TEXTILES company Macnaughton Holdings has stayed profitable in spite of the high cost of raw materials and falling sales.

The Perth business saw sales decline from £3.47 million to £3.38m with many of its export markets, including its largest in the US, flat at best.

Alongside that there was soaring yarn and wools costs, due to high demand from emerging economies such as India and China.

But the business reported a pre-tax profit of £48,960, which was only slightly down on the £58,745 for the previous year.

Overall UK sales were steady at £2.05m but there was a decline in exports from £1.4m to £1.3m.

Blair Macnaughton, managing director, said: "The business is doing okay but we are suffering the same as everyone else.

"There is a major economic crisis which has been traumatic for a lot of companies.

"We lost a lot of business in the States. We got to a situation where about 60% of our turnover was export by 2009.

"I remember the day I came in when there were no orders on the fax. I thought the paper must have been jammed but it didn't unjam for another six months."

The business, which makes interiors fabrics plus tartan for kilts and Paisley print, has not passed on all of the rising cost of materials to customers which has squeezed margins.

Mr Macnaughton said: "We are in a market that has been fairly stable for years on a price supply basis. But last year the Chinese started buying as much wool as they could get hold of and climatic problems in the southern hemisphere led to a lack of supply.

"So high demand and low supply meant in a lot of cases my raw materials went up between 60% and 70% and we can't get those kind of price increases from our customers."

A fire in April last year which destroyed premises in Selkirk at yarn dyeing firm Bridgehaugh, which Macnaughton had a stake in, eventually caused that business to be liquidated.

Mr Macnaugton estimated that had cost up to £30,000 to the bottom line of Macnaughton Holdings.

He said: "It was a very sad event. It was an exceptionally good dye house but with today's economy we just felt we could not take the risk of rebuilding.

"It would have been 12 months before it got going again. There are two other dye houses in Scotland and there really was not enough work for three."

Trading in the first few months of the current financial year has been better.

Mr Macnaughton said: "Luckily 2012 has started off pretty well. While a few good months make a trend at least it is four good months. We are trading around 20% up on last year.

"Although there is a lot of doom and gloom around we are starting to see signs of encouragement particularly in the American market.

"At the same time we are not finding any major problems with the strength of the pound against the euro.

"We have put a lot of push into Russia as there is huge potential there. I am just back from a trip to St Petersburg, which was pretty successful.

"It is always nice when you have 16 presentations and sell to 12 of them. There price is not an issue but getting the goods to market is tricky and we are hampered by a lot of the very difficult rules about exporting to non-EU markets.

"In January I was at an exhibition in Germany when a Japanese customer made an order for £30,000 of fabric for a hotel, so there are orders out there.

"There are lots of markets out there we are not tapping but as we are a small company we tend to have to take them one at a time. All in all we are quietly optimistic about the future.

"I've been doing textiles for 35 years and the past three years have been the toughest I have ever known it to be but I am now starting to see opportunities, and doors are opening where they were well and truly closed beforehand."

Macnaughton Holdings can trace its roots back to the 1783 when Alexander Macnaughton decided to stop being a tenant farmer and set up a small spinning mill to process wool.

Retail brand names the company trades under include The Isle Mill, Viyella Home, Whitehill & Wilsons and The House of Edgar.