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".

Life and Style
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
ebookA unique anthology of reporting and analysis of a crucial period of history
Luis Suarez looks towards the crowd during the 2-1 victory over England
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform