ICI paints brighter picture as demand begins to rise

The speciality chemicals group Imperial Chemical Industries painted a rosier picture of trading yesterday on the back of a better performance in the fourth quarter.

John McAdam, ICI's chief executive, admitted that the company's profit performance for the year as a whole had been "unsatisfactory" ­ profits before tax, goodwill, amortisation and exceptionals fell from £400m to £341m. But he insisted that demand appeared to be picking up.

Trading did improve in the fourth quarter relative to the first nine months of the year. He also noted that "the demand outlook appears to be more encouraging, particularly in North America."

The company's fourth quarter profits before tax and exceptional items came in at £86m, a fall of 2 per cent from the same period a year before.

The figure was, however, at the top end of City forecasts and shares in the company finished up nearly 3 per cent, or 6.25p, at 220.25p ­ making it the second biggest riser in the FTSE 100 index last night.

The company's reduction in its debt pile also pleased investors. Debt fell by £341m to stand at £1.3bn at the end of the year, helped by favourable exchange rate movements and lower restructuring costs. This was far better than the City hoped, with analysts forecasting £1.5bn of debt.

ICI stressed, however, that cost control and successful execution of its restructuring plans were essential as it cautioned that there was uncertainty over raw material costs.

A spokesman said about 2,100 people would be leaving ICI under the group's restructuring programme, with about 640 of them having already left last year. About 600 of the job losses are in the UK.

ICI announced a final dividend of 3.5p which, on top of the 2.75p interim pay-out, gives 6.25p for the full year ­ down from 7.5p last year. The dividend policy is not expected to change in the near term.

Another negative point, analysts noted, was a near £200m increase in pension liabilities to nearly £870m this year. "Given the scale of debt and debt equivalents, we believe the shares are now significantly overvalued," said analysts at Smith Barney.