Coats says rising sales in early 2015 affirm outlook for stable annual profit

Friday 22nd May 2015

Coats Group, the NZX-listed UK threadmaker once part of the Guinness Peat Group empire, says sales growth has been in line with management's expectations in the first four months of the year, and affirmed its forecast for stable operating profit in 2015.

Excluding currency effects, the group lifted sales 3 percent in the four months ended April 30 from the same period a year earlier, it said in a statement, without disclosing the value. Including currency effects, reported sales were down 3 percent over period, due to a stronger US dollar against the Brazilian real and euro. The company's like-for-like sales growth was driven by a 6 percent gain in Coats' industrial division, largely in Asia and North America, while the craft unit reported a 6 percent decline in sales due to a decline in fashion hand-knitting.

"The continuing business of Coats has made a good start to the year and is on track to at least deliver management expectations," the company said.

In February, Coats said operating profit would be broadly stable in 2015 as a strong US dollar, which erodes export earnings, was offset by the treatment of losses attributed to its divested craft units in Europe, the Middle East, and Asia. Attributable profit is expected to be lower than the 9 million British pounds reported in 2014 due to an increase in pension finance costs.

Coats is still in discussions with the UK Pensions Regulator after it received a warning notice over how much support it needs to provide to three superannuation schemes.

The company said it acquired GSD Corporate in early May, a UK-based company that supplies management systems in the sewn products sector and has been folded into Coats Global Services. The company generated US$2 million of revenue in 2014.

Coats also said it submitted a remedial investigation and feasibility study to the US Environmental Protection Agency, proposing clean-up action in New Jersey's Lower Passaic River, which requires action to deal with historical pollution by various industries. The company is assessing the implications of the study and will update investors in its first-half results.

Shares of the company last traded at 55 cents, and have gained 22 percent this year.

BusinessDesk.co.nz

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