Profits up but ICI warns of prices rises

Chemicals and paint group ICI said today its sales outlook was good as it unveiled an 11% rise in third-quarter profits but warned of further price hikes to offset cost increases.

ICI, which has been undergoing a restructuring drive, said strong comparable sales growth and benefits from its shake-up more than offset the impact of rising raw material costs in the third quarter, in which pre-tax trading profits lifted to £117m (€168.4m).

The firm said that despite some signs of lower growth in electronics and reduced demand for its paint in North America, the overall sales outlook appeared to be good.

But chief executive John McAdam said: “Further price increases will be essential if we’re to continue to mitigate the impact of raw material cost increases and meet current market expectations for pre-tax profits for the year.”

The Dulux paints company has been working to bounce back from a series of disappointments over the past two years after tough economic conditions and problems at key divisions affected its performance.

The company, which employs more than 35,000 people worldwide, including about 200 in Ireland, cut around 1,400 jobs last year as part of a drive for cost savings worth £70m (€100.7m).

ICI said group sales for the quarter were £1.4bn (€2bn) - 5% below the third quarter of 2003 due to currency fluctuations and business divestments, but 8% ahead of the same time last year after excluding those items.

The group said strong like-for-like sales growth and good overall cost management resulted in 17% growth in comparable quarterly trading profit across its international businesses, which include National Starch, Quest, Uniqema and Paints.

This came despite increases in many raw material costs, wnich the firm had predicted in its half-year results announcement in July.

The company’s regional and industrial business reported a £4m (€5.7m) trading loss for the quarter against a £7m (€10m) loss last year.