COURTAULDS' OUTLOOK
While I find it difficult to muster much enthusiasm, from the capital appreciation standpoint, for many of our leading industrial ordinary shares, I cannot help liking the chances of the rayon trade in general and of Courtaulds in particular. In the full accounts now available it is shown that Cour- taulds' trading profit rose last year from £600,0.50 to £2,598,000. Even allowing for the taxation charge of £991,257, against only £121,577 in 1938, net profit, at k1,581,255, was up by £1,128,990, and the ordinary divi- dend has been raised from 4 to 7 per cent. This dividend is well covered by earnings, and about £32,000 is added to the carry forward.
There are one or two pointers in the report which suggest a further rise in profits this year. The directors state, for example, that profit margins in the English business im- proved in 1939 partly as a result of the stabilisation of selling prices following the agreement with British Celanese and partly owing to reduced costs. Even so, however, it was not until the late autumn that all departments were running full time. On the export side business increased and is being actively developed. As for the American Viscose subsidiary, whose earning power in good times can reach very substantial proportions, it made satisfactory profits in the last few months of 1939, and should continue to do so. My feeling is, therefore, that this year's prospects are distinctly promising despite the board's warning that war conditions may bring a decline in the home trade. At 36s. 9d. Courtaulds' kr ordinary units yield just under 4 per cent. on the 7 per cent. dividend, but have scope for capital appreciation.
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