This trading update precedes the publication of the group’s preliminary results for the year to 31 March 2003, due on 22 May.

FULL YEAR PERFORMANCE EXPECTATIONS

• Group turnover up 15% to £1.9 billion, driven by growth in European and North American plasterboard volumes, higher average US prices and the acquisition of James Hardie Gypsum.
  
• Underlying profit before tax (pre goodwill and exceptional items) to advance by some 25% to around £190 million (2001/02: £153 million) despite restructuring costs up by almost a half at £20 million.
  
• Turnaround in North American operating profit of circa £40 million, moving from loss to a profit approaching £30 million, due to better selling prices, further operating cost efficiencies and the JHG acquisition.
  
• Solid European performance despite profitability affected by a worsening German market, difficult trading conditions in Poland and higher input costs. Regional operating profit is expected to be marginally lower, underpinned by further overall cost savings and continuing good volume growth in Western and Southern Europe.
  
• Rest of the World profit improvement, with a small loss in South America offset by strong volume growth in Thailand and a robust South African result.
  
• Group underlying operating profit up more than 20% to almost £220 million despite an additional UK-related group pension charge of £6 million and £20 million (2001/02: £14.4 million) of restructuring costs, including redundancy. Half the restructuring costs were taken in the enlarged North American business.
  
• As indicated last November an appeal has been lodged with the European Court of Justice against the European Commission’s decision and fine imposed for alleged breaches of competition law between 1992 and 1998. In the meantime, the fine of £89.2 million has been paid and will be reported as an exceptional item.
  
• The group’s full year tax rate is expected to reduce to around 32% (last year 37%, high due to unrelieved US trading losses).
  
• Strong operating cash flow in excess of £300 million (excluding EC fine) and underlying interest cover of more than 7 times.
  
• Year-end net debt around £650 million following EC fine, the £245 million acquisition of James Hardie Gypsum, and the very recent £34.2 million (including debt assumed) acquisition of Gyproc Benelux.

GROUP TRADING CONDITIONS

• Group plasterboard volumes will increase around 25% to over 1 billion square metres due to BPB’s strengthened US market position, with like-for-like global volumes growing 3%.
  
• European sales volume growth of over 5% has continued into the second half, with good growth in key plasterboard markets and much of Eastern Europe offsetting a decline in German volumes.
  
• North American like-for-like volumes will increase by 2%, primarily benefiting from continuing robust US and Canadian housing demand.
  
• US wallboard selling prices have remained relatively stable throughout the year, averaging $90 per 1,000 square feet, resulting in year-on-year average realised prices up some 15%. Prices have fallen back during the quieter winter period to around $86 although a price increase of 10% has been introduced to coincide with the seasonal up-turn in March.
  
• Modest plasterboard price increases have been announced in a number of key European markets since the start of the New Year.
  
• Building plaster volumes are expected to grow by 2% from additional demand in the UK and Spain, supported by further good growth in Eastern Europe.

SECOND HALF KEY TRENDS

• Volume growth in Western and Southern Europe, combined with stable European selling prices, continue to counter the impact of challenging trading conditions in Germany and Poland.
  
• North America’s wallboard business firmly into profit despite rising energy costs, with second-half return on sales (before restructuring charges) around 10% and benefiting from resilient housing and renovation demand. However, the commercial market continues to be depressed, affecting in particular the ceiling tiles business which remains in modest loss despite further operating improvements.
  
• BPB’s on-going businesses will continue to deliver worldwide cost savings equivalent to circa 1.5% of group turnover, offsetting the general impact of inflation.
  
• Continuing strong cash flow, reflecting the strength of the group’s financial position.

Commenting on BPB’s full year performance expectations, Richard Cousins, chief executive said:

“Management is delivering on BPB’s business plan for future growth, achieving a turnaround in North American results, a solid European performance, and stronger cash generation. Two important strategic developments, last April’s US acquisition of James Hardie Gypsum and the recent acquisition of Gyproc Benelux, serve to strengthen our North American and European plasterboard businesses, consolidating BPB’s position as the global market leader.”

• 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 10.00 am today to discuss this trading update. The dial-in number is 020 7162 0125 and the password is BPB.

• Group results for the year to 31 March 2003, together with the recommended final dividend, will be announced on 22 May 2003.