ICI faces pounds 100m disposal write-off: Shares slip on leak of plans to sell US firm

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The Independent Online
THE CHEMICALS group ICI is facing a pounds 100m write-off in connection with the proposed sale of a US composite materials subsidiary.

News of the write-off, which follows a leak of the disposal plans, pushed ICI shares 7p lower to 761p yesterday.

The company admitted that it was in 'preliminary talks' to sell the Arizona-based Fiberite Composite Business, which makes advanced carbon-based materials, principally used by the aerospace industry.

However, it refused to name the potential buyers, and did not indicate the likely price. Industry experts value Fiberite at pounds 50m- pounds 75m, but a deal could take months to conclude.

The sale is in line with ICI's strategy of concentrating on its core chemicals, explosives and paints activities. This week it sold Modar, a modified acrylics resins business, for an undisclosed sum to Ashland Oil, the US oil and chemicals group.

Although acrylics are a growing part of ICI's operations, accounting for pounds 500m group turnover, Modar served markets from which the group is withdrawing.

Martin Evans, chemicals analyst at Hoare Govett, said: 'The extent of the write-off on Fiberite and the scale of its losses are rather surprising. Equally, the fact that ICI is looking to get rid of it is mildly encouraging assuming that it can find a buyer.'

The business was inherited by ICI with the acquisition of a big US company almost 10 years ago.

Fiberite, which has 800 employees in the US and 70 in Germany, is regarded as one of the largest US composite materials companies. Its customers include Boeing and McDonnell Douglas, the defence and aerospace contractor.

However, many composite materials companies have struggled with financial problems stemming from high research and development costs but inadequate margins.

Fiberite made an operating loss of pounds 10m on turnover of pounds 94m in 1992. 'We have taken the view that progress was not sufficiently attractive and would like to sell the business,' a spokesman said.

The expected write-off includes about pounds 77m relating to purchased goodwill. The company's net book value has yet to be disclosed.

The potential of composites - which combine lightness with strength - have attracted many large companies to sink million of pounds into development over the past 10 years but returns have been disappointing.

As a result many composite manufacturers are up for sale, lowering their market value. Other UK sellers include British Petroleum, whose large advanced materials business - which provides tiles for the space shuttle - has been for sale for more than a year.

In October, ICI reported a 43 per cent jump in taxable profits to pounds 240m for the first nine months of this year.

The results, the first since its pharmaceuticals business was demerged, reflected cost- cutting and currency benefits.

Hoare Govett is forecasting full-year taxable profits, ignoring exceptional items, of pounds 280m this year, rising to pounds 350m next, which values the shares at about 28 times 1994 earnings.

(Photograph omitted)