ICI has reported that for the third quarter, its paint unit recorded sales of £587 million, a two percent decline from the same quarter in 2003.
Company officials said ICI saw substantial increases in raw material costs. “As in the second quarter, strong comparable sales growth and benefits from restructuring more than offset the impact of rising raw material costs in Q3, and profit and cash flow were again ahead of last year for the quarter,” said John McAdam, chief executive. “Despite some signs of lower growth in electronics and reduced demand for paint in North America, the overall sales outlook appears to be good. However, 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.”
ICI Paints continued to deliver good results with six percent comparable sales growth and nine percent comparable trading profit growth for the quarter, according to ICI. For ICI’s decorative Europe sector, sales rose four percent over a weather-impacted third quarter last year, when sales were adversely affected by a heat wave. Sales in the UK were particularly strong. Despite increased raw material costs and higher costs below gross margin, trading profit was ahead of last year.
Decorative sales in North America were up one percent above last year, despite September being adversely impacted by hurricanes and related flooding. Growth continued in the U.S., particularly for ICI’s retail business, Canada and Puerto Rico. However, with adverse product mix and higher freight and raw material costs, trading profit was below last year, according to the company.
ICI reported another year of excellent performance from its decorative business in Asia. Sales rose 27% sales and trading profit was significantly ahead. All countries performed well, most notably China, India, Indonesia, Vietnam and Pakistan.
Also, decorative sales in Latin America were positive in the third quarter, up 15% over the same quarter in 2003. Brazil was again the leading performer, with Argentina and Uruguay also delivering good performances. Local currency appreciation and higher employee costs in Brazil impacted costs, but despite this, trading profit was significantly ahead, the company reported.
Sales for ICI’s packaging coatings business rose three percent, with continued strong growth in Asia and good performance in Latin America. Despite higher raw material costs, trading profit was ahead of last year, ICI said.
For the first nine months, ICI’s total paint sales were flat at £1.6 billion.
National Starch, which sells adhesives as well as other products for ICI, recorded sales of £469 million in the third quarter. Adhesives sales were 10% above last year, with all regions ahead. Growth was particularly strong in the U.S., Asia and Latin America. However, significant increases in raw material costs led to lower gross margin percentages, and with costs below gross margin above last year, trading profit for the quarter was lower.
For the nine months, National Starch’s sales were £1.37 billion, down one percent compared to the same period in 2003.