Shares in performance materials group Low & Bonar rose despite pre-tax profits plummeting by almost 75% on the back of a multi-million-pound write-down in its yarns business.
The company saw pre-tax profits plunge to £6.1 million last year from £23.4m in 2011 as it was forced to swallow an £11.2m impairment charge on its loss-making yarns operation.
Group turnover dropped by 2.1% to £380.5m in the year to November 30.
The yarns division produces artificial grass surfaces and carpet-backing products from Caldrum Works in Dundee and a sister facility in Abu Dhabi.
The company said yarns which makes up 7% of overall group sales had endured a “difficult year”, with sales volumes and prices having reduced during 2012.
The division, which supports around 120 jobs in Dundee, saw turnover drop by 13.4% to £26.5m in 2012 as it slumped to a £1.8m loss after making a modest £300,000 profit in 2011.
The problems in the yarns division came despite a major restructuring of the business in 2011 that saw L&B strip £3m of costs out by shutting a factory in Belgium and consolidating manufacturing on the two current sites.
The firm said yarns continued to be hit by a reduction in discretionary public funding for new and replacement sports fields.
Chief executive Steve Good said the £19.5m capital investment in the business last year and the increase in the final dividend, up from 1.4p in 2011 to 1.6p, showed the confidence the board had in the company overall.
“In the context of the group it has been another year of progress in more difficult markets and further movement towards the targets we have set for the business,” he said.
“We are working hard to develop a broader business geographically, and we are investing to make this happen this year.”
However, he admitted the yarns performance was not good enough.
Asked whether there was a question-mark over the future of Caldrum Works given the situation, Mr Good said he could not guarantee anyone a job but the company was determined to get the business back into the black.
“We are working hard to try to counteract a difficult market issue,” Mr Good said.
“We got the business back to profitability in 2011 but we are now back in stormy waters and it is all hands to the deck to try to improve the performance of the business going forward.
“No one is going to sit in my seat with a loss-making business and say it is OK.”
Group-wide L&B profits from continuing operation before tax, amortisation and non-recurring items which include the yarns write-down, £0.9m in relation to acquisition activity and £500,000 in restructuring costs in the performance technical textile division increased by 4.7% to £24.5m.
Underlying operating profits were 5.2% higher but were impacted by the weak euro.
Analysts Jon Lienard and James Tetley of N+1 Singer said: “We consider this a very solid set of results in a challenging environment.
“The outlook for FY13 is encouraging, with the potential for an improved performance from yarns, favourable currency movements and the initial payback in the current year from significant recent investments.”
Howard Seymour, of house broker Numis Securities, said: “Full-year figures were marginally ahead of expectations, with strong performances from both divisions slightly negated by the impact of yarns.
“However, results do clearly demonstrate the benefit of management actions to date.”
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