ICI posts upbeat results and pledges to cut debt

ICI, Britain's former industrial bellwether, yesterday posted first-quarter profits at the top end of analysts' expectations and promised to cut its debt to pounds 2.5bn by July next year.

The Dulux paint and speciality chemicals group, which last week announced a pounds 1.7bn deal to sell its polyurethane, tioxide and petrochemicals businesses to Huntsman of the US chemicals, said profits fell from pounds 87m to pounds 49m in the first quarter. Most analysts were predicting less than pounds 40m.

In spite of the upbeat results, shares in the group fell 4 per cent to 649.5p on a rising market, cutting pounds 180m from the group's market value. Observers said the results would help relieve pressure on ICI, which has been struggling for two years to dispose of its industrial chemicals businesses in the midst of a sharp down-turn in the sector.

Alan Spall, finance director, said the group was committed to completing the disposal programme by selling its acrylics, halochemicals and other bulk chemical assets.

Analysts blamed the share price fall on flat results for the core ICI businesses, specialty chemicals and paints. Much of the upside came from Tioxide and Polyurethanes, both of which are being sold to Huntsman. Profits in paints were unchanged, with improvements in the North American operations and in Asia offsetting tough trading conditions in Latin America. Trading in specialty chemicals was weak in January but picked up in March.

The group's net debts, up from pounds 4.2bn to pounds 4.5bn because of seasonal factors, should be reduced next year by the Huntsman purchase. But ICI plans to improve returns on capital.

After a disastrous year, which saw the shares fall from 1244p to just 446p last autumn, the stock has enjoyed a good run in the past few weeks. The run has been helped by the Hunstman deal and a return to favour of cyclical stocks while US value funds have also been buying.

But Michael Eastwood of Dresdner Kleinwort Benson remains bearish, predicting full- year profits of pounds 208m. That puts ICI on a forward multiple of 31, a sizeable premium to the market. Overvalued, he says.

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