This trading update is published ahead of the announcement of the group’s interim results and dividend for the six months to 30 September 2002, due on 28 November.

FIRST HALF PERFORMANCE EXPECTATIONS

• Group turnover to increase by around 15% to almost £1 billion primarily due to the acquisition in April of the James Hardie US wallboard business and strong volume growth in Europe.
  
• Underlying profit before tax (before goodwill and exceptional items) around £95 million, up approximately 33% on the corresponding period and continuing the recovery trend first reported last November.
  
• North American operating profit (after restructuring charges) expected to be around £12 million (corresponding period loss of £16.7 million), a profit turnaround of almost £30 million, benefiting from increased pricing levels and continuing strong demand.
  
• European operating profit broadly maintained, as a combination of difficult trading conditions in Scandinavia and Germany and higher recycled paper prices is offset by further good turnover growth in Western and Southern Europe.
  
• Groupwide restructuring costs, including redundancy, will reduce operating profit by close to £10 million (£7 million corresponding period), mostly relating to the closure of the US paper mill at Quincy and the integration of James Hardie.
  
• Following the triennial valuation of BPB’s principal UK pension scheme, which is expected to disclose a lower actuarial surplus, there will be an additional group pension charge of around £6 million per annum, with 50% taken in the first half.
  
• Average net debt, compared to the corresponding period, will increase by around £100 million following the US $345 million acquisition. However, the group’s interest charge for the first half will rise by less than £1 million due to reduced borrowing rates.
  
• BPB’s estimated tax rate is expected to fall significantly from the corresponding period’s 39% (which was high due to unrelieved US trading losses) to around 33%.

FIRST HALF TRADING CONDITIONS

• Group plasterboard volumes (including acquisitions) will be around 25% higher, increasing 4% on a like-for-like basis. North American volumes will increase substantially, reflecting BPB’s higher market share following the recent acquisition, with like-for-like growth of some 2% benefiting from continued strength of the US housing market, albeit with a slight weakening in demand in the Summer. European volumes are expected to increase by more than 5% due to good growth in key markets.
  
• US wallboard selling prices have stayed relatively stable through the period, holding at the level reached last March of about $90 per 1,000 square feet, resulting in an average realised price up 25% on the corresponding period. An attempt to further increase prices in May was withdrawn but an increase has been announced this month. While average European plasterboard prices will be slightly lower than in the corresponding period, some improvement has been achieved since the Spring.
  
• Group plaster volumes will grow by some 5%, with additional capacity introduced in the UK to meet higher demand and further strong like-for-like growth in Spain and Portugal.
  
• Group cost reduction is continuing. However, recycled paper prices have risen sharply in recent months, increasing the cost of liner supplies and affecting plasterboard manufacturing margins groupwide.
  
• Integration of James Hardie into the North American wallboard business is running to plan and is expected to deliver an annualised rate of at least $10 million of cost savings by September 2003.

FIRST HALF KEY TRENDS

• Recovery in the North American business is now well underway based on a combination of lower costs, greater wallboard volumes and better selling prices, despite modest losses in a difficult US ceiling tiles market.
  
• Volume growth in the Western and Southern European regions continues to offset difficult trading conditions in other markets, underpinning a solid overall European performance.

OUTLOOK

• Although global economic growth forecasts are generally being revised downwards, BPB still anticipates the current year to be one of progress.

• BPB is the world leader in the supply of plasterboard and gypsum plasters, and a major supplier of insulation, ceiling tiles and related products for internal linings, serving growing markets for building systems in over 50 countries.
  
• There will be an analysts’ conference call at 9.00am BST today to discuss this trading update. The dial-in number is 020 8240 8242 and the password is BPB.