Soap wars rot Hickson profit

BY MAGNUS GRIMOND

The "soap wars" claimed another victim yesterday when Hickson, the chemicals group, revealed it was cutting its dividend. The action was taken in response to Unilever's decision to cancel purchases of the controversial Accelerator detergent ingredient.

The West Yorkshire-based group warned in December that profits would suffer as a result of the Unilever decision, which followed charges by the rival Procter & Gamble that the ingredient - a manganese catalyst compound - was suspected of rotting clothes.

But yesterday's news that Hickson was cutting the final dividend from 5.15p to 2.15p, reducing last year's total by 3p to 5p, surprised analysts.

Along with an announcement that the finance director, Michael Rowley, is to leave the company, it drove the shares down 15p at one stage. They later recovered to close 6p lower at 129p.

James Hann, the Scottish Nuclear chairman who moved over to the same position at Hickson in October, said the business was fundamentally sound.

But in view of the delay in restoring earnings at PharmaChem, the subsidiary that produced Accelerator, the board believed it could not prudently maintain the dividend.

The company estimates the loss of the Lever Brothers business at around £8m in a full year. Dennis Kerrison, chief executive, said Hickson had recently secured contracts with two pharmaceuticals groups to fill part of the gap, and had a further eight negotiations in progress.

One or two of these were expected to produce contracts by the middle of the year, but the benefits were unlikely to be seen before 1996.

"It would certainly fill up the capacity. Sad to say, it won't meet the returns we would have hoped to see from the Lever Brothers business", Mr Kerrison said.

Pre-tax profits fell 13 per cent to £19.2m in the year to December, cutting earnings per share by 11 per cent to 8.9p.

As well as the Unilever problems - which probably cost around £2m last year - the company's headline profits were hit by difficulties at the Kerley sulphur operation in Carolina and a £4.5m provision for rationalisation.

Mr Kerrison said Kerley had suffered from price increases for raw materials and from slack management.

A new president had been appointed, and the company had been restructured and was now "back on track".

Rationalisation at the main Castleford, West Yorkshire, plant is expected to result in cost savings of £4m in a full year.

The company has a shortlist of three to replace Mr Rowley as finance director. The appointment should end a series of management changes at Hickson, which also saw new heads appointed for the protection and coatings and the fine chemicals businesses last December.