CORRUPTION-TAINTED chemical firm Innospec has seen its balance sheet turn toxic after a £100m reversal in its profitability.

The Ellesmere Port company made a pre-tax loss of £22.5m in 2009, after a £77.7m profit a year earlier – despite a 9% increase in sales to £193.7m.

Its accounts just filed at Companies House also showed it made an actuarial loss of £66.6m on its pension scheme.

Innospec was hit by an £8.3m fine for bribing Indonesian officials to prolong the use of harmful lead-based fuel in the South-East Asian country. Handing down the judgement, Lord Justice Thomas said the fine was “wholly inadequate” but said he did not want to make the company insolvent, affecting its innocent employees.

It has also admitted bribing government officials in Iraq, through its Swiss subsidiary Alcor, in order to obtain contracts.

The firm’s ultimate holding company Innospec Inc – a company based in Delaware, USA and listed on the NASDAQ – paid fines of more than £25m to the US and UK courts.

As part of the fall-out, chief executive Paul Jennings left, forfeiting share options worth about £600,000. However Innospec has agreed to cover legal costs of up to £500,000 on his behalf relating to the bribery scandal.

His replacement as chief executive, Patrick Williams, said: “We have taken full responsibility for the company’s past actions and are extremely happy that a line can now be drawn through this deeply regrettable chapter of our history.

“Our new management team has grasped these experiences and has implemented more enhanced and robust compliance procedures to ensure that nothing like this will ever happen again.”

The Cheshire company also lost £10.2m through “adverse movement in exchange rates”.

The firm is mainly exposed to movements in the euro and dollar rates against the pound.

During the financial year the pound ranged from 1.02 euro to 1.19 euro, and from $1.35 to $1.70.

It said it has “an inherent hedge in that the group has cash inflows and outflows in these currencies”.

However it also suffered from a massive swing in foreign exchange gains and losses related to loans. It lost £25.7m compared with a gain of £49.0m in 2008.

A £227m loan note and related interest of £79.7m owed to its parent company Innospec Trading was converted into shares.

Innospec, which used to be called Associated Octel, employs about 380 people at its sites in Ellesmere Port, Widnes and at several other locations around the world.

The firm makes additives to improve the efficiency and environmental performance of fuels as well as speciality chemicals for other markets.

Its increase in sales was mostly attributed to its fuel specialities division, which increased by £20.9m and now accounts for 78% of the firm’s turnover. The growth was caused by increases in both volumes and price.

Its active chemicals division saw a small rise in sales of £1.3m.

Its octane additives operations – which manufactures tetra ethyl lead, still used in cars in some countries and also in aviation fuel – saw sales fall by £6.6m.

Innospec made a hefty actuarial loss on its pension scheme of £66.6m, more than doubling the £31.8m loss a year earlier. The scheme had a deficit of £72.8m at December 31, 2009.

In a statement, Innospec said: “Following the triennial actuarial valuation carried out by the plan’s trustees, the company has agreed that the plan has a substantial funding deficit, driven by a number of actuarial factors including improved mortality.

“Innospec is taking steps to reduce its exposure to additional pension liabilities, including closure of the plan to future service accrual.”

It said it expects its cash contribution to increase to about £13m in the current financial year.

Innospec employs 800 people in 23 countries. In 2009, its global sales fell 7% to £400m and it made an operating profit of £14m.

Commenting on the group’s global results, Mr Williams said: “I am very pleased with the performance of Innospec’s global management teams under extremely challenging circumstances throughout 2009.

“Our strong results excluding special items reflect the quality of our people, our continued investment in product innovation, and our customer-oriented service techniques.

“We know we will face additional challenges in 2010, particularly given the continued softness in global fuel markets.

“However, we remain confident that our ongoing businesses in fuel specialities and active chemicals are positioned to drive substantial earnings growth and shareholder returns over the longer term.”