Interim Results

1
Interim Results
Six months to 30 June 2003
Tuesday 29 July 2003
2
Statements contained in these materials,
particularly those regarding possible or assumed
future performance, costs, production levels,
industry growth or other trend projections are or
may be forward-looking statements. These
statements are based on managements current
expectations and are subject to uncertainty and
changes in circumstances. Actual results may
differ materially from these expectations due to
changes in global economic, business,
competitive, market, legal, environmental or
regulatory factors. Furthermore no warranty or
representation is given or made as to the
accuracy or completeness of the information
contained in these materials and no investment
decision should be made in reliance thereon.
3
Elementis plc
Geoff Gaywood, Chief Executive
4
Elementis today
5
Strategy
Business strategies
Fix the obvious
Growth
Acquisitions
6
Strategic objectives

• Manage short term performance
• Secure sector leadership in key markets
• Capture inter-business synergies to achieve top
  quartile excellence in all operations and
  processes
• Expand technology scope to drive growth

Transform Elementis into a leading global
specialty chemicals company through careful
management of resources and capabilities, a
growth culture, a step change in financial
performance and selective acquisitions
7
Progress against strategic objectives

• Manage short term performance
• Profitability sustained despite poor general
  economic environment
• Secure sector leadership in key markets
• Market share gains
• Capture inter-business synergies to achieve top
  quartile excellence in all operations and
  processes
• ERP programme on schedule
• Expand technology scope to drive growth
• Increased RD spend and innovation strategy

8
Half year highlights

• 8 per cent US dollar sales increase
• Market share gains in difficult operating
  environment
• Oxychem integration yielding additional benefits
• Increased resources and Innovation Board driving
  growth in Specialties
• Strong sales growth in Specialty Rubber

9
Specialties and Pigments
Sales
m
119.7
108.1
105.3
H1 2002
H1 2003
H2 2002
10
Specialties and Pigments
Operating profit
m
10.2
9.7
8.5
H1 2002
H1 2003
H2 2002
before goodwill amortisation and exceptionals
11
Business overview - Specialties

• Sales up 4 per cent in US dollars, but down7 per
  cent in sterling
• Good progress in all market sectors, and in
  Europe and Asia/Pacific
• Growth suppressed by weak US coatings demand
• Innovation resources in place
• Variable cost under pressure from US gas and raw
  materials prices

12
Business overview - Pigments

• Sales on continuing businesses up 4 per cent in
  dollars, but down 7 per cent in sterling
• Global growth in Coatings and Construction
  sectors
• Higher sales in Europe and Asia offset poor
  demand in North America
• China production at record levels
• Iron oxide plant under construction

13
Chromium
Sales
m
62.4
59.5
49.5
H1 2002
H1 2003
H2 2002
before elimination of inter-group sales Note
OxyChem sales consolidated from December 2002
14
Chromium
Operating profit
m
5.2
4.8
H2 2002
H1 2002
H1 2003
(1.5)
restated
15
Business overview - Chromium

• Sales increased by 17 per cent in US dollars and
• 5 per cent in sterling
• Global volumes have declined
• Market price erosion and poor demand in aerospace
  and steel industries
• Operating profit impacted by 0.4 million
• Cost base affected 1.2 million by higher energy
  prices
• Mitigated by transfer of production to Castle
  Hayne

16
OxyChem acquisition update

• Acquisition objectives
• Capacity rationalisation of US production - in
  wake of CCA demise
• Decisive reduction of global manufacturing cost
  base
• Achievements and Benefits
• Single NA chromium chemicals producer
• Around 50 million incremental annualised sales
  
• Cost savings objectives exceeded
• No loss of personnel, customer retention almost
  complete
• Exposure to gas price volatility
• Savings generated in first half 2003 reached 6.6
  million
• Expected to exceed 15 million annualised of
  which more than half to be achieved in 2003

17
Specialty Rubber
Sales
m
21.2
19.7
18.1
H1 2002
H1 2003
H2 2002
18
Specialty Rubber
Operating profit
m
H1 2002
H2 2002
H1 2003
0.0
(0.9)
(1.1)
before exceptionals
19
Business overview - Specialty Rubber

• Sales rose by 20 per cent in US dollars and8 per
  cent in sterling
• Business achieved breakeven
• Sales improved in all geographic areas with the
  exception of South Africa and Asia
• Malaysian plant performing well

20
Brian Taylorson
Finance Director
21
Sales and operating profit
Constant currency 188.7 182.2 4 4
Operating profit Reported 14.5 14.5
-
22
Effect of currency on sales and operating profit
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Financial highlights

• 2003 2002
• m m

Operating profit Specialties and
Pigments 9.7 10.2 Chromium 4.8 5.2 Specialty
Rubber - (0.9) Total 14.5 14.5 Profit before
tax 11.4 13.3 Earnings per share Pre goodwill
and exceptionals 2.0p 2.4p Basic 1.0p 1.0p
before goodwill amortisation exceptionals
24
Exceptionals
1st half 2003 m
(0.9)
Non-operating - Property disposals
0.8 Total (0.1)
25
Net interest expense
2003 2002 Income/(expense) m m
Interest on net borrowings (1.0) (1.0)
FRS17 pension charge (2.0) (0.2)
Other (0.1) -
26
Tax charge
1st half 1st half 2003 2002

• On profit before goodwill amortisation
• and exceptionals (2.9) 25 (2.6) 20
• Credit in respect of goodwill amortisation 2.3 36
  2.5 36
• Tax on exceptionals (0.2)
• Total tax charge (0.8) (0.1)

Cash tax rate
4 8
27
Tax rate

• Effective rate on profit before goodwill
  amortisation and exceptionals
• Dependent on mix of US profits and UK profits
• US profits taxed on average at 39
• UK profits taxed at 10 - due to surplus ACT
• More volatile due to FRS 19
• Cash tax rate to remain low

28
Operating cashflow
m
EBITDA 22.2 million
29
Working capital movements
30 June 31 Dec First half
cashflow 2003 2002 2003 2002 Days Days m m
Trade debtors 59 54 (13.9) (9.2) Trade
creditors 50 57 (9.4)
(1.0) Inventory 95 92 (1.7) (1.1)
Total Cash Outflow (25.0) (11.3)
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Net cashflow
m
Increase in debt
20.8
31
Pension summary
m
70
63.8
63.6


58.0
60

50
40
30
20
10
0
Dec 2002
June 2003
June 2002
32
Pension summary
m
4.0
2.9
2.9
3.0

2.0
1.0
0
2003 2002
Charge to operating profit
33
Redeemable B shares
Amount per share Announced Issued (pence)
1.1 Interims 2003 Nov 2003

• 1.1 Interims 2002 Nov 2002
• 1.1 Prelims 2002 May 2003

34
Balance sheets
30 June 31 Dec 30 June 2003 2002 2002
m m m
Fixed assets 341.4 353.4 390.4 Working capital
81.1 59.4 79.0 Provisions/other
(30.3) (34.6) (34.1) Net pension liability
(63.8) (63.6) (58.0) Net borrowings
(58.2) (37.4) (37.1) Minority interests
(1.9) (1.9) (1.9)
Shareholders funds 268.3 275.3 338.3
Gearing 17.8 12.0 9.9
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Summary and Outlook

• Strong market positions in all businesses
• Improving market position
• Aggressive strategies in place
• Potential for further top-line growth
• BUT global economic prospects still uncertain
• Potential for further cost base improvements

Transform Elementis into a leading global
specialty chemicals company through careful
management of resources and capabilities, a
growth culture, a step change in financial
performance and selective acquisitions
36
Interim Results
Six months to 30 June 2003
Tuesday 29 July 2003