Mr Eccles said the weak trading conditions in the US reported at the full-year results announcement in February "have proved to be more severe and long-lasting than previously expected. Additionally, lace markets in continental Europe have been softer since the turn of the year". The result for the group's continuing businesses in the first half of 1996 is now likely to be "substantially" below that of the previous year, with the US business showing a small loss, he said.
Analysts were yesterday surprised by the scale of the impact, cutting full-year profit forecasts by between pounds 2m and pounds 7m to pounds 40m to pounds 42m. Courtaulds had warned in December that its US business was being hit by destocking after US retailers and lingerie manufacturers over-estimated consumer demand in the run-up to Christmas. In February, it said the problem was likely to continue until the end of March.
Chris Burbridge of UBS said: "I was not surprised by the style of the statement, but I was surprised by the degree. The company had made it quite clear that the States would be the problem, but the word 'substantial' had a fair old sting in it."
The US problems follow difficulties faced by Courtaulds Textiles and the rest of the industry last year after a sharp run-up in raw materials prices and weak consumer demand. That helped to cut underlying profits by 12 per cent to pounds 40.4m in 1995.
Noel Jervis, Courtaulds Textiles' chief executive, said the group had left many of the problems of last year behind it, but, as it warned in February, the US destocking had continued. There were now clear signs of improvement. The order pipeline was filling up as customers recognised that the de-stocking phase was coming to an end and, as a result, manufacturing activity was returning to a degree of normality.
However, he warned that the changing nature of the business would have an impact on jobs. The group has been running short-time working at its three US factories in the first quarter and recently laid off 100 of its 1,000-strong US workforce. At home it has axed 600 to 700 jobs with the closure of two spinning and several small clothing factories in the first three months of the year.
Investment Column, page 20