Trading ahead Trading has been ahead of prior management expectations in the first four month of FY21. A&F customer volumes continue to recover, driven by threads (+2% vs FY19) while zips is still down on FY19 levels. Threads is benefitting from higher sportswear and footwear sales in Europe and the US. Zips are mainly focused on luxury products, such as handbags and boots. Performance Materials volumes were good to very good in all segments apart from Personal Protection where US labour shortages continue to affect production despite having strong order books. Telecoms and energy end markets have recovered strongly from 2020 CV19 disruption. Automotive volumes have benefitted from 2020 new contract wins. Cost inflation headwinds grow, but are being passed through At the FY20 results, the company set out $45m of cost headwinds, equally split between raw materials, non-raw materials (mainly labour) and freight cost inflation, partially offset by $15m of cost savings. Current inflation trends are in line with management’s expectations from March. Pricing power: Management are actively passing-through the raw material cost inflation into higher pricing. Forecast under review Trading is ahead of management’s expectations and we see scope for current consensus adjusted EBITA (c.$169m) to move up towards our $176m, implying a 3-4% upgrade. Valuation: Continues to look attractive, trading on 11.5x CY22E earnings for a global market leader. We believe the current market disruption from CV19 and increasing focus on sustainability all play into Coats gaining further market share.