The latest Standard & Poor's outlook on US textile manufacturers sees some improvement in the sector, although the difficult operating environment and weak retail climate means it continues to attract a negative rating.

According to a commentary published by Standard & Poor's Ratings Services, "US Textile Firms Show Improvement Despite Continuing Difficult Environment," most rated textile firms are showing improvements in operating and financial results. Revenues continue to be pressured, but margins and cash flow have improved as a result of better fixed-overhead absorption and lower operating and raw material costs.

Textile firms have restructured their operations and reduced overhead costs in 2000 and 2001, improving margins and cash flow. They have also divested unprofitable businesses and rationalised capacity to reflect reduced demand.

However, the environment is still challenging, the report notes. Most textile firms are highly leveraged following heavy capital investments in the late 1990s. In addition, liquidity in the sector is expected to remain tight, holding ratings down at their current levels.