Points to note:
- Courtaulds made a mistake in staying out of Asia.
- Tencel can't grow fast enough to make a difference.
- The old fibres have to recover and perform reasonably - or else!
So we have commercial challenges and we have technical challenges. The capital cost of Tencel is too high. We have a geographic challenge coming upon us. We have to go to Asia. We can't leave the next generation of managers in Courtaulds in the same position that our predecessors left us, which was to avoid Asia back in the 1960s. Even then it was evident that textiles were going to be made (there). We can't do that to the next generation. So we have to be in Asia and handle all the cultural challenges that go with it.
Fibres: Tencel has to go from zero turnover in 1992 to €400 million in 2000, almost doubling every two years. At the same time it has to make 25 per cent return on sales. lf it doesn't make that we won't pay back the €600 million capital we will have invested. We can't depend on Tencel to provide the growth that will drive Courtaulds over the next five years. No matter how fast we develop it, it won't make enough impact on the top line, never mind the bottom line, to drive Courtaulds forward in terms of shareholder value.
Speciality Fibres: There are two small businesses. One superb, growing
rapidly, turnover about €5 million, 50 per cent return on sales. The other part is a financial disaster at the moment. lt is a technology looking for a home. They need to find a home quickly.
Coatings: The target is to improve at five per cent real and grow margins from 8 to 10 per cent There should be a fair degree of confidence we can achieve that. They are already in Asia. Those businesses are growing at 20 per cent and making more than 10 per cent ROS lf it continues to grow at that rate then we ought to be able to deliver the target.
Polymer Products: lt is too small at the moment lt either has to disappear or grow very rapidly. We have said we are going to try to grow it rapidly. That may well mean acquisitions. But the market seems to be very good, almost an insatiable demand. There was a managerial mess at Woodstock. lf we get that fixed we can get back on the strategy.
Five per cent growth in Coatings, doubling of Polymer Products. Static in sales and modest profits in the older businesses. Go like hell on Tencel. lf we do that , in the year 2000 Courtaulds will achieve its profit target and we will be back in the FT-SE 100.
There will be sufficient cash generated to pay dividends and we can invest in the business, so we have a virtuous circle, a snowball of growth, if we achieve that. That depends on recovery in our Fibres business from where it is today and it depends on the determined growth of Tencel. lt means Fibres has to perform, not spectacularly but reasonably well. lt means there hasn't to be any feeling of "We are a mature business". lt means going out there and raising quality standards. lt means defining and developing differentiated products. And of course it means continuing to reduce costs. Then there is no reason Fibres can't beat that target. Courtaulds will be seen as a quality company, a growing company, one in which our careers can be enhanced and we will all make money out of - and we shall be enjoying ourselves.
(From the transcript of an inspirational opening speech given by Courtaulds CEO - Gordon Campbell)
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