The Investment Column: Courtaulds shows fibre as cyclist
But Courtaulds continues to be dogged by this cyclical image, which is a shame, given its performance elsewhere. It has made a conscious effort to expand in the Far East, particularly in powder coatings. Demand has already outstripped supply from manufacturing facilities in China and Korea, where new plants are under construction.
Meanwhile, the group should also do well from the growth of the aerospace market, to which it supplies coatings and a new lighter sealant enabling aircraft to carry heavier payloads.
But the main excitement remains Tencel, the revolutionary fibre into which the group has sunk around pounds 300m in the past 10 years. The move into "very modest" profits in 1995-96 from "significant" losses previously helped offset the collapse in acrylics and viscose profits last year. Despite having doubled capacity, all the output has already been sold and turnover could be hitting $400m by the end of next year. Courtaulds reckons it could be 20 per cent of the business by early next century.
Given the higher-than-expected margins and the group's leading position in the market for Tencel, that would add an element of stability to the business. But with no plans for further big disposals, the prospects for Tencel will be overshadowed by Courtaulds' exposure to the chemical cycle.
The group and the market now believes that the worst of the recent volatility is over, which goes a long way to explaining yesterday's 7p bounce in the shares to 422p. The problem is that after such a mauling, customers are understandably still fearful about stepping back into the market.
Success in continuing attempts by Courtaulds to persuade suppliers to link raw material costs with selling prices would enhance the quality of earnings. Until then, after seeing margins wiped out last year in acrylics and viscose, the big question is when the bounce-back will come and how far it will go.
Profits of pounds 170m this year would put the shares on a forward p/e of 16. That discounts the expected recovery. Hold.
Newcastle manager taunted again as his side loses to Stoke
- 1 Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
- 3 The Simpsons death: Creator Al Jean would 'kill himself' before a character like Homer or Lisa
- 4 British man raped while urinating in bushes at Oktoberfest beer festival in Germany
- 5 Pope Francis assures atheists: You don’t have to believe in God to go to heaven
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
British man raped while urinating in bushes at Oktoberfest beer festival in Germany
George Clooney and Amal Alamuddin wedding: The famous congratulate actor and human rights lawyer after Venice nuptials
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
'Women, walk wherever you want' posters taken down in Stamford Hill following 'unacceptable' signs separating men and women
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Should gay sex be illegal? 16% of Britons think so
- < Previous
- Next >
iJobs Money & Business
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...