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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Ashdown Group: Contracts Executive - City of London

£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

Recruitment Genius: Call Centre Debt Collector - Multiple Roles

£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Day In a Page

Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

Uganda's giants are flourishing once again

After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

After 350 years, the riddle of Britain's exploding fleet is finally solved

Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
Airbus has patented a jet that could fly from London to New York in one hour

Airbus has patented a jet that could fly from London to New York in one hour

The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
10 best sun creams for kids

10 best sun creams for kids

Protect delicate and sensitive skin with products specially formulated for little ones
Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

Tate Sensorium

New exhibition at Tate Britain invites art lovers to taste, smell and hear art
Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

Nice guy Finn is making up for lost time – and quickly

He was man-of-the-match in the third Test following his recall to the England side
Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

Remember Ashton Agar?

The No 11 that nearly toppled England
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks