Supply Chain Bottlenecks: OrthoLite Parent Sees Revenues Dip Amid Indonesian Factory Expansion

Coats Group plc, the UK-based industrial thread giant and parent company of insole leader OrthoLite, reported a slight dip in year-to-date organic revenues today, pointing to temporary factory capacity constraints in Indonesia as it expands its manufacturing footprint.

The trading update, covering the four-month period ending April 30, 2026, was released ahead of the company’s Annual General Meeting (AGM) on Wednesday. Despite the minor setback, management characterized the overall performance as "robust," noting that profit margins edged higher thanks to aggressive cost-saving measures implemented last year.

A Tale of Two Divisions

Overall Group revenue slipped 1% year-over-year at organic constant exchange rates (CER), navigating a tough comparison against a highly productive, pre-tariff period in early 2025. Performance diverged sharply between the company's two primary segments:

• Apparel (+1%): Strongly outperformed the broader thread market. Growth was driven by market share gains in domestic China and a surge in the automotive thread sector.

• Footwear (-4%): Declined in line with broader industry trends. Brands continue to exhibit extreme caution, maintaining low inventory levels and lean ordering patterns.

• OrthoLite Hits Speed Bumps in Indonesia

OrthoLite—the dominant premium insole brand found in everything from Nike running shoes to outdoor hiking boots—saw revenues fall compared to last year's record-setting performance.

Management attributed the drop directly to temporary capacity challenges in Indonesia, where the company is actively expanding its production facilities to meet long-term demand. Essentially, the growing pains of expanding the factory temporarily bottlenecked the brand's ability to ship product.

However, Coats Group remained highly optimistic about the acquisition’s long-term trajectory.

"Our plans to realize cost synergies are on track and we are increasingly positive on sales synergies," the company stated. "We remain confident in OrthoLite’s growth prospects."

Defending Margins Amid Geopolitical Friction

Despite the lower footwear and OrthoLite volumes, the Group’s EBIT margin was slightly higher than the same period last year. Management credited this profitability boost to a major footprint consolidation executed across the footwear division in 2025, alongside the structural benefits of absorbing OrthoLite into its global network.

The company also noted it is keeping a watchful eye on geopolitical risks, particularly ongoing tensions in the Middle East, which have yet to materially disrupt business.

"We have promptly enacted our well-honed operational and commercial playbook ensuring optimal pricing and cost discipline," the company said. "We will continue to take action as required to mitigate supply chain pressures and raw material and energy cost increases."

The Road Ahead

Coats Group left its full-year outlook unchanged for the remainder of 2026. The company expects profits to weight slightly heavier toward the second half of the year as it catches up on inflationary cost recoveries.

Supported by strong forecasted free cash flow, the Group plans to steadily pay down debt, aiming to pull its leverage back into its target range of 1.0x to 2.0x by the end of December.