National Starch boosts profits for parent company

Sales are down but profits have perked up for UK chemical giant Imperial Chemical Industries (ICI) with National Starch bringing a considerable chunk to the growth.

A producer of speciality starches used to stabilise and bring texture to a wide variety of food applications, National Starch brought £202 million ($376.84 million) in operating profit to the £439 ($819.06 million) total for the group, that includes flavours and fragrance firm Quest.

In a move reflected across the food ingredients industry, National Starch is hooking onto 'value-added' products to drive profit growth through higher prices in the starch market, forecast in Europe to reach €2.1 billion ($2.7 billion) by 2006.

In 2003 the food and beverage industry represented about a quarter of turnover for National Starch, that in addition to food starches includes adhesives, electronic materials and healthcare products.

John McAdam, ICI's chief executive, said that the growth in starch sales in 2004 reflected the firm's strategy to 're-focus the business on added-value food starches.'

"Rationalisation of manufacturing capacity and an improvement in productivity also contributed to the achievements in food sales at National Starch,"​ commented McAdam.

Last year the firm closed plants in the UK and Canada, while expanding a facility in Indianapolis.

The chief executive added that the company's functional native starch line 'Novation', and Signature Secrets brands are 'delivering good growth'.

Since 1 January the ICI specialty starch subsidiary has been known globally as National Starch Food Innovation, aimed at moving away from any chemical connotations and towards a "clean label" image.

After a shaky few years due to client loss through a computer mishap, Quest, says the chief executive, is back on track.

"The flavours business is starting to gain some of the ground in terms of reputation,"​ said McAdam.

ICI spun off the food ingredients arm of its struggling flavour and fragrance business last year to Irish ingredients group Kerry, giving the flavours operation room to concentrate on the core business.

In a deal worth €355 million ($457.12 million) and 900 jobs, Kerry bought into the bio-ingredients and pharma-ingredients business of Quest, including protein hydrolysates, emulsifiers, hydrocolloids and fermentation products.

Now with a reduced operation, ICI reported yesterday that operating profit at Quest had improved by some £28 million in 2004 on 2003 figures, despite more than a 14 per cent fall in sales, knocked by the divestment.

A stronger development pipeline and new wins coming through should help the unit's performance, but 'much work is required,' he added.

Shares in Imperial Chemical Industries spiked up by 11.75 per cent yesterday on news of the impoved 2004 profits.