2001 AGM - Chairmans Address

19th December, 2001

The past year has been an exceptionally poor year for Orica with profit before significant items falling to $62.3 million after tax. After significant items (previously known as abnormal items) Orica made a loss of $192.7 million.

This performance is clearly unacceptable.

In response the Board has undertaken some radical steps to improve performance.

In May, the Board conducted a thorough analysis of our existing businesses and their future potential. We reviewed the company’s strategy and options in the light of this analysis and, in short, reconfirmed that there was a lot of value in each of the four main businesses. In July, the Board determined to stay with all four main businesses, at least for the time being, and seek a dramatic improvement in their performance. That same review led to the decision to write down the carrying value of the explosives and plastics businesses.

Let me be clear about what I am saying here. Some argue that Orica’s current strategy and business mix are too complex for a company of our size. I argue that, given that our businesses are good businesses, surely the priority is firstly to have them operating to their full potential and thereafter to consider any strategic re-alignment.

Let me briefly tell you why I think we have four fundamentally sound businesses.

Orica is the world’s leading explosives company.

We have the leading market share in North America, Latin America, Australia, Asia and Europe – and we have the world’s most advanced detonator technology.

Orica has the leading paint and paint preparation brands in Australia and New Zealand.

We have great brands, icon brands – Dulux, Cabot’s and Selleys are just 3 examples – and we have the leading market position in Australia and New Zealand.

Orica is the leading chemical company in the region.

We manufacture and supply chemical products and specialist services to industrial markets in Australia, New Zealand, Fiji and Papua New Guinea. Orica is the market leader in the Australasian chemical industry.

And finally, Orica has a majority share in the leading agricultural chemicals company in Australia.

Our business in this area is conducted by Incitec, 77% owned by Orica, and Crop Care, a crop protection company jointly owned by Orica and Incitec. Orica’s Incitec is the leading fertilizer producer in Australia.

There is no structural reason why these businesses should not perform well. We know that each one of them can and should do better. They have great technology, great assets and great people.

In early July, Philip Weickhardt stood down as CEO and we embarked on a search for a CEO who would drive the necessary change in company culture and performance. Senior management was told that the priority was to lift financial performance. They had to be tougher on costs; they had to make the balance sheet perform; and they had to deliver appropriate returns on capital already invested.

In early September we secured the services of Malcolm Broomhead as our new CEO.

Malcolm has a proven track record of driving change and performance,and has extensive Australian and international experience in the mining and industrial sectors. He was the managing director and CEO of North Limited until it was taken over by Rio Tinto in October 2000.

The Board has given Malcolm a mandate to move with urgency to transform the culture and the financial performance of the company. As you see from reading our annual report and the media coverage – he ha s begun this process, and will talk more about this in his address. The recent improvement in our share price might be seen as market support for the approach we have taken.

During the year, the Board has undergone some changes of its own, including the appointment of myself as chairman on the retirement of Ben Lochtenberg, who was a member of the board for 8 years and an employee of ICI and then Orica for 45 years. Philip Weickhardt stood down from his position as managing director and CEO in July, leaving the company after a career of 30 years. Geoff Heeley, our longest serving non executive director and chairman of the Board’s Audit Committee, also left the Board. We thank each of them for the service they have given this company and wish them well for the future.

Tony Larkin, our Executive Director Finance, is retiring and this is his last shareholder meeting with Orica. On behalf of the directors I would like to thank him for his dedication and contribution to the Company. As you will have seen, we have secured the services of Jim Hall, Vice President, Group Accounting and Controller of BHP Billiton, as our new CFO and we expect him to take up the role early in the new year.

The Board also welcomed one new non-executive board member. He is Peter Duncan who comes to us following an outstanding career with the Royal Dutch/Shell Group. He brings valuable international, business and technical expertise. Peter is the new chairman of the Audit and Risk Management Committee.

This year the Board broadened the remit of the audit committee to ensure significant attention is paid to risk management issues, and it also created a new committee to focus on corporate governance issues.

The media often discusses CEO and other senior executive remuneration packages. I would like you to know that the Board seeks independent advice on current market practice and rates of remuneration prior to making such appointments. The directors are satisfied that the total package for Malcolm Broomhead is entirely reasonable for a candidate of his experience and calibre, and is substantially linked to his ability to deliver improved shareholder returns.

On the general issue of executive remuneration it is important to recognise that separation payments made to executives leaving the company were made as a result of contractual obligations. And let me assure you that incentives paid to Orica’s executives are only earned in accordance with objective criteria set at the start of each financial year. The company is currently reviewing all aspects of the contractual and remuneration structure that Orica has with its most senior people, to ensure that what we have is current and is best practice.

Turning now to the future, we believe that the outlook for Orica is a positive one.

Orica’s performance in the coming year will be a lot stronger. The restructuring and the associated cost efficiencies will themselves deliver over $70 million in the 2001/2002 financial year, and will contribute their full impact in the year after that. That is in addition to the underlying profit from the operations and the many other business improvements which are budgeted.

While we are entering a troubled, uncertain time in the world economy, much of our business is domestic and it appears the Australian economy is weathering the storm better than most. As we exit 2001 we are seeing strong volumes across all businesses, including a marked improvement in the building and construction area for trade paints and chemicals and strong demand in the explosives business in Australia and Asia. It is early in the financial year o f course, but so far, so good.

Finally, I would like to express my thanks to all employees across the company and to my colleagues on the board for their continuing effort and contributions during a challenging year. I also thank you, our shareholders, for your patient support and for attending this meeting today.

Now I would like to introduce Malcolm Broomhead, our new CEO and managing director, who will tell you what he is doing to turn around the performance of this company.