ICI covers pension costs with improved WCM
International chemicals company ICI saved £17 million through working capital management (WCM) schemes last year, easily covering the £10 million increase in its pension fund requirements.
CFO Tim Scott talked through ICI's annual results today, explaining that as a result of the company's commitment in 2003 to pay £62 million a year into its pension fund, costs in 2004 rose by £10 million.
But the company's WCM plan, which has seen it reduce its proportion of operating working capital to annualised sales from 19% in 1998 to 8% last year, saved it £17 million in 2004.
Scott and CEO John McAdam explained that the WCM profits came from a mixture of renegotiating contracts with suppliers, sharpening debt collection and reducing the amount of stock sitting in ICI's factories.
?We established a WCM masterclass that brought people from all over the company together to focus on items along the production line. It also helped that we linked many of our bonuses at lower levels to improvements in WCM,? said McAdam.
ICI also outlined plans to increase prices in 2005 to cope with the 3% rise in raw materials costs it saw in 2004, which cost the company around £60 million.