ICI acts to boost paints & explosives' margins

05 June 1996 00:00  [Source: ICB]

ICI ceo Charles Miller Smith revealed recently the group's plans to enhance radically the performance of its paints and explosives divisions - particularly in the US.

Multinational giant ICI will tighten its focus on the intermediate and light end of its product portfolio, but still defend its position in the bulk sector, ceo Charles Miller Smith stated in London recently.

He aims to 'transform the overall level of efficiency of the business... and move the proportion of sales in the US and Far East from 40% today to 60% within a decade'. By the end of 1997, ICI aims to generate a further £400m/year ($600m) in profits through operating improvements.

Miller Smith also intends to recruit more middle managers from outside ICI 'to top up the pool' of talent, taking on more local managers in Asia and the Americas. Some 30-40 posts could be filled this way in the next 18 months, he indicated.

The bulk businesses - Tioxide, polyester raw materials and Klea CFC alternatives - 'have good positions' although Miller Smith admitted profitability in the Klea business needs much improvement.

PAINTS AND EXPLOSIVES UNDERPERFORM AT ICI IN 1995
Division	Turnover, £m	Return on sales, %
Paints	2003	5.34
Materials	2067	9.43
Explosives	778	6.30
Industrial chemicals	4250	11.67
Regional businesses	1604	9.1
Total	10 269	9.68

In polyester raw materials, ICI is no.2 in PTA after Amoco, but needs to boost its position in PET resin from its no.4 ranking limited to the UK/US. 'PET is a good business but one in which we must get stronger,' said Miller Smith.

ICI's strategy will be to take partners at various points along the polyester chain, an approach which he says brings competitive edge. The company has already formed a PTA jv in Taiwan and has public involvement in its PTA investment in Pakistan. He is very cautious on downstream polyester investment in Asia, given the strength of local players.

Miller Smith also has plans for the underperforming paints and explosives businesses. In explosives, the company will announce changes 'to radically sort out the US', which is holding back the performance of the rest of the division. 'We need to focus our competitive advantage and cost structure in the US.'

In paints, which ICI has recently boosted through the acquisitions of Grow Group and Fuller O'Brien in the US and Bunge in South America, Miller Smith says he needs to see performance improve significantly before making any further major moves.

The business, he notes, is capable of doubling in size to a $4bn operation over the next five years, but return on sales must be much improved to at least 10%. Again, it is the US side that is causing most problems, with Asia-Pacific showing good growth and returns.

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