Sales volumes rose during 2004 in our Specialties, Pigments and Specialty Rubber businesses and were flat at Elementis Chromium, where increased sales to China compensated in volume terms for the loss of the residential market for CCAs in the US. Prices have risen in all businesses. However these increases were not sufficient to offset the negative impact on Group profitability of rapidly escalating energy, raw material and freight costs, adverse currency movements and extreme weather conditions in Northern and Central America.

Although very challenging, 2004 saw the successful implementation of some of the major transformational steps planned as part of the Elementis strategy. The chromium chemicals market has turned and by January 2005 realised prices were 25 per cent ahead of the low point of late 2003. Elementis Specialties completed a key acquisition and growth accelerated. Pigments executed an investment in China which will transform its cost base. Profitability was restored in Specialty Rubber and our company-wide ERP implementation progressed successfully.

At Elementis Specialties our strategy is to achieve sustainable high growth by expanding our market and technology platforms. Sales at Specialties in 2004 have increased by approximately 37 per cent in US Dollars, with the acquisition of Sasol Servo, geographical expansion and new product introductions contributing significantly. Potential synergies from the Sasol Servo acquisition are currently expected to exceed our original estimates by approximately 40 per cent.

The Elementis Pigments strategy is to secure leadership in premium markets while transforming our cost base in Asia Pacific to drive growth and profitability. Our new worldscale Pigments plant in China is now complete and commercial operations will begin at the end of February 2005.

Following the streamlining of global operations at Elementis Specialty Rubber, our strategy is to leverage our well-invested, low cost manufacturing cost base, local market presence in key mining areas, product performance advantages and brand recognition to drive volume and continue to improve profitability.

Specialty Rubber has maintained high sales growth and delivered a corresponding improvement in margins. The performance potential of Specialty Rubber has now been demonstrated and Elementis has therefore begun a process of considering the strategic options for this business.

At Elementis Chromium, our strategy is to strengthen and leverage our market leadership to achieve superior returns on capital over the cycle. Elementis Chromium successfully led a sustained recovery in global prices during 2004, after a four year period of decline. Margin recovery was not however achieved during the year, due to intense variable cost pressures and adverse currency trends, which led to a drop in overall Group profitability. Sales at Elementis Chromium decreased by 9 per cent to £110.5 million. The operating loss before exceptionals for the year was £3.8 million compared to a profit of £6.8 million in 2003.

Greg McClatchy, who has led the turn around in performance at Specialty Rubber since his appointment as Managing Director in 2002, was appointed as Managing Director, Elementis Chromium, in February 2005. Neil MacLeod, previously Finance Director, Specialty Rubber, has taken over as acting Managing Director, Specialty Rubber.

Elementis Chromium announced the first in a series of global price increases at the end of 2003. Early resulting volume losses were recovered and the prices of all chromium chemicals have risen world wide since that time. During the course of 2004, operations at our plant at Castle Hayne, US, were suspended on two occasions in anticipation of hurricanes, which resulted in lost production. In January 2005, aggregated selling prices for Elementis Chromium's products reached the highest level since December 2001 and were more than 25 per cent higher than the historic low levels experienced in November 2003.

The trading outlook for Elementis Chromium is encouraging. Fixed costs have been further lowered as a result of a manufacturing rationalisation at the Eaglescliffe, UK, plant. Global industry capacity utilisation is now estimated to be in excess of 90 per cent and it is anticipated this figure will continue to rise throughout 2005 as demand increases and further industry capacity rationalisation occurs. In February 2005, Elementis Chromium announced price increases of up to 20 per cent effective from 1 April 2005.We anticipate that selling prices for chromium chemicals will continue to increase as the year progresses.