The Investment Column: Hold on to ICI as it paints a picture of recovery from troubled times

Today, more than 40 per cent of ICI's revenues come from the paints division, led by the Dulux brand, and most of the remainder is spread across three large international chemicals businesses - Quest, Uniquema and National Starch. Pharmaceutical ingredients and bulk chemicals - once the heart of the group - now play a marginal role.

Repositioning did not come without its difficulties and by 2003, with many of its new divisions faltering, it was forced to issue a string of profit warnings and oust its then chief executive, Brendan O'Neill. But two years on, and the group is well into the restructuring plan laid down by its current boss, John McAdam - and also well on the road to recovery. With its interim results yesterday, which convincingly beat analysts' expectations, the group finally appeared to be demonstrating that it was back on a stable footing.

But while ICI looks a much less risky bet than it did two years ago, the company is certainly not completely out of the woods yet. One of the main reliefs yesterday was the news that its paints division was in good nick, with very strong growth in Asia helping to offset the slowdown in its core European and North American markets. However, high oil prices continue to take their toll on the division, and although ICI has managed to get away with passing some of these costs on to the consumer, further larger increases in raw materials costs will more likely have to be absorbed by the company.

The company also has one of the biggest pension deficits in the FTSE 100 and says it is likely to revise its liabilities upwards again.

Trading on 11 times forecast earnings, ICI shares are fairly priced. A dividend yield of less than 2.5 per cent is not enough for investors to take the risk of getting involved just yet. For those already on board, hold.