Elementis Chromium is the world's largest producer of chromium chemicals. The primary focus of the business is continuous growth underpinned by operational excellence and a proactive approach to product stewardship.

Business review for 2003
Elementis Chromium's operating profit increased by 84 per cent to £6.8 million in 2003 with sales increasing by 12 per cent to £121.9 million, 15 per cent on a constant currency basis, in the same period. It is estimated that between 2002 and 2003 the total Western market for chromium chemicals fell by 3 per cent in volume terms.

Demand in most market sectors was weak and, in particular, the market for chromic oxide was affected by the continuing slowdown in aerospace, refractories and pigments. In contrast to this general market slowdown, the market for chromium chemicals in China is estimated to have grown by approximately 7 per cent. New business won by Elementis Chromium in the Asia Pacific region doubled in 2003 to over £10.0 million including product supplied by Elementis Chromium to Nippon Chemical, following the phased closure of Nippon Chemical's Japanese chromium dichromate facility, announced in October 2003.

The US Environmental Protection Agency (EPA), following concerns regarding the potential impact of the arsenic content on end users, withdrew registration for Chromated Copper Arsenate (CCA) for residential use from the market with effect from 1 January 2004. With proposed replacements meeting customer resistance on performance and cost grounds, it remains unclear which products will now replace CCA. A decision by the EPA to allow registration of ACC, an arsenic-free chromium based alternative, which is currently used in the German market, is still pending.

Downward pressure on pricing was evident throughout 2003 and capacity rationalisation continued in the chromium producing sector, with three plants in China and Japan, which together represent 7 per cent of global capacity, closing in the last four months. Prices for a wide range of raw materials continued to increase throughout 2003. A phased price increase of 10-15 per cent, effective from January 2004, was announced by Elementis Chromium to customers in late 2003.

Integration of the existing Elementis Chromium US operations with those of the acquired OxyChem chemicals business proceeded throughout 2003. Integration synergies have exceeded original expectations in both size and timing. Extension of the Elementis Six Sigma initiative to the acquired operation contributed to annualised savings in 2003 of approximately £1.4 million for the Chromium business. Customer retention during the period has been close to 100 per cent.

In December 2003 Elementis Chromium launched a new chromic acid product known as CA Ultra™. The product is complementary to the existing Elementis CA21 product range and should provide opportunities for growth.

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