ICI shares took a tumble yesterday on fears that the Dulux paints to speciality chemicals group could be hit by a renewed surge in raw material prices.
The 3 per cent fall in the shares came despite first-quarter profits coming in at the top end of expectations and a bullish market outlook from ICI.
Reporting a 29 per cent increase in pre-tax profits before exceptional items to £67m, ICI's new chief executive John McAdam, said that while demand continued to be generally good, the outlook for raw material costs was "uncertain".
Analysts took the comments as an indication that ICI could suddenly be hit by a repeat of the rise in input prices, which prompted last year's profits warning and the departure of its former chief executive Brendan O'Neill. However, Tim Scott, ICI's finance director, stressed that the group had not seen any price rise between the end of last year and the first three months of this. "We were able to get price increases last year when we needed to and if raw material prices rise again we would seek to repeat that," he added.
Mr Scott said ICI remained committed to remedying the problems in its Quest flavourings and fragrance division. The sale last month of Quest's food ingredients arm to Kerry Group for £200m prompted speculation that ICI might dispose of the remainder of the business. However, Mr Scott said: "There is still a lot of value in Quest for ICI shareholders which we do not intend to give away to others."
The weak dollar knocked £6m from profits for the three months. Despite this, the paints division increased trading profits by 26 per cent to £34m while Quest's trading profits rose 45 per cent to £13m and National Starch reported a 28 per cent improvement to £50m.
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