Better margins push ICI Q1 profit up

03 May 2007 08:28  [Source: ICIS news]

SINGAPORE (ICIS news)--ICI on Thursday posted a 4% rise in its first quarter trading profit from the same period a year ago on improved margins and said the outlook for its second quarter remains positive.

The paints, adhesives and specialties starch group has also reached agreement with South Korea’s Dongsung Chemical to buy a 30% stake in Dongsung NSC, for $29m (€21.4m).

Dongsung NSC is a supplier of specialty adhesives for the footwear industry and the transaction is expected to be completed around the middle of the year, ICI said in a statement.

ICI’s trading profit from continuing operations reached £101m ($202m/€136.5m) from £97m in the first quarter of 2006, it said. Excluding currency effects and the impact of acquisitions and divestments, trading profit was 14% higher.

“The combination of good sales growth and further benefits from our transformation programme contributed to improved trading margins,” ICI’s chief executive John McAdam said in a statement.

In absolute terms, however, trading profit for continuing businesses was reduced by a £7m adverse impact from exchange rates and £1m from disposals, he added.

Sales from continuing operations fell 2% to £1.1bn, but rose 6% if currency effects were excluded.

“Europe was particularly buoyant and our developing market businesses in Asia and Eastern Europe and the Middle East continued to perform well, McAdam said.

“North America was mixed, with weak construction markets, though we have made good progress in reducing cost in our North American business.”

Trading profits for its paints and national starch units were up 9.5% and 7% to £46m and £61m respectively.

In its adhesives segment, trading profit fell 5% to £19m. Sharply lower margins for its Pakistan purified terephthalic acid (PTA) business caused trading profit for its regional and industrial division to fall 57.1% to £3m.

The division was expected to post lower trading profit for 2007 compared with 2006 as low gross margins for PTA was likely to continue for some time, ICI said.

“The outlook for the second quarter remains positive. Although visibility of trading conditions beyond current quarter is always limited, our expectations for the year as a whole remain unchanged,” McAdam said.

($1 = £0.50/€0.74)

(€1=£0.68)

By: Florence Tan
+65 6780 4359

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