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Business

SLIGHT OPTIMISM IN EARLY RESULTS

Companies see hint of upturn, but currency effects will continue to hurt

by PATRICIA SHORT
February 9, 2004 | APPEARED IN VOLUME 82, ISSUE 6

McAdam
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Credit: ICI PHOTO
8206NOTW4_mcadam.JPG
Credit: ICI PHOTO

The first batch of annual results from European chemical companies shows an industry hard hit by the impact of currency exchange rates but leavened by a slight upturn in business.

Wijers
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Credit: AKZO NOBEL PHOTO
8206notw4_wijers.JPG
Credit: AKZO NOBEL PHOTO

The optimism was most pronounced at ICI. The hopeful mood was evident even though the company's 2003 net profit, $400 million at current exchange rates, was 17% below the comparable figure for 2002. Sales were down 4%, to $10.7 billion. And the company cut its dividend by 17%, the third such cut in as many years.

John McAdam, chief executive, noted that business improved in the fourth quarter relative to the first three quarters, "and the demand outlook appears to be more encouraging, particularly in North America."

At Akzo Nobel, Chairman Hans Wijers reported that sales were $16.3 billion, down 7%, and net profits were $1 billion, down 9%. Wijers said adverse currency exchange rates wiped roughly $212 million off the firm's operating profit over the year.

He predicted that net profit for 2004 would be below that of last year, as the company sees negative currency translation effects only partially being offset by restructuring cost cuts and a slow improvement in the general world economy.

Ciba Specialty Chemicals CEO Armin Meyer reported 2003 sales of $5.3 billion--steady in local currencies but down 6% in Swiss francs. Net profits were off by 15%, to $455 million, reflecting, in part, a two-week shutdown of facilities at year's end to reduce stocks. The move cost the company nearly $50 million but trimmed more than four times that amount from inventories.

"I do think that business will pick up in 2004," Meyer said, "but we have no hard facts." U.S. companies, in particular, he noted, are benefiting from the weak dollar: "Their situation will seem more positive as they correct upwards" when overseas sales are repatriated as dollars.

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