ICI Australia and Montell Forge Plastics Deal

28th October, 1997

ICI Australia today announced the sale of its Polypropylene business to Montell Australia. The company will cease trading in polypropylene on completion of the sale, scheduled for January 5 1998, and plans to close its Botany Polypropylene plant in mid-to-late 1998.

ICI Australia managing director Mr Philip Weickhardt said the company will now focus on its Polyethylene business which recently secured a world-class supply of ethane feedstock.

"This previous $250m investment has positioned ICI Australia as a world competitive supplier of low and linear low density polyethylene and we aim to vigorously pursue this opportunity."

Mr Weickhardt noted that the decision to sell the Polypropylene business is another example of the active portfolio management of fixing, closing or selling underperforming assets that the company has been pursuing for a number of years.

Polypropylene division general manager Dr Terry Keating said, "There are two major factors which have caused ICI Australia to take this step. Firstly, our plant is small by world-scale standards and operates in the Australian market together with three other plants. Australia has twice as much capacity as demand. Secondly, the diminishing supply of available propylene feedstock in Sydney, where our plant is located, precludes effective expansion."

"This is the sort of industry rationalisation required to ensure a robust and more competitive manufacturing industry," Mr Weickhardt said. "We're pleased to have been able to come to this win-win arrangement with Montell."

ICI Australia ceased propylene manufacture when it converted its ethylene cracker to ethane last year. "Since then local supplies have been 30 per cent below forecast levels, with the shortfall being filled through imported product and LPG sourced from Brisbane and Melbourne," Dr Keating said.

"The need to supplement local supplies with material sourced from interstate or overseas is extremely expensive. This issue is exacerbated by the current oversupply of polypropylene in the South East Asian region which puts severe pressure on all manufacturers who are less than world scale.

"While the capacity of our plant was 85,000 tonnes per annum, Montell will be able to increase its Clyde plant output to 170,000 tonnes a year which is at the current world scale.

"Given the combination of these factors, we believe this rationalisation is a logical decision which allows ICI to utilise its processing facilities at Botany and facilitates Montell's scale and competitiveness. "Unfortunately there will be some job losses between January and the ultimate closure of the plant, but we will be providing every support to help those affected find alternate employment," said Dr Keating.

ICI Australia will continue to manufacture polypropylene during 1998 on behalf of Montell to ensure a smooth customer transition. The sale includes goodwill but excludes the company's Botany polypropylene manufacturing assets. The sale price will realise a small profit after the cost of redundancy and asset write-offs.

ICI Australia and Montell have also signed supplementary agreements which will see ICI Australia continuing to convert refinery grade propylene into polymer grade propylene for Montell's use at Clyde. This will coincide with the effective sale of the business. The sale of the business is subject to approval by FIRB. The ACCC has been briefed on the sale.

ICI Australia will continue to use its strong technology base in Films and Engineering Plastics to supply added-value products to local and world markets.ICI Australia today announced the sale of its Polypropylene business to Montell Australia. The company will cease trading in polypropylene on completion of the sale, scheduled for January 5 1998, and plans to close its Botany Polypropylene plant in mid-to-late 1998.

ICI Australia managing director Mr Philip Weickhardt said the company will now focus on its Polyethylene business which recently secured a world-class supply of ethane feedstock.

"This previous $250m investment has positioned ICI Australia as a world competitive supplier of low and linear low density polyethylene and we aim to vigorously pursue this opportunity."

Mr Weickhardt noted that the decision to sell the Polypropylene business is another example of the active portfolio management of fixing, closing or selling underperforming assets that the company has been pursuing for a number of years.

Polypropylene division general manager Dr Terry Keating said, "There are two major factors which have caused ICI Australia to take this step. Firstly, our plant is small by world-scale standards and operates in the Australian market together with three other plants. Australia has twice as much capacity as demand. Secondly, the diminishing supply of available propylene feedstock in Sydney, where our plant is located, precludes effective expansion."

"This is the sort of industry rationalisation required to ensure a robust and more competitive manufacturing industry," Mr Weickhardt said. "We're pleased to have been able to come to this win-win arrangement with Montell."

ICI Australia ceased propylene manufacture when it converted its ethylene cracker to ethane last year. "Since then local supplies have been 30 per cent below forecast levels, with the shortfall being filled through imported product and LPG sourced from Brisbane and Melbourne," Dr Keating said.

"The need to supplement local supplies with material sourced from interstate or overseas is extremely expensive. This issue is exacerbated by the current oversupply of polypropylene in the South East Asian region which puts severe pressure on all manufacturers who are less than world scale.

"While the capacity of our plant was 85,000 tonnes per annum, Montell will be able to increase its Clyde plant output to 170,000 tonnes a year which is at the current world scale.

"Given the combination of these factors, we believe this rationalisation is a logical decision which allows ICI to utilise its processing facilities at Botany and facilitates Montell's scale and competitiveness. "Unfortunately there will be some job losses between January and the ultimate closure of the plant, but we will be providing every support to help those affected find alternate employment," said Dr Keating.

ICI Australia will continue to manufacture polypropylene during 1998 on behalf of Montell to ensure a smooth customer transition. The sale includes goodwill but excludes the company's Botany polypropylene manufacturing assets. The sale price will realise a small profit after the cost of redundancy and asset write-offs.

ICI Australia and Montell have also signed supplementary agreements which will see ICI Australia continuing to convert refinery grade propylene into polymer grade propylene for Montell's use at Clyde. This will coincide with the effective sale of the business. The sale of the business is subject to approval by FIRB. The ACCC has been briefed on the sale.

ICI Australia will continue to use its strong technology base in Films and Engineering Plastics to supply added-value products to local and world markets.