Summary

Paolo Scaroni, Chief Executive, commented:

"For the fifth year in a row, Pilkington will report improved results for the year to 31 March 2002. This performance is despite the deterioration we have experienced in our major markets in the second half of the financial year, where trading conditions were as bad as the Group has faced for several years. The new competitiveness which Pilkington now enjoys has underpinned our results."

Trading Environment

The slowdown in economic conditions worldwide affected demand in the automotive and construction sectors, with requirements for glass easing as the year progressed. North America slowed throughout 2001, while the construction sector in continental Europe has been weak for some time. In addition, confidence in South American markets has been dented by the financial crisis in Argentina. By contrast, the market in Australia has been recovering well.

Building Products

Efficiency and productivity improvements secured over the last few years were again the drivers behind the performance of our Building Products business. Despite lower demand and weaker selling prices, results for the business line will be ahead of last year.

In Europe, the economic slowdown affected demand for our Building Products business, which represents over 60% of Building Products sales. The UK was an exception to this trend where the market for Processed Products in particular has been strong.

In January 2002, at a time of low demand, one of the two floats at Gladbeck in Germany was taken down for cold repair. Restart was originally planned for May this year, but will now be postponed until market conditions improve. In the spring of this year our float plant at Porto Marghera (Venice) will also be taken down for repair.

Building Products North America, which accounts for approximately 20% of Building Products sales, was also affected by weak market conditions. However, the initial benefits from the North American Step Change programme, and the absence this year of cold repairs, have combined to provide an improved trading result.

Our 35% owned Mexican associate, VVP, increased its sales overall, largely due to growth in its foreign subsidiaries, particularly following the acquisition of Cristal Glass in Spain. Domestic Mexican sales were stable despite pressure from Asian imports. Profits were adversely affected by the strong peso, since a significant proportion of sales are in foreign currencies.

Our Building Products business in Brazil was affected by currency devaluations at the beginning of 2001. Droughts affecting the generation of hydro electricity then led to limitations on electricity usage. The business in Argentina has been disrupted by the economic crisis. Chile also suffered from devaluations and increased imports of glass. Despite the external pressures, ongoing efforts on cost reduction and excellent production performance on the float plants produced satisfactory returns from South America overall. In the final quarter, the float plant at Cacapava was taken down for its first repair after twelve years in operation.

The Australian housing market began the year at very low levels, but improved sharply in the second half year. Commercial building activity is now improving as well. The float plant at Ingleburn (Sydney) was shut down for a mini repair in the summer of 2001 and is now back in full production. Reorganisation and cost reduction efforts showed through strongly in improved results.

Our 19% owned associate company in China, SYP, had another good year, with both sales and profits ahead.

Automotive

The Automotive business experienced a mixed year. The OE business was adversely affected by the fall off in car production worldwide, though the auto glass replacement business held up well.

The European Automotive glass business accounts for approximately half the Group's automotive sales. OE sales declined, due to slowing demand and model changes at major manufacturers, which failed to materialise as quickly as planned. While results will be adversely affected this year, the ongoing programme of productivity and quality improvements will ensure that the impact is muted. The position is expected to recover once the model changes are worked through.

The Automotive Glass Replacement business in Europe consists essentially of two businesses; specialised OE (for buses, coaches and trucks), and autoglass replacement. Specialist OE had a difficult year, as a consequence of the fall off in demand for leisure travel, and for trucks. However, demand for replacement glass was strong, supported by growing requirements for more complex windscreens. Results overall matched last year's strong performance.

In North America our OE sales fell 10%. Completion of a short term contract to supply Ford, which was anticipated for some time, was a contributory factor. In difficult market conditions, GM, our major customer, fared the best of America's "Big Three".

Two fabrication plants - one in Sherman, Texas and one in Lathrop, California - were closed towards the end of the year, with business successfully re-sourced to other facilities. This brings to an end the "infrastructure" phase of the North American Step Change programme, as a result of which automotive OE fabrication in North America has been concentrated in three major facilities. The aim now is to bring productivity and quality levels up to the levels already achieved elsewhere in Pilkington.

The Automotive Glass Replacement business in North America is now producing very good returns, following a complete reworking of the business model. The turnround was facilitated by the innovative use of e-commerce.

In Mexico, VVP's automotive glass division experienced a reduction in demand and produced lower profits.

In South America, automotive production in Argentina has virtually ground to a halt, while Brazil was affected by uncertainties following the devaluation in 2001. Continued productivity improvements mitigated the impact on results, which will be modestly lower for the year.

Results of the Australian automotive business improved on last year, as a result of good work to improve productivity.

Pilkington continues to grow its position as number one supplier to the Chinese automotive market, outside the domestic producers. Though still relatively small, the business is profitable and is growing rapidly.

Aerospace

Our aerospace business was adversely affected by the sharp contraction experienced by the commercial aviation industry in the second half year. Nevertheless considerable progress was made on the military side, where a long term contract was secured to provide canopies for the Joint Strike Fighter, itself one of the largest military contracts ever awarded. Other contracts obtained, both civil and military, point to a good future for this business.

Growth

The new integrated float and laminating line at Freyming - Merlebach, France, operated with our joint venture partner, Interpane, started up in November 2001 and is operating well. The float plant has sales capacity of approximately 250,000 tonnes/year of which Pilkington's share is half. Construction of the fourth float line in Brazil to be operated by Cebrace, Pilkington's joint venture with Saint Gobain, began in February, in the south of the country. The float plant, to be built by Pilkington Engineering, will have a sales capacity of approximately 200,000 tonnes/year and will commence production in spring 2003.

Demand for Pilkington's products continues to be driven by an increasing requirement for sophisticated and added-value glass in both the automotive and building products sectors.

The European production plant for Pilkington Activ(TM) , the world's first self-cleaning glass, started up at Weiherhammer, Germany, in December 2001. Availability of production quantities of this exciting new product led to the full product launch in March 2002 starting with the Fensterbau trade fair in Germany. Pilkington Activ(TM) is now on sale in Austria, Benelux, France, Germany, Ireland and Switzerland. Other European countries, including the UK, will follow later in the year. Interest in North America, where Activ(TM) was first manufactured, has been strong. Several projects featuring Activ(TM) have now been completed, while a major customer in Canada has already committed to convert 100% of its double glazing output to Pilkington Activ(TM) .

Ends