Cotton plant
PLEXUS Cotton has achieved its first profit for five years after an “extremely successful” year, LDP Business can reveal.
The Liverpool-based trader, which reports its figures in dollars, saw group sales increase by 51% to more than £250m in 2010. This remained 12% below 2008 sales, although since then it has since discontinued unprofitable activities in Zambia which contributed about one-fifth of its revenues.
A huge upturn in the price of cotton helped the group to generate pre-tax profits of £4.3m . It was the first profit for the group since 2005, having amassed losses of about £9m in the intervening years.
Plexus Cotton’s chairman, Nick Earlam, said: “Part of the sales growth was because of increased prices but there was also a volume increase.
“In 2008, the worldwide cotton industry suffered a crisis of unprecedented proportions and our results reflect the space that has been created as a result of this.
“They also reflect lower costs as a result of the dollar sterling exchange rate and a more focused approach to existing and new markets.”
He added: “We expect 2011 to be another good year also, although beyond that it is too early to tell.” Plexus, which grows cotton in sub-Saharan and East Africa, highlighted the performance of its Mozambique operation, which recorded a £1.1m profit after losing £2.3m a year earlier, describing it as a “key achievement”.
Since the turn of the century, a pound of cotton had almost always traded between 30¢ and 80¢, before moving permanently above 80¢ at the end of July, 2010. It climbed steadily to nearly 135¢ in mid-November before a brief lull, then it climbed to a record high of 212¢ in early March, before falling in April and May.
Despite that, its current level of 146¢ is still twice that of just 18 months ago.
Mr Earlam added: “The spike was positive for us because of our producing operations, but we greatly sympathise with our customers.
“We expect all commodity prices to maintain higher nominal levels than earlier years, reflecting tight supply demand fundamentals, and their store of value in the face of the ongoing debasement of the US dollar. However, we do not expect nominal prices at the level of this year to remain.”
The accounts do not include its Zimbabwe operations, which the company believes it “no longer controls” because of the political situation.
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Tags: Plexus Cotton, Profit
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