Chairman's Statement

Overview
Sales for the first half of 2005 rose by £46.8 million compared to the same period of last year to £223.6 million, due to the acquisition of Sasol Servo on 30 June 2004 and improved pricing, particularly in chromium chemicals. Soft global demand in the coatings sector and unfavourable currency movements negatively impacted sales by £8.0 million.

Operating profit for the period, before exceptional items,was £8.1 million, an improvement of £2.5 million, as a result of the Servo acquisition and prices moving ahead of raw material and energy cost inflation.

There was a net charge of £7.6 million for exceptional items, which comprised £4.6 million from the sale of the Hardman adhesives business completed in June, offset by charges of £7.1 million for the rationalisation of the East St Louis pigments plant, £4.0 million for the rationalisation of the Servo operations, and a £1.1 million head office restructuring charge.

The newly constructed pigments production facility in TaiCang, China, is now producing a full range of products, and operations at the East St Louis plant will be scaled down during the second half of the year as production is transferred to other manufacturing sites including TaiCang. The Company expects that these moves will result in an improvement in margins for its pigments business in 2006 when they will have been implemented fully.

Dividends and issue of redeemable B shares
The Board has not declared an interim ordinary dividend. Instead it will continue with its programme of issuing and redeeming redeemable B shares. The Board intends to issue further redeemable B shares to ordinary shareholders on the register on 27 October 2005, such that they receive redeemable B shares with a total nominal share value of 1.1 pence for each ordinary share held. The issue will be coupled with an offer to redeem the new shares for cash at their nominal value on 2 November 2005. A further offer will also be made to existing holders of redeemable B shares to redeem these shares for cash at their nominal value on the same date. A circular providing full details of the issue and redemption of redeemable B shares will be posted to all ordinary shareholders on 22 September 2005.

Current trading and outlook
The Board of Elementis, which was reconstituted in June 2005, is reviewing the Company’s strategy and the operations of each of its business units. The Company will provide an update of the plans resulting from this process during the second half. Excluding any changes that may result from the Board’s review, the Company’s current trading performance is in line with its expectations for continued improvement in the second half of the year.

Edward Bramson
Chairman

28 July 2005