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Preliminary Results 2004

Preliminary Results 2004. Thursday 17 February 2005. The world’s largest producer of chromium chemicals. World leading producer of rheology & surface chemistry additives. World leading producer of synthetic iron oxide. World leading Linatex brand of wet abrasion resistant rubber.

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Preliminary Results 2004

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  1. Preliminary Results 2004 Thursday 17 February 2005

  2. The world’s largest producer of chromium chemicals World leading producer of rheology & surface chemistry additives World leading producer of synthetic iron oxide World leading Linatex brand of wet abrasion resistant rubber Elementis plc Geoff Gaywood, Chief Executive

  3. Full year highlights • Sales increase to £389.2 m(2003: £368.2 m) • Operating profit (before goodwill amortisation and exceptionals) £11.8 m(2003: £24.5 m) • Successful implementation of structural improvements in all businesses • Selling prices of chromium now at highest level since 2001 • But - raw material, energy, freight and currency movements all adverse

  4. Strategy • Chromium market leadership • Specialties innovation • Pigments cost leadership • Specialty Rubber leverage quality • Systems operational excellence • Chromium rationalisation • Specialties growth • Pigments cost base • Specialty Rubber focus and volume • Systems sustainability Fix the obvious Business strategies Growth Acquisitions • OxyChem • Sasol Servo

  5. Specialties and Pigments £m 2004 2003 Sales 238.2 209.3 Operating Profit* 15.4 17.7 * before goodwill amortisation and exceptionals

  6. Business overview - Specialties • Good sustainable growth supported by geographic expansion, new product introductions and the Sasol Servo acquisition • Good market demand in key markets • Sasol Servo acquisition performing well • Annualised synergistic benefits now expected to exceed original estimates by about 40 per cent • Operating profit impacted by • Increased innovation spend • Ongoing ERP performance optimisation costs

  7. Business overview - Pigments • Sales up 7 per cent in US dollars • Volume and price increases • Operating profit impacted by • Raw material and freight cost increases • Chinese plant start up costs • TaiCang plant complete • Commercial production scheduled for H1 ’05 • Will substantially lower aggregate cost base • Easton PA plant fully operational • No long term impact of flooding

  8. Chromium £m 2004 2003 Sales 110.5 121.9 Operating (Loss)/Profit* (3.8) 6.8 * before exceptionals

  9. Business overview - Chromium • Sales £110.5 million • Operating loss £3.8 million • Prices increases began January 2004 • Sharp freight and energy cost escalation • Product mix improving • Market capacity rationalisation progressing • Further price increases of up to 20% in April

  10. CCA Impact Elementis Chromium EBITDA History EBITDA 0

  11. Indexed pricing by product Sodium Sulphate Sodium Dichromate US Chromic Acid Chromic Oxide - Metallurgical CA21 Chromic Oxide - Industrial

  12. Elementis average chromium prices 2003 2001 2002 2004 2000

  13. Specialty Rubber £m 2004 2003 Sales 45.9 42.7 Operating Profit* 0.2 - * before exceptionals

  14. Business overview - Specialty Rubber • 8 per cent Sterling sales increase • >20 per cent in US dollars • Business achieved profitability • Strong sales growth in all geographic regions • Geographic expansion in China and Chile • Strategic options under review

  15. Brian Taylorson Finance Director

  16. Financial summary 2003 £m 2004 £m Turnover 389.2 368.2 Before goodwill amortisation and exceptionals Operating profit 11.8 24.5 Profit before tax 6.2 18.3 Earnings per share 1.4p 3.0p After goodwill amortisation and exceptionals Operating profit (2.5) 10.9 Profit before tax (7.8) 5.5 Earnings per share (1.8)p 1.0p

  17. Divisional summary Underlying growth 2004 £m 2003 £m Sales Specialties & Pigments 238.2 209.3 4% Chromium 110.5 121.9 (2)% Specialty Rubber 45.9 42.7 8% Inter company (5.4) (5.7) 389.2 368.2 3% Operating profit * Specialties & Pigments 15.4 17.7 Chromium (3.8) 6.8 Specialty Rubber 0.2 - 11.8 24.5 * Before goodwill amortisation and exceptionals

  18. Analysis of operating profit* £m (3.4) 6.6 (10.9) Currency 24.5 Volume (2.6) (2.4) Raw materials and freight 11.8 Energy Other 2003 reported 2004 reported * Before goodwill amortisation and exceptionals

  19. Net interest expense 2003 £m 2004 £m Income/(expense) Interest on net borrowings (3.8) (1.9) FRS17 pension charge (1.1) (4.2) Other (0.7) (0.1) Net interest expense (5.6) (6.2) Interest cover (times) 3.1 12.9

  20. Exceptionals £m • Operating: • Integration costs on Servo acquisition (1.6) • reorganisation costs at Chromium Eaglescliffe (1.3) (2.9) • Non Operating: • loss on termination of business (2.3) • profit on disposal of property 2.6 (2.6) Total

  21. Charge on profit before goodwill amortisation and exceptionals (0.2) (2) % (29)% Credit in respect of goodwill amortisation - 36% Tax on exceptionals 0.2 9% n/a Total tax credit/(charge) - 16% Tax 2004 2003 £m

  22. Ebitda £27.2 million (2003: £40.1 million) £m 24.5 18.3 15.4 15.6 13.1 11.8 Working Capital Other Operating Cashflow Operating Profit Depreciation (2.9) (5.1) (9.0) 2004 2003 (18.9) Operating cashflow

  23. 2004 cashflow Outflows Inflows Increase in debt 36.3 Acquisition 43.3 Other 1.0 B Shares 9.2 4.5 Tax 5.6 Property Sale Capex 22.0 Operating Cashflow 13.1 2004 Gearing December 2004 30% December 2003 16%

  24. Pension deficit 2003 2004 Gross Deficit 78.5 78.6 Acquisition 2.9 - 81.4 78.6 Deferred Tax (16.9) 21% (25.8) 33% Net Deficit 64.5 52.8

  25. Balance sheets 31 Dec 2004 £m 31 Dec 2003 £m Reported Acquisition ADJ Fixed assets Working capital Provisions/other Net pension liability Net borrowings Minority interests 319.7 74.6 (27.9) (64.5) (90.2) (1.8) 209.9 24.5 16.6 (2.9) (1.9) (36.3) - - 295.2 58 (25.0) (62.6) (53.9) (1.8) 209.9 320.2 59.8 (26.1) (52.8) (46.9) (1.9) 252.3 Shareholders’ funds

  26. 1.1 Interims 2003 Nov 2003 1.1 Prelims 2003 May 2004 Redeemable B shares Amount per share Announced Issued (pence) 1.1 Interims 2004 Nov 2004 1.1 Prelims 2004 May 2005 2.2 2.2

  27. International accounting standards • As from Jan 1, 2005 • Analyst presentation in March • Main areas of change: • Goodwill Amortisation • Share Based Payments • Intangible Assets • Financial Instruments • Deferred Tax • No material impact on 2005 operating profit before goodwill and exceptionals

  28. Summary and outlook • Good progress in 2004 in achievement of strategic objectives • Specialties growth accelerating • Pigments Chinese plant will transform cost base • Chromium prices showing significant improvement • Specialty Rubber top line and profitability growing • Growth in market demand evident • Costs closely managed • Prices generally increasing • Benefits from structural improvements implemented in 2004 should become apparent in 2005

  29. Preliminary Results 2004 Thursday 17 February 2005

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