Harris Tweed Hebrides (HTH) chairman Brian Wilson insisted yesterday the business remained strong despite management expectations of a possible fall in net profits this year.
The former energy minister was speaking after accounts from Companies House showed the firm grew pre-tax profits on lower turnover during 2016.
Mr Wilson, who was drafted in as chairman at the firm’s launch nearly 10 years ago, said performance was impacted by a downturn in the Japanese market.
Japan is the company’s biggest importer of HTH hand-woven woollens, but Mr Wilson said the country’s clamour for authentic Harris Tweed had waned as a result of more manufacturers trying to feed demand.
He added: “If something becomes very popular, you risk some dilution of the status of the product. There has maybe just been too much of it about, and not always at the high end.”
Sales in the UK were “very strong” and HTH was “working on other markets,” he said.
The firm is on the verge of announcing a major collaboration aimed at growing sales to other parts of Europe.
Mr Wilson said: “There are places which are currently difficult for us to reach, countries where we should have a market but are not directly represented.”
Brexit may interfere with efforts to grow sales in the European Union, however, and Mr Wilson said the company did not wish to see barriers to trade.
Despite the company warning of a possible drop in turnover and profits in 2017, its chairman said HTH was “in a very strong place”.
“We’ve just completed a £2.4million investment in expansion and are hoping to see the benefits of that,” he added.
Harris Tweed can only be produced in the Outer Hebrides by weavers working in their own homes. The cloth is then finished in island mills.
HTH is the largest producer, employing about 90 people at its mill at North Shawbost and providing work for a further 140 home-based weavers.
The mill had been in mothballs before Scottish oil entrepreneur Ian Taylor funded the restart of production by HTH in late 2007, with Mr Wilson coming in as chairman.
Recent expansion of the site included a new dye house and upgrades to warehouse facilities and equipment.
HTH’s accounts show pre-tax profits rose to £2.43million last year, from £2.23million in 2015.
But turnover fell to £10.54million in the latest period, from £10.91million previously.
The company is controlled by Mr Taylor, who is both chairman and chief executive of £112billion turnover energy and commodity trading company Vitol.
In his annual business review for HTH, Mr Taylor said the firm benefited from continued demand for Harris Tweed in all its major markets.
But he added: “The company continues to face increased price competition … and maintaining output off-season is challenging.
“This could lead to a reduction in turnover and net profit in 2017, but the business remains strong.”