ICI profits likely to fall by pounds 80m

ICI, the chemicals group, will this week report a fall of about pounds 80m in pre-tax profits compared with the same period last year, writes Richard Thomson.

The result from a company still widely regarded as a bellwether of British industry is likely to deepen the pessimism in the stock market, which continued to weaken last week with a 22.3-point fall in the FT-SE 100 Share Index to 2,377.2 on Friday.

ICI's profits will be about pounds 425m, against pounds 507m in the first half of 1991. The group is struggling with deeply depressed world chemicals markets and excess manufacturing capacity built up during the 1980s. Excess capacity throughout the chemicals industry has forced savage price-cutting in areas such as agrichemicals, which has put most manufacturers under severe pressure.

ICI is likely to maintain its 21p interim dividend and 55p payout for the full year. But with dividends covered only 1.4 times, the payout in unlikely to rise for several years, analysts said.

As part of its strategy to remain independent, ICI has made sweeping cost reductions since Lord Hanson bought a stake last year. But these have not been enough to offset the steep decline in profits this year.

Since Lord Hanson sold his shares two months ago, ICI's share price has dropped from pounds 14 to pounds 11, reflecting the general fall in the stock market and the perception that ICI's problems will persist for some time.