Investment: ICI aims to cut debt mountain by pounds 700m

ICI YESTERDAY set itself the target of reducing its debt mountain by pounds 700m this year and achieving double-digit earnings in its speciality chemicals, paints and materials businesses in a bid to win back the confidence of the City.

The company, whose share price has plunged by almost 60 per cent in the past year, said it was introducing tougher bonus targets for senior executives and preparing radical cutbacks in support operations.

Brendan O'Neill, ICI's new chief executive, said strengthening the balance sheet was the top priority this year after a series of setbacks in 1998 when US regulators blocked asset disposals worth pounds 1bn.

ICI's aim is to reduce debt from pounds 4.2bn to pounds 3.5bn. Mr O'Neill said ICI still intended to meet its target of raising pounds 5bn from disposals to help pay for the pounds 4.9bn acquisition of Unilever's speciality chemicals business in 1997.

But he gave no indication as to when ICI's remaining industrial chemicals businesses in Runcorn and Wilton would be sold, or how quickly it could resurrect the $1bn disposal of its Tioxide pigments business.

The targets for individual businesses are to raise margins to 15 per cent in speciality chemicals, 10 per cent or more in materials and 9 per cent in paints and decorative coatings.

The final aim is to cut borrowing to 30 to 40 per cent of market capitalisation, now pounds 3.8bn - less than it paid for the Unilever businesses. As margins improve, interest payments would be covered four to five times by earnings, Mr O'Neill projected.

He was speaking as ICI reported a 17 per cent fall in pre-tax, pre-exceptional profits last year to pounds 321m and confirmed it would maintain the dividend at 32p. At that level the dividend is not covered by earnings. The net interest charge was up by pounds 81m to pounds 332m, while the strong pound and Asian downturn together knocked pounds 100m from profits. ICI shares rose 2 per cent to 528p. Analysts are pencilling in full-year profits for 1999 of around pounds 300m.

Alan Spall, ICI finance director, said that for now dividend policy remained "steady as she goes". Some analysts believe ICI will seek to maintain the dividend until it has sold its last bulk chemicals businesses - the petrochemical division on Teesside and the chlorine division at Runcorn. After that it could cut the payout to bring it into line with higher-rated rivals such as Ciba and Clariant.

Mr O'Neill dismissed the idea that ICI could not survive as an independent company and said it had received no takeover approaches from rival chemical groups.

Both main speciality chemicals businesses turned in higher profits, with National Starch recording its 29th successive year of growth and the Quest food flavourings and fragrances division increasing margins to 13 per cent. The industrial chemicals division cut losses from pounds 98m to pounds 41m on turnover down by 26 per cent to pounds 2.46bn.

Mr O'Neill said the move into speciality chemicals meant that ICI's capital spending would fall to about pounds 375m a year compared with pounds 750m in the old ICI.

ICI was planning to make bolt-on acquisitions, he said, but these would be small and carefully selected.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Life and Style
Suited and booted in the Lanvin show at the Paris menswear collections
fashionParis Fashion Week
News
i100
Arts and Entertainment
Kara Tointon and Jeremy Piven star in Mr Selfridge
tvActress Kara Tointon on what to expect from Series 3
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
i100
News
An asteroid is set to pass so close to Earth it will be visible with binoculars
news
News
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project