AGM Statement

Yule Catto & Co PLC
20 May 2004



Yule Catto & Company plc

AGM Statement: 'Sales demand is solid in all three divisions'


Yule Catto is an international producer of speciality chemicals, which are
supplied to global customers, ranging from manufacturers of medical gloves,
paint and adhesives to the pharmaceuticals and cosmetics industries

At today's Annual General Meeting of Yule Catto & Company plc, Anthony
Richmond-Watson, Chairman, made the following comments:

'When I addressed this meeting last year, I indicated that, despite challenging
conditions in a number of the sectors in which we operate, we were looking
forward to new record levels of profit in 2003 for our group.

'The performance in 2003 indeed lived up to expectations, with the achievement
of particularly pleasing financial results that saw profits and earnings per
share rise by an impressive 14% and 15% respectively.

'During the course of the year, strategic investment continued in the
strengthening of our polymer activities through the acquisition of a carpet
latex compounding business in Holland and in taking full control of our South
African operations. The equity stake in our joint venture performance chemical
business in India was also increased. Capital investment in recent years has
been high due to the commissioning of large scale manufacturing assets and 2003
saw it fall back to a more normal level, a situation that should be sustained
for the next few years.

'Once again, the maintained focus on cash management produced a noteworthy
result with free cash flow before dividends of £62.8m at record levels and net
borrowings substantially reduced.

'In the second half of the year a formal valuation of the main UK pension fund
was conducted by our external advisers. The final salary scheme was closed to
new entrants in 1998, but in common with most UK companies, a deficit was
revealed. This has been addressed through a combination of modifying benefits
and higher employee contribution rates. The group will also pay an additional
£5m per annum as its employer contribution to the pension fund. Whilst the
position will be reviewed in three years time, I feel shareholders should be
aware of the magnitude of our present commitment to this employee benefit.

'May I now, as usual, say a few words on each of our three main operating areas.

Polymer Chemicals

'Firstly, Polymer Chemicals, our largest division, has seen substantial
investment in strategically positioned new manufacturing in recent times. Sales
volumes again grew last year with turnover up close to 14% driven by progress in
the expansion of sales of dispersions into continental Europe; growth in demand
for nitrile dipping latex in the Far East; and the first time inclusion of the
Dutch latex compounding operation.

'In Malaysia, the new nitrile latex facility is running well and, at times,
close to design capacity. With demand continuing to grow, our technical and
manufacturing teams are therefore currently engaged upon developing ways of
enhancing this output. In the meantime, support will be provided from our
European facilities. The position at the Belgian dispersion plant should reach a
similar point over the next year and design work has been initiated to evaluate
its expansion with construction possibly commencing in late 2005.

'While sales volume in 2003 was at reasonable levels, margins remained under
pressure from raw material cost increases. At this time last year, there were
some signs of an easing in the price of both crude oil and its downstream
derivatives. The anticipation of this caused customer sentiment towards selling
price increases to harden. As it turned out, raw materials rose in the last
quarter, meaning that overall margins for our polymer businesses were at the
bottom end of the levels we traditionally achieve, depressing profitability.

'The first quarter of 2004 has shown further turnover growth, but rising raw
material input costs remain an issue holding back progress on the improvement of
margin levels. Little possibility is seen in the short term for this situation
to markedly change with monomer prices reflecting the stubbornly high price of
oil. We, however, continue to win new business and introduce innovative products
directed at maximising returns at all stages of the petrochemical cycle.


Pharma and Fine Chemicals

'For our Pharma and Fine Chemicals companies, 2003 was a remarkable year with
good underlying business activity boosted by the unique situation surrounding
the launch of generic omeprazole in the United States. This resulted in
operating profits more than treble those of only two years before. The flavour
and fragrance business also had a good year, which is continuing, at the start
of 2004.

'Unfortunately, quite unexpectedly, the competitive landscape in the United
States for omeprazole changed in the third quarter of 2003 when new competitors
to our exclusive customer entered the market ahead of the completion of the
original patent legal process. Our customer's loss of exclusivity has had a
detrimental effect on the returns we were achieving on this business.

'In other territories, sales of omeprazole continue to grow with Europe
particularly strong. To support this, our manufacturing capability was increased
through investment at our second site in Sant Celoni in Spain to provide
additional volumes and security of supply. Omeprazole came off patent in France
in mid-April 2004, which is boosting volumes as should the launch of a new
patented immediate release version of the product in the USA later this year,
for which we have secured an exclusive supply contract.

'The performance of other generic products was solid in 2003 and demand
continues at a satisfactory level. The Mexican facility remains highly loaded,
but our Italian plant has considerable free capacity following the cessation of
Cephalosporin manufacture. It will be later this year before the benefit of new
contracts is felt.

'Our management team has recently completed an exercise to update and expand the
generic development programme for the coming years. This extends to products
that will come off patent between 2005 and 2015. Bearing in mind that Uquifa
first made and sold omeprazole in 1991, an appropriate long-term plan is
essential for success.

'In support of the generic and ethical development programme, our new Spanish
pilot plant was fully committed in 2003 and is projected to be so for the
foreseeable future. To relieve the pressure, the older pilot plant in Spain has
been retrofitted and a new facility in Italy is presently under construction.

'This year has started well, but results are obviously well down on the high
figures seen last year due to the changed market circumstances for omeprazole in
USA. Opportunities have been identified and plans are in place, which give us
confidence in achieving long-term future growth.


Performance Chemicals

'Turning to our Performance chemical companies, they saw operating profits rise
by 9% on a fairly static level of turnover. This improvement was achieved
against a backdrop of a rapidly weakening US dollar in the second half of the
year; restricted sales due to the fire at our ultramarine facility in France in
2002; and the impact of restructuring costs at a number of our businesses.

'The ultramarine operation was particularly affected, towards the end of 2003,
by the US dollar impact and the loss of volume caused by the supply issues from
France. It will take time to rebuild sales levels, but the facility is back on
stream with the new state of the art flue gas desulphurisation plant in the
final stages of commissioning.

'In other areas, inorganic chemicals have come under pressure from overseas
competitors, but James Robinson's hair dye, photochromic and photographic sales
are performing strongly after the business restructuring that has been
initiated.


Outlook

'Overall, the start to 2004 has been reasonable and, while below the exceptional
achievement of 2003, remains in line with our expectations given the present
economic environment and the ending of the exciting returns from omeprazole in
the United States.

'Sales demand is solid in all three divisions. In the near term, further raw
material increases as a result of the impact of a high crude oil price on
downstream derivatives may continue to hold back margins in our Polymer Chemical
activities. The relative strength or weakness of Sterling against the US dollar
and the Euro will also play its part in our results this year as we continue the
drive to increase sales around the world.

'Looking further ahead, over the medium term, we remain confident that our
strategy of investing in new and appropriately positioned manufacturing units,
coupled with long-term product development plans will deliver growth for the
benefit of everyone associated with Yule Catto.'
                                                                     20 May 2004


Enquiries:

Yule Catto                      01279 442791
Alex Walker, Chief Executive
Sean Cummins, Finance
Director

College Hill                    020 7457 2020
Gareth David                                    [e-mail]
Crawford Burden                                 [e-mail]




                      This information is provided by RNS
            The company news service from the London Stock Exchange
  ND
AGMEANSEALELEEE