The Leader's Bad Lead
The ICI half-year report was bound to set a bad market tone. In spite of record sales, net Profits were 25 per cent. down as compared with the first half of 1960 and profit margins fell from 23.6 per cent. to 19.5 per cent. This great company is rightly regarded as the market leader. If 1CI does badly, they say, who else can 1;10 well? That is an absurd exaggeration, for if the earnings of the past five years are examined in relation to the issued capital em- ployed in the business it will be found that ICI has been growing at the rate of only about 7 per cent. per annum, whereas RUGBY PORTLAND CEMENT have been growing at the rate of 11 Per cent., MARKS AND SPENCER 16 per cent. and JAGUAR 32 per cent. per annum. There are several industries which have escaped the bad cut in profit margins of some chemical com- panies. LONDON BRICK has actually cut the prices of its bricks by 2s. per 1,000. The cement com- panies have higher fuel costs, but are still work- ing on a satisfactory profit margin. WALL PAPER MANUFACTURERS, having got 90 per cent. of the trade.by buying out the companies which con- trolled their main competitors, need not worry about its margins. And what price beer? It seems that some chemical companies have been hit by cheap imports, but I have good reports of ALBRIGHT AND WILSON, which are low-cost pro- ducers and are able to export over the tariff wall to the European Common Market. These 5s. shares at 21s. 3d. yield 4.6 per cent. on the 20 per cent. dividend 2.4 times covered. This is much the same as ICI at 59s. 3d. to yield 4.6 per cent. on the 133 per cent. dividend not twice covered. Further, as ICI employees under (he profit- sharing scheme will be receiving about £8 million worth of bonus shares, there may be a steady stream of small selling to depress the market.
Previous page
