Shake-up cuts Courtaulds profit to pounds 186m: Recovery seen in large markets

COURTAULDS, the chemicals and fibres group, is seeing the beginnings of recovery in its important markets, particularly in Europe, after a year in which tough trading conditions contributed to a fall in pre-tax profits from pounds 186.2m to pounds 121.6m.

The profits fall was exacerbated by a pounds 49.7m restructuring charge, foreshadowed at the half-way stage in November, partly offset by exceptional gains of pounds 25.1m on disposals. Dividends rose 5.7 per cent to 14.8p with a final of 10.8p.

Most of the restructuring will be in the coatings and sealants business, where the group's 10 plants in the US and Europe will be reduced to six, yielding benefits to the company of pounds 17m- pounds 18m a year over a four-year period, Sipko Huismans, chief executive, said.

'We start the new year from a lower cost base in all business areas with productivity markedly higher than a year ago. The coatings productivity programme is well under way and we expect it to take another two years to complete.'

Mr Huismans said no decision had been reached on the location of a new European plant to produce the group's revolutionary Tencel fibre. The choice for the new 25,000-tonne facility, expected to cost pounds 90m and generate 130 jobs, was between two sites in the UK, one in Spain and another in Germany. US production of Tencel is being increased from 18,000 to 43,000 tonnes with the addition of a second pounds 134m plant. Courtaulds hopes to announce a fourth plant in China next summer and expects Tencel fibre sales to top pounds 250m worldwide.

A maiden contribution from Tencel failed to stem a downturn in Courtaulds' fibres and chemicals operations, where operating profits fell from pounds 108m to pounds 93m. A sharp decline in Chinese demand led to a flood of imports elsewhere and lower prices for acrylics, acetate tow and rayon.

Lower raw material prices, on the other hand, boosted acetate yarns while European viscose benefited from the growing cotton shortage, ensuring a good start for Courtaulds' pounds 130m acrylics and viscose joint venture with Hoechst

Coatings and sealant profits eased from pounds 64m to pounds 62m as weakness in Australian retail markets offset stronger North American consumer demand. Polymer profits were flat at pounds 32m as an unexpected turnround to losses in OPP film offset strong progress elsewhere.

Gearing by the end of March fell from 39 to 29 per cent, bolstered by pounds 94m of disposals.

(Photograph omitted)

Bottom Line, page 36