Dawson shares dive on rising costs warning

SHARES in Scottish cashmere group Dawson International fell sharply yesterday after the company warned that rising costs would hit trading this year.

Although the Kinross-based company said results for its last financial year to 1 January would be in line with expectations, significant increases in the cost of cotton and cashmere meant figures for 2011 were likely to be less than originally pencilled in.

Dawson said it anticipated that customers would accept price rises caused by cotton increases which would enable the company to recover some margin in its home furnishings business but rises in the cost of cashmere were more difficult to absorb.

"Cashmere price increases will impact on both our UK and US knitwear businesses. Of most concern is the impact on our US knitwear business, where private label customers have indicated that they will reduce their cashmere buys, leading to a significant reduction in turnover and profitability in that business," the company said in a statement.

The company said that in its last financial year losses in home furnishings widened but the performances of both the UK and US knitwear divisions were ahead of expectations. Results will be released in March.

Dawson added it had recently received a further payment of 940,000 from Inner Mongolia King Deer as part of a debt repayment plan, though some of this would be offset by restructuring costs. Shares in the company fell by 14.2 per cent, or 0.25p, to 1.5p.