1999 AGM - CEO's Address

21st December, 1999

Good morning, ladies and gentlemen.

Orica has a vision of "Winning Against the World's Best". It is clearly a challenging vision but, we believe, it is achievable. We are using it not only to help drive our strategy - but to continually remind us that we must be world competitive to succeed in the rapidly globalising markets in which we operate.

Our strategy, as the chairman has already said, is to build the company around four core business areas. In each of these areas we believe we have real strengths to exploit opportunities to make this a world class company. What we have done over the past two years is to make changes across all Orica's businesses so we can realise these opportunities.

In each business, and across the company, we have pushed hard to deliver cost and efficiency improvements. We have also sought out external profitable growth opportunities.

Let’s look at how our businesses have done this.Mining Services is now our biggest core business since we acquired the International Explosives business in May last year. It is headed by executive director Peter Clinch, who is sitting here today with other board members. Peter is based in America at Denver. The Australian/Asian arm is managed by Julian Segal, who is based in Sydney.

This year:

• We have completely restructured our North American explosives business, relocating our headquarters to Denver, Colorado, close to high growth mining markets.
• We have started construction on a new technical centre in Denver to provide technical service to customers in the Americas. This will complement the research and innovation coming out of our other world class centre in Kurri Kurri, in New South Wales.
• And, once again, we are increasing ammonium nitrate output from our Carseland plant in Alberta, Canada. This is already the world’s biggest and lowest cost industrial grade ammonium nitrate plant.

The improvements to our operations have been substantial. They have enhanced our ability to build our business and exploit opportunities for growth both directly and through relationships with other companies.

Such relationships include:

• A 10 year ammonium nitrate supply agreement with Enaex in Chile to support business growth in Latin America
• A joint venture with our German partners – DNES - for the production of innovative electronic detonators.
• A 49 per cent stake in Indian Explosives Limited which gives us an important base in the rapidly growing Indian explosives market, and
• A joint venture with Nelson Brothers Mining Service which opens doors to rapidly growing coal markets in four north western states of America.
• We have also signed Letters of Intent with the global mining house Rio Tinto to supply explosives products and services to much of its business in North America. Earlier this year we signed a $120 million, three year agreement to supply explosives to Rio Tinto's Eastern Hemisphere business.

In Australia one of our young graduates, Jane Slack-Smith won a Churchill Fellowship to study remediation blasting overseas. Through remediation blasting, former mining and quarry sites are much more efficiently converted into safe reusable land. This is great recognition of Jane's work and important for Orica.

Our Agricultural Chemicals core business is one we conduct through Incitec and Crop Care Australasia. This business is led by Greg Witcombe, who is based in Brisbane.

Improvements we have made in this business include:

• Completion of a $12.5 million upgrade to the Gibson Island distribution centre in Brisbane. This follows upgrades to other distribution centres in Queensland.
• Completion of a $43 million urea granulator at the Gibson Island plant, which will significantly reduce plant emissions and create a more desirable form of product for our customers.
• And completion of a $6 million Granulock plant at Kooragang Island in New South Wales. This plant, which is expected to be up and running in the new year, will expand production capacity and improve quality of this important fertilizer product for grain markets….
• And we have commenced restructuring initiatives to drive productivity and efficiency improvements across support and functional areas.
• And we are intending to rationalise Crop Care’s manufacturing operations next year, with the closure of the Villawood NSW site and relocation of operations to Brendale in Queensland and Welshpool in Western Australia.

Our Crop Care business demonstrated the benefits of their focus on quality when the business delivered a record profit result this year and was one of seven companies recognised for high achievement in business excellence in the Australian Quality Awards.Consumer Products is one core business many shareholders know a lot about – because the products are so visible around us. Brands such as Dulux, Berger, British Paints, Cabot's and Selleys are household names. Consumer Products is led by Russell King, who is based in Melbourne. The business has operations throughout Australia, New Zealand, Fiji and Papua New Guinea. We have also recently established a small Textured Coatings facility in Malaysia.

This year in Consumer Products:

• We started construction on a new state of the art technology centre in Melbourne
• We progressed the upgrade of our decorative paint manufacturing facility in Brisbane and successfully integrated powder coatings businesses acquired from H B Fuller, and the Feast Watson and Intergrain woodcare businesses, into our existing operations.
• We also launched initiatives like the Dulux Training Academy to improve product knowledge of the people who sell our products to customers, and
• We embarked on a program to upgrade our Dulux Trade Centres.

Once again, we won numerous supplier of the year awards from large hardware customers who recognised Orica Consumer Products as their best supplier.

This year our Chemicals business, which is led by Barbara Gibson from Melbourne, has complemented internal improvement initiatives with the pursuit of market opportunities.

These include:

• Continued progress with our $145 million reinvestment in our ChlorAlkali business with our new plant at Laverton due for commissioning next year and another new plant soon to be started at our Botany site in Sydney.
• The signing of a Heads of Agreement with the Water Corporation of Western Australia to use our MIEX resin in a new water treatment plant to assist with treating drinking water, and
• In another development with our novel MIEX resin we also started construction of a pilot plant at our Deer Park site to support the continued commercialisation of this product developed with the CSIRO.

This year one of our scientists, Hung Nguyen, was awarded a CSIRO medal for his contribution in the development of the MIEX resin. This was the first time that the CSIRO had awarded the medal to someone from a commercial company.

Our Plastics business, which resides in the non core part of our portfolio, continues to receive our attention. We were extremely pleased to see our 50:50 polyethylene joint venture with Exxon and Mobil (known then as Kemcor) launched during the year and now renamed Qenos. We look forward to leveraging the benefits from the significant synergies and reduced costs that will come from this joint venture. Building value in this way will optimise the opportunity for Orica shareholders.

For some time now we have made it clear that we did not consider our Moomba to Botany ethane pipeline as a core asset and that we would sell under the right conditions. I am pleased to say that today we have announced the sale of this pipeline to a consortium for approximately $124 million.

It has been a busy year at Orica - a demanding year.

Our businesses have been reshaped, reduced costs and sharpened their focus in an environment in which record low prices for chemicals impacted most of our businesses. Extensive restructuring and streamlining of functional support services being implemented across the whole company will make us a more effective and flexible organisation. Last year I indicated we were targeting cost and efficiency savings of $120 million over a two year period. I am happy to tell you we are well on track to deliver this target, having exited 1999 with benefits exceeding $80 million.

Throughout all of this we have adhered to our long standing corporate values. We remain uncompromising about safety, health and the environment, quality, providing outstanding customer satisfaction, and developing leadership and teamwork in all our people.

We have a safety vision of "No injuries to anyone, ever" and we believe this is achievable. We endeavour to instil in the minds of all our people that nothing is so urgent or important that the time cannot be taken to do it safely. While our safety performance is excellent by Australian standards, we know that internationally the best companies do better still. For the past year we have been operating under a more rigorous reporting system which, we believe, will help us lift our overall health and safety performance.

Some of our businesses have recently won important industry awards for safety.

• Orica Explosives won the 1999 TG Crane/PACIA Health and Safety Innovation Award for the outstanding work done to improve the safety performance of United Pacific Drilling’s operations in Papua New Guinea.
• And Incitec Fertilizers’ Jamie McMaster won the PACIA Environmental Innovation Award for developing the Environment Management System.

As I look back over the past year I see that we have made significant progress with the implementation of our strategy. We believed we had to change, and we have moved rapidly to make that change. Of course, we have not been alone. In the past year we have seen massive restructuring and rationalisation in the chemical industry as well as in other industries, confirming that in today’s world the only constant is change. We will be proactive about looking for opportunities to take advantage of the inevitable industry restructuring that still lies ahead. Part of this restructuring will be driven by the opportunities and threats posed by e-commerce. Orica is active in exploring the best ways to exploit e-commerce opportunities across all our businesses. I would encourage those of you with internet connections to visit our web site – orica.com.au – and follow the links to our various business sites. You should expect to see significant increases in our e-business activity in the future.

The trading environment over the past year has been difficult. Although volumes in most businesses have been strong, many prices that we and our customers have experienced have been at record lows. Provided forecasts of continued world growth materialise, we hope to continue to enjoy good volumes and also see some recovery in margins. However, in the near term, excess capacity and a tough competitive environment still limit the rate at which we can grow profits at this point in the cycle. The need to drive down costs and improve efficiency is still vital. At the same time, we will continue to vigorously pursue profitable growth in each of our core businesses to build for the future.

This year’s results could not have been delivered without an extraordinary effort from our employees. I have only been able to mention some here today. I would like to express my appreciation and sincere thanks to all of them.

Over the long term we have delivered excellent shareholder value, although in the past, as at present, we have experienced uncomfortable periods when our share price has seen some significant reductions from previous highs. I am convinced that with our reshaped portfolio, our strong management team and resourceful workforce, we will deliver the profitable growth that will lead to superior shareholder value creation. Our vision of "Winning Against the World's Best" is not about resting on past successes, but about striving to do better and grow profits whilst delivering superior value to our customers.

Thank you, ladies and gentlemen.