.

"Consumers are also very value conscious. We are striving to offer more for less," he added.

Bertrand said Mega Brands is also responding to the desire of retailers by shaping its product lines to focus on those that drive traffic and generate margins.

"Our core business remains strong, supported by great innovation," Bertrand said. "For 2009, we have adjusted our portfolio to suit the economic climate and ... we are working very hard to position the company for better days ahead."

Cost savings have been made from closing a plant in China. But it has also increased its Montreal workforce by about 100 to produce its new Halo construction toy based on the Microsoft computer game, its pre-school Mega Bloks and another toy.


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