Restructuring programme puts ICINZ into loss

Press, 27 April 1989, Page 42

Restructuring programme puts ICINZ into loss

ICI New Zealand has suffered from a lack of domestic demand in the half year ended March 31, the directors said yesterday when announcing the unaudited interim result, a $1,124,000 loss after tax. ““Although there are indications that the economic downturn may be levelling off, difficult trading conditions persist particularly in manufacturing, agricultural and retail markets with a high incidence of business failures,” they said. Sales, at $165.9 million were 10 per cent higher than the same period in the previous year because of mostly the acquisition of British Paints and the Smith and Smith Decorat-

ing stores. Trading profit at $2 million was 25% of that for the same period in 1988. A loss of $1 million was realised before tax and after deduction of financing costs. The directors have declared an interim dividend of 7c a share, same as last year, with no imputation credit attached. It will be paid on July 7. “The restructuring of the company’s activities had continued apace, said the directors, and its major elements were now complete: • Closing of the BJN manufacturing plant at Avondale; • Sale of the company’s 51% shareholding in Coopers Animal Health

NZ, Ltd, with settlement expected within the current financial year; • Sale of the plastic compounding plant at Avondale; • Rationalisation of paint manufacturing activities. “In addition to the oneoff costs associated with the restructuring programme, there were significant increases in bad debt write-offs, provisions for doubtful debts, and in stock write-downs.” -The directors said that these costs accounted for the majority of the reduction in trading profit when compared with the same period last year. “The chemicals group experienced difficult trading conditions in most of

its markets. Although sales to the horticultural markets were strong, demand in most other markets remained weak, particularly for explosives and agricultural products. The Government’s move to allow the introduction of generic drugs will cause a reduction in pharmaceutical profitability, and ultimately in the funds available for research into new products. Seasonal demand for Decorative Dulux and British Paints products was strong. Supplies were affected by a three-week industry strike in Auckland, which reduced stocks of paint throughout the industry. The demand

for industrial paints remained low. A difficult trading environment caused by a reluctance on the part of farmers to spend, the continuing South Island drought, and intense price competition had impacted severely on domestic sales and the profitability of Coopers Animal Health NZ, Ltd. Export orders were stronger, particularly for the company’s Footvax vaccine, which would help sales later this year. “Rationalisation has increased productivity and the company is now in a strong position to take advantage of any upturn in demand,” the directors said.