Stock market shock for upbeat ICI

ICI's chief executive, Charles Miller Smith, probably thought he was presenting an exceptional set of half-year results: the recently-acquired specialties businesses had improved their margins, and profits were up despite cyclical problems in the up-for-sale industrial chemicals division.

But the City, surprised by a warning that second-half profits would drop because of the strength of the pound and problems in Asia, responded by wiping 14 per cent off the company's share price as analysts reduced their full-year profits forecast by a quarter. Shares worth £12.44 three months ago were worth 780p as PEwent to press.

Miller Smith tried to brush off the profits warning: it was merely 'prudent' in the light of the strength of the pound, uncertainty in Asia and the continuing downturn in bulk chemicals, he said.

Currency effects knocked 3 per cent off turnover, which was 5 per cent down at £4.7 billion; the remainder was due to falling volumes in the acrylics and industrial chemicals division, and in Asia Pacific. Interim pre-tax profit, however, rose by 23 per cent to £197 million. 'The lighter end businesses accounted for over 90 per cent of our half-year profits,' commented finance director Alan Spall.

The specialties division, bolstered by the acquisitions from Unilever a year ago, saw trading profit climb from £30 million to £205 million. Industrial chemicals, however, saw turnover tumble 22 per cent; the process of exiting this sector is continuing, Miller Smith indicated.

The underperforming US paints business is to be restructured with stringent new targets. 'Unless our businesses can perform,' said Miller Smith, 'then these businesses will be in better hands, other than ICI's.'