Analysis: ICI demonstrates underlying performance in Q4

04 February 2002 17:15  [Source: ICIS news]

LONDON (CNI)--ICI unveiled on Monday better than expected fourth quarter 2001 earnings before interest, tax, depreciation and amortisation (EBITDA), with the principal businesses - Quest, Industrial Starch and Paints - showing the first benefits of new cost control programmes implemented in November 2001. EBITDA for continuing operations for the year were 4% lower at £782m ($1.11bn/Euro1.28bn).

Chief executive officer Brendan O’Neill said the 2001 performance was resilient and was underpinned by an aggressive focus on costs. ICI’s businesses in Asia and Europe did relatively well, he said, and he identified continued growth in gross margins in the fourth quarter by the paints operations and by flavours and fragrances producer Quest. Earlier cost control measures reduced fixed costs at National Starch by 9%, he added.

The stronger business performance helped offset the ongoing costs associated with ICI’s transformation into a specialty chemicals company. However, the disposals programme has cost the company dearly in terms of its high debt burden and weakening market capitalisation. ICI earlier today gave details of its 7 for 11 rights issue through which it expects to raise £808m to pay down debt and satisfy credit rating agencies which had threatened it with ‘junk bond’ status.

The relatively strong earnings performance helped the company produce a positive net operating cashflow of £3m in 2001 compared with a £91m outflow in 2000. The working capital outflow was less in 2001 and capital spending was maintained at £235m (£233m in 2000).

ICI’s net interest and tax payments were somewhat lower in 2001, with the company benefiting from lower interest rates over the course of the year. Dividend payments were also lower, in line with the policy to bring payments down to levels which management considered to be a more reasonable in November 2000. ICI said it intends to keep dividend payments to about a third of net profits in 2002 and beyond.

The company nevertheless continues to pay heavily for its transformation. The various payments against divestment provisions total £298m in 2001 against divestment proceeds - principally from the sale of the Chlor-Chemicals, fluorocarbons producer Klea, and the Crosfield catalysts business - of £344m. The net cash outflow due to these so-called ‘reshaping and legacy items’ was £114m for the year and included a special top-up pension payment of £30m.

ICI announced a supply chain efficiency and cost effectiveness improvement programme in November which has resulted in an exceptional charge of £143 before tax to the 2001 results. The charge is split £46m to National Starch, £45m to Quest, £28m to performance specialties and £24m to paints. At National Starch the programme will include the closure or sale of several sits in the US, Europe, Asia and Australasia and what ICI classes a "further significant headcount reduction". The programme is focused on specialty polymers and adhesives in North America and Europe. At Uniqema the programme is to improve supply chain efficiencies and undertake site restructuring. In other segments the plan is to improve supply chain logistics and close some facilities.

By: Nigel Davis
+44 20 8652 3214

< previous article(ICIS Podcast: Chemical News Central 2 November 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly