Press information

PILKINGTON plc TRADING STATEMENT

In accordance with its established policy, Pilkington today issued the following trading update ahead of its interim results announcement for the period to 30 September 2005, which will be made on Thursday, 3 November 2005.

International Financial Reporting Standards (IFRS)

Pilkington, along with all EU listed companies, is now required to produce its financial results under IFRS. In anticipation of this change, earlier this year Pilkington published IFRS information relating to its balance sheet at 1 April 2004 and its results for the first half-year and for the full year to 31 March 2005. Full details, together with reconciliations between previously published UK GAAP reported results and those prepared under IFRS, are available on the Pilkington website at www.pilkington.com. References in this trading statement to expected changes compared with previously reported numbers include any adjustments required under IFRS.

Summary

Profit before tax is expected to be more than 20 per cent above the first half of last year, taking into account the timing of strong first half licensing and engineering receipts. The market background remains challenging, made more so with rising energy costs, however solid progress is being made in Automotive and the Group expects to meet market expectations for the full year.

Stuart Chambers, Group Chief Executive commented:

“Pilkington continues to deliver ongoing improvements in manufacturing efficiency and cost reduction. Results for the underlying core businesses in the first half-year are in line with our expectations. Emphasis on generating free cash flow will enable us to report another strong cash performance. The Group remains on track to begin its transition to the third phase of its strategy over the course of this financial year and has begun to target investments into profitable growth opportunities.”

Building Products

Building Product markets in general remain competitive, despite which revenues are up by approximately 5 per cent.

Rising energy and raw material prices continue to put pressure on input costs. However, renewed cost reduction efforts, efficiency improvements, and the surcharge mechanisms which pass on part of the impact of energy cost increases have mitigated the effects. Overall, profits in Building Products should improve over the first half of last year by up to 10 per cent.

The European Building Products business represents two thirds of total Building Products sales. The energy surcharge introduced last year has offset some of the cost push from higher gas and oil costs, though underlying float prices continue to be under pressure. The UK market is soft and utilisation levels are low, which has affected sales volumes and profitability. In continental Europe, market volumes have improved slightly, but prices have weakened. Nevertheless, due to improved operating efficiencies and a revamped management and administration structure, operating profits will be above the first half of last year.

Previously we reported that Building Products North America, representing 12 per cent of Building Products sales, was expecting the weak commercial construction sector to recover. The market has, as yet, failed to improve although expectations are that recovery will come. As a result, revenues are unchanged and profits are slightly down on last year.

In South America, our Building Products business continues to perform well. Economic conditions in the major markets are strong and revenues from our operating businesses are expected to be higher than last year. However, higher input costs and exchange rate fluctuations have impacted profitability, keeping returns at levels similar to last year. In Australasia and Asia revenues and profits are expected to improve on last year.

Automotive

Pilkington Original Equipment (OE) volumes were robust, partly due to several successful new product launches from vehicle manufacturers. The North American Automotive Glass Replacement (AGR) market has stabilised and AGR sales in Europe have improved. As a result, Pilkington Automotive operating profits will be up by around 25 per cent on the first half of last year.

More than 55 per cent of Pilkington Automotive’s sales are in Europe. The market for light vehicles has been flat, but once again, due to success with new models, Pilkington’s sales volumes continue to move ahead. The European AGR market has been stable, though the Group’s AGR sales increased. Our ongoing emphasis on efficiency improvements and cost reductions means that despite continuing price pressure and rising energy-related costs, profits in Automotive Europe will exceed the same period last year.

Over 30 per cent of our Automotive business is in North America, where light vehicle build is expected to be around 1 per cent up on last year. Our sales to OE manufacturers are higher than last year and the acquisition of AGR branches from Autostock has started to flow through into higher sales in the AGR market. There is still significant pressure on prices and higher energy costs, though the benefits of increased volumes, operational efficiency improvements and cost reductions will lift profits above the first half of last year.

In South America, light vehicle demand has risen 10 per cent. Strong sales volumes and ongoing manufacturing efficiencies will lead to higher operating profits than the same period last year. Results in Australasia have improved, partly as a result of stronger market volumes. In China, the market continues to expand rapidly and increased emphasis has been put on developing the cost and operational efficiency of the businesses.

Associates and Joint Ventures

Under IFRS, the results of joint ventures and associates are disclosed differently from UK GAAP. In future Pilkington will report the Group’s share of post tax profits of joint ventures and associates as a one line item, prior to disclosing the Group’s profit before tax.

In the first half the results from Vitro Plan SA de CV and subsidiaries (VVP) (in which Pilkington has a 35 per cent stake) are well down on last year, as VVP continues to suffer margin erosion in its main markets.

Operating profits in the Cebrace joint venture in Brazil are at similar levels to last year, though borrowing costs have risen following the investment last year in a fourth float line.

In China, the Group's main investment, SYP, has seen both sales and operating profit broadly in line with the first half of 2005, as China experiences steady demand for more high performance glass products in construction projects.

The Russian joint venture float with Emerging Markets Partnerships is due to be commissioned in the next few months.

Overall, largely as a result of the difficulties at VVP, we anticipate that the profit after tax contribution from associates and joint ventures will be down by more than 50%.

Finance

The Group remains committed to the generation of free cash flow, though cash flow generation in the half-year is likely to be lower than in the same period last year. The beginnings of investment for growth – the Autostock acquisition in North America and further investments in China – have been accomplished within self-generated cash flow, while still enabling borrowings at the end of September to be reduced further since March 2005.

Interest costs in the first half-year are running at similar levels to the first half of last year. Due to the volatility of some of the items now included within overall finance costs it is not possible to predict the final outcome for the half year at this stage. While the Group’s borrowings are down, interest rates are generally higher.

Both Standard and Poors and Moodys have reconfirmed the Group’s ratings at BBB and Baa2 respectively. In the first half-year, Pilkington refinanced £430 million of 5 year term facilities through a syndicated loan arranged through its core bankers, at substantially lower rates.

Analysts' Site Visit

Pilkington will be hosting a site visit for analysts and investors at its European Technical Centre at Lathom, Lancashire on 29 September 2005. The visit will entail presentations by management, with particular reference to the Group’s Automotive Products business and a guided tour of relevant parts of the Lathom site. No new financial information will be released in the course of this visit.

The presentations will be available from 29 September 2005 on the Investor Relations section of www.pilkington.com.