The Investment Column: The real test lies ahead for ICI chief

The easy bit is over for ICI's chief executive, Charles Miller Smith. That may sound churlish, given the scale and speed of his transformation of the chemicals group. Less than a week after handing over a chunky pounds 5bn to buy Unilever's speciality chemicals business, Mr Miller Smith has sold off almost pounds 2bn of its poorest performing bulk chemicals businesses to DuPont and raised pounds 1bn from selling its Australian business. This compares with his original target of pounds 3bn disposals in three years. Pretty fast work.

But while the speed of the as yet uncompleted transformation of ICI from a lumbering bulk business to a nimble speciality chemicals group has surprised the City, Mr Miller Smith has so far only shown he can, albeit deftly, swap one business for another. Now he has to prove he can handle the new beast which has been created.

As an ex-Unilever man, he has a head start, although his ability to steer ICI through the cultural transformation will be hard to gauge this year. Yesterday's half-year numbers were no real guide. What was clear is that ICI is still highly vulnerable to the strong pound and falling chemicals prices, even in the speciality end.

Underlying profits, excluding the bulk chemicals to be sold, fell from pounds 267m to pounds 149m in the half year to June. The pound wiped pounds 90m off profits in the latest period, two-thirds of which was a real economic hit, not just translation effects. A pounds 150m currency cost is forecast for the full year.

Shifting to higher value chemicals will undoubtedly reduce this exposure. Rather than exporting, ICI will manufacture chemicals in its customers' markets, allowing it to produce and sell in the same currency. ICI will also be much bigger in the US, reducing its exposure to sterling.

The interim dividend, to be paid as a FID while stocks last, was maintained. As a less cyclical, speciality group, ICI should trade on a lower yield and could justify not raising its full year payout, though no cut is likely. Analysts forecast profits of around pounds 370m for this year, putting the shares, down 17p to 908p, after profit-taking on a forward multiple of 30 times. That is fair.