Raw material price increases weighed on the profits of Forfar-based textiles company Don & Low last year.
The company, which manufactures polypropylene textiles from a factory in Glamis Road in the Angus town, has a history dating back to 1792.
Accounts filed at Companies House show sales rose by £5.1 million to £64.9m for the year to December 31.
However, rising cost of sales and distribution expenses meant pre-tax profits dropped from £5.7m to £3.7m.
In his strategic report, director Colin Johnson acknowledged the company’s margin had dropped and said “significant resources” were directed at managing raw material costs.
He said the company’s large capital expenditure this year – recorded at £8.4m – would lead to improved results in future years.
“As part of the strategic plan, the group increased sales during the year but also incurred specific costs in relation to supporting the future plans.
“In addition, the group faced increased raw material costs during the year. The result of these factors was a reduction in margin compared to the previous year.
“However, it is the group’s view that this will improve as new investments come on stream.
“Trading conditions during the year remained challenging and the factors affecting these continue to be monitored closely by management.”
Don & Low produces carpet backing, geotextiles, yarns and construction fabrics.
The company employed an average of 479 people, up 16 on the year, with staff costs rising by £1m to £16.1m.
Risks to the group include the cost of raw materials increasing as well as its exposure to fluctuations in foreign currency.
Mr Johnson predicted the challenging conditions would continue this year, but was hopeful of improved results.
“Further progress will be made on capital expenditure projects that are designed to improve capabilities and long term performance and competitiveness,” he added.
“The plans, policies and procedures that are in place mean that the directors are confident that the group’s budgeted performance will be achieved.”
In 1999 Don & Low was acquired by Thrace Plastics, part of the Greek-based Thrace Group, which has 20 companies worldwide.