Doubts remain over ICI move into speciality chemicals

Despite its announcement ofan increase in annual profits for the first time in four years, industry analysts are concerned about ICI’s ability to grow or even maintain its position in the speciality chemicals market.

After disposals in the bulk chemicals sector, debt still stands at £2.3bn, down from £4.2bn. The remaining disposals planned by ICI are unlikely to yield more than £1bn, leaving little leeway for growth.

`The world is changing rapidly around ICI,’ Phillip Morris, an analyst with Albert E Sharp Securities, said. `You can see the industry consolidating segment by segment. Weighed down with debt and with cash flow fully committed for at least the next couple of years – mainly due to a £400m under provision for the pension funds of companies sold – the scope for ICI to make meaningful acquisitions is limited.’

But Brendan O’Neill, ICI’s chief executive, believes that after nearly three years, his vision of ICI’s transition from a bulk to a specialist chemicals company is bearing fruit.

`Last year was one of considerable accomplishment,’ he said. `There is plenty of evidence that we are now better able to manage our destiny because we have a great set of quality positions. ICI is increasingly becoming an ideas company, selling not so much products as customer solutions.’

Pre-tax profits in the fourth quarter were 91% up on the same period last year. Annual pre-tax profits rose 17% to £376m on a turnover of £5.6bn.

The star performer of the group was Quest, the flavours and fragrances division, which turned in 18% growth in profits, at £92m, on turnover of £676m.