Specialty Rubber is an international manufacturer of high quality wet abrasion resistant rubber products. These products, marketed under the Linatex brand name, protect plant and equipment from the wear and tear generated in high abrasion operating environments, such as those to be found in the mining industry. Specialty Rubber also produces a range of equipment for use in these markets.

Business review for 2003
Significant progress was made in 2003 with sales increasing by 13 per cent to £42.7 million, despite low growth in the global mining sector, a primary market for Specialty Rubber. The decline in the value of the US dollar negatively impacted the mining markets in Australia and South Africa in particular.

The sand and gravel market also remained depressed throughout 2003, primarily due to a lack of growth in the European construction sector. In the vehicle market, global demand remained robust.

In 2003 Specialty Rubber achieved an operating level break even before exceptionals, versus a loss for 2002 of £2.0 million. The new plant in Malaysia has delivered improved operating efficiences.

Specialty Rubber sales were above 2002 levels in every geographic region with particular progress being made in Europe, Australia and the Americas. Sales growth was secured in cured rubber sheet, a primary product, and especially strong growth was seen in three additional product categories: moulded products, hoses and capital equipment. We did not however see strong growth in our operating markets during 2003. Mining remains the primary market for the exceptional antiabrasion qualities of Linatex rubber.

During 2003, additional investment was made in expanding the moulded products capacity in order to meet the strong demand. Continued robust growth in this area is anticipated as moulded products made from Linatex rubber have significant benefits, especially in equipment protection. Following the acquisition of the Dunlop Hose business in 2002, there has been strong sales growth in this product range, especially in Australia. Capital equipment sales have also increased following a renewed commitment to this product category and focused sales and marketing efforts targeting the world's major mine sites.

Throughout 2003 there was a continued transfer of production from higher cost areas of the world to the new plant in Malaysia. Specialty Rubber is pursuing rapid sales growth in order to optimise utilisation of these production capacities. In support of this strategy, special programmes are underway to improve quality and supply chain processes. These are expected to remain key areas of focus during 2004.

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