Preliminary Results

1
Preliminary Results

• 27 February 2003

2
Geoff Gaywood

• Chief Executive

3
Financial highlights
before goodwill amortisation exceptionals
4
Key achievements in 2002

• Performance discipline established
• Growth strategy in place
• step change improvements in financial performance
  underway
• Systematic cost control
• Addressed structural over capacity in chromium
• improved cost position
• Increasing footprint in China
• Non-core businesses rationalised

5
Chromium
Down
14
Sales
m
126.9
109.0
2001
2002
before elimination of inter-group sales
6
Chromium
Up
42
Operating profit
m
3.7
2.6
2001
2002
before exceptionals
7
Chromium

• Global demand flat in H1 but down in H2
• down-turn in demand in turbines and refractories
• Over supply pressured prices
• pricing down 10, H2 most affected
• Global market share increased, mix and margin
  improved
• plant closures reduce global capacity by around
  13
• Fixed and variable costs reduced
• energy 4.6 million, Six Sigma 2.0 million,
  operating efficiencies 3.5 million
• Chromic acid demand for CCA held up
• EPA final ruling still awaited

8
Chromium

• OxyChem acquisition made in response to EPA
  action on CCA
• Castle Hayne becomes Elementis primary US
  manufacturing facility
• first class operation
• Corpus Christi kiln mothballed and acid plant
  closed
• oxide, hydrate remain
• around 60 jobs taken out
• Expected annualised cost savings increased to at
  least 13 million, starting 2003
• at least half expected in 2003

9
Pigments Specialties
Down
1
Sales
m
228.0
225.0
2001
2002
10
Pigments SpecialtiesOrganic growth
Up
3
Sales
m
225.0
218.7
2001 restated
2002
11
Pigments Specialties
Up
Operating profit
73
m
18.7
10.8
2001
2002
before goodwill amortisation exceptionals
12
Pigments Specialties

• Organic sales growth 3
• masked by currency movements and exit from
  non-core businesses
• Operating profit up significantly
• first class cost management
• Six Sigma 1.0 million, energy 1.6 million and
  operating efficiencies 4.2 million

13
Pigments

• Strong recovery in Pigments business
• increased share in higher margin sectors
• strong growth in Asia Pacific
• record production in China
• Systematic cost control improvements
• Exit from non-core/declining businesses
• disposal of AAC and commodity zinc business
• Strategic investment in China to drive future
  growth

14
Specialties

• Volume growth in rheological additives
• good growth in acqueous coatings, oil field,
  consumer
• exited unprofitable inks business
• Systematic cost control improvements
• Growth drivers in place
• new resource in place in RD, innovation,
  licensing and business development resources
• Innovation Board has been formed
• New expansion into China
• low cost platform for domestic and export
  expansion

15
Specialty Rubber
Down
Sales
18
m
46.0
37.8
2001
2002
16
Specialty Rubber
Operating loss
m
(0.9)
(2.0)
2001
2002
before exceptionals
17
Specialty Rubber

• Global mining industry decline drove down demand
  for Linatex
• North America worst affected
• Acquisition of Australian hose manufacturer made
  positive contribution
• Strategy to streamline business and transfer
  fabrication to Asia progressed
• Final commissioning of continuous press delayed
• Business stabilised and refocused under new
  manager

18
Brian Taylorson

• Finance Director

19
Financial highlights

• 2001
• 2002 restated
• m m change

Operating profit 20.5 12.6 63 on continuing
operations
Operating cash flow 38.0 37.9 -
Earnings per share - pre goodwill and
exceptionals 3.4p 2.9p 17 - basic (7.1)p 1.0p
Net borrowings 37.4 40.0 - 7
before goodwill amortisation exceptionals
20
Financial summary

• 2001 2001
• restated restatement original
• m m m

Operating profit - continuing operations 12.6 (3
.2) 15.8 - discontinued operations 2.4 - 2.4 Inte
rest (0.5) 3.7 (4.2) Profit before
tax 14.5 0.5 14.0 Goodwill amortisation
(14.0) - (14.0) Exceptionals (3.8) (0.1) (3.7)
before goodwill amortisation exceptionals
21
Financial summary

• 2001 2002 restated m m

Operating profit - continuing operations 20.5 1
2.6 - discontinued operations - 2.4 Interest
(0.8) (0.5) Profit before tax 19.7 14.5 Good
will amortisation (13.5) (14.0) Exceptionals
(40.4) (3.8)
before goodwill amortisation exceptionals
22
Net interest expense
2002 2001 m m
Income/(expense)
Interest on net borrowings (1.9) (4.2)
Discount accruals on environmental
provisions (1.0) -
FRS17 pension credits 0.1 3.7
Interest received on tax refunds 2.0 -
23
Operating cashflow
m
45
EBITDA 38.8 million
35
25
15
5
-5
-15
2002
2001
24
Net cashflow
25
Net debt
m
Interest cover
60
35
30
50
48.0
45.5
25
40
41.7
40.0
37.4
20
30
15
20
10
10
5
0
0
1998
1999
2000
2001
2002
Borrowing
Int cover
26
Operating exceptionals
m
2002
Pigments - Birtley restructuring (4.5)
27
Exceptional items
Profit/ (charge) Cash flow in/(out) m
2002 2002 2003

• Operating exceptionals (44.7) 0.3 (7.1)
• Property disposals 6.2 9.4 -
• Business disposals (1.9) 3.5 -
• Total (40.4) 13.2 (7.1)

28
Earnings per ordinary share
pence
2001
Original 4.0 FRS 17/19 adjustment 0.1 FRS19
attributed to goodwill amortisation (1.2)
2002
before goodwill and exceptionals
29
Tax rate
Tax Rate m
Full year - 2002 4.9 25 - 2001 1.5 10
on profit before goodwill exceptionals
30
Redeemable B shares
Amount p/share Announced Issued
1.1 Interims 2002 Nov 2002 1.1 Prelims 2002 May
2003 2.2

• 2.1 Interims 2001 Nov 2001
• 1.0 Prelims 2001 May 2002
• 3.1

31
Pension summary
m
450
400
350
300
250
200
150
100
50
0
Dec 2001
Dec 2002
32
Pension summary
m
14
12
10
8
6
4
2
0
2003
2001
2002
33
Balance sheetAt 31 December
2001 2002 restated m m
Fixed assets 353.4 415.0 Working capital
59.4 66.8 Provisions/other (34.6) (35.3) Net
pension liability (63.6) (25.3) Net borrowings
(37.4) (40.0) Minority interests (1.9) (2.7)
Shareholders funds 275.3 378.5
Gearing 12.0 9.6
34
A year of strategic action
35
Priorities

• Activate growth strategy
• resources and capabilities
• growth culture
• step changes in financial performance
• selective acquisitions

• Manage short term performance
• manage trading position
• tight control of costs,
• capex, and inventory

36
Strategy
Business strategies
Fix the obvious
Growth
Acquisitions
37
Growth strategy activated
Chromium strengthen and leverage market
leadership
Pigments build globally competitive cost base
to drive growth
38
Growth strategy activated
Specialties leverage technology, markets and
acquisitions to achieve significant growth
Linatex streamline fabrication, leverage cost,
quality and product innovation to accelerate
performance
39
Foundations for growth

• Enhanced sector leadership
• Six Sigma and ERP will deliver further cost
  savings
• Expanded footprint in Asia Pacific
• Innovation engine start up
• Acquisition and portfolio development
• Elementis people and industry reputation

40
Short-term outlook

• Continuing uncertainty in global economy
• Continuing pressure on chromium pricing
• Further cost base improvements
• Strengthen market positions

41
Medium term goals

• Above market sales growth in all Elementis
  businesses
• Operating profit improvements in all businesses
• Strong operating cash generation
• Further safety improvements targeted

42
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