That division, responsible for around 6% of group sales, makes artificial grass for sports pitches and carpet backing.
It has been affected by reduced levels of public funding for sport pitches and is now expected to report "materially lower" sales than last year.
Low & Bonar said: "Despite the restructuring of the business, which significantly reduced the cost base and returned yarns to profitability last year, the recent deterioration in market conditions will result in the business making a loss this year.
"Management is currently evaluating options to address this situation."
Along with its operation in Dundee, the yarns business has sites in Abu Dhabi, China, the Netherlands and Belgium. In the rest of the group – which covers industrial textiles for sectors such as civil engineering, building, flooring and transport – sales, margins and profits are expected to come in ahead of last year.
However the loss in yarns mean the final results are likely to come in slightly below market expectations.