ICI Paints Autumn 2006 Performance
Sales growth of 3 per cent for the third quarter of 2006
ICI Paints delivered comparable sales growth of 3% for the quarter, with good volume growth for the Decorative businesses in the UK & Republic of Ireland, Latin America and Asia, partly offset by the impact of the weaker trading environment in North America.
Gross margin percentages improved slightly compared with last year as increased selling prices offset the impact of higher costs. As a result, with costs below gross margin broadly in line with last year, comparable trading profit was 9% ahead of the third quarter last year.
Sales for Decorative UK & Republic of Ireland grew by 6% as a result of good volume growth, notably in the UK retail business, despite mixed market conditions. Gross margin percentages were broadly in line with last year and with costs below gross margin lower than last year, benefiting from restructuring, trading profit was ahead of the third quarter of 2005.
Decorative Continental Europe sales were 1% lower than last year with continued weakness in France and Germany offsetting good growth in many of the developing markets in Eastern Europe. Gross margin percentages were ahead of last year due to improved average selling prices and stronger mix, which offset higher raw material costs. However costs below gross profit were higher and as a result, trading profit was below last year.
Sales for Decorative North America were 4% lower than last year, led by lower sales in the US retail market, although sales through the US trade business were in line with last year despite the downturn in the housing market. Higher average selling prices offset the monetary impact of increased raw material costs, however as a result of the weaker volumes, trading profit was lower.
Decorative Asia again delivered good growth and sales were 18% ahead of last year with higher sales volumes, notably in China and India. Gross margin percentages were broadly in line with Q3 2005 and despite higher costs below gross margin, mainly in support of sales activities, trading profit was substantially ahead.
Decorative Latin America sales for the quarter were 9% ahead of last year, with increased sales volumes in all key countries, notably Brazil. Gross margin percentages were ahead of last year, benefiting from favourable exchange rates and with lower costs below gross margin, trading profit was significantly ahead of the prior year.
Sales for the Packaging Coatings business were 5% ahead of last year, with good growth in North America, Latin America and Asia. With gross margin percentages broadly in line with the prior year, trading profit was well ahead.
The outlook for the balance of the year is mixed. The strong performance in Latin America and Asia is expected to continue but with weak trading conditions in North America, the overall Paints trading profit is expected to be below the strong fourth quarter delivered in 2005.
