ICI profits slump 50% as debt proves hard to shift

IMPERIAL CHEMICAL Industries, the troubled chemical giant, painted a dismal picture of its business yesterday as it revealed a collapse in profit and dampened hopes of a near-term reduction in its debt mountain.

Sir Ronald Hampel, ICI chairman, blamed the disappointing performance in the third quarter on tough trading conditions in its commodity chemicals businesses, the strength of sterling and the fall-out from the Asian economic turmoil. The three factors slashed pre-tax profits by nearly 50 per cent to pounds 70m. Trading profit in the quarter slumped 33 per cent to pounds 151m, heavily hit by a pounds 23m loss in the industrial chemicals division.

The results were at the bottom end of market expectations and triggered a raft of earnings downgrades for this year, with analysts expecting a 1998 profit of around pounds 300m, down from pounds 350m previously.

Shares in ICI, which have more than halved since May, shrugged off the revisions and rose 7.5p to 506.5p, boosted by the company's reassurance that it would not cut its final dividend. However, the figures heightened the City's fears over the company's plans to sell its low-margin commodity chemicals, such as plastic and petrochemicals, to concentrate on high- return speciality chemicals such as food flavourings and fragrances.

ICI bought the speciality chemicals operations of rival Unilever last year for $8bn (pounds 4.7bn) and sold pounds 3bn worth of commodity products. However, its efforts to sell the rest of the industrial operations have been hampered by a cyclical downturn in the sector and a series of regulatory problems in the US. City analysts said the fall into the red of the industrial chemicals division would hamper ICI's plan to dispose of the businesses and reduced the chance of fetching its target price of pounds 1.5bn.

"The problem is that ICI is saddled with these on-going losses which make it difficult to get a good price," said Martin Evans, head of research at broker Sutherlands.

The company is under pressure to dispose of the businesses to repay its pounds 4.4bn debt mountain - well above its pounds 3.6bn market value - accumulated at the time of the Unilever acquisition. In the third quarter the company paid pounds 242m of interest on the debt. The disposals' proceeds would also be used to buttress ICI's interest cover - a measure of how easily a company's profit can finance interest payments - now standing at just 2.2 times.

Alan Spall, the ICI finance director, yesterday admitted that the cover and the balance sheet were "stretched", but said the company was confident it would be able to finance the debt. He said that a good performance from the food flavourings, adhesives and fragrances divisions in the third quarter "vindicates the strategy of focusing on speciality chemicals".

Start your day with The Independent, sign up for daily news emails
News
people
News
Amazon's drones were unveiled last year.
business
Arts and Entertainment
Russell Tovey, Myanna Buring and Julian Rhind Tutt star in Banished
tvReview: The latest episode was a smidgen less depressing... but it’s hardly a bonza beach party
Life and Style
Worth shelling out for: Atlantic lobsters are especially meaty
food + drink
Sport
Gareth Bale
footballPaul Scholes on how Real Madrid's Welsh winger would be a perfect fit at Old Trafford if he leaves Spain
Arts and Entertainment
Lily James in ‘Cinderella’
film
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Recruitment Genius: Security Officer

£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

Ashdown Group: Business Analyst - City, London

£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss