This trading performance update is published ahead of the announcement of the group’s interim results and dividend for the six months to 30 September 2000, due on 30 November.

FIRST HALF PERFORMANCE EXPECTATIONS

• Turnover to grow approximately 8%, driven by acquisitions and further strong European demand, with return on sales around 15% and EBITDA margin above 20%.
  
• Underlying profit before tax similar to last year’s second half but down on the strong corresponding period after an adverse £4 million foreign exchange translation impact.
  
• European operating profit to improve over 5%, with strong volume growth, better selling prices and the delivery of further cost efficiencies more than offsetting significant commodity cost inflation.
  
• With lower sales volumes in North America, regional profitability will, as anticipated, be significantly below last year’s exceptional level.

• Group plasterboard volume will increase almost 7%, or 2% before the contribution from the recent acquisition of Celotex. Total plaster volume is expected to be 3% higher.
  
• European demand continues to grow strongly, with plasterboard volumes up 7%. North and Western Europe will advance 9%, due mainly to the strength of the British and Irish markets, while Southern Europe will increase by 8%. Within Central Europe, east German volumes will be disappointing but overall regional volume will grow by some 2.5%.
  
• Following an outstandingly good year's trading North American revenues will, as expected, be lower on a like-for-like basis, reflecting the cessation of an exceptional level of exports from Europe and Canada into the US. Underlying volumes will be 30% lower, or 12% lower after including two months' trading from Celotex.
  
• Plasterboard volumes in other continents now represent nearly 9% of group sales, with good growth reflecting recent investments in Asia and rising demand in South Africa and South America.
  
• Commodity cost pressures for energy, recycled paper, steel accessories and insulation materials have all increased sharply, up £30 million on the corresponding period and double the amount absorbed in the second half of last year.
  
• Selling price increases are being implemented across all key markets and product groups except in North America and will benefit the second half. Prices have, so far, been stable in Canada but are declining rapidly in the US.
  
• Groupwide operating efficiencies will deliver further savings equivalent to approximately 1.5% of group turnover.
  
• Integration of complementary and core acquisitions is moving ahead quickly and both Rigips Dammsysteme (a leading supplier of expanded polystyrene insulation products) and Celotex (BPB's new plasterboard and ceiling tiles business) will contribute to operating profit. Commissioning of the new low-cost Kentucky plasterboard plant is proceeding to plan.
  
• Sterling’s strength against the Euro will result in a cost of some £4 million on the translation of overseas earnings.
  
• The recent sale of UK and Dutch solid case paperboard businesses, the closure of Fiberite Packaging in the UK and the sale of the Dutch recycling operations will result in around £10 million of exceptional costs (corresponding period £0.3 million gain).

• BPB’s European business continues to strengthen its underlying operating performance, generating over 85% of first half EBITDA from further good volume growth, continuing cost efficiencies, and better selling prices coming through.
  
• Inflationary pressures on key inputs will continue into the second half.
  
• Interest costs will be higher, reflecting post-acquisition debt financing, resulting in first and second half charges estimated at £11 million and £15 million respectively.
  
• The economic fundamentals of the US construction industry remain strong and actions to improve the cost efficiency of the group’s enlarged North American business platform are progressing to plan. However, as expected, the installation of new US plasterboard capacity is leading to lower selling prices (now some 30% below the December 1999 peak) which will impact second half profitability.

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