Interim Results

1
Interim Results
Six months ended 30th June 2006
Tuesday 1st August 2006
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
Interim ResultsKey objectives

• Increase base earnings level
• Emphasise growth in free cash flow
• Finance growth internally
• Provide funds for increased distributions to
  shareholders and employees
• Increase quality and predictability of earnings
• Chrome restructuring
• Other measures to reduce volatility
• Focus on Specialty business
• Longer term growth potential
• Superior margins and return on capital

4
Interim Results
2005
Continuing Operations (m)
2006
Sales 210.9 199.6 6 Operating
profit 18.1 7.4 145 Profit before tax 14.4
3.9 269 EPS before exceptional items 3.2p
0.8p 300 EPS reported 3.2p (0.6p)
Before exceptional items
5
Interim ResultsExceptional Items Announced
March 2006
Specialties Restructuring
millions
Total
US Pension

• Specialty Products 0.3 (1.4) (1.1)
• Surfactants - (0.3) (0.3)
• Pigments 1.0 - 1.0
• Chromium 0.4 - 0.4
• Total 1.7 (1.7) -
• Gain/(charge)

6
Interim Results
2005
2006
Continuing Operations (m)
Sales 210.9 199.6 Cost of goods sold (145.9)
(140.9) Gross Profit 65.0 31
58.7 29 Distribution Costs (15.7) 7 (14.3) 7
S.G A. (31.2) 15 (37.0) 19 Operating
profit 18.1 9 7.4 4 - Net operating
assets 18.2 6.6
Before exceptional items
7
Interim Results
2005
Cash Flow (m)
2006
Profit before tax 14.4 4.6 Net finance costs 3.7
3.5 Depreciation 7.3 8.8 Ebitda 25.4 16.9 Capita
l expenditure (5.0) (9.0) Pensions (1.6) (1.8) Oth
er (4.1) (4.0) Operating cash flow (excl.
WC) 14.7 2.1 Restructuring (8.1) - Net cash flow
(excl. WC) 6.6 2.1
Before exceptional items
8
Restructuring Costs
Cash Spent
PL Charge
2005
2005
H1 06
H2 06
2006
Total
2007
Restructuring - Cash (21.2) (1.7) (22.9) (9.9
) (8.1) (3.5) (1.9) - Non Cash (23.3) 1.7 (21
.6) (44.5) - (44.5) Disposals (3.2)
- (3.2) Tax (3.1)
- (3.1) Total exceptionals (50.8)
- (50.8)
9
2006 Interim Results
Central Costs
Business Line summary (m)
Specialties
Surfactants
Chromium
Pigments
Total
Sales Cost of goods sold Gross
Profit Distribution Costs S.G. A. Operating
profit
76.8 (45.5) 31.3 (5.8) (13.7) 11.8
50.9 (39.0) 11.9 (2.1) (6.8) 3.0
24.7 (20.8) 3.9 (1.5) (2.0) 0.4
210.9 (145.9) 65.0 (15.7) (31.2) 18.1
61.9 (44.0) 17.9 (6.3) (5.6) 6.0
(3.4) 3.4 - - (3.1) (3.1)
Operating profit sales Operating profit Net
operating assets
6 12
9 18
15 33
10 17
2 1
10
Interim Results
2005
2006
2004
3.1 4.8 4.9 1.5 2.4 3.2
Central Costs(m) of sales

• Head office functions downsized
• Operational activities absorbed by businesses

11
Interim ResultsChromium
2006
2005
millions
Sales - UK 27.0 30.5 -
US 34.9 31.5 Operating Profit - UK 0.4
(1.5) - US 5.6 4.4

• Break even level of sales reduced by 30
• UK returned to profit
• Higher pricing offsets lower volume

12
Interim ResultsPigments
2006
2005
millions
Sales 50.9 46.7 Operating Profit 3.0 1.1

• Higher sales due to
• Favourable coatings market
• Market share gains in US and Asia construction
  markets
• China plant cost reductions as anticipated
• Reduced overhead from consolidation of admin
  functions
• Further benefits from full year of new plant in
  2007

13
Interim ResultsSurfactants
2006
2005
millions
Sales 24.7 24.8 Operating Profit 0.4 0.7

• Continued competitive pressure
• Shares facility with certain Specialty Products
• Optimizing product mix
• Continuing to review strategy

14
Interim ResultsSpecialty Products
2006
2005
millions
Sales 76.8 69.5 Operating Profit 11.8 7.5

• Sales growth
• Market conditions in coatings and oilfield
• Market share gains
• Sales efforts
• Operational improvements
• Industry consolidation
• Raw material cost pressures in H1 2006
• Price increases effective in H2.

15
Specialty ProductsComparative performance
ElementisSpecialty Products H1 2006 FY2005
Croda PLC FY 2005
Rohm and Haas FY 2005
S.GA sales 18 22 13 16 Operating profit
sales 15 12 17 14 Operating profit
net 33 25 28 25operating assets
16
Specialty ProductsNew product development

• Rheological Additives
• Liquid organic thickeners - test marketing
  commenced May
• Low solvent Rheolate - US market introduction
  July
• Compounded additives and dispersions
• Colorant stability additive - patent filed and
  test marketing commenced in June
• Nanolayers in plastics
• One new patent filed, two more in preparation
• Materials for use in PVC available for customer
  testing now
• Materials for use in polyethylene/polypropylene
  scheduled for September
• Oilfield and other projects continuing

17
Interim ResultsNet Debt
(m)
2006
2005
Opening net debt (99.4) (90.2) Net cash flow
(excl WC) 6.6 2.1 Working capital (16.5) (9.0) Div
idend/B share (4.8) (4.6) Reclassification of B
shares - (2.2) Disposals - 7.8 Currency 4.4 (5.0)
Closing net debt (109.7) (101.1)
New 150m 5 year bank facility signed in July
18
Interim ResultsTax charge
2006 Rate
2005 Rate
0.2 1.3 0.1 2.6
(m)
On profit before exceptional items

• Low rate due to US goodwill amortisation
  (23mm pa)
• Current level of earnings will accelerate use of
  losses
• Rate 5-10 for 2007
• Available NOLs
• US 140 million
• UK 58 million

19
Interim ResultsDividend
2006
2005
1.2p 1.1p 9
Issue of redeemable B shares

• 9 increase reflects progress made so far
• Free cash flow improving but still negative in
  H1 2006 due to seasonality and restructuring
• 2007 free cash flow expected to be
  significantly positive

20
Outlook

• Market conditions in H2 expected to be similar to
  H1
• Pricing actions, particularly in Specialty
  Products
• Further benefits from cost reduction programme
• Target for 2006 11.1 million
• 6.8 million already achieved
• Anticipate further benefits from actions already
  taken of 5.3 million (1.2p per share) in 2007
• Free cash flow will benefit from lower cash
  restructuring payments
• H1 2007 versus H1 2006 payments reduced by 6.2
  million
• 2007 versus 2006 reduced by 9.7 million

21
Summary

• Operating performance improved
• Dividend increased
• Free cash flow improves next year
• New Bank facility in place
• Senior management transition