The charges and the difficulties experienced by its customers in the paper industry plunged the group to a pounds 42.9m loss for last year, against profits of pounds 95.1m before.
Lawrence Urquhart, the chairman, described the year as one of "restructuring and renewal" for the company against the background of severe volume decline in the paper market and "the lowest point" in the turnaround of the speciality chemicals business. The cut in the final dividend from 11.2p to 7p, reduces the total by a quarter to 12.5p. "This annual rate of dividend represents a base from which the directors consider the company can generate dividend growth in future", Mr Urquhart said.
The reduction was signalled at the time of the interim results in September, but the shares slid 8p to 207.5p yesterday. Nick Wilson, analyst at Kleinwort Benson, said he was expecting the dividend cut but thought it should have gone further. "Certainly down to 10p and you could have argued for lower than that."
The exceptional charges were higher than he was expecting. He has cut his forecast for the current year from pounds 69m to pounds 65m and warned the group's future depended on a revival in the paper industry. "Until we see that, [management] haven't done enough to bail themselves out. The shares will still drift lower until we can see signs of a recovery under way."
Of the exceptional costs, pounds 84.9m relate to asset write-downs, mainly at Georgia Kaolin, a US paper minerals business acquired for its reserves at a cost of $355m (pounds 210m) in 1990. The group is now writing off some $100m of the $250m carrying value of those assets and Dennis Rediker, who took over as ECC chief executive from Andrew Teare at the beginning of 1996, acknowledged yesterday that the group had overpaid for the business.
Mr Rediker said "the majority" of the trading profit decline from $60.2m to $30.8m in ECC's American and Pacific operations related to Georgia Kaolin. The division has been hit by a 2 to 3 per cent drop in prices, 2 per cent lower volumes and operating problems. The write-off had also been prompted by tighter UK accounting rules, he said.
Another pounds 10.1m of the exceptionals covered restructuring in the European minerals and North American chemicals operations to cover redundancies. Around 400 jobs, mostly in Cornwall, went last year. Mr Rediker said they were "on track" to accomplish the target set last autumn of achieving pounds 30m of cost savings in the kaolin business "and we are looking for more".Reuse content