Outlook: Miller Smith's new year shocker

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The Independent Online
esolution was to stop giving the stock market nasty surprises, then he has already broken it. Just four days into 1999 and ICI has come up with a belter, announcing the collapse of another important element in its disposal programme and abandoning plans for a joint venture with DuPont in Pakistan.

In an effort to sugar the pill, the group has pledged to maintain the dividend for 1998 and taken the axe to a further 1,000 jobs. The pounds 70m in savings generated by the latest job cuts will go some way towards paying the interest charges on the pounds 4.4bn of debt ICI is still groaning under following the purchase of Unilever's speciality chemicals business.

But by any yardstick, Mr Miller Smith's grand strategy of dumping bulk chemicals and reinventing ICI as a manufacturer of scents and starches, looks to be in tatters.

The chemical reaction to the latest piece of bad news from 9, Millbank was predictable. The shares were marked down 6 per cent. At this rate, the next 12 months could turn out every bit the annus horribilis than 1998 proved to be.

Since their peak in May last year of 1244p, ICI shares have fallen by 60 per cent. ICI is now worth just a fifth of the value of Zeneca, the junior partner at the time of demerger six year ago. Mr Miller Smith calls ICI's start to the year "rumbustious". Others might regard it as calamitous while for the ICI chief executive himself, it begins to look perilous. ICI as a whole is now worth less than it paid for Unilever's speciality chemicals interests.

The collapse of the Tioxide sale to DuPont and NL shows that ICI cannot refinance this purchase price through disposal of the group's unwanted parts. While ICI dusts off plans for a flotation of the Tioxide business, the world is left wondering when Mr Miller Smith will deliver on his promises.

It is a moot point as to whether ICI would have been better off doing nothing, although it is hard to see how owning a collection of commodity chemicals businesses at the bottom of the cycle would now put it in a stronger position.

But that should not obscure the disaster that has overtaken Mr Miller Smith's grand strategic switch of direction. In these circumstances it is also a moot point as to whether a different management could now manage the situation any better. Mr Miller Smith must nonetheless be wondering if his position is as safe as ICI's dividend right now.

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