LONDON, Nov. 1 /PRNewswire/ -- "ICI's (NYSE:ICI) results continue to demonstrate the quality of the business, with earnings per share only 7% lower despite increasingly difficult trading conditions."
Charles Miller Smith - Chairman
Nine Months Third Quarter
Highlights
2000 2001 2000 2001
$m $m $m $m
Sales - Continuing
Operations 7,077 7,228 2,464 2,346
Net income before goodwill
and exceptionals 360 335 125 116
Net income per ADR
- before goodwill and
exceptionals 1.99 1.86 0.69 0.65
- after goodwill and
exceptionals 1.81 1.41 0.67 0.44
The US Press Release for the Third Quarter and First Nine Months is a summary document of the Company's full UK Results Statement, which was issued today in London. All figures in this Release are UK GAAP figures unless otherwise stated and are expressed in US Dollars and Net Income in ADR terms (apart from the Chairman's comments, which are reproduced in full from the UK Press Release). A reconciliation of UK and US GAAP, and summary segment information are included. A copy of the full UK Press Statement containing an Operational Review and financial information, with figures in pounds Sterling, is attached.
Results in the third quarter were creditable given the difficult external environment.
For the International Businesses, comparable sales for the quarter were 2% lower, with Asia 2% up, Europe flat and North America 4% lower than prior year. However, with gross margin percentages maintained and the benefits of cost saving initiatives, trading profit was only 7% lower on a comparable basis, and 6% lower as reported.
Interest cover rose to 3.6 times for the quarter, compared to 3.1 times a year ago, as reductions in global interest rates contributed to a significant reduction in interest costs. This more than offset a lower contribution from associates.
Profit before tax and earnings per share were, respectively, 11% and 7% lower than prior year, and net debt was maintained at 3.1bn pounds sterling.
For the nine months, comparable sales for the International Businesses were in line with last year. Profit before tax and earnings per share were, respectively, 8% and 7% lower.
As we announced yesterday, negotiations between Huntsman and ICI regarding the sale of ICI's investments in Huntsman International continue, and have now reached a significant phase. As part of these ongoing negotiations, and in order to protect our position, ICI has exercised its right to 'put' its 30% shareholding to Huntsman Specialty Chemical Corporation.
The outcome of these negotiations is difficult to predict, both in proceeds and timing. However, proceeds from the transaction are unlikely to be received this year and could well be deferred beyond 2002.
Given the uncertain environment, we are implementing a major programme to improve cost effectiveness and supply chain efficiency across all our International Businesses. This programme, which will essentially be completed within the next 2 years, will result in exceptional cash expenditure of approximately 120m pounds, and will utilise a further 60m pounds from existing capital budgets. It will deliver annualised savings of some 60m pounds, reduce working capital by more than 50m, and reduce Group headcount by a further 1,300.
Overall, the programme will payback in about 2-1/2 years and put ICI in a significantly stronger position to meet the challenges ahead.
The tragic events of 11 September have increased uncertainty about the outlook for quarter four, although current indications are that sales for October will be slightly below prior year levels. Whatever the environment, our results to date support the view we expressed in July that ICI will continue to perform well relative to the industry for the full year.
Results are based on United Kingdom accounting principles and are unaudited. Under US Generally Accepted Accounting Principles (GAAP), net income for the nine months ended 2001 and 2000 were as follows:
Nine Months
2000 2001
$m $m
Net income before goodwill and exceptionals - UK
GAAP 360 335
UK GAAP amortisation of goodwill (38) (40)
Net income before exceptionals - UK GAAP 322 295
Analysed:
Continuing operations 323 295
Discontinued operations (1) --
322 295
Net income after exceptionals - UK GAAP
Continuing operations 341 248
Discontinued operations (15) 6
326 254
Adjustments to conform with US GAAP
Pension expense 35 (49)
Capitalisation of interest less amortisation
and disposals -- (1)
Purchasing accounting adjustments
Amortization of goodwill and intangibles (157) (140)
Adjustments to account for financial instruments -- 34
Restructuring costs (12) 1
Deferred taxation (6) (15)
Share Compensation expense -- 3
Other 33 13
(107) (154)
Net income after exceptionals - US GAAP
Continuing operations 219 100
Discontinued operations -- --
219 100
For the purposes of segmental disclosures under UK GAAP, reference should be made to Appendix II where there is a clear description of each class of business. For US GAAP purposes, Businesses have been appropriately reclassified between continuing operations and discontinued operations as required by APB 30.
Results for all periods and other references in this document have been expressed in US dollars at a convenient exchange rate of $1.47 to the pound, the rate prevailing on September 30, 2001. Four ICI GBP 1 Ordinary Shares are represented by each ADR.
Certain statements in this press release may be forward-looking statements as that term is defined in the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These factors include, among other things, changes in demand and in the cost of raw materials for the Group's products, changes in interest rates, the impact of competitive products and pricing, risks of litigation, fluctuation in foreign currencies, changes in general economic conditions and global production capacity, and the ability of ICI to reduce or refinance indebtedness, as well as other factors described in ICI's filings with the SEC, including its Form 6-K.
Sales Operating Income
Before exceptionals and
goodwill amortisation
Nine Months Nine Months
2000 2001 2000 2001
$m $m $m $m
Continuing Operations
National Starch 2,076 2,061 276 237
Quest 764 816 119 123
Performance Specialties 923 930 83 76
Paints 2,420 2,520 200 203
International businesses 6,183 6,327 678 639
Regional and Industrial 942 950 4 3
Inter-class eliminations (28) (49) -- --
Gross total 7,097 7,228 682 642
Sales by Ongoing
Operations to
Discontinued Operations (20) -- -- --
Net total 7,077 7,228 682 642
Discontinued Operations
Gross total 1,460 -- (6) --
Sales by Discontinued
Operations to Ongoing
Operations (8) -- -- --
Net total 1,452 -- (6) --
Total Group 8,529 7,228 676 642
Segmental data in this statement is analysed as follows:
Continuing Operations
International Businesses
-- National Starch
-- Quest
-- Performance Specialties
-- Paints
-- Regional and Industrial
-- Discontinued Operations
The Regional and Industrial segment comprises the Group's Regional businesses (of which the largest operation is the pure terephthalic acid business in Pakistan) and some ongoing residual activity in the UK relating to legacy management.
For 2000 Discontinued Operations comprise the following:
-- Halochemicals, being the Klea and Chlor Chemicals business
-- Crosfield
-- Methanol
-- The 50% associate, Phillips-Imperial Petroleum
2. Segmental allocation of interest and tax
Net interest payable and taxation have been allocated to Discontinued
Operations to reflect the legal entity incidence of these items within the
businesses divested.
3. Relationship to Statutory Accounts
The financial information included in this document does not comprise
statutory accounts within the meaning of Section 240 of the Companies Act
1985. The statutory accounts for the year ended 31 December 2000, have
been reported on by the company's auditors and have been filed with the
Registrar of Companies. The report of the auditors was unqualified and
did not contain a statement under section 237 (2) or (3) of the Companies
Act 1985.
4. Interest Cover
Calculations of interest cover are based on the sum of Group trading
profit before goodwill and exceptionals and net associate company income
(associate trading profit less associate interest) divided by Group
interest cost (excluding associate interest).