ICI disclosed yesterday that its overall pension fund deficit has ballooned to £1.5bn and said it was doubling contributions to its main UK scheme over the next four years to cover the shortfall.
The news overshadowed a solid set of annual results from the speciality chemicals group and the announcement that its Uniqema division is up for sale. ICI shares fell 4 per cent to close at 339.5p.
ICI said that after an actuarial review, the deficit in its main UK pension scheme had risen by £187m to £657m to reflect the fact that people were living longer. The company said it had decided to increase payments into the fund from £62m to £122m a year between now and 2010 with the aim of eliminating the deficit altogether by 2015. There are some 59,000 pensioners and 14,000 deferred members in the scheme, which is now closed to new employees, but only some 1,200 active members.
Applying new international accounting rules, which produce much more volatile fluctuations in pension fund deficits, the shortfall across all ICI's funded and unfunded schemes rose from £1bn to £1.5bn at the end of last year.
But ICI's chief executive John McAdam said most of the other schemes were relatively young with large numbers of active members so there was much less of a pressing need for the company to act to cover the shortfall.
Uniqema is a semi-commodity business which makes fatty acids used in the production of detergents, lubricants and personal healthcare products. The by-product of the process, glycerine, goes into products such as toothpaste and mouth wash.
Analysts expect the sale of the division, originally acquired as part of ICI's £4.9bn purchase of Unilever's speciality chemicals business, to raise between £200m and £400m. ICI will take a book loss on the disposal of Uniqema if it sells for anything less than £400m. Potential bidders include Cognis, a spin-off from the German detergents group Henkel which is now owned by Goldman Sachs and Permira. Several Asian companies are also likely to bid.
Adjusted pre-tax profits for 2005 rose 4 per cent to £444m as ICI managed to more than offset weak demand in European markets with higher selling prices. Net debt came down by a further £244m to £745m compared with more than £3bn at the time of the Unilever deal.
ICI is on course to cut 2,500 jobs and £140m in costs by next year as part of a four-year efficiency drive. Mr McAdam said the group was looking at fresh restructuring measures.Reuse content