ICI Paints Summer 2006 Performance
Second quarter of 2006
| Second Quarter | Half Year | |||||||
|---|---|---|---|---|---|---|---|---|
| 2006 £m |
2005 £m |
Reported % |
Comparable % |
2006 £m |
2005 £m |
Reported % |
Comparable % |
|
| 647 | 606 | 7 | 5 | Sales | 1,218 | 1,112 | 10 | 6 |
| 79 | 74 | 7 | 4 | Trading Profit | 121 | 113 | 6 | 3 |
"Comparable" performance percentages exclude the effect of currency translation differences and the impact of acquisitions and divestments. Unless otherwise stated the commentary below refers to performance measured on a "comparable" basis.
Gross margin has been redefined for all years presented to reflect total manufacturing and distribution costs, some elements of which were previously included in costs below gross margin.
From 1 Jan 2006, the Decorative Europe business unit was split into two new business units comprising the UK and Republic of Ireland (ROI), and Continental Europe.
ICI Paints delivered comparable sales growth of 5% for the quarter, with good volume growth in the UK & Republic of Ireland and Asia. Gross margin percentages were slightly below last year, primarily due to the expected higher raw material and freight costs in North America, and some adverse mix effects. With increased spend on advertising, costs below gross margin were higher compared to the second quarter of 2005 and, as a result, comparable trading profit was 4% ahead of the second quarter last year.
For the half year, comparable sales were 6% ahead. Gross margin percentages were below last year and, with increased costs below gross margin, trading profit was 3% ahead of last year.
Sales for Decorative UK & Republic of Ireland were 9% ahead of last year with good volume growth, particularly in the UK retail business despite mixed market conditions. Gross margin percentages were in line with last year. Costs below gross margin increased from last year, led by increased advertising expenditure early in the quarter. However, as a result of the strong sales growth trading profit was ahead of the same period in 2005.
Decorative Continental Europe sales were 3% lower than last year with continued weak performance in France offsetting growth in Benelux and other countries. Gross margin percentages were slightly above last year due to higher average selling prices and stronger mix. However, with increased costs below gross margin, trading profit was lower than last year.
Sales for Decorative North America were 2% ahead of last year as selling price increases and stronger mix offset the impact of lower sales volumes. Growth in both the US trade and retail segments offset weakness in the Canadian market. Gross margin percentages were below last year as increased raw material and freight costs offset the benefits of higher selling prices. Costs below gross margin were marginally higher than 2005, and as a result trading profit was lower for the quarter.
Decorative Asia had another good quarter, with 12% sales growth. Sales volumes were well ahead, notably in China, India, Pakistan and Vietnam. Lower gross margin percentages and higher costs below gross margin, mainly to support increased sales volumes, resulted in trading profit in line with last year.
Decorative Latin America sales for the quarter were slightly ahead of last year, due mainly to a steady performance in Brazil. Gross margin percentages were higher than last year although higher costs below gross margin meant trading profit was broadly unchanged.
Sales for the Packaging Coatings business were 5% ahead of last year, with particularly strong demand in Latin America. With higher gross margin percentages, trading profit was significantly ahead of the prior year.
