View from City Road: ICI getting the chemistry right
Friday 26 February 1993
The hope for shareholders is that this spirit will continue in the two new companies. Ronnie Hampel, chief executive-elect of the bulk chemicals business, sounds positively enthusiastic when he talks about the scope for a global restructuring of the chemicals industry, which ICI is already leading with its asset swaps with Du Pont and BASF. He is also more realistic than his predecessors about its prospects of bucking the cycle. The pounds 565m of pre-exceptional profits earned in 1992 look poor relative to pounds 259m in 1982, the last trough.
Mr Hampel admits that the group's belief that it could thrive by building strong, regional bulk chemical businesses was wrong. And, while the pursuit of higher added- value has produced some successes - notably paints and pharmaceuticals - he is right that the jam was spread too thin. Mr Hampel's ICI will be far more conscious of costs and global market positions.
David Barnes, who will head Zeneca, will also be thinking globally. His approach is likely to be to look for alliances and joint ventures to give access to new products, rather than acquisitions. But his claim that the current drug pipeline is more exciting than it has been in years has yet to be tested by the market. Growth of more than 30 per cent in three new drugs sounds impressive, but, with average annual sales of less than pounds 170m each, they are hardly blockbusters yet.
That, coupled with ICI's conviction that the recession is close to its trough, means new ICI could have better prospects in the medium-term than Zeneca. In the short-term, it will be hampered by an uncovered dividend this year and probably next - which Zeneca's rights issue will in effect fund - which could inhibit its ability to grow.
With a pounds 1.3bn rights overhanging the market the share price is bound to come under pressure, at least until the terms of the issue are clear. ICI has left itself vulnerable to market movements by delaying the cash call until June.
- 1 Reader dilemma: 'Our son is 34 with an IQ of 85, and spends all his time in his room. What will happen to him when we're no longer here?'
- 2 Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
- 3 Russian officials ban yoga because it's too much like a religious cult
- 4 German ethics council calls for incest between siblings to be legalised by Government
- 5 Ginger Pride festival to take place next summer, organisers say 'time of bullying gingers is over'
Tunisia hotel attack: Locals form 'human shield' to protect hotel from gunman Seifeddine Rezgui
German ethics council calls for incest between siblings to be legalised by Government
People are American flagging their Facebook profile pictures in response to those rainbow flagging them
Ginger Pride festival to take place next summer, organisers say 'time of bullying gingers is over'
Historic meeting between Pope Francis and Russian Orthodox head 'getting closer'
The moment a Queen's Guard soldier lost it and drew his gun at annoying tourist
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Pentagon accuses Russia of 'playing with fire' over nuclear threats towards Nato
They are neither a 'state' nor 'Islamic': Why we shouldn't call them Isis, Isil or IS
Tunisia beach attack: How can British Muslims respond to the latest outrages?
iJobs Money & Business
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...
Negotiable: Recruitment Genius: This extremely successful and well-established...
Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...