The investment column: Albright scare heralds changes

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Albright & Wilson, the chemicals group that puts the tang in Coca- Cola and the brightener in toothpaste, gave the stock market a fright yesterday with news of what looked like a profits collapse. The headline pre-tax number for the six months to June fell from pounds 32m to pounds 1.6m, knocking 17p off the shares at one stage before the price partially recovered to 163p, down 4.5p on the day.

In fact the results, which included a pounds 27.8m restructuring provision, are a welcome sign that Paul Rocheleau, the group's new chief executive, is already rolling up his sleeves to make some changes.

The bulk of the provision is for asset write-downs to tidy up the balance sheet, which should have no cash cost implications. However, some pounds 5m is being set aside for the closure of a sulphuric acid factory in Whitehaven in the UK, which will mean around 70 redundancies, and for another 30 or so job cuts outside the UK. That is not huge in relation to the group's 5,000 staff world-wide.

Otherwise the underlying business looks in good health. Operating profits, excluding a pounds 6m currency hit, rose 6 per cent to pounds 39m on steady volumes.

Margins in surfactants - cleaning agents to you and me and over one-third of the business - rose 2 percentage points to 5.4 per cent as the group shifted to more value-added structured liquids. Mr Rocheleau reckons there is scope to take margins in this business to 8 per cent in the short term. Phosphates, used in detergents, took the bulk of the sterling hit in Europe, but performed well in Asia and America.

With minimal gearing and good cash flow, the company has some pounds 200m to spend on its plans for expansion in China and Brazil. Wisely, given what can be difficult markets, the group will start with joint ventures along the lines of its Mexican operation. House broker BZW forecasts profits of pounds 63m for the full year. Even though sterling will remain a continued pressure, a forward price-earnings ratio of 11 looks cheap.