CHEMICALS group ICI sprang a better-than-expected profits report on the City yesterday but warned that uncertain times lay ahead.

The group's pre-tax profits were down 13 per cent to £105m, an improvement on analysts' expectations that they would drop 21 per cent to £96m

But its Uniqema division, which employs 400 staff on Teesside, was a poor performer - profits were down 78 per cent to £1m.

The results will turn an unwelcome spotlight on the Teesside operation at a time when ICI is looking for cost savings and staff cuts.

John McAdam, ICI chief executive, said recent indications of an improving US economy provided some encouragement.

But he added: "The outlook for quarter four remains uncertain."

ICI, whose brands include Dulux paint, has a workforce of about 36,000 and employs 5,000 people in the UK.

In July, ICI announced plans to axe 1,400 jobs, 300 of them in the UK, after first-quarter profits fell 21 per cent to £98m. The cuts followed 700 job losses announced in May.

Anthony Platts, assistant director at stockbrokers Wise Speke, said: "ICI's problems stem from the £5bn acquisition of speciality chemicals from Unilever and the failure to obtain book value on disposals of heavy chemical plants.

"The company should be applauded, however, for getting the debt level down from approaching £5bn at one stage to £1.64bn at the end of the quarter just reported.

"Paying down this level of debt continues to be a serious issue, with ICI only valued at £2.129bn at the close of business on Wednesday. ICI's target is to be broadly cash-neutral by 2005."