ICI shares dive as pensions deficit widens to £688m

The speciality chemicals group ICI was the biggest faller in the FTSE 100 index yesterday after it struck a cautious note on trading and revealed that the hole in its pension fund had grown to £688m.

Although the pension fund deficit was less than analysts had forecast and ICI made bigger inroads into its debt burden than expected, shares in the company fell 7 per cent to close at a 10-year low of 190p.

Brendan O'Neill, ICI's chief executive, said the group had turned in a "resilient" performance last year with pre-tax profits before exceptional items in line at £400m and net debt reduced by £1.25bn taking it down to a seven-and-a-half year low of £1.7bn ­ the lowest since ICI re-invented itself as a paints, fragrances and flavourings business by buying Unilever's speciality chemicals division.

He said the outcome for the final quarter and the year was satisfactory, "given the persistence of difficult conditions in many of our markets". But he cautioned on the outlook for the current year, particularly in light of the looming conflict in the Gulf.

Mr O'Neill said: "It looks to me as though the Middle East will cast a pall over sentiment, particularly in the United States where there is a degree of uncertainty."

ICI said that it had injected £30m into its pension funds because of the shortfall that is equivalent to 10 per cent of its total pension liabilities of £7.5bn. The three-yearly valuation of ICI's pension liabilities takes place this spring but Tim Scott, the group's finance director, said this would not necessarily result in it having to make a further top-up payment. Its key UK pension fund, which has liabilities of some £7bn, has a deficit of some £250m but 75 per cent of its investments are now in bonds and only 25 per cent in equities.

The group also said it expected its restructuring programme to result in a further 150 job losses in addition to the 1,300 already announced.