Good fit seen for ICI in Akzo specialty chemicals

06 March 2008 17:06  [Source: ICIS news]

LONDON (ICIS news)--The ex-ICI businesses being retained by the Netherlands' Akzo Nobel are an excellent strategic fit with the other parts of the specialty chemicals division, Leif Darner, head of the division, said on Thursday. 

Following the acquisition of ICI in January this year, Akzo Nobel’s chemicals business is to divest the UK coatings and specialty chemicals group's starch business, leaving the company its specialty polymers business with €400m in annual sales. 

The specialty polymers unit’s components have strong synergies with the existing specialty chemical portfolio, said Darner.

Darner said powdered polymers - used as thickeners for paint, adhesives and insulation - fit well within the company’s cellulosic specialties group, part of the functional chemicals business.

“This will remain a separate business as we don’t want to break up what is running nicely,” he said.

The Alco Chemical business, strong in chemicals for water treatment and detergents, fit into functional chemicals and surfactants, while polymers going into personal care “have similarities with our surfactants business so we’re quite excited about that”.

ICI’s regional and industrial group contained ICI Pakistan, the country’s top producer of chemicals and coatings, so Akzo Nobel will also become the dominant chemical producer in the country.

“This gives us a nice footbridge to a region where we’re not so strong, enabling us to develop other chemical platforms,” Darner said.

To fuel growth in China, the company remains committed to making a decision in the first half of this year on possible construction of additional organic peroxide capacity and production of cellulosic specialties at its Ningbo, China complex.

Darner said Akzo Nobel is still in an acquisitive mood, with a strong balance sheet, though “of course we’ve got a bit of digestion to do with the integration of ICI”.

He added: “We are looking at a whole range across all sectors following the same criteria: a good strategic fit and financial return. That is the priority of the board when making these decisions.”

In today’s fourth-quarter results published earlier, Darner’s specialty chemicals division posted a record return on investment of 21.7%, up from 17.5% last year and 12-13% four years ago despite maintaining investment levels well above depreciation.

Darner attributed the achievement mostly to a special margin management programme where software and training have been rolled out to the sales organisations to manage product mix and pricing with customers.

“We have been able to successfully mitigate the raw material price increases and have improved gross margins and contributions,” Darner said.

He said the tools allowed managers to analyse the product portfolio, margins and market positions.

“Then you can prepare each discussion in the market place and also tell the customer how you can add value by moving to higher value-added products. We are also managing our long term contracts in a more sophisticated way,” he said. 

Darner sees no worrying signs of a recession despite weaknesses in some markets, particularly North American decorative coatings.

“Sometimes you wonder when you read the newspapers and see all the Doomsday scenarios. Then you look at the results and you talk to the managers and we don’t recognise it. For the full year, the feeling is good and it has started well.”

($1 = €0.65)

ICIS Copyright © Reed Business Information 2009

< previous article(VIDEO - ICIS news Asia Lunchtime Bulletin 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.