2000 AGM - CEO's Address

21st December, 2000

Good morning ladies and gentlemen.

Our chairman has spoken the enormous task involved in the restructuring of the company and of the talent and commitment of Orica people.

I would just like to dwell on the quality of our people for a minute - a vital ingredient for the future health of this company. I wish you could have seen what I saw just two weeks ago at our annual Excellence Awards where people from across the company, indeed from across the world, gathered to tell us about their many and diverse achievements. Our Excellence Awards are only five years old but already we are seeing some of our past winners deliver significant new profits for this company.

At all levels Orica's people are working extremely hard and creatively, to build a better future.

In a quick review of Orica's operations during the past year I would like to highlight just a few of our people-driven achievements this year before I turn to some of the challenges of the year ahead. Orica is the world's leading supplier of commercial explosives and blasting services.

Our International Explosives business is headed by Graeme Liebelt, who is based in Denver in the United States. He is an executive director of the company and is sitting here today with other board members. The Australian/Asia arm is managed by Julian Segal, who is based in Sydney.

This business forms the major part of our Mining Services core business.

In the business last year:

• We continued to expand into new markets, establishing operations in Venezuela, Kazakhstan, Krgyzstan, India, China and most recently, in Scandinavia. We are still in the process of completing the acquisition of DNES in Germany which will expand our involvement in Germany and also take us into Estonia.
  
• We increased our share of the North American explosives market during the year, winning new contracts and benefiting from the reorganisation of our surface mining business to include two new joint ventures with Nelson Brothers.
  
• We implemented a number of plant improvements including an increase in the capacity of our Carseland Canada ammonium nitrate plant, further automation of the Brownsburg Canada and Helidon Australia detonator assembly operations, expansion of the Cuatrocienegas Mexico packaged explosives plant, and we purchased two ammonium nitrate plants from LaRoche in the USA at a fraction of their replacement costs.
  
• We opened our new technical centre in Denver in the United States to complement the activities of our other centres in Brownsburg, Canada, and Kurri Kurri, here in Australia.
  
• We also launched our i-kon digital energy control system to customers around the world. The result of many years research and development, this electronic detonator system sets a new benchmark for safety, precision timing and reliability for the mining industry.

Our Agricultural Chemicals core business is one we conduct through Incitec, one of Australia's largest manufacturers of fertilizers, and Crop Care Australasia, our crop protection business.

The business is led by Greg Witcombe, who is based in Brisbane.

In this business last year:

• Incitec Fertilizers increased sales volumes and market share, and achieved record sales volumes. While seasonal conditions were not favourable for our crop protection chemicals, the Crop Care business was also able to improve its market share during the year.
  
• Productivity improvements of $9 million a year were achieved through the restructuring of manufacturing operations and distribution systems.
  
• New and upgraded plants were opened during the year in this business, bringing improved production efficiency for the company and improved product quality for customers.
  
• Significant reductions of emissions to air and water were achieved at our Gibson Island Queensland operations, and Incitec won the chemical industry's 2000 PACIA environment Award for this achievement.Orica is a leading manufacturer and supplier of paint and paint preparation products in Australia, New Zealand, Fiji, Papua New Guinea and we have a small Texture Coatings facility in Malaysia.

Our Consumer Products core business has brands such as Dulux, Berger, British Paints, Cabot's, Selleys and Rota Cota, all of which are household names. Consumer Products is led by Jerry Adams, who is based in Melbourne.

• Once again last year our Consumer Products business received a number of major supplier awards in recognition of the strong customer service focus and commitment to building long term partnerships.
  
• The business substantially improved its manufacturing facilities at Rocklea in Queensland, and completed a new technical centre at Clayton in Victoria, to support the ongoing product development our business is renowned for. Dulux Wash & Wear 101 and Berger BreatheEasy are just two examples of our innovation abilities.
  
• In July 2000, the business launched duluxtradeonline.com an electronic shopfront designed to deliver online trading access to trade painters, government and trade corporate accounts.

Orica is the leading supplier of industrial and speciality chemicals in Australia. New Zealand and the Asia Pacific region. Our Chemicals core business, which is led by Barbara Gibson from Melbourne, has improved profitability with process and cost improvements in all of its units.

Last year in Chemicals:

• The newly constructed MIEX® Resin pilot plant at Deer Park in Victoria produced its first development batch in August, marking another milestone for this water treatment technology which removes dissolved organic compounds from drinking water prior to disinfection.
  
• In New Zealand, we signed a long term exclusive agreement for bulk chemical supply and in-plant technical service, providing Kiwi Co-operative Dairies with the most cost effective cleaning of its plants in the world.
  
• We made progress with the building of two new, significantly more energy efficient plants at Laverton in Victoria and Botany in New South Wales as part of a $145 million reinvestment in our ChlorAlkali business. The plants are due for completion in 2001.
  
• We introduced the Chlorine Safeguard program to assist our customers with the safe management of chlorine, and this program won the chemical industry's 2000 TG Crane/PACIA Health and Safety Award.
  
• And we launched an internet shopfront (orica-chemicals.com), opening the door to another way to do business with our customers. This internet shop front automatically interfaces with our internal business computer systems.

Our Plastics businesses, which are in the non core part of our portfolio, had a difficult year with losses in the last quarter at Australian Vinyls wiping out the year’s profit from this business. Our Qenos joint venture had a year of good production from our Botany manufacturing facilities, but feedstock restrictions and a high cost base at Altona, together with dumped imports, made the overall result less than we had hoped for. However, we were pleased to have finally sold the ethane pipeline and the LPG ship Kelvin at good prices.

As the chairman has said before me, our core business platforms have in aggregate demonstrated steady and relatively non cyclical profitable growth for more than a decade. Through a multitude of initiatives we are determined to keep building and indeed accelerate this growth and to complete the divestment of our non core businesses.

We clearly understand the disappointment and frustration of shareholders in regard to our share price and the fact that each year it seems as if some unexpected event such as the weather, the Asian crisis or high feedstock costs diminishes the anticipated improvement in our profits. Despite these undoubted difficulties we have managed to keep the core businesses growing and we are determined to maintain this progress. Once we have completed the divestment of our non core businesses, Orica will be a much less cyclical company than it has been. We fully understand the concerns of shareholders about our current share price but we have experienced such impacts in the past. For example, back in 1991 our share price dropped to $3.06 after hitting a high of $7.40 in 1988. The current fall in our share price from the previous peak of $13.85 experienced in 1997 is of almost identical proportions. The strategy that we embarked on in 1997 was to avoid the impact of such vicious cycles in the future. We are convinced that strategy is right but we have not yet completed the execution.

The year ahead also has its share of challenges for Orica. In North America we are experiencing unprecedented gas and energy prices which significantly increase our explosives production costs, and in Australia explosives will experience a full year impact of new competitive ammonium nitrate capacity in Queensland. Our Chemicals, Consumer Products and our Plastics businesses are feeling the impact of a significant downturn in the building industry in Australia and lower levels of demand by other customers. However, one of the advantages of a diversified business like ours is that we have offsetting effects. The lower Australian dollar is definitely helpful overall. The very high gas prices I referred to earlier are helping to maintain relatively high prices for ammonia and urea which have a beneficial impact on Incitec. Further, the deal we have just announced with Syngenta in regard to Crop Care will provide clarity and certainty to the Crop Care business and our shareholders. Crop Care will receive appropriate compensation for termination of the distribution agreement it has had with Zeneca. This agreement was responsible for roughly half of Crop Care's revenue. Part of the compensation will underwrite the next two years' profits which would have accrued from the distribution agreement as well as provide for a range of ongoing products for distribution and toll manufacturing by Crop Care. In addition, Crop Care will be free to build upon its remaining business in a variety of ways which we are confident will be value adding.

The impact of some of the negative influences on Orica's 2001 performance will be particularly obvious in our first half results compared to the previous corresponding year. The first half ending 31 March 2001 will contain some non recurring write off of the Qenos Altona plants, the impact of the current strike, and will also show the strongest variation to last year in terms of higher gas and energy prices, and the impact of the competitive Queensland ammonium nitrate plant which was not experienced in this period last year. Counterbalancing these negatives will be the compensation from Syngenta in regard to termination of the Crop Care agreement.

We operate in a tough market and, in response, we are tough about reducing cost and implementing improved efficiencies across the company. I can assure shareholders that we will continue to do all that is under our control to maintain and improve the level of profit growth delivered by Orica. We believe that our strategies and business fundamentals are sound. The job we face is to maintain our progress in growing our core businesses despite the effects of external events, and to divest for value our remaining non core businesses.

Orica is a company with a clear strategy and vision of where we want to go and we have a strong management team and resourceful and talented employees to help take us there. We are determined to accelerate the profitable growth seen in our core businesses, complete the restructuring we embarked on in 1997 and to restore the confidence of investors that, despite the external difficulties, we can and will deliver. Orica has historically delivered top quartile total shareholder returns. That is a position we wish to resume. To do that we know we have to demonstrate a track record of consistently growing our profits. Our target as a management team, which we have agreed with the Board, is to grow earnings over the long term by 10% per annum. I believe our strategy and our growth platforms can deliver this profitable growth, and I can assure you that I and my whole management team are working extremely hard to produce this outcome.

Thank you, ladies and gentlemen.