Orica Continues Its Reshaping and Focus on Strategy

27th August, 1998

Orica Limited announced today it had reached an agreement to sell its Technical Coatings business, including products servicing the automotive, coil, packaging, production coatings and automotive refinish markets in Australia and New Zealand, to PPG Industries for a consideration of $A259 million.

Orica managing director and chief executive officer Mr Philip Weickhardt said: "This divestment is entirely consistent with Orica's strategy of increasingly focusing its portfolio into its chosen four growth platforms."

Mr Weickhardt said that the proceeds from this divestment will be initially used to retire debt but will provide funds for reinvestment in higher growth businesses and contribute to the ongoing growth of the Orica group. The divestment will give rise to an abnormal profit of approximately $A125 million after tax, allowing for separation costs.

"Whilst Technical Coatings has historically been reported as part of the Consumer Products segment, it has always been managed and viewed as a distinct and separate business from Decorative Paints and the Selleys range of products.

"The Technical Coatings business which is being divested is a global business requiring global technology and relationships with global customers. In contrast to the Decorative business, where we have been self sufficient in technology, Orica is largely reliant on licensed technology to support the technical businesses.

"This is a high quality business which fits more logically with a global leader in this area such as PPG. I am absolutely delighted to have achieved this excellent outcome as it will deliver more value to Orica shareholders and will allow our Consumer Products management team to focus on growing and delivering shareholder value from the core businesses of Decorative paints, Woodcare products, Textured and Powder coatings and Selleys products."

This year the businesses being divested are forecast to have total sales of $A165 million and net assets of approximately $A100 million.

Dulux managing director Mr Russell King said: "Dulux, like all of Orica's businesses, has completed a rigorous process of evaluating its strengths and ability to deliver shareholder value.

"As an international technical coatings company and supplier of relevant technologies, PPG is in a position to grow and expand these businesses in the Asian region."

Dulux's decorative, powder coatings, textured coatings and polyester resins businesses were not part of the sale. "We recognise that the decorative, powders and textured coatings businesses, together with Selleys, Polycell and Woodcare, are where our real strengths lie in the Consumer Products portfolio," Mr King said.

These Consumer Products businesses had sales last year of $A550 million, employ about 2240 people and manufacture well known brands such as Dulux, Berger, Levene, Cabot's, Feast Watson, Selleys, Polycell, Rota Cota, British Paints, Intergrain and Walpamur.

Mr King said: "The future for Consumer Products is very bright and our growth opportunities and ability to deliver long term shareholder value are extremely promising in these businesses.

"Recent announcements such as the acquisition of Rota Cota, HB Fuller Powder Coatings in New Zealand, Feast Watson and Intergrain wood care businesses, together with the $16 million upgrade of our decorative manufacturing site at Rocklea in Brisbane, confirm our strong commitment to these businesses."

PPG will acquire all the assets of the technical coatings businesses, including the Clayton site in Melbourne, and approximately 600 employees will transfer to PPG. All other manufacturing sites will remain with Orica.

PPG's general manager of auto refinishes, Mr Douglas Hepper said: "Combining Orica's technical coatings unit with PPG's automotive and industrial coating businesses will assure customers of an expanded, full range of products backed by strong technical and marketing support.

"The acquired business will be the foundation on which we will build a substantial coatings business presence throughout the southern Pacific region."

PPG, based in Pittsburgh USA, is the world's leading producer of automotive and industrial coatings and a major North American producer of architectural coatings. The company is also a leading maker of fibre glass, flat and fabricated glass, and industrial and specialty chemicals. The coating segment contributed 42 per cent to PPG's 1997 sales of $US7.4 billion.

The agreement is due to be finalised by the end of September, subject to FIRB approval.