FINANCIAL NOTES COURTAULDS' PROSPECTS OF RECOVERY
ON the face of it the preliminary statement of Courtaulds could hardly have been worse. A decline of over £2,000,000 in profits to an insignificant figure, a dividend reduced from per cent. to 4 per cent., and at that reduced figure paid largely from reserves—these are hardly the results expected from one of the most prominent and most respected British industrial companies. If there had been no further announce- ment than the reduction from £2,373,892 to £352,265 in Courtaulds' net profit and the reduction in the dividend, one can safely assume that the shares would have fallen sharply from their then price of 25s. 9d. Thanks to the further announcement that an arrangement as to prices had been arrived at by both viscose and acetate yarn producers, including Courtaulds and British Celanese, pending the outcome of negotiations between those companies, and to the subsequent publication of revised and higher price-lists, the shares have risen sharply to around 28s., at which price they yield a shade under 3 per cent.
The market is thus evidently prepared to discount recovery on the basis of the new harmony which is developing in the British rayon industry. A price agreement of any sort seems a wide departure from Courtaulds' traditionally competitive policy, but it is hard to believe that the market is wrong in read- ing it as a bull point. It is probably right also in attaching im- portance to the statement that the profits would have been substantially higher but for the necessity of writing down the valuation of raw materials owing to the fall in wood-pulp prices. Such writing down, one is entitled to assume, will not be a recurrent feature. Having regard to the position which the company holds in the public esteem and the reputation of its directors, one also assumes that the board would not have used Lroo,000 of stock reserve and £521,938 of insurance reserve to pay dividends unless they had been confident that 1939 will show better results than 1938.
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