Deputy City Editor
Last year's "soap wars" left a lingering dirty stain on figures from speciality chemicals manufacturer Hickson International in the six months to June. Profits fell by half as the company struggled to replace business lost when Unilever pulled its failed Persil Power washing powder after allegations that it rotted laundry.
Hickson made an important ingredient for Persil, a so-called manganese accelerator, and the loss of the account is estimated to have cost the company pounds 8m a year in profits. The withdrawal was yesterday cited as the biggest factor in a slump in interim profits from pounds 12.1m to pounds 6.1m. The shares slipped 3p to 115p, little more than half the level at which they traded in early 1994.
The fall came despite steady sales - pounds 207.3m versus pounds 208.6m - underlining the attractive return the Unilever business produced once the initial research and development stage of the accelerator was finished and deliveries started.
The hangover from Unilever's well-publicised spat with Procter & Gamble knocked profits from Hickson's fine-chemicals division from pounds 7.5m to pounds 2.1m. Some new contracts have been negotiated to fill the hole left by the Persil Power contract, but the margins are much less attractive.
After months of negotiating, Hickson and Unilever agreed a figure for compensation. Chief executive Dennis Kerrison said it was a fair settlement, but City speculation put the payment at less than pounds 1m, a fraction of the annual hit to the chemicals company's profits.
More worrying for Hickson than the well-flagged speciality chemicals problems was its knock-on effect on the company's performance products division, which supplies manufacturers of high concentrate detergents. The expected switch from standard detergents has been slower than forecast as consumers shun new formulations in the wake of the Persil debacle. Profits in the division fell from pounds 4.7m to pounds 3.2m.
Hickson's third division, timber protection and coatings, also suffered during the half as sharply higher raw material prices and the sluggish US construction market held back profits. They fell from pounds 6.5m to pounds 5.5m.
After a fall of more than 50 per cent in group earnings per share from 5.6p to 2.7p, the interim dividend was trimmed from 2.85p to 2p. That followed the surprising cut in the last year's full-year dividend from 8p to 5p as the company admitted that it would take time for profits to recover from the loss of the accelerator business.