Sales increased to £368.2 million in 2003 while
operating profit* increased to £24.5 million.

Overview
Sales increased by 1 per cent to £368.2 million versus the previous year. The increase after adjusting for businesses sold during 2002 was 3 per cent which on a constant currency basis represented an increase of 6 per cent. The major factor in the sales increase was volume gains at Elementis Chromium, largely as a result of the OxyChem acquisition, offset to some extent by price erosion in the same business.

Operating profit before goodwill amortisation and exceptionals improved by 20 per cent over the previous year to £24.5 million and on a constant currency basis was similar to the previous year.

Operating profit after goodwill amortisation and exceptionals was £10.9 million (2002: loss of £37.7 million) for the year.

Sales in the second half of 2003 were 5 per cent higher than the prior year at £179.5 million (2002: £170.4 million). Operating profit before goodwill amortisation and exceptionals was 67 per cent higher in the second half of 2003 at £10.0 million (2002: £6.0 million).

Specialties and Pigments

£million	2003	2002
Sales	209.3	225.0
Adjusted operating profit*	17.6	18.7
Operating profit	3.7	0.7

*before goodwill amortisation and exceptionals

Sales on continuing businesses in constant currency were in line with the previous year, while reported sales in sterling were lower by £15.7 million at £209.3 million. £7.6 million of the decrease was due to currency movements and £7.8 million related to businesses sold during 2002.

Operating profit before goodwill amortisation and exceptionals was £1.1 million lower than the previous year at £17.6 million. Marginally higher volumes and currency benefits, arising largely from a stronger Euro, were more than offset by higher energy and raw material costs, ERP spend and a planned increase in spending on R&D and the Innovation programme.

Elementis Specialties
Sales in Elementis Specialties on a constant currency basis were marginally lower than the previous year as strong growth in the personal care and oilfield sectors was partially offset by weak demand in the US coatings market.

Operating profit before goodwill amortisation and exceptionals was lower than the previous year as a 2 per cent improvement in volume and a positive currency impact were offset by a planned increase in spending on R&D and the Innovation programme, as well as higher raw material and energy costs. Weak demand in the high margin US coatings market was also a factor.

Elementis Pigments
Sales in Elementis Pigments on a constant currency basis increased by 2 per cent on higher volumes after adjusting for businesses sold in 2002. Operating profit improved over the previous year as higher energy costs were more than offset by lower manufacturing costs and positive currency effects.

Elementis Chromium

£million	2003	2002
Sales	121.9	109.0
Adjusted operating profit*	6.8	3.7
Operating profit	7.4	(35.8	)

*before exceptionals

Sales in Elementis Chromium increased by 12 per cent to £121.9 million and on a constant currency basis sales increased by 15 per cent.

The OxyChem business, acquired in December 2002, added around £30.0 million to sales while average pricing versus last year declined by approximately 9 per cent.

Operating profit before exceptionals increased by 84 per cent to £6.8 million versus the previous year. Benefits of the OxyChem acquisition, including integration savings, which exceeded the original expectations in both size and timing, were offset by lower selling prices and higher energy costs.

Financial review continues on the next page >
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