Inspec '97 pre-tax profits up 47% to £47.1m

03 March 1998 12:27  [Source: ICIS news]

LONDON (CNI)--A strong contribution from its fine chemicals business helped Inspec achieve a 47% rise in 1997 pre-tax profit to £47.1m ($77.5m), the UK speciality chemicals group said Tuesday.

Inspec said Tuesday the strength of sterling had reduced pre-tax profits by an estimated £10m. However, chairman John Hollowood said actions taken last year and the company's focus on organic growth would continue to offset the strong pound and market uncertainties in Asia.

Group turnover in 1997 rose by 31% to £394.3m, reflecting the first full year's sales from the fine chemicals business which Inspec bought from Shell in 1996. Operating profit was up 43% to £55.5m and the operating margin improved to 14.1%, from 12.9%.

Inspec estimated underlying growth in operating profit at 24%, after allowing for the effects of sterling. Equivalent figures for its business divisions were 13% for the specialities division, 11% for fine chemicals and 136% for ethylene oxide/ethylene glycol (EO/EG).

The performance products division, however, more than doubled its actual operating loss from £1.2m to £2.9m, reflecting a disappointing result from the US mining chemicals business. Inspec said prospects looked much better in 1998.

The overall profits increase enabled Inspec to reduce net debt by nearly £30m to £120.4m. The group is still very highly geared, but net gearing fell from 228% in 1996 to 138% at the end of last year.

In a detailed review of its operating divisions, Inspec said its specialities operations exceeded expectations due to an outstanding year from Inspec Belgium coupled with a resilient performance at Inspec UK. The division boosted turnover last year to £147.7m from £137.6m but operating profits eased from £22.1m to £21m, due partly to a disappointing first half from the US Fine Chemicals business acquired from Allied Signal in 1996.

The group's star performer last year was its fine chemicals division, which made an operating profit of £24.3m on a turnover of £126.2m. Comparisons with 1996 are not wholly relevant because the business was acquired halfway through 1996. Inspec said the business bought from Shell had been successfully integrated and reorganised and was now well placed to take advantage of new growth opportunities.

In the performance products division higher sales and profits from the fibres business was overshadowed by continuing losses from the US mining operations. Inspec foams performed below expectations, although it ended the year profitably.

The EO/EG business benefited from gradually improving demand, enabling the division to take full advantage of increased capacity. Operating profits more than doubled, from £6.4m to £13.1m, on sales up 35% to £92.4m.

By: Neil Sinclair
+44 20 8652 3214

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