1997 Full Year Results Announcement

28th October, 1997

SALES, OPERATING PROFIT AND DIVIDEND UP


PROFIT

The profit after tax and before abnormal items was $242.2 million, up 10% from the previous corresponding period. The profit after tax and abnormal items for the year to 30 September 1997 was $132.2 million, down 33% on the previous corresponding period.

FINAL DIVIDEND

The Directors have declared a final dividend of 28 cents per share fully franked at 36% an increase of 7.7% over the previous year.

The total dividend for the year is 48 cents per share fully franked at 36%, an increase of 9.1% over last years total dividend of 44 cents per share 66% franked.


ABNORMAL ITEMS

The abnormal charges are made up of a number of items:

Separation Costs

The costs associated with separation from ICI PLC including changing the Company's name have resulted in an abnormal charge of $32.1 million after tax.

Restructuring and Rationalisation

As a result of the recent strategy review of the Chlorine & Derivatives business it has been decided to invest in new Chlorine plants in Sydney and Melbourne replacing the existing plants which have operated for up to 50 years. The cost associated with the closure of the old chlorine plants has resulted in an abnormal charge of $33.9 million after tax.

It has also been decided to cease manufacturing ethylene di chloride (EDC) at Botany during 1998. The cost associated with the closure of the EDC plant has resulted in an abnormal charge of $37.5 million after tax.

More information about the chlorine reinvestment decision and the closure of the EDC plant can be found in the accompanying press release.

The restructuring and rationalisation program, which commenced in 1994 and is continuing across the company, has resulted in an abnormal charge of $6.5 million after tax.


BUSINESS PERFORMANCE

Group sales were $3.6 billion, up 4% from $3.46 billion for the 1996 year. Operating Profit before Tax and Abnorma l Items was $ 402 million, up 15% from $350 million last year.

The better trading result is partly due to an improvement in volumes across most sectors. The benefit was reduced to some extent by falling domestic prices as lower international chemicals, fertilisers and plastics prices were only partly offset by the weakening of the Australian dollar in the second half of the year. The benefits of the cost saving, productivity and rationalisation projects undertaken in recent years also contributed significantly to the improved trading result.

Fertilizers and Crop Care

The Crop Care business continued to grow with favourable seasonal conditions in most key market areas. Fertilizers also benefited from lifting volume with strong demand across the product range. However international urea prices were significantly lower which impacted fertilizer profits. The Brisbane ammonia plant upgrade took place in the second half and is now delivering the planned benefits, however, margins were affected during the shutdown due to the reliance on imported ammonia.

Chemicals

The significantly lower international prices for caustic soda and other chemical products, combined with lower demand made it a very difficult year. The company closed the phthalic anhydride and plasticiser plants at Rhodes in Sydney as part of its program to exit from businesses not capable of providing acceptable returns. It has now, for similar reasons, decided to close the EDC plant at Botany which is old and small in comparison to competitive operations.

Mining Services

The Australian and Asia Pacific Explosives business continued to grow benefiting from the strength of mining in the region. The expanded ammonium nitrate plant at Yarwun performed above expectations, replacing higher cost imported product. The Sodium Cyanide business, which provides chemicals to the gold mining industry, performed well although international prices and demand softened in the second half.

Plastics

Asian polymer prices, having risen in the first half, fell in the second half to finish in some cases lower than at the start of the year. This was offset by the improved cost base delivered by last year's restructuring, the completion of the Ethane pipeline and the Laverton Vinyls expansion. The Company continues to focus on opportunities for industry rationalisation with the Australian Vinyls Corporation joint venture with Geon improving the prospects of the vinyls business. Part of the films business was sold in the second half. Today the Company has announced that (subject to ACCC approval) it will enter into an arrangement with Montell which will see it exit polypropylene manufacture but supply Montell with chemically pure propylene. More details are available in the associated press release.

Consumer Products

Higher sales volume for Dulux compared to last year and a lower cost base due to rationalisation p rojects and competitive raw material costs contributed to a better performance this year. Selling prices have remained soft during the year in an increasingly competitive market. The Selleys business improved its performance assisted by the acquisition of the Rota Cota brushes and roller business during the year.

Advanced Sciences

The Adhesives and Resins businesses continued to be affected by very competitive markets particularly in New Zealand. In Australia, while volumes showed some improvement, pricing was very competitive. The Pharmaceuticals business continued its strong growth. The Advanced Ceramics business was divested during the year.


FINANCIAL POSITION

The buyback of shares undertaken as part of the ICI plc share sale has increased the company's gearing from 17% to 34%, interest cover was maintained at 12 times compared with 14 times in 1996. Capital expenditure during the past year was $255 million, down from $352 million in the previous year due to the completion of a number of large projects in that year.

As stated in the annual accounts, the company has not been contributing to the defined benefits superannuation scheme as fund assets have been well in excess of liabilities. This position is projected to end sometime in the coming year, with a partial contribution necessary later in the year. It is estimated that a full year contribution of between $40 - $50 million before tax will be necessary in the 1998-99 year.

In 1995 the company embarked on several projects to replace aging computer systems with modern fully integrated business systems that will deliver significant operational ef ficiencies. These new systems are millennium (year 2000) compliant and the implementation is expected to be complete by the end of 1998. The total cost of these projects will be close to $100 million over 5 years.


SIGNIFICANT EVENTS

A number of issues were raised during the sale of the fo rmer parent's (ICI PLC) shares in July this year. The status of the items that have progressed since then is summarised below.

Pharmaceuticals Sale

Discussions with Zeneca about the sale of the Pharmaceuticals business are currently underway.

Review of Chlorine Business

The review has been completed and the Board has taken the decision to reinvest in new Chlorine and Caustic Soda manufacturing plants in New South Wales and Victoria, replacing the existing plants that are now very old. An abnormal charge has been taken this year to cover the closure costs of existing plants. The decision was made after intensive analysis of the current and future caustic and chlorine markets in Australia. The reinvestment will strengthen the company's position in this important sector of the market.

Name Change and Corporate Identity

The selection of the new name for the company and the design of a new corporate identity is well advanced for launching early in 1998 .


OUTLOOK

Now the company is independent from the influence of a major shareholder, it is taking the opportunity to review its business strategy from both a territorial and business portfolio perspective. The review is being undertaken and is expected to be completed at the end of the calendar year.

With regard to future earnings, the company remains largely dependent on the level of activity in the Australian economy particularly the housing and construction sector, agriculture and mining and on the strength of international plastic, fertilizer and chemical prices. The company will continue its strategy of creating value for shareholders by growing the profitable businesses in Australia and developing opportunities internationally. A strong focus is also being maintained on improving world competitiveness of the business portfolio, with projects completed last year now starting to deliver benefits. The company remains committed to industry rationalisation and improving the return on underperforming assets.


CALENDAR

ATTACHMENT 1

ICI AUSTRALIA LIMITED

Summary of Consolidated Results for twelve months to 30 September 1997