CONE MILLS CHARGES SEEN CAUSING LOSS
GREENSBORO, N.C. — Cone Mills Corp. said planned fourth-quarter charges primarily related to write-downs in the value of its equity interest in Compania Industrial de Parras SA de CV (CIPSA), a Mexican denim manufacturer, will result in a loss of about $13.6 million, or 50 cents a share, in the fourth quarter.
Before the write-downs, Cone expects to lose “a few cents a share” as a result of weakness in the specialty sportswear and decorative print markets, Pat Danahy, chief executive officer, said in a statement. Treasurer David E. Bray said that before the write-downs, analysts were estimating earnings of 5 or 6 cents a share.”
In the year-ago fourth quarter, Cone Mills earned $7.3 million on sales of $205.1 million.
Jack Pickler, at Prudential Securities, explained that Cone Mills has been having problems with CIPSA because of currency fluctuations. “They had to revalue their entire investment because of the volatile peso,” Pickler said, adding that occasionally net earnings were not fully indicative of the company’s performance. With a lower stake in the Mexican company, the currency changes will affect the firm to a lesser degree, he added.
Pickler has lowered his fourth-quarter estimate, before the special items, to a loss of 3 cents a share from a profit of 8 cents.
Cone Mills will also take write-downs associated with the relocation of its headquarters and other modernization initiatives.
The company would not comment further on either the charge or the resulting loss.
At the same time, Cone Mills said it completed the sale of its Olympic Products Division to British Vita PLC on Jan. 22. The company will realize more than $50 million from the sale of fixed assets and inventories and the liquidation of receivables.
As a result of this sale, Cone Mills expects a first-quarter gain of more than 10 cents a share, or $2.75 million. In the year-ago first quarter the company earned $3.6 million on sales of $226.2 million. — Fairchild News Service