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.
Malaysia Airlines plane crash exposes alarming flaw in airline security: over one billion flights made last year without stolen-passport check
Kim Jong-un wins 100% of the vote in North Korean elections
Teacher shows sex tape featuring herself to pupils during class by mistake
Malaysia Airlines Flight MH370: Oil slicks in South China Sea ‘not from missing jet’, officials say
Swarm of killer bees sting woman 1,000 times
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Poor 'live like animals' says Boris's privately educated sister after going on 'poverty safari'
Exclusive: Impact of immigrants on British workers ‘negligible’
Vince Cable: Teachers 'know absolutely nothing' about the world of work
Ukraine crisis: Russia pledges to 'retaliate against sanctions' as Ukrainian president says Crimea vote will not be recognised
- 1 International Women's Day 2014: The shocking statistics that show why it is still so important
- 2 Australian man Rod Sommerville reacts to bite from deadly snake by reaching for cold beer
- 3 Teacher shows sex tape featuring herself to pupils during class by mistake
- 4 David Cameron resorts to paying for Facebook fans because not enough people like him
- 5 Steve Irwin’s final words: Cameraman present at death opens up about deadly stingray attack for the first time
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£55000 - £70000 per annum + benefits: Pro-Recruitment Group: In-House Corporat...
£80000 - £100000 per annum + benefits: Pro-Recruitment Group: In-House Opportu...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...