Trading Statement

Cookson Group PLC
5 October 2001



5 October 2001

THIRD QUARTER TRADING UPDATE

  * Difficult trading conditions in major markets
  * Group pre-tax profit for nine months ended 30 September of £17 million*
  * Strong support from core relationship banking group
  * Significant new cost saving initiatives implemented
  * Final dividend for 2001 to be passed

*(Note: All financial data in this announcement is preliminary and unaudited;
profit is stated before all exceptional items and goodwill amortisation)

Commenting on the trading update detailed below, Stephen Howard, Group Chief
Executive, said:


    'We have experienced a unique confluence of challenges to our businesses
    over the past nine months. However, we firmly believe these challenges are
    one-off or cyclical, not fundamentally structural. We have taken prompt
    and decisive action with regard to our cost base, but have been careful
    not to cut into the muscle of the business, and we are totally focused on
    cash generation. We are also reshaping elements of our business to meet
    anticipated changing dynamics in certain markets and are continuing to
    invest in the growth engines of the future. Furthermore, we have
    communicated openly with the investment community, with our providers of
    finance and with our colleagues and will continue to do so. Cookson is a
    strong company with excellent positions in long-term growth markets. We
    will come through the current challenges fit and ready for growth.'

Further to the statement made on 20 September, Cookson Group plc, the
international materials technology company, today provided the following
update on trading in the third quarter ended 30 September 2001.

The difficult and deteriorating trading conditions experienced in the Group's
major markets during the first half continued into the third quarter. Group
sales in the third quarter of £477 million were down by 28% on the same period
last year and by 14% for the nine months ended 30 September. As a consequence,
pre-tax profit before exceptional items and goodwill amortisation was £17
million for the year-to-date, with a pre-tax loss of £14 million arising in
the third quarter. Historically, trading activity in the third quarter has
been relatively slow due to routine factory shutdowns and holiday periods. For
the third quarter of 2001 this trend has been particularly pronounced with
many companies, including Cookson, imposing enforced vacation and protracted
plant shutdowns. In addition, the tragic events of 11 September have clearly
had a negative impact on business and consumer confidence and on trading
activity in the USA in the month.

The Electronics division continued to be affected by the unprecedented
downturn in the global electronics industry. Sales for the division in the
third quarter were £185 million, down 47% in comparison with a particularly
buoyant third quarter last year and 15% lower than the second quarter of this
year. Despite this, order books had begun to improve in early September and
the rate of decline in sales started to moderate, offering tentative evidence
that the sharp fall in demand in the electronics industry could be bottoming
out and that inventory levels in the supply chain were more balanced. However,
in light of the events of last month and the extremely uncertain outlook for
business in general, it is not clear that this improvement in trend is
sustainable. The sales shortfall in the quarter was experienced by all three
of the division's sectors, with the decline most acute for PCB laminates and
PCB assembly equipment. As in the first half, the most difficult trading
conditions were experienced by the division's operations in the USA where,
according to industry data, PCB billings for the industry were down some 45%
in July and August compared with last year. As a result of the severe fall in
sales, the Electronics division registered a trading loss in the third quarter
of approximately £14 million.

As in the first half, weakness persisted in the US and UK steel industries,
both of which are major end-markets for the Ceramics division's products and
services. Steel production in the third quarter in these two areas was lower
than that of the second quarter of this year and down some 12% compared with
last year. There were also signs of deterioration in some northern European
steel making countries, although production in southern Europe remained at or
above last year's levels. In the rest of the world, steel production levels
held up reasonably well and the performance of the division's Steel sector in
these regions was less affected. In the division's Foundry & Industrial
Products sector, activity weakened in line with that of the steel industry to
which demand for its products is indirectly linked. For the division's Glass
sector, sales in the quarter were in line with last year. In total, the
Ceramics division's sales in the third quarter were £173 million, 10% lower
than last year, and trading profits for the three months ended September were
approximately £8 million.

For the Precious Metals division - which had performed well in the first half
- sharply reduced consumer confidence in the USA in the third quarter resulted
in a decline in sales for its Jewellery Products sector. This was exacerbated
by a fall in orders and output in the sector's US activities in the immediate
aftermath of the 11 September attacks. As in the past, this sector's results
are highly dependent on Christmas and fourth quarter holiday season demand.
The division's Precision Products sector was also adversely impacted by a
difficult US manufacturing environment. Sales for the quarter for the division
as a whole were £99 million, which was 4% higher than last year, though 21%
lower excluding the contribution of last year's E-CLAL acquisition. Trading
profits for the division were some £6 million for the three months.

The Board indicated in the interim results announcement of 26 July that it
would take proactive and vigorous action to ensure that the cost base of each
of the Group's businesses is aligned with current and near-term market
conditions. This was demonstrated in the first half by a 19% reduction in the
headcount of the Electronics division in swift response to a fall in demand in
the electronics industry. In light of further declines in activity across the
Group in July and August, it was decided that the following additional actions
should be taken:

  * Electronics division: the consolidation of a number of facilities and
    the exit from certain non-core product lines, resulting in the closure of
    7 plants; and a headcount reduction of 900 people. As part of these
    divisional initiatives, the activities of Speedline Technologies, the
    division's equipment sector, will be re-engineered by increasing the
    emphasis on outsourcing of components, streamlining its manufacturing
    processes, rationalising product lines and increasing the effectiveness of
    its sales and distribution activities.


    Together with the 1,600 headcount reduction in the first half, this will
    result in a total decrease of 2,500 people or 30% in the division's
    workforce since the beginning of the year.

  * Ceramics division: the closure of 6 plants in addition to the 6
    previously announced as part of the Premier Refractories integration
    programme and a reduction in headcount of 670 people. The primary focus of
    these actions is to realign the US and UK activities of the division with
    the current and near-term reductions in steelmaking capacity in these
    regions.


    Together with the 360 headcount reduction associated with the Premier
    integration programme, this will result in a total decrease of 1,030
    people or 12% since the beginning of the year.

  * Precious Metals division: the reduction in headcount of some 170 people
    in the second half in response to weakening demand, equivalent to 5% of
    the division's total workforce.

The total one-off cash costs of the actions announced today are expected to be
some £18 million, approximately £12 million of which will be outlaid in 2001
and the associated asset write-downs amount to £38 million. The annual
reduction in the Group's cost base that is expected to derive from these
actions is £30 million, of which £5 million arises in 2001.

Once these new initiatives and those announced during the first half are
completed and the Enthone and Premier integration programmes finalised, the
headcount of the Group's on-going activities will have been reduced by a total
of 3,700 people (18%) since the start of this year. The reduction in the
Group's annual cost base that arises from all of these initiatives is some £90
million, of which £40 million arises in 2001.

With regard to Cookson's borrowings position, the level of net borrowings at
the end of the third quarter was marginally higher than the £794 million at
the beginning of the year. Considerable success in generating cash was
achieved in the first half when £62 million of free cash flow before payment
of dividends was recorded. Management throughout the Group continues to be
focused on the goal of cash generation. The Company also continues to pursue
vigorously its asset disposal programme of non-core businesses.

Cookson enjoys strong and longstanding relationships with its principal
lenders, with whom it communicates on a regular basis. The Group's core
banking group has also recently been apprised of, and has given its full
support to, the many initiatives underway to reduce costs and to generate cash
by selective asset sales, decreased capital expenditure and tight control over
working capital. The Company has in place £1 billion of committed funding
facilities - both from its banks and from its loan note holders - to finance
the continuing activities of the Group.

The Board declared an interim dividend for 2001 of 4.5 pence per share in July
which will be paid to shareholders on 19 October 2001. Given the further
deterioration in profits in the third quarter and the uncertain short-term
outlook, it is the intention of the Board not to recommend the payment of a
final dividend for 2001. The Board will review the dividend policy for 2002 in
light of business conditions then.

Although difficult trading conditions continued to impact the Group adversely
in the third quarter, Cookson remains a strong business. It has industry
leadership positions and products and services that address substantial global
markets that will grow and endure for many years to come. Management is
confident that Cookson will continue to maintain and enhance these positions
of leadership. It is also confident that the extensive cost saving initiatives
it has implemented will bring substantial operational benefits in the
near-term and significant rewards when market conditions improve.

Note: This announcement contains certain forward looking statements about
Cookson. Although the Company believes its expectations are based on
reasonable assumptions, any forward looking statements may be influenced by
factors that could cause actual outcomes and results to be materially
different from those predicted. These forward looking statements are subject
to numerous risks and uncertainties that could cause actual results to differ
materially from those in forward looking statements, certain of which are
beyond the control of Cookson.

A conference call for analysts will be held at 10am today which is accessible
via www.cooksongroup.co.uk.

For further information, please contact:

Stephen L. Howard - Group Chief Executive

Dennis H. Millard - Group Finance Director

Cookson Group plc

Tel:     [phone]

Fax:     [phone]

e-mail: [e-mail]

e-mail: [e-mail]