Demerger in doubt as ICI profits are halved

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The Independent Online
IMPERIAL Chemical Industries will decide in February whether to go ahead with its proposed demerger, although preparations for the split are continuing as planned.

After reporting worse-than-expected third-quarter results yesterday, ICI said the businesses should be operating separately by 1 January. But Alan Small, chief financial officer, said the group would 'take stock of the economic climate and the state of the financial markets' before deciding whether to proceed.

The prolonged recession in the chemical industry has caused doubts to be raised over the demerger, under which ICI would float off its pharmaceuticals, agrochemicals and speciality chemical businesses.

The effects of the recession were underlined in figures which showed that pre-tax profits had more than halved from pounds 196m to pounds 93m in the three months to 30 September. Profits for the first nine months of the year dropped 27 per cent to pounds 513m on sales down 6 per cent to pounds 8.9bn.

Disposals of businesses accounted for 3 per cent of the drop in sales, with exchange movements causing a further 1 per cent fall. But the group expects the devaluation of sterling to add pounds 100m to profits in a full year.

Sir Denys Henderson, chairman, said difficult trading conditions, particularly in Europe, 'combined with an overvalued pound' had hit results. 'There is little expectation of improvement in trading conditions in the near term,' he said. The results depressed ICI shares by 14p to 1,036p and undermined the wider market.

Trading profits from pharmaceuticals increased slightly to pounds 387m as sales of new drugs compensated for the decline in Tenormin, the heart drug, following the loss of its US patent last year. Mr Small said Tenormin had fallen off more quickly than expected although the pace of decline was now slowing. By the end of September prescriptions - for which it is the sole supplier - still accounted for 54 per cent of the market and ICI had retained a 70 per cent share of the total market.

Profits from industrial chemicals plunged from pounds 137m to pounds 40m as prices and volumes in the chemicals and polymers markets fell. Agrochemicals and seeds were hit by uncertainty over the restructuring of the Common Agricultural Policy and profits declined from pounds 155m to pounds 92m.

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