Bottom line: Real test awaits Hampel's crusade

If Ronnie Hampel, chief executive of Imperial Chemical Industries, plays anything like as good a game as he talks, ICI really will live up to the name world- class.

His objective of a minimum 20 per cent return on capital from each business is espoused with such enthusiasm that it sounds more like a crusade than a corporate strategy.

Mr Hampel's analysis of the weaknesses of the old corporatist regime - the rigid reporting structure, the lack of rigour in approving capital spending, the fact that chiefs of the individual businesses rarely saw the main board - makes one wonder how ICI survived at all, let alone built leading positions in so many markets.

His aim of making employees more responsible for their own actions has had such a dramatic impact that even shop-floor workers on Teesside talk proudly of saving pounds 80,000 of working capital.

His list of the benefits of demerging Zeneca - from a streamlined board to an empowered workforce - is impressive enough to send every company with more than one division rushing to its advisers to see whether it cannot emulate the feat.

So far, however, it has all been talk. Return on capital in 1993 was a meagre 7 per cent, and that after pounds 340m of cost savings from the restructuring - for which Mr Hampel can take just part of the credit. First-quarter profits were up 31 per cent, but they still reached just pounds 93m on pounds 2.1bn of sales.

Even on forecasts of pounds 450m for the full year, 55 per cent up on 1993, the return will be some way from being acceptable. Gearing may be down to just 11 per cent, but that is only because of the pounds 1.3bn rights issue needed for last year's demerger.

That said, ICI has survived the recession in better shape, and is further down the restructuring path, than most of its rivals - although Lord Hanson can take at least as much credit for that as Mr Hampel. And there are at least tentative signs that the market may finally be moving in ICI's direction.

Volumes are recovering, although they are still nothing to write home about, and there are signs that the European recession is at last levelling off. That has helped it to raise prices, albeit that overall they were level with last year's first quarter. An ICI-led rise in the price of tioxide last autumn has stuck and it has managed to keep the benefits of a fall in olefin input prices.

The 15 per cent outperformance of ICI's shares over the past month suggests that investors believe it is finally poised to reap real benefits from recovery. The real test for Mr Hampel, however, will be how well it weathers the next recession.