LANCASHIRE COTTON PROSPECTS
Spending Christmas in the north, one could scarcely avoid hearing something of the vicissitudes of the cotton trade. Vicissitudes there have been in recent months, for it seems that boom-like conditions which filled order-books to over- flowing in the spring gave place in the late autumn to an almost deathlike stillness in the cotton trade, with virtually no new orders offering. The spring boom, so Lancashire thinks, and probably rightly, was generated by the rising trend of raw cotton prices which forced manufacturers into the market as buyers of all kinds of semi-finished and finished goods. As a result, everybody was well stocked by the summer when cotton, along with other commodities, sustained a heavy fall ; hence the sudden drying up of new business. Has there been any subsequent improvement ? I gather that there has, but so far only on a limited scale.
Until the outlook becomes clearer I would not advise fresh purchases of textile shares, but I think holders of Lancashire Cotton Corporation £i Ordinaries and, for that matter, of the LI Non-cumulative Preferences, should not sell at today's prices. The preferences have fallen back from 2IS. to as. 6d., and should get their full 5 per cent. for the year ended October 31st last. The fall in the ordinaries from 21s. to I2S. 6d. has been very disappointing, especially in the light of the Corporation's strong recovery. I understand that despite the difficult trading conditions the Corporation will show a very satisfactory profit in its forthcoming accounts. Preference holders should certainly receive their 5 per cent., and there would be enough to spare, after covering depreciation, to pay something on the Ordinaries. For the time being, in view of the uncertain outlook, the board may decide to defer any ordinary distribution, but the shares, at I2S. 6d., are not over-valued in relation to earnings.
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