​Trading improvements lift Coats Group as Performance Materials star

By

Nigel TAYLOR

Published
Nov 4, 2020

Understatedly positive is probably the best way to describe the latest trading update from global thread manufacturer Coats Group on Tuesday.

The business talked of a continued improving sales trend and said it expects 2020 adjusted operating profit to be ahead of market expectations.

Although group current exchange rate (CER) sales for the 1 July to 31 October period were down 9% year-on-year, that was a marked improvement on the 21% dip recorded in the wider H1 period.

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That four-month CER decline included a 15% sales dip in Apparel and Footwear (A&F), offset by a strong showing in Performance Materials (PM), which grew 10% and included an initial 6% contribution from the Pharr HP business bought in February.

Coats noted that it saw improving demand across both A&F and PM, “notably into the start of the peak trading period of September to November”.

“A&F showed continued performance improvement throughout the period… following the first half in which sales were significantly impacted by brands and manufacturers cancelling or deferring orders from mid-March, as well as enforced government lockdowns affecting a number of our sites”, Coats explained.

There were also “further incremental customer wins and share gains” from its competitors “as we leverage our global footprint, flexibility and digital tools to deliver high levels of customer service”.

What all that positivity means is that Coats now expects group adjusted operating profit for 2020 to be ahead of market expectations in the range of $100 million-$110 million while its balance sheet “remains strong” and cash generation for the period was ahead of expectations. In September, its net debt total stood at $211 million.

Coats added: “Our unwavering focus on supporting customers through these difficult times continues to deliver incremental new customer wins as we are able to leverage our global footprint, flexibility and customer service offering to deliver high quality products at speed.  

“The Apparel and Footwear industry continues to focus on accelerating its sustainability agenda, and as such we have seen significantly increasing levels of demand for our sustainable product range, EcoVerde, with year-to-date sales around six times higher than 2019 levels. 

In addition we have continued to make progress with our innovation programme with nine further new product launches in the period.”

Coats concluded: “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”.