Bottom Line: Caught out in China

COURTAULDS is without doubt a well managed company. But some things are plainly out of its control. A drying up in demand from China last year flowed back into Courtaulds' European and US markets in the form of soaring imports and price pressure.

An increase in acetate yarn margins, as flake raw material prices fell, was only part compensation but volumes and prices have now stabilised. Meanwhile a world- wide shortage of cotton has injected new life into viscose fibre, a close substitute, and ensured that the new joint venture with Hoechst is running unexpectedly on all cyclinders.

With the elimination of surprise losses at OPP Film these factors will drive profits ahead this year while Tencel is building up nicely. But a premium rating - a prospective p/e of 17 on profits of pounds 175m and yield of 3.7 per cent- may restrain the shares at 527p.