Chemicals and paints group ICI maintained a positive view on its business yesterday after price rises helped it recover higher raw material costs.
Shares rose by five per cent as the company posted a 12 per cent rise in half-year profits to £207 million and said it was hopeful of satisfactory progress this year.
The group said a restructuring programme underway since 2003 would now achieve the desired benefits at a cost lower than forecast, and it would further extend the programme with the loss of 300 additional jobs.
The extended programme, which will see the company shed 2,534 jobs, will now deliver £140 million in savings in 2007 against £127 million previously estimated.
The group reported signs of an improvement in trading conditions towards the end of the second quarter, but added European markets remained "generally subdued".
Comparable group sales for the three months to the end of June were six percent above a year earlier, with price rises accounting for four percent of the six per cent improvement in sales from its main international businesses division, which features ICI paints and the company's National Starch operation.
Sales growth in the Duluxbased paints division was strongest at eight per cent in the quarter, helped by double-digit growth in Asia and Latin America.
Turnover was ahead in the UK trade market for paint, but ICI said continued weakness in retail markets impacted sales to several key customers in the UK.
Overall profits at the paints division were £74 million, up five per cent on a comparable basis following sales of £613 million.
ICI has been working to bounce back from a series of disappointments in the past two years after tough economic conditions and problems at key divisions affected its performance.
Chief executive John McAdam said: "The outlook for the second half of the year remains as it was at the end of first quarter" and added " provided there is no further deterioration in overall market conditions we continue to expect to make satisfactory progress in 2005."
Analysts said ICI's outlook looked better than what it said at the end of the first quarter as it saw improved trading conditions towards the end of the second quarter.
The maker of Dulux paints said that while trading improved in June compared with April and May, overall demand remained subdued and much of its six percent underlying revenue growth in the quarter came from price increases rather than volume growth.
That caution did not dampen demand for its stock, with the shares rising to levels last seen in August 2002.
ICI reported profit before tax and special items of £123 million for the quarter, unchanged from last year, but above the average market forecast of £118 million. Predictions ranged from £108 million £127 million.
ICI raised its interim dividend by 10 percent to 3.75 pence.
The UK's largest chemicals company had 2,000 job cuts in 2003 and replaced chief executive Brendan O'Neill with Mr McAdam.