Courtaulds pins hopes on Tencel: Asia plant is going ahead (1997)

Tencel sales in Japan had stalled and the delay in the start of the new Grimsby Tencel plant was probably "helpful". However:

• The South Asia Tencel plant "is going ahead"
• Another plant "most likely in China": decision in 2003

Courtaulds will maintain heavy investment in its promising Tencel fibres business as other units continue to be hit by negative currency effects. Chief executive Gordon Campbell described potential growth for the product as 'very significant to the company's future although it represented only 4% of turnover last year'.

Campbell confirmed the company is going ahead with an investment of about £150m ($254m) for a 60 000 tonne/year Tencel plant in Indonesia, Singapore or South Korea in spring 1998. He said a further Asian Tencel production site would most likely be built in China but no decisions will be made until the year 2003.

Campbell said completion of its 42 000 tonne/year Tencel plant at Grimsby, UK, had been delayed until next spring after the subcontractor at the site had run into 'labour difficulties'. He added that the patent dispute over lyocell technology with Lenzing (ECN 28 July 1997, p6) will likely be resolved in the next few weeks.

The strength of sterling dampened Courtaulds' first-half results which saw pre-tax profits drop 5% to £62m on sales 6% down at just over £1bn. The currency impact on translating overseas profits cost £6m and an estimated £10m was lost on transactions. Campbell said: 'This was particularly acute in fibres and chemicals where our major manufacturing facilities are located in sterling and dollar areas.'

Operating profits for the fibres and chemicals division fell 7% to £25m on sales down 12% at £388m. Viscose fibre sales remained depressed as US volumes and prices continue to fall.

The firm has curtailing its viscose capacity by 20% but Campbell said there is a need for further reductions. However, he refused to discuss rumours of rationalization talks with industry competitors.

24 November 1997 [Source: ICB]