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Thursday 12 February, 2009

Imerys

Imerys - 2008 Annual Results





PARIS, February 12 /PRNewswire/ --

- Sharp Decrease in 4th Quarter Sales Volumes

- Swift Adjustment by the Group to the Downturn in its Environment

- Decrease in Net Current Income per Share: - 15%

- Proposed Dividend Reduced to EUR1.00

    The Board of Directors of Imerys, meeting under the chairmanship of
Aimery Langlois-Meurinne, examined the definitive financial statements for
2008, as presented by Chief Executive Officer Gerard Buffiere. The financial
statements will be submitted for approval at the Annual General Meeting on
April 29, 2009.


    
    (EUR millions)                         2008       2007       % current
                                                                   change
    Consolidated Results
    Sales                               3,449.2    3,401.9         + 1.4%
    Current operating income(1)           403.4      478.3        - 15.7%
    Net current income, Group's share(2)  267.1      316.7        - 15.7%
    Net income, Group's share             161.3      284.2        - 43.2%

    Financing
    Current operating cash flow(3)        458.4      522.6        - 12.3%
    Booked capital expenditure            238.1      367.0        - 35.1%
    Shareholders' equity                1,546.3    1,663.6         - 7.0%
    Net financial debt                  1,566.1    1,343.0        + 16.6%
    DATA PER SHARE (weighted average 
    number)                          62,801,382 63,330,652         - 0.8%
    Net income from current      
    operations, Group's share(2)        EUR4.25    EUR5.00        - 15.0%
    Proposed dividend                   EUR1.00    EUR1.90        - 47.4%

    (1) Operating income before other operating revenue and expenses.

    (2) Group's share of net income, before other operating revenue
        and expenses, net.

    (3) EBITDA minus tax on current operating income.


Macroeconomic environment

    In 2008, Imerys' environment was marked by a gradual downturn in American
and European economic conditions. This slump sharply worsened in the fall,
resulting in an unprecedented drop in sales volumes in the last few months of
the year. New housing-related markets (building materials, ceramics,
performance minerals) were particularly affected in both the United States
and Europe. In the paper sector, demand decreased and the industrial base
underwent further restructuring in developed countries, while trends remained
positive in Asia. Global markets related to industrial equipment
(refractories, abrasives, graphite, etc.) benefited from firm growth during
the first nine months of the year but were severely hit in the 4th quarter by
production stoppages, particularly in the steel and automotive industries.



    As regards variable costs (energy, raw materials, freight, etc.), while
some energy prices eased off towards the end of the year, other cost factors
remained high, after the historical peaks reached in mid-year. As a result,
inflation in those factors for 2008 as a whole was unprecedented. Finally,
the dollar rate against the euro was lower than in 2007, despite an increase
at the end of the year.



Highlights

    In 2008, in this difficult economic context, the Group's action plans
were focused along the following lines:


    
    - Completing the extensive industrial performance improvement programs
      begun in 2007 in kaolins for paper and Minerals for Filtration;

    - Integrating the companies acquired since 2007, which are in the
      rationalization process and enable Imerys to strengthen its positions 
      in developing economies, particularly Asia-Pacific.


Since the summer, priority has been given to:

    
    - Free cash flow generation through strict management of capital
      expenditure and working capital requirements;

    - Adjusting production assets to demand across all the Group's
      activities.


Performance

    The Group's sales grew in 2008 (+ 1.4% vs. 2007), benefiting
from the consolidation of the acquisitions made since 2007. Current operating
income, however, showed a - 15.7% decrease, mainly reflecting the impact of
the volume decreases recorded towards the end of the year in most markets.
Net current income was also down - 15.7%.



    Taking difficult economic conditions into account, at the Annual General
Meeting of April 29, 2009, the Board of Directors will propose payment of a
dividend reduced to EUR1.00 per share, compared with EUR1.90 for financial
2007, i.e. a total of approximately EUR62.8 million, which represents 23.5%
of the Group's share of net current income. This dividend will be paid out
from July 7, 2009.



    Gerard Buffiere commented, "2008 will go down as an extremely
disruptive year: the first three quarters were marked by record inflation in
external costs; then, from the end of October, a dramatic fall in sales
volumes affected the great majority of industrial sectors worldwide; finally,
exchange rates were extremely volatile in 2008.



    Despite that upheaval, Imerys proves that its business model
is profitable, its activities generate cash flow and the Group is able to
adapt swiftly to changing conditions.



In that crisis context, our priorities are:

    
    - Generating free cash flow thanks to cutting working capital
      requirements and capital expenditures;

    - Reducing our fixed costs and overheads base everywhere in
      order to adjust the Group's structures to lower demand.


    The growth in current free operating cash flow, at EUR253
million in 2008 (vs. EUR174 million in 2007), reflects the first effects of
the measures taken, which will continue to be implemented in 2009.



    Mobilization of all teams around these goals will enable
Imerys to keep its room to maneuver and consolidate its world leadership in
industrial minerals."



DETAILED COMMENTARY ON THE GROUP'S RESULTS

    The consolidated income statement, statement of changes in financial
position and balance sheet are presented in appendix to this press release.



    Sales up + 1.4%, i.e. + 0.7% at comparable Group structure and
exchange rates



    Sales totaled EUR3,449.2 million in 2008, up + 1.4% from 2007 (+ 4.2%
over 9 months; - 7.1% in 4th quarter).



For 2008, the increase in sales takes into account:

    
    - A + EUR131.3 million net effect of changes in Group structure(1),
      i.e. + 3.9% (+ 4.5% over 9 months; + 2.0% in the 4th quarter);

    - Negative exchange rate impact, despite a firmer US dollar against the
      euro towards the end of the period (- EUR108.3 million, i.e. - 3.2%, 
      of which - 4.8% over 9 months; + 1.4% in the 4th quarter).


At comparable Group structure and exchange rates, sales increased + 0.7%

(+ 4.5% over 9 months; - 10.5% in the 4th quarter). This trend reflects:

    
    - An improvement in the price/mix component for EUR151.4 million,
      reflecting record inflation in variable costs across all business 
      groups (+4.5%, of which + 3.7% over 9 months; + 6.6% in the 4th 
      quarter);

    - A sharp decrease in sales volumes for - EUR127.2 million, which
      occurred in full in the 4th quarter (- 3.7% of which + 0.7% over 9 
      months; -17.1% in the 4th quarter).


    In terms of the geographic distribution of sales, Western Europe
represents 53% of turnover, of which 19% for France. North America accounts
for 19%, Japan and Australia 5%. Emerging countries now represent 23% of the
Group's sales, a + 16% increase from 2007.



    (1) Of which, 2008 acquisitions: Astron China (China, February 2008),
Svenska Silika Verken AB (Sweden, April 2008), Kings Mountain Minerals Inc
(USA, October 2008) and Suzorite Mining Inc (Canada, October 2008).



    Current operating income down - 15.7%, i.e. - 13.5% at comparable Group
structure and exchange rates



    Current operating income, at EUR403.4 million, decreased - 15.7% compared
with 2007 (- 9.3% over 9 months; - 35.5% in the 4th quarter). It includes:


    
    - Negative exchange rates impact for - EUR18.3 million (- EUR21.8 million
      over 9 months; + EUR3.5 million in the 4th quarter), primarily due to a
      currency translation effect;

    - Net effect of changes in Group structure for + EUR8.1 million.


    Allowing for the effects of exchange rates and changes in Group
structure, current operating income decreased by - EUR64.6 million (i.e. -
13.5% of which: - 6.0% over 9 months; - 36.8% in the 4th quarter):


    
    - The sales efforts made throughout 2008 led to a substantial improvement
      in the price/mix component (+ EUR160.0 million). This was needed to 
      offset fully the record inflation in variable costs during the period 
      (- EUR159.3 million);

    - Fixed costs improved as expected (+ EUR14.5 million) as a result of the
      restructuring plans carried out in 2007 and 2008 and the cost reduction
      actions taken in all the Group's activities;

    - The decrease in current operating income is therefore entirely due to
      the sharp drop in sales volumes towards the end of the year (- EUR79.3
      million, of which - EUR57.4 million in the 4th quarter). This affected 
      all the Group's activities, most heavily those that make the largest
      contributions to income.


    The Group's operating margin worked out at 11.7% compared with 14.1% in
2007.



Net income from current operations down - 15.7%

    The Group's share of net income from current operations totaled EUR267.1
million in 2008 (EUR316.7 million in 2007), i.e. a - 15.7% decrease (- 4.8%
over 9 months; - 45.4% in the 4th quarter).



    In addition to the drop in current operating income, this decrease
factors in:


    
    - - EUR46.2 million in financial expense (- EUR55.7 million in 2007). The
      improvement is due to lower interest rates and gains on the settlement 
      of exchange rate and interest rate transactions;

    - A current tax charge of - EUR98.1 million (- EUR110.1 million in 2007),
      reflecting as expected a slight increase in the effective tax rate to 
      27.5% (26.0% in 2007). This rise particularly results from the very 
      high depreciation of the Brazilian real against the US dollar.


    At EUR4.25 compared with EUR5.00 in 2007, net current income per share
was down - 15.0% from 2007, with a slight decrease in the weighted average
number of outstanding shares, at 62,801,382 compared with 63,330,652 in 2007.



Decrease in net income

    The Group's share of net income totaled EUR161.3 million in 2008,
compared with EUR284.2 million in 2007. It includes - EUR105.8 million in
other operating revenue and expenses, net of tax (- EUR32.5 million in 2007).


    
    - - EUR35.9 million in cash expenses (restructuring, litigation) mainly
      related to the cost reduction programs implemented throughout the year,
      especially the measures taken in the 4th quarter to respond swiftly to 
      the heavy downturn in demand. These programs particularly concerned 
      kaolins and carbonates for paper activities, as well as Performance 
      Minerals in the United States and the adjustment of refractory 
      chamotte production in Ukraine;

    - - EUR69.9 million in non-cash expenses relating to industrial asset
      depreciations resulting from the restructuring programs carried out in 
      2008 and an impairment recorded on goodwill in Performance Minerals in 
      the United States.


Substantial cash flow generation, sound financial structure

    Current operating cash flow(1) remained high at EUR458.4 million 
(EUR522.6 million in 2007). It takes into account:


    
    - EBITDA(2) of EUR569.1 million (EUR646.7 million in 2007), i.e. a -
      12.0% decrease;

    - A notional tax charge on current operating income of - EUR110.8 million
      (- EUR124.6 million in 2007).


    After the highest-ever level of capital expenditure in 2007
(EUR367.0 million booked, i.e. 186.1% of depreciation expense), the 2008
program still invested a significant amount in the Group's development
(EUR238.1 million booked, i.e. 123.3% of depreciation expense), focusing on:


    
    - Sustaining existing industrial assets (EUR122.1 million);

    - Completing the extensive industrial performance improvement plans begun
      in 2007 (kaolins for paper and Minerals for Filtration). The targeted
      extension of some capacities (EUR116.0 million) mainly concerned 
      andalusite production in China, minerals for refractories manufacturing 
      in Europe, North America and South Africa, the development of 
      carbonates for paper units in Asia and the supply of rectified 
      structure bricks in Western France.


    Efforts by the Group's teams helped to improve the working capital/sales
ratio from 24.8% in 2007 to 24.1% in 2008. Consequently, changes in operating
working capital formed a resource of + EUR32.3 million (vs. a use of - EUR4.9
million in 2007).



    In total, current free operating cash flow(3) increased significantly
to EUR253.4 million (EUR174.1 million in 2007).



    After allowing for - EUR33.6 million financial expense, net of
tax, (- EUR41.2 million in 2007) and other working capital and non-cash
items, for a total of - EUR40.0 million (- EUR15.5 million in 2007), mainly
relating to the settlement of tax downpayments that proved far greater than
the likely amount of tax owed in 2009, current free cash flow(4) totaled
EUR179.8 million (EUR117.4 million in 2007).



    After completing the acquisition of the Chinese activities of Astron
(Imerys Astron China), a specialist in zircon products, the Group's
acquisition policy has been highly selective, particularly since the
beginning of the global economic crisis in early autumn 2008. The total cash
impact of external growth operations was - EUR155.8 million (- EUR33.8
million excluding Imerys Astron China) for the period (- EUR232.8 million in
2007).



    Finally, Imerys paid out EUR119.7 million in dividends in 2008 (EUR116.0
million in 2007).



    Consolidated net financial debt at the end of the period
increased to EUR1,566.1 million, compared with EUR1,343.0 million as on
December 31, 2007. It represents 101.3% of shareholders' equity (80.7% in
2007) and 2.8 times EBITDA (2.1 times in 2007).



    The Group's financial structure is sound with EUR2,353.6
million in total financial resources with an average maturity of 5.5 years as
on December 31, 2008. No significant refund is scheduled until the end of
2012, with repayment dates spaced out after that. Funded by bonds (in euros,
US dollars and Japanese yen) and multi-currency bank debt (bilateral lines,
syndicated credit), Imerys' currency debt structure is consistent with its
activities' cash flow generation.



(1) EBITDA minus tax on current operating income.

(2) Current operating income plus depreciation expense and provisions.

    (3) Current operating cash flow minus paid capital expenditure and
change in operating working capital.



    (4) Current operating free cash flow minus financial expense net of
tax, and change in other working capital items and non-cash items (deferred
taxes and financial provisions).


    
    COMMENTARY BY BUSINESS GROUP

    Minerals for Ceramics, Refractories, Abrasives & Foundry

    (33% of consolidated sales)

    
    (EUR millions)                   2008     2007    Current   Comparable
                                                       change    change(2)
    Sales                         1,159.8  1,051.2    + 10.3%      + 4.8%
    Current operating income(1)     125.9    145.4    - 13.5%      - 9.0%
    Booked capital expenditure       70.4     78.7    - 10.5%

    (1) Operating income before other operating revenue and expenses; (2) At
        comparable Group structure and exchange rates.

    - Increase in sales at comparable Group structure and exchange
      rates; some dynamic markets during first 9 months; sharp drop in 
      volumes in the 4th quarter

    - Improvement in price/mix component, offsetting very high
      inflation in variable costs

    - Gradual integration of Imerys Astron China


Markets

    The business group's markets showed contrasting trends in
2008. The Minerals for Refractories, Fused Minerals (particularly
refractories and abrasives) and Graphite (mobile energy) markets were all
healthy in the first nine months when they benefited from a dynamic global
market for industrial equipment (particularly steel, aluminum and glass),
before slowing down very sharply towards the end of the year.



    Ceramics markets remained affected throughout the year by the
construction sector crisis in North America. In Europe, they went into a
downturn at the end of the 1st quarter, because of the slump in the new
construction sector.



Highlights

    In Minerals for Refractories, to support demand growth on some
markets, particularly due to substitution to other minerals, a refractory
clay calciner was built in the Andersonville (Georgia, United States) plant
and the andalusite production capacity extension in Yilong (China), a company
acquired in 2007, is in progress. Integration of the Ukrainian company
Vatutinsky Kombinat Vognetryviv (Vatutinsky) resulted in major adjustments to
production assets.



    Various optimization actions were taken to reduce costs in
Minerals for Abrasives (Zschornewitz, Germany and Domodossola, Italy);
optimization of Imerys Astron China's industrial and commercial assets
continues but is however behind the initial schedule.



    In Minerals for Ceramics, the consolidation of feldspar
production units - one of which was acquired in 2007 in the United States -
is well under way.



    Capital expenditure totaled EUR70.4 million, i.e. 114.0% of depreciation
expense, compared with EUR78.7 million in 2007.



Performance

    Sales in 2008 totaled EUR1,159.8 million in 2008. This figure takes into
account the net effect of changes in Group structure for + EUR96.4 million,
i.e. + 9.2%(1), and - EUR37.9 million in exchange rates impact (- 3.6%).



    At comparable Group structure and exchange rates, sales rose + 4.8%
during the period (of which + 9.4% over 9 months and - 8.2% in the 4th
quarter).



    (1) Baotou (China, February 2007), UCM Group PLC (United Kingdom, April
2007), Yilong (China, May 2007), ZAF (China, June 2007), Jumbo Mining (India,
June 2007), Vatutinsky (Ukraine, July 2007), The Feldspar Corporation (USA,
September 2007), Astron China (China, February 2008).



    Current operating income for 2008 was EUR125.9 million (EUR145.4 million
in 2007). Allowing for exchange rates (- EUR6.2 million) and Group structure
(- EUR0.3 million) effects, the business group's current operating income
decreased by - EUR13.0 million. The significant improvement in the price/mix
component offsets the rise in variable costs (mainly energy and raw
materials). The change in current operating income reflects the significant
drop in sales volumes towards the end of the year with many production
stoppages by customers.



    Operating margin was 10.9% (13.8% in 2007), which also reflects the
integration of newly-acquired companies with profitability that remains lower
than for the business group's other activities.


    
    Performance & Filtration Minerals

    (15% of consolidated sales)

    
    (EUR millions)                  2008   2007    Current   Comparable
                                                    change    change(2)
    Sales                          526.5  564.5     - 6.7%      - 2.6%
    Current operating income(1)     45.0   48.4     - 7.1%     - 10.6%
    Booked capital expenditure      47.7   60.2    - 20.8%

    (1) Operating income before other operating revenue and expenses; (2) At
        comparable Group structure and exchange rates.

    - Decrease in sales at comparable Group structure and exchange
      rates, driven by a further downturn on construction markets

    - Inflation in variable costs offset by price increases

    - Satisfactory cost reduction actions

    - Acquisition of mica mineral reserves and production units in
      North America


Markets

    During the year, Performance Minerals markets (paint, plastic, ink,
pharmaceuticals, etc.) went through a slump that worsened in the 2nd half
with a downturn in construction markets in the main European countries. In
North America, activity remained poor throughout the year with a further
decrease in new housing compared with 2007. Filtration Minerals markets were
stable overall, with demand softening at the very end of the year.



Highlights

    A highlight of 2008 was the optimization of the industrial base in all
activities.



    In Performance Minerals, the reorganization of the European kaolin
production platform was completed in the 2nd half of 2008 with the closure of
the Devon (UK) site. In the United States, capacity adjustments continued
with, in particular, the transfer of calcined kaolin operations from the Dry
Branch facility to Sandersville and the adaptation of the Sylacauga plant
(ground calcium carbonates).



    In Minerals for Filtration (World Minerals), the industrial optimization
plan for the activity in North America was completed with the modernization
of the Lompoc (California, USA) plant.



    In Argentina, the acquisition of Perfiltra S.A. in 2007, enabled the
Group to develop its perlite production base in the region. Production assets
were optimized to improve performance.



    Finally, in October 2008, the acquisition of Kings Mountain Minerals Inc
and Suzorite Mining Inc, two companies that specialize in mining and
processing mica, extended the mineral product range. With very high quality
reserves and two production units (North Carolina, USA and Quebec, Canada),
these activities achieve yearly sales of approximately US$ 20 million. They
are a useful addition to the Performance Minerals offering (especially
plastic and paint applications).



    Capital expenditure totaled EUR47.7 million, i.e. 155.7% of
depreciation expense, compared with EUR60.2 million in 2007.



Performance

    Sales, at EUR526.5 million in 2008, decreased - 6.7% from
2007. This decrease takes into account a negative exchange rates effect of -
EUR29.8 million (- 5.3%) and a positive Group structure impact of + EUR6.7
million (+ 1.2%)(1). At comparable Group structure and exchange rates,
sales decreased - 2.6% (of which + 0.4% over 9 months and - 12.8% in the 4th
quarter), with the improvement in the price/mix component not totally
offsetting the impact of lower volumes, mainly recorded in Performance
Minerals.



    Current operating income totaled EUR45.0 million (EUR48.4
million in 2007). Excluding Group structure (+ EUR0.9 million) and exchange
rates (+ EUR0.8 million) effects, the business group's operating performance
was down - EUR5.1 million. The improvement in the price/mix component offset
the rise in variable costs. Reorganizations carried out since 2007 led to a
significant reduction in the fixed costs and overheads base in Performance
Minerals, but also in Minerals for Filtration, where the Lompoc unit
optimization plan was completed in the 2nd half of the year. This reduction
limited the impact of the slump in volumes.



Operating margin was stable at 8.5% (8.6% in 2007).

    (1) Xinlong (China, May 2007), Perfiltra (Argentina, May 2007), Kings
Mountain Minerals Inc (USA, October 2008) and Suzorite Mining Inc (Canada,
October 2008)


    
    Pigments for Paper

    (22% of consolidated sales)

    
    (EUR millions)                 2008   2007   Current   Comparable
                                                  change    change(2)
    Sales                          764.4  798.9    - 4.3%      - 0.5%
    Current operating income(1)     55.2   83.9   - 34.2%     - 25.5%
    Booked capital expenditure      63.5  174.7   - 63.7%

    (1) Operating income before other operating revenue and expenses; (2) At
        comparable Group structure and exchange rates.

    - Virtually stable sales at comparable Group structure and
      exchange rates

    - Price campaign not enough to make up for very high rise in variable
      costs

    - Improved cost base

    - Further development in carbonates in Asia; production capacity
      reductions in USA


Markets

    In Pigments for Paper, global production of printing and writing papers
decreased slightly over the period (- 1.8%) with a significant reduction in
productions levels in the 4th quarter. Production continued to rise in
Asia-Pacific (+ 2.6%). However, it decreased in Europe and North America,
where the main papermakers continue to restructure.



Highlights

    Cost base reduction efforts in kaolin for paper continued throughout the
year. After the transfer of coating kaolin for paper production from the
United Kingdom to Brazil, which was effective early in the year, the
optimization of the new industrial and logistical platform was completed. In
parallel, to adapt to lower demand, kaolin production capacities at the
Sandersville (Georgia, United States) unit were reduced in the 3rd quarter.
In addition, it was decided in the United Kingdom to restructure support
functions and shut down the Salisbury GCC plant; this measure should be
effective in the first few months of 2009.



    At the same time, the business group continued its progress in calcium
carbonates, which now account for more than half its sales volumes. In
Asia-Pacific, where markets remain firm, the capital expenditure projects
carried out in 2007 in Niigata (Japan) and Kerinci (Indonesia) are operating
at full capacity.



    Capital expenditure totaled EUR63.5 million, i.e. 106.0% of depreciation
expense, compared with EUR174.7 million in 2007.



Performance

    Sales, at EUR764.4 million in 2008, were down - 4.3% from
2007. This change takes into account the negative effect of exchange rates at
- EUR27.0 million (- 3.4%). At comparable Group structure and exchange rates,
sales were stable over the year (- 0.5%, of which + 2.6% over 9 months and -
10.1% in the 4th quarter), with the improvement in the price/mix component
offsetting the lower volumes recorded in Europe and the United States.



    Current operating income amounted to EUR55.2 million (EUR83.9 million in
2007). This result includes the negative impact of exchange rates (- EUR7.1
million). At comparable Group structure and exchange rates, the business
group's operating performance was down - EUR21.4 million. In addition to the
negative exchange rates effect, the business group was affected by very high
inflation in its variable costs for most of the year, which was not fully
offset by the price rises implemented. On the other hand, the restructuring
of the Group's coating kaolin production base had the expected results.


    
    Operating margin decreased to 7.2% (10.5% in 2007).

    Materials & Monolithics

    (30% of consolidated sales)

    
    (EUR millions)                   2008     2007    Current   Comparable
                                                       change    change(2)
    Sales                         1,041.4  1,025.7     + 1.5%      - 0.1%
    Current operating income(1)     225.4    235.4     - 4.2%      - 6.3%
    Booked capital expenditure       52.0     53.2     - 2.3%

    (1) Operating income before other operating revenue and expenses; (2) At
        comparable Group structure and exchange rates.

    - Stable sales on a comparable basis thanks to a dynamic
      monolithic refractories markets for the first 9 months; Weak 
      construction market in France with a stable renovation sector

    - Price / mix offsetting the rise in variable costs

    - Lower sales volumes in 2nd half

    - Positive contribution of acquisitions made in 2007 and 2008


Markets

    In Building Materials, business slumped significantly in the
2nd half after several years of steady growth. Over the year, housing starts
were down almost - 15%. However, thanks to a more stable roofing market and
to further penetration by clay bricks, sales volumes in France were down only
- 6.8% for clay roof tiles and - 2% for clay bricks.



    The Monolithic Refractories market benefited from buoyant
business until the last few weeks of the year when demand fell as a result of
some customers' production stoppages, particularly in the iron & steel
sector.



Highlights

    In that context, productivity improvement efforts continued in
Building Materials. The new equipment installed on production lines in the
Saint-Germer-de-Fly (Oise) clay roof tiles plant is working at full capacity.
Moreover, capital expenditure projects to improve industrial efficiency were
completed in the Sainte-Foy l'Argentiere (Rhone) and Phalempin (Nord) units
and a production line was stopped in Quincieux (Rhone).



    In bricks in France, rectified brick production capacities
were optimized at the Gironde-sur-Dropt (Gironde) plant in 2008 and are in
the optimization process at the La Boissiere du Dore (Loire-Atlantique)
plant. Finally, given the slowdown on the construction market in France, the
Bessens (Tarn & Garonne) plant is being shut down and its production
relocated to other sites.



    In November 2008, Imerys Terre Cuite signed a partnership
agreement with EDF ENR (Energies Renouvelables Reparties, distributed
renewable energies) to create a joint venture with the aim of developing and
manufacturing efficient and innovative integrated photovoltaic roof tiles.
The new entity intends to make electricity generation widespread on
conventional roofs, particularly during roofing renovation.



    In Monolithic Refractories, the year was marked by the
successful integration of ACE, the Indian leader in the sector. External
growth continued with the acquisition on April 30, 2008, of Svenska Silika
Verken AB, a Swedish producer of monolithic refractory products (EUR13.0
million sales in 2007).



    Capital expenditure totaled EUR52.0 million, i.e. 135.5% of depreciation
expense, compared with EUR53.2 million in 2007.



Performance

    At EUR1 041.4 million, the business group's sales rose + 1.5% with a
EUR31.6 million (+ 3.1%) effect of changes in Group structure(1) and a -
EUR14.9 million (- 1.4%) exchange rates impact. At comparable Group structure
and exchange rates, sales were stable for the year (- 0.1%, of which + 3.9%
over 9 months and - 11.7% in the 4th quarter).



    Current operating income is EUR225.4 million, compared with EUR235.4
million in 2007. Allowing for the effects of changes in Group structure (+
EUR6.2 million) and exchange rates (- EUR1.4 million), the business group's
operating performance was down - EUR14.8 million. Over the period, this trend
was entirely due to lower volumes, with the improvement in the price/mix
component offsetting inflation in variable costs.



Operating margin remained high at 21.6%, (22.9% in 2007).

    (1) Divestment if clay bricks and roof tiles activities in Spain &
Portugal (August 2007), acquisitions of B&B (South Africa, August 2007), ACE
(India, September 2007) and Svenska Silika Verken AB (Sweden, April 2008).



HUMAN RESOURCES

    The Group's workforce numbered 17,016 as at year-end 2008
(17,552 employees as on December 31st, 2007), with the following changes
during the period: the headcount totaled approximately 18,200 employees in
February after the acquisition of Astron's activities in China (Imerys Astron
China), then was stable overall until decreasing in mid-year, primarily
because of industrial reorganization in Cornwall (UK), the reorganization of
the Ukrainian company Vatutinsky acquired in 2007, and restructuring programs
in the activities affected by the global economic crisis.



    These changes shaped the Human Resources teams' activity in
2008 to a large extent. Particularly for the integration of recently-acquired
companies, the changes were supported by an extensive recruitment program and
a significant number of in-house promotions. In practical terms, more than 25
managers (i.e. 2/3 of senior management vacancies) were promoted to
significant responsibilities during the 1st half. The difficult international
context facing most of the Group's activities since late autumn makes
efficient internal mobility even more crucial.



    As regards the restructuring programs in progress, in
accordance with its policy, Imerys strives to mobilize all internal and
external placement solutions through personalized training and support
measures.



SUSTAINABLE DEVELOPMENT

    The Group's international scope gives it particular
responsibilities with respect to its employees, its shareholders, the
communities where it is based and the environment.



    Sustainable Development strategy is defined by a Steering
Committee, three members of which are also on the Executive Committee. The
Board of Directors pays growing attention to Sustainable Development risks
and issues. Plan and results in this area were examined in January 2009 by
the Audit Committee. The findings of that review will be presented to the
Board of Directors at its next meeting. They concern all aspects of
Sustainable Development: safety, environment, community relations, human
rights, human resources, corporate governance and the products of the future.



    Safety is a top priority for Imerys. Thanks to the
mobilization of the Group's people, the lost-time accident rate has been cut
by more than 60% since 2005. To make further progress, Imerys is stepping up
its preventive efforts in the six areas that cause the most serious accidents
and systematically analyzes accidents to draw lessons for the Group.



    As regards the environment, beyond compliance with local
regulations, Imerys has developed eight common environmental standards for
all its activities. To step up improvement, in 2008 the Group began rolling
out an Environment Action Plan based on the Safety Plan methodology.



    Finally, the Group fosters the integration of its activities
into their environment through active involvement with local communities.
Since late 2007, a protocol for community relations has set down commitment
principles.



CORPORATE GOVERNANCE

    As regards Governance, a highlight of 2008 was a change in the
composition of the Board of Directors with the cooptation in July 2008 of Mr.
Amaury de Seze in succession to Mr. Paul Desmarais, Jr., and the resignation
of Mr. Gregoire Olivier in November. On February 13, 2008, on the proposal of
the Chief Executive Officer, the Board also appointed Mr. Jerome Pecresse as
Delegate Chief Executive Officer of the Company.



    The Board conducted the annual self-appraisal of its
functioning and work, which it judged satisfactory. At the same time, it was
decided to extend the duties of the Audit Committee by having it review the
Group's Sustainable Development policy and monitor its results, which were
the focus of Imerys' third specific report on the issue, published in July
2008.



    Finally, in its last meeting of the year, the Board carefully
examined the recommendations arising from the AFEP-MEDEF Corporate Governance
Code on the compensation of corporate officers. It considered that they were
perfectly in line with the Corporate Governance implemented by the Company
for several years and was satisfied to note that most of them were already
implemented. Consequently, the Board confirmed that Imerys would now use the
AFEP-MEDEF Corporate Governance Code, as amended by those new recommendations
, as a reference, and would give its reasons in the event that any provisions
were not applied.



    The world leader in adding value to minerals, Imerys is active in 47
countries through approximately 260 industrial and commercial sites. The
Group achieved almost EUR3.5 billion in sales in 2008. Imerys mines and
processes minerals from reserves with rare qualities in order to develop
solutions that improve its customers' product performance and manufacturing
efficiency. The Group's products have a great many applications in everyday
life, including construction, personal care, paper, paint, plastic, ceramics,
telecommunications and beverage filtration.


    
                             Appendix - 2008 Results

    1. Sales breakdown

    Change in consolidated 
    sales                      % current      %        %          %
                                change   structure  change   comparable
                                          effect    effect   change(1)
    Group total                 + 1.4%    + 3.9%    - 3.2%     + 0.7%

    Quarterly comparable change    Q 1       Q 2       Q 3       Q 4
    2008 vs 2007                + 3.2%    + 5.1%    + 5.0%   - 10.5%

    2007 vs 2006 (reminder)        Q 1       Q 2       Q 3       Q 4
                                + 4.3%    + 4.5%    + 3.8%    + 4.1%

    
    Quarterly                    Q4 '07   Q4 '08  % current      %
    comparable change                               change   comparable
                                                              change(1)
    Minerals for Ceramics, 
    Refractories, Abrasives
    & Foundry                     274.2    269.1   - 1.9%     - 8.2%
    Performance &       
    Filtration Minerals           128.1    119.6   - 6.5%    - 12.8%
    Pigments for Paper            194.0    181.4   - 6.1%    - 10.1%
    Materials &        
    Monolithics                   262.7    228.4  - 13.1%    - 11.7%
    Total                         849.4    788.9   - 7.1%    - 10.5%

    ...continued
    
    Quarterly comparable          2007     2008      %            %
    change                                        current     comparable 
                                                  change      change(1)
    Minerals for Ceramics,   
    Refractories, Abrasives
    & Foundry                  1 051.2  1 159.8   + 10.3%      + 4.8%
    Performance &      
    Filtration Minerals          564.5    526.5    - 6.7%      - 2.6%
    Pigments for Paper           798.9    764.4    - 4.3%      - 0.5%
    Materials &                                          
    Monolithics                1 025.7  1 041.4    + 1.5%      - 0.1%
    Total                      3 401.9  3 449.2    + 1.4%      + 0.7% 

    
    Quarterly change     Q1'08   Q2'08   H1'08   Q3'08  Q4'08    H2'08   2008
    Imerys Group - 
    current change      + 3.9%  + 4.3%  + 4.1%  + 4.5%  - 7.1%  - 1.3% + 1.4%
    
    Imerys Group -        
    comparable change, of
    which:              + 3.2%  + 5.1%  + 4.2%  + 5.0% - 10.5%  - 2.7% + 0.7%
    Minerals for Ceramics,
    Refractories,
    Abrasives & Foundry + 6.3% + 11.1%  + 8.8% + 10.6%  - 8.2%  + 0.8% + 4.8%
    Performance &      
    Filtration Minerals - 1.9%  + 0.0%  - 0.9%  + 3.0% - 12.8%  - 4.3% - 2.6%
    Pigments for Paper  + 3.9%  + 3.9%  + 3.9%  + 0.0% - 10.1%  - 4.9% - 0.5%
    Materials &    
    Monolithics         + 3.0%  + 3.6%  + 3.3%  + 5.1% - 11.7%  - 3.5% - 0.1%

    
    Sales by geographic             2008   2007
    destination

    Western Europe                   53%    55%

    - of which France                19%    20%
    North America(2)                 19%    20%
    Japan / Australia                 5%     5%
    Emerging countries               23%    20%
    Total                           100%   100%

    (1) Change at comparable Group structure and exchange rates.

    (2) United-States & Canada.

    
    Sales by business group        2008   2007
    Minerals for Ceramics,          
    Refractories, Abrasives &
    Foundry                         33%    30%
    Performance & Filtration        
    Minerals                        15%    16%
    Pigments for Paper              22%    24%
    Materials & Monolithics         30%    30%
    Total                          100%   100%


    
    2. Simplified income statement
   
    (EUR millions)           Q4 '08   Q4 '07  Change   H2 '08  H2 '07  Change

    Sales                     788.9    849.4  + 7.1%  1,675.1 1,697.1  - 1.3%
    Current operating income   75.2    116.6 - 35.5%    167.2   235.4 - 29.0%
    Financial income 
    (expense)                 (16.4)   (13.8)           (17.2)  (26.8)
    Current tax               (16.0)   (21.1)           (37.9)  (49.8)
    Minority interests /  
    equity method               3.6      3.1              5.5     3.1
    Net income from current 
    operations (1)             46.3     84.8 - 45.4%    117.6   161.9 - 27.4%
    Other revenue and 
    expenses, net             (80.7)   (17.4)           (97.9)  (29.2)
    Net income (1)            (34.4)    67.4    n.a.     19.7   132.7    n.a.

    (1) Group's share.

    
    APPENDIX Imerys - 2008 Summary financial statements

    CONSOLIDATED INCOME STATEMENT

    (EUR millions)
                                                               2008      2007

    Revenue                                                 3,449.2   3,401.9
    Raw materials and consumables used                    (1,268.5) (1,159.9)
    External expenses                                       (890.7)   (867.7)
    Staff expenses                                          (652.3)   (685.4)
    Taxes and duties                                         (53.0)    (47.9)
    Amortization, depreciation and impairment losses        (193.2)   (197.4)
    Other operational revenue and expenses                     11.9      34.7
    Current operating income                                  403.4     478.3
    Income on asset disposals                                   0.1     (1.3)
    Impairment losses, restructuring and litigation         (115.0)    (44.7)
    Other operating revenue and expenses                    (114.9)    (46.0)
    Operating income                                          288.5     432.3
    Income from securities                                      4.1       5.7
    Gross financial debt expense                             (61.1)    (63.7)
    Net financial debt expense                               (57.0)    (58.0)
    Other financial revenue                                   231.9      50.5
    Other financial expenses                                (221.2)    (48.2)
    Financial income (loss)                                  (46.3)    (55.7)
    Income taxes                                             (88.9)    (96.6)
    Share in net income of associates                          10.4       6.9
    Net income                                                163.7     286.9
    of which:
    Net income, Group share                                   161.3     284.2
    Net income, minority interests                              2.4       2.7
 
    Net income, Group share                                   161.3     284.2
    of which:
    Net income from current operations, Group share           267.1     316.7
    Other net operating revenue and expenses, Group share   (105.8)    (32.5)
    (in EUR)
    Net basic earnings per share from current operations       4.25      5.00
    Net basic earnings per share                               2.57      4.49
    Diluted net earnings per share                             2.56      4.49
    Average exchange rate euro/USD                           1.4708    1.3702

    
                                 Imerys - 2008 Summary Financial Statements

    CONSOLIDATED BALANCE SHEET

    (EUR millions)                                             2008    2007
    CONSOLIDATED ASSETS
    Goodwill                                                  899.4   860.7
    Intangible assets                                          45.0    49.3
    Mining assets                                             395.6   399.6
    Property, plant and equipment                           1,314.0 1,280.9
    Investments in associates                                  51.6    42.9
    Available-for-sale financial assets                         5.5     9.0
    Other financial assets                                     13.8    11.3
    Other receivables                                          40.4    46.8
    Derivative financial assets                                18.7     5.6
    Deferred tax assets                                        55.9    59.4
    Total non-current assets                                2,839.9 2,765.5
    Inventories                                               611.0   502.0
    Trade receivables                                         523.3   623.4
    Other receivables                                         154.2   133.3
    Derivative financial assets                                 1.1   (0.6)
    Marketable securities and other financial assets            4.4     5.3
    Cash and cash equivalents                                 214.0   173.4
    Total current assets                                    1,508.0 1,436.8
    TOTAL CONSOLIDATED ASSETS                               4,347.9 4,202.3
    CONSOLIDATED LIABILITIES AND SHAREHOLDERS' EQUITY
    Capital                                                   125.6   126.3
    Premiums                                                  115.8   131.7
    Reserves                                                1,123.7 1,097.5
    Net income, Group share                                   161.3   284.2
    Shareholders' equity, Group share                       1,526.4 1,639.7
    Minority interests                                         19.9    23.9
    Shareholders' equity                                    1,546.3 1,663.6
    Provisions for employee benefits                          133.2   177.7
    Other provisions                                          153.7   150.5
    Loans and financial debts                               1,054.7 1,021.1
    Other debts                                                13.6    23.0
    Derivative financial liabilities                           19.2    12.5
    Deferred tax liabilities                                   75.4    53.9
    Total non-current liabilities                           1,449.8 1,438.7
    Other provisions                                           20.8    14.8
    Trade payables                                            337.9   321.5
    Income taxes payable                                       13.4    30.0
    Other debts                                               199.7   240.3
    Derivative financial liabilities                           49.8     2.8
    Loans and financial debts                                 727.3   388.0
    Bank overdrafts                                             2.9   102.6
    Total current liabilities                               1,351.8 1,100.0
    TOTAL CONSOLIDATED LIABILITIES AND SHAREHOLDERS' EQUITY 4,347.9 4,202.3
    Net financial debt                                      1,566.1 1,343.0
    Closing exchange rate euro/USD                           1.3917  1.4721


    CONSOLIDATED CASH FLOW STATEMENT

    (EUR millions)                                             2008    2007
    Cash flow from operating activities
    Cash flow generated by current operations                 576.3   612.9
    Interests paid                                            (46.6)  (58.4)
    Income taxes on current operating income and 
    financial income (loss)                                  (127.1) (118.0)
    Dividends received                                          4.4     2.6
    Cash flow generated by other operating revenue 
    and expenses                                              (41.8)  (41.2)
    Cash flow from operating activities                       365.2   397.9
    Cash flow from investing activities
    Acquisitions of property, plant and equipment and 
    intangible assets                                        (247.9) (351.9)
    Acquisitions of investments in consolidated entities 
    after deduction of cash acquired                         (142.6) (191.4)
    Acquisitions of available-for-sale financial assets           -       -
    Disposals of property, plant and equipment and 
    intangible assets                                          20.9    27.5
    Disposals of investments in consolidated entities 
    after deduction of cash disposed of                         0.9    18.4
    Disposals of available-for-sale financial assets            0.3       -
    Net change in financial assets                             (0.6)   (0.4)
    Paid-in interests                                           2.9     2.8
    Cash flow from investing activities                      (366.1) (495.0)
    Cash flow from financing activities
    Capital increases                                           0.9    15.9
    Capital decreases                                         (17.4)  (42.1)
    Disposals (acquisitions) of treasury shares                11.5   (13.6)
    Dividends paid to shareholders                           (119.0) (114.2)
    Dividends paid to minority interests                       (0.7)   (1.8)
    Loan issues                                               490.8   503.4
    Loan repayments                                           (15.2) (402.8)
    Net change in other debts                                (205.1)   93.9
    Cash flow from financing activities                       145.8    38.7
    Change in cash and cash equivalents                       144.9   (58.4)
 
    Cash and cash equivalents at the beginning of the period   70.8   136.5
    Change in cash and cash equivalents                       144.9   (58.4)
    Impact of changes due to exchange rate fluctuations        (4.4)   (7.3)
    Impact of changes in accounting policies                   (0.1)      -
    Cash and cash equivalents at the end of the period        211.2    70.8
 
    Cash and cash equivalents                                 214.0   173.4
    Bank overdrafts                                            (2.8) (102.6)
    Cash and cash equivalents at the end of the period        211.2    70.8

    
    Analyst/Investor Relations:              Press contacts:
    Isabelle Biarnes -                       Isabelle Biarnes - 
    +33(0)1-49-55-63-91                      +33(0)1-49-55-63-91 /66-55

    Pascale Arnaud -                         Matthieu Roquet-Montegon - 
    +33(0)1-49-55-63-23                      +33(0)6-16-92-80-65





                                                                                                                                           

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