Coats Group weathers turbulent year with improving H2, outlook positive

By

Sandra Halliday

Published
Mar 4, 2021

After a “turbulent” trading year, it certainly wasn’t all bad news for Coats Group despite delivering mostly negative numbers in its 12-month trading statement to 31 December on Thursday.

Indeed, the industrial threads giant said it has been encouraged by its improved trading performance at the end of 2020, as well as the first two months of the new fiscal year. 

“We have delivered a strong operational performance despite a very difficult global backdrop”, an upbeat chief executive Rajiv Sharma said. Importantly, he added: “The board expects to see continued recovery through 2012. We have a strong balance sheet, which provides strategic optionality and positions us well to navigate the ongoing challenging environment”.

But, as with most businesses last year, the pandemic took a heavy toll on balance sheets, and Coats was no exception.

Despite improving sales momentum through H1 last year, with sales down just 5%, they fell 26% in H1 and were down 15% for the four months to October 2020.  This meant overall sales for the full year fell 16% to $1.163 billion.

Sales in the Apparel & Footwear (A&F) category fell 23% to $823 million, slightly offset by a rise of 5% to $341 million in the Performance Materials (PM) category.

By region, Asia sales fell 21% to $629 million, Americas fell 3% to $315 million and EMEA dipped 17% to $219 million.

Adjusted operating profit for the year fell 44% to $111 million and reported operating profit dipped 46% to $103 million, both above expectations, it noted.

But back to the positives. Coats also said it saw continued market share gains in A&F and customer wins in PM as “priorities pivoted even more towards reliability, speed and flexibility” during Covid. 

Other good points included maintaining its pace of innovation, launching 22 new products last year across both A&F and PM, delivering incremental sales of $13 million, while furthering its sustainability agenda. 

Looking forward, Coats added: “We remain cautious around the recovery profile of our various global end markets and will be vigilant regarding inflationary pressures within the supply chain.  Notwithstanding this uncertainty we are encouraged by our improved trading performance towards the end of last year as well as in the first two months of this year, and the board expects to see continued recovery through 2021.”

In the recovery out of Covid, Coats also said it anticipates capital expenditure ranging $35 million-$40 million for 2021, including around $7 million to support strategic growth initiatives, primarily in its Asian operations.