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Strong balance sheet and liquidity boost Coat’s future outlook

Despite the challenges faced by the company due to COVID-19, Coats Digital, the world’s largest manufacturer and distributor of sewing thread is confident of dealing with the virus impact as it has a strong balance sheet with comfortable liquidity.

The management of the company reported a 40 per cent decline in operational costs in the second quarter compared to the same period in 2019, helped by lower activity levels and cash-saving actions. Its last month’s numbers led to a 17 per cent reduction in sales for the period 1 January to 30 April compared to the prior year.

The company also reported a 23 per cent decline in demand for apparel and footwear as fashion companies cut back spending amid widespread Coronavirus uncertainty. Many brands and manufacturers cancelled their orders or deferred orders from mid-March, which significantly impacted demand in April. This hit some of its largest apparel and footwear markets.

Benefiting from its recent acquisition of Pharr HP, the group’s performance in materials division was more resilient. Though its organic sales declined by 12 per cent year-on-year, Pharr’s contribution led to a 6 per cent increase in overall sales.