2002 Sales £million		2002 Operating profit* £million		2001 Sales £million		2001 Operating profit* restated £million
Continuing operations
Chromium	59.5		5.2		68.2		3.4
Pigments & Specialties	119.7		10.2		119.7		9.7
Specialty Rubber	19.7		(0.9	)	25.3		0.7
Inter-group	(4.4	)	-		(3.8	)	-
	194.5		14.5		209.4		13.8
*before goodwill amortisation and exceptionals

Financial results
With effect from the current financial year, Elementis has adopted Financial Reporting Standards FRS17 'Retirement Benefits' and FRS19 'Deferred Tax' and the results of previous periods have been restated accordingly. There has been no impact on the Group's underlying performance.

Sales on continuing operations decreased in sterling terms by 7 per cent on the first half of 2001 to £194.5 million, reflecting the lower economic activity and the weakening of the US dollar. On a constant currency basis, sales declined by 6 per cent.

Operating profit before goodwill amortisation and exceptionals on continuing operations was £14.5 million, compared to £13.8 million (restated) in the first half, and a loss of £1.3 million (restated) in the second half, of 2001. Lower energy costs favourably impacted operating profit by £3.3 million versus the first half of 2001 on a comparable basis. Other cost initiatives, including Six Sigma and people reductions, also had a favourable impact on operating profit. Operating profit before goodwill amortisation and exceptionals for the first half of 2001 was impacted by a restructuring charge of £2.3 million at Corpus Christi, Texas, US.Currency effects were minimal.

Profit before goodwill amortisation, exceptionals and tax was £13.3 million compared to £15.1 million (restated) in the first half of 2001 and a loss of £0.6 million (restated) in the second half. Basic earnings per share before goodwill amortisation and exceptionals were 2.4 pence (2001: 2.9 pence restated).

Chromium
Elementis Chromium is the world's largest producer of chromium chemicals.

Elementis Chromium recovered sharply from the decline in the second half of 2001, improving sales mix, reducing costs and generating strong cashflow.

Global demand for chromium chemicals is estimated by Elementis to be about the same as in the first half of 2001, with the overriding market characteristic being one of intense competition.

Operating profit before exceptionals was £5.2 million, compared to £3.4 million (restated) in the first half of 2001, on sales down 13 per cent to £59.5 million. On a constant currency basis, sales decreased by approximately 12 per cent.

Sales volumes were down by per cent, largely as a result of manufacturing problems in the UK in June, which have now been resolved; otherwise modest volume growth in most downstream products was offset by lower dichromate sales. Increased sales volumes to Europe and Asia Pacific were offset by lower sales volumes to North America and the rest of the world.

Lower energy costs favourably impacted operating profit by 2.6 million versus the first half of 2001. Operating profit before exceptionals in the first half of 2001 was impacted by a one-off cost of 2.3 million related to restructuring at Corpus Christi, Texas, US. The cost benefits of this, together with 1.2 million lower raw material costs and benefits from Six Sigma projects, were also a significant factor in controlling costs in the first half of 2002. The project to link the Corpus Christi site to a steam and electricity co-generation plant being constructed at an adjacent oil refinery, will be fully on-stream in August, further reducing energy costs.

In May, Elementis Chromium was honoured with the Queen's Award for Enterprise in the Innovation category for the development of CA21™.

On 12 February 2002, the US Environmental Protection Agency EPA) announced restrictions, from 2004, on the use of chromated copper arsenate (CCA) as a wood preservative in the US, affecting CCA treated timber for consumer use. Elementis Chromium supplies chromic acid which is used in the manufacture of CCA and acts primarily as a binding agent. As previously indicated, Elementis estimates that as a result of the EPA's decision, the global and US demand for chromium chemicals would reduce by around 5 and 30 per cent respectively.

Elementis Chromium's sales for industrial applications of CCA, such as utility poles, rail sleepers and marine pilings are relatively strong and are not affected by the EPA ruling. Nevertheless, its global sales of chromium chemicals could be adversely affected by around 15 per cent by 2004. Elementis Chromium did not experience any adverse impact on sales in the first half of 2002 from this EPA ruling and does not expect its sales in 2002 as whole to be materially affected. Following the public consultation period, the EPA is now considering its final position.

Pigments & Specialties
Elementis Pigments is a world leading producer of synthetic iron oxide pigments.

Elementis Specialties is a world leading producer of rheological additives.

Operating profit before goodwill amortisation was £10.2 million compared to £9.7 million (restated) in the first half of 2001, on flat sales of £119.7 million. On a constant currency basis sales increased by approximately one per cent. Elementis Pigments' performance improved significantly compared to the prior six months as a result of increases in volume, effective cost management and high production levels.

In Elementis Pigments sales of iron oxide pigments were higher than the first half of 2001 offset by lower sales of zinc oxide. Sales into coatings and chemicals applications showed some improvement over the first half of 2001, offset by lower sales into the construction market.

Some modest improvement in demand in the North American coatings market was evident in the period, while the global construction market remained highly competitive. Sales of construction grade Ferrispec™ granular product nevertheless continued to show strong growth. Sales volumes improved in both North America and Asia Pacific but declined in Europe. Sales into global markets from the Shenzhen manufacturing facility in China reached record levels and this facility is being further expanded.

Underlying operating profit for Elementis Pigments improved over the same period last year.

The operating loss at the carboxylates and zinc businesses at the Birtley site in Durham, UK, were reduced as a result of improving contribution margins. As announced earlier in the year, a strategic review of the site was launched in February 2002 and will be completed and actioned during the second half of 2002.

In July, an agreement was signed to sell the anhydrous aluminium chloride business in Allentown, US, for £1.7 million. As a result, a provision for loss on sale of £2.1 million has been taken as an exceptional item in the first half of 2002 (including an adjustment related to goodwill previously written off to reserves).

Elementis Specialties' sales and operating profit recovered quickly from the year end downturn, driven by restored volume and improved sales mix.

Sales at Elementis Specialties in the first half of 2002 were flat compared to the prior year. There was no net currency impact. Improved sales for coatings applications, due to modest improvements in demand, were offset by lower sales to the inks market. Sales to the oilfield market grew at a more modest rate than in the first half of 2001 due to reduced drilling activity in North America.