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Interim Results - 26 July 2001

Interim Results - 26 July 2001. Process solutions for industry worldwide. Introduction. Unprecedented trading conditions in major markets Strong action taken to reduce cost base Significant improvement in cash generation Secure financial position

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Interim Results - 26 July 2001

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  1. Interim Results - 26 July 2001 Process solutions for industry worldwide

  2. Introduction • Unprecedented trading conditions in major markets • Strong action taken to reduce cost base • Significant improvement in cash generation • Secure financial position • Continued investment in growth engines of the future • Interim dividend maintained

  3. Dennis Millard Group Finance Director Interim Results - 2001

  4. Group - Ongoing Operations vs GrowthReported H1 2000 H1 2001 Organic Sales £1,097m -3% -17% -54% Operating Profit* £54.1m -50% Return on Sales* 4.9% 2000 : 9.6% *(Before goodwill amortisation and exceptional items)

  5. Electronics % of Ongoing - H1 2001 Sales vs GrowthReported H1 2000 H1 2001 45% Organic Sales £497m -20% -27% Speedline -51% Polyclad -21%Alpha -18%

  6. Electronics % of Ongoing - H1 2001 Sales Profit 20% vs GrowthReported H1 2000 H1 2001 45% Organic Sales £497m -20% -27% -81% Operating Profit* £10.9m -82% Return on Sales* 2.2% 2000 : 10.0% *(Before goodwill amortisation and exceptional items)

  7. Ceramics % of Ongoing - H1 2001 Sales 35% vs GrowthReported H12000 H1 2001 Organic Sales £382m +6% -3% Iron & Steel -7%Foundry +9% Glass +6%

  8. Ceramics % of Ongoing - H1 2001 Sales Profit 35% vs GrowthReported H12000 H1 2001 49% Organic Sales £382m +6% -3% -25% -18% Operating Profit* £26.6m Return on Sales* 7.0% 2000 : 9.0% *(Before goodwill amortisation and exceptional items)

  9. Precious Metals % of Ongoing - H1 2001 Sales Profit vs GrowthReported H1 2000 H1 2001 20% Excl ECLAL 31% Sales £219m +49% +1% +2% +19% Operating Profit* £16.6m Return on Sales* 7.6% 2000 : 9.4%

  10. Precious Metals % of Ongoing - H1 2001 Sales Profit vs GrowthReported H1 2000 H1 2001 20% Excl ECLAL 31% Sales £219m +49% +1% +2% +19% Operating Profit* £16.6m 20009.4% 20019.7% Return on Sales* 7.6%

  11. Geographic Analysis: H1 2001 Sales100% Operating Profit 100% ROW Asia-Pacific Continental Europe UK -14%vsH1 2000 USA -80%vsH1 2000

  12. Premier Chemicals (£3m) Disposals 2000 (£4m) Group Operating Profit* £ million H1 2001 Inc/(Dec) vs H1 2000 ONGOING OPERATIONS 54(54)Electronics11 (51)Ceramics26 (6)Precious Metals17 3 TO BE DISPOSED -Moldings4(1) DISCONTINUED (1)(7) GROUP 57(62) Premier Chemicals * (Before goodwill amortisation & exceptional items)

  13. Group Profit Before & After Tax* £ million Inc/(Dec) vs H1 2000 H1 2001 OPERATING PROFIT57 (62) Less : Interest 26 1 PROFIT BEFORE TAX 31 (61) Less : Taxation 915: Minorities 1- PROFIT FOR PERIOD 21(46) -66% vs H1 2000 • Effective Rates • 2001 : 30% • 2000 : 26% * (Before goodwill amortisation & exceptional items)

  14. Earnings and Dividends per Share 2001 2000 EARNINGS PER SHARE Headline* Basic 2.9p 0.3p 9.3p 5.2p 4.5p 4.5p INTERIM DIVIDEND * (Before goodwill amortisation & exceptional items)

  15. Exceptional Items £ million Profit/(Loss) OPERATING - Redundancy costs (7) 8 NON-OPERATING Profit on property disposals Loss on business disposals 13 (5) 1

  16. Operating Cash Flow £ million Inflows/(Outflows)H1 2001 Surplus/(Deficit)vs H1 2000 86 5 (29) 21 (7) 76 (61) 68 6 20 8 41 EBITDA Working Capital Capital Expenditure Asset Disposals Rationalisation/Other OPERATING CASH FLOW

  17. Free Cash Flow £ million Inflows/(Outflows)H1 2001 Surplus/(Deficit)vs H1 2000 OPERATING CASH FLOW Interest - normal - SWAP proceeds 76 (27)26 41 (5)26 (12) 63 (40) 23 Taxation FREE CASH FLOW - before dividend Dividend (2000 Final) FREE CASH FLOW - NET 20 82 (2) 80

  18. Net Cash Flow / Borrowings £ millionH1 2001 FREE CASH FLOW - NET Acquisitions / Disposals / Other 23 14 NET CASH INFLOW FOR PERIOD 37 Exchange rate effect (18) NET DECREASE IN BORROWINGS 19

  19. Funding and Financial Condition 30 June 2001 31 December 2000 BORROWINGS (net) FUNDING RATIOS Interest cover Gross Borrowings: EBITDA Gearing £775m 3.6 times* 3.0 times* 46% £794m 4.8 times 2.6 times 46% * (12 months: July 2000 - June 2001)

  20. Financial Highlights • Group sales & profits fall sharply - Electronics- Ceramics: Iron & Steel- US activities • Significant improvement in cash flow • Interim dividend maintained at 4.5p • Gearing unchanged

  21. Interim Results 2001

  22. Agenda • Markets overview • Managing in a downturn • Investment in high growth engines • Priorities for H2 • Conclusion

  23. Our Customers Merchant Manufacturers OEMs Assembly (EMSI) PCB Fab Assembly PCB Fab Super Merchant

  24. 94 95 96 97 98 99 00 01 US Electronics Goods vs PCBs $ Bookings Growth 3/12 Rate of change 1.5 1.4 1.3 1.2 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 Peak PCB Growth 45%/yr Equipment Peak Equip Growth 22%/yr PCB 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 6/2001

  25. Electronics - Markets Overview • Downturn in US has spread to Europe & Asia • Slowdown in Speedline has spread to other sectors • Demand for Polyclad’s laminates particularly hard-hit • Market share maintained, or better • Performance relative to peer group demonstrates value of total solutions strategy • Industry weakness is cyclical, not structural

  26. Military 8.4% Consumer 10.7% Industrial/ Medical 10.4% Consumer 15% Military 19% Automotive 5.4% Comms. 27% Industrial/ Medical 13% Comms. 26% Automotive 4% Computer 37% Computer 23% $913 bn $247 bn Fundamental Market Attractions Trillion $ 4.0 Asia (Ex. Japan) 48% Japan 10% Europe 14% 21% 17% Americas 28% 22% 40% 0 1980 2020 2000 Source: Prismark

  27. Cookson Electronics Speedline Alpha Fry Polyclad Cookson Electronics

  28. Ceramics - Markets Overview • US steel production down 13% on prior year • US anti-dumping actions • UK steel market remains depressed • Rest of World (circa 50% of sales) more resilient • Evidence of cyclical upturn in demand for glass furnace linings • Growth opportunities emerging in non-steel related sectors

  29. Precious Metals - Markets Overview • Jewellery sector to follow traditional seasonal pattern and performing to expectations • Gold recovering versus platinum in fashion stakes • Reduction in demand in Precision Products sector,from automotive, electronic and telco customer base • Growth opportunities emerging in polymer-based photonic applications

  30. Managing in a Downturn • Decisive actions taken to reduce costs & lower break-even points • Continued emphasis on cash generation • Ability retained to deliver high levels of customer service • Focus on increasing share of customers’ business • Continued investment in growth engines of the future

  31. Group Cost Reduction Initiatives • ‘Total Cost of Ownership’ programme driving down costs on a wide front • Maximum efficiencies being extracted from recent acquisitions (Premier, Enthone, ACHEM, ECLAL) • Integration of Premier manufacturing sites underway;will result in 6 plant closures • Electronics headcount reduced by 1,600 people in H1

  32. Electronics – Further Recent Actions • Mandated unpaid leave for US employees • Polyclad capacity decommissioned in USA and Asia • Facility integration at Polyclad Europe • Major inventory reduction and outsourcing initiatives in Speedline • Global rationalisation of Alpha Fry product lines

  33. Investment in Future Growth Engines • Semiconductor Copper • Semiconductor Packaging • Solar Energy Technology • Strip Casting Technology • Polymer-Based Photonic Applications

  34. Semiconductor Copper Dual Damascene Process Flow Open dielectric Cu barrier by etch Deposition of TaN Barrier Copper Seed Copper Fill CMP Copper Electrochemical Deposition Benefits of copper • Simplified interconnect routing • 30% less power required • 25% - 30% cost reduction • Speed

  35. Semiconductor Copper CopperElectrochemical Deposition • Market for copper interconnect expected to grow >50% CAAGR; long-term viability • Enthone’s process first to be used on shippable product • High levels of copper technology uptake in Asia

  36. Semiconductor Packaging EncapsulantALPHA Under Bump MetallurgySPEEDLINE UnderfillALPHA/SPEEDLINE High Density Organic SubstratePOLYCLAD Solder BallsALPHA Bumping TechnologyENTHONE

  37. Solar Crucible Technology • Vesuvius is the world’s leading supplier • Technologically demanding process - zero failure rate required • Market expected to grow >30% CAAGR in 3-5 years • Major customers include BP, Kawasaki Steel and Sharp Electronics

  38. Solar Plating Chemistry Laser Grooved Buried Grid (LGBG) technology • Narrower conduction tracks and larger surface area for solar absorption • Up to 18% photovoltaic energy conversion efficiency • Enthone partnering with BP Solar Anti-Reflection Surface Layer Silicon Nitride n+ P BuriedContact n++ Aluminium Back Contact

  39. Polymer-Based Photonic Applications • Low cost polymer-based alternatives to glass • Focused on cost reducing assembly and packaging niche • Low cost assembly:key to providing economies necessary for broad commercialisation of optics applications

  40. Priorities for H2 2001 • Continued prompt action on cost base across the Company • Intense focus on cash and revenue generation • Completion of Premier manufacturing integration programme • Leverage market and technology leadership positions • Continued policy of open communication with stakeholders

  41. Conclusion • Focused, responsive management teams • Market and technology leadership positions • Integrated, global product offerings • Sound financial and competitive position • Longer-term market fundamentals remain attractive “Strong, global market presence, competitiveness and technology will ensure long term success and deliver value to shareholders”

  42. Interim Results 2001

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