Coats Shares Higher As Annual Profit Set To Beat Market Expectations

(Alliance News) - Shares rose in Coats Group PLC on Tuesday as it expects operating profit for to be ahead of market expectations, despite a decline in sales for the second half of 2020 to date.

Shares in the FTSE 250 threads manufacturer were 10% higher at 59.90 pence on Tuesday in London.

For 2020, Coats expects adjusted operating profit to be in the range of USD100 million to USD110 million, and ahead of market expectations. However, this still reflects a 44% to 49% drop from USD198 million the year before.

For the period from July 1 to October 31, constant currency sales were down by 9% year-on-year, consisting of a 15% decline on an organic basis, and a contribution from Pharr High Performance Yarns, which was acquired in February for USD37 million.

On a reported basis, sales declined by 11%, due to the depreciation in the Indian rupee, Brazilian real and Turkish lira.

However, the second half to date marks an improvement from the first six months of 2020, where constant currency sales fell by 21%.

Sales in the Apparel & Footwear division declined by 15% in the recent quarter, although it has continued to improve from a dismal interim period, where sales were hurt by brand and manufacturers cancelling or deferring orders since March, as well as government enforced lockdowns.

The Performance Materials segment meanwhile increased sales by 10%, driven by the contribution from Pharr High, and growth in the Transportation and Household & Recreation units, as a result of higher demand.

Looking ahead, Coats said it will keep the payment of future dividends under review, with any decision to be announced with its results for 2020 in March next year.

"The improving performance seen to date and trading outlook for the remainder of 2020 remains encouraging, however, we are mindful that uncertainties related to Covid remain around the recovery profile of our various global end markets as we look into 2021," the company said.

By Dayo Laniyan; dayolaniyan@alliancenews.com

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