Outlook: ICI

IT SEEMS like only last week that Charles Miller Smith, chief executive of ICI, was waxing lyrical about how the stock market had got it all wrong about his company and its strategy of switching from bulk to speciality chemicals. Come to think of it, it was only last week.

Possibly it was because nobody back home believed him, but Mr Miller Smith chose a chemicals industry conference in New York to insist that he was on target to pay for his acquisition of Unilever's starch and flavourings interests with a corresponding programme of disposals in bulk chemicals.

What he might not have bargained for, however, was the wretched regulators. Yesterday they struck with a vengeance. W.R. Grace, the US packaging and chemicals group, announced it was scrapping plans to buy ICI's Crosfield offshoot for $455m because of opposition from the US Federal Trade Commission.

There was not a hint of this from Mr Miller Smith last week. The markets drew the obvious inference. If Mr Miller Smith can unexpectedly be blocked on one of his disposals, he can be blocked on others too. His promised programme for reducing debt and increasing interest rate cover could therefore be in some danger.

With or without the interference of regulators, the difficulty Mr Miller Smith has is that he bought from Unilever at the top of the market and it now looks as if he is going to have to do the bulk of his selling at the bottom.

Mr Miller Smith's strategy of swopping ICI's highly-cyclical bulk chemicals business for less cyclical speciality chemicals looked inspired at the time he embarked on it. The subsequent collapse in asset values makes it look not so clever now. It may be that the precipitous plunge in ICI's share price is justified by the mismatch between what Mr Miller Smith bought for and what he can now sell for. If so, then it is reasonable to regard the strategic switch as nothing short of disastrous.