Scotland based Dawson International has reported an overall trading performance for the year to 1 January 2011 in line with expectations. Despite widening losses in its home furnishings division following a rise in cotton prices, the company said its UK and US knitwear divisions performed better than expected in the past six months.

However, Dawson said its performance in 2011 was likely to be poorer than previously expected due to rising cashmere fibre prices.

In a statement, Dawson said: "The increase in cotton prices is now well communicated in the market and it is anticipated that price increases will be accepted by our customers in 2011, allowing some recovery in margins in our home furnishings business. Cashmere price increases will impact on both our UK and US Knitwear businesses."

The company is worried about the impact of the cashmere price increases on its US knitwear division where customers have hinted that they will scale back their cashmere buys, leading to a significant reduction in turnover and profitability in that business.

Cotton prices have more than doubled over the past year whereas the cost of cashmere is up 30%. This has dented Dawson’s sales, pushing up losses at its home furnishings division.

Even so, Dawson insisted the group's overall trading performance for the year to 1 January 2011 should still meet the board's expectations due to its knitwear operations in the UK and US doing better than expected last year.

Last September, the company's chief executive, Andy Bartness, stood down amidst falling profits warnings and a large pension deficit.