FORM 6-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION ~~Washington, DC 20549~~

Washington, DC 20549

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13(a)-16 OR 15(d)-16 OF THE SECURITIES EXCHANGE ACT OF 1934

~~November~~August 45, ~~2003~~2004

Commission File No. 333-87974

INEOS GROUP HOLDINGS ~~Plc (Exact name of registrant as specified in its charter) INEOS HOLDINGS LIMITED (Exact name of registrant as specified in its charter)~~PLC

(Exact name of registrant as specified in its charter)

England and Wales
(Jurisdiction of incorporation or organisation)

Hawkslease, Chapel Lane, Lyndhurst, Hampshire SO43 7FG, United Kingdom
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under
cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934

Yes o No x

Page 1

TABLE OF CONTENTS

CONSOLIDATED PROFIT AND LOSS ACCOUNTS ~~(UNAUDITED)~~ CONSOLIDATED BALANCE SHEETS CONSOLIDATED CASH FLOW STATEMENTS ~~(UNAUDITED)~~ RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS FUNDS NOTES TO THE FINANCIAL STATEMENTS ~~(UNAUDITED)~~ OPERATING AND FINANCIAL REVIEW AND PROSPECTS SIGNATURES

INEOS GROUP HOLDINGS ~~CONSOLIDATED PROFIT AND LOSS ACCOUNTS (UNAUDITED)~~

	Three-Month Period Ended						Nine-Month Period Ended
	September 30,						September 30,
	2002			2003			2002			2003
	(€ in millions)						(€ in millions)
Turnover		585.7			594.4			1,686.3			1,926.7
Cost of sales		(481.2	)		(483.5	)		(1,375.4	)		(1,612.5	)
Gross profit		104.5			110.9			310.9			314.2
Distribution costs		(40.8	)		(39.1	)		(120.3	)		(114.4	)
Administrative expenses		(16.5	)		(13.4	)		(47.0	)		(34.7	)
Exceptional administrative expenses		(1.2	)		—			(17.3	)		—
Other operating income		—			4.9			—			13.4
Operating profit		46.0			63.3			126.3			178.5
Share of operating profit of associate		—			0.2			0.2			0.5
Profit on disposal of subsidiary		—			—			—			0.1
Profit on disposal of fixed assets		—			1.3			—			1.3
Net interest payable		(15.0	)		(15.9	)		(55.2	)		(47.2	)
Profit on ordinary activities before taxation		31.0			48.9			71.3			133.2
Taxation on profit on ordinary activities		(4.5	)		(2.1	)		(19.4	)		(9.5	)
Profit on ordinary activities after taxation		26.5			46.8			51.9			123.7
Equity dividends		—			(20.8	)		—			(20.8	)
Profit for the financial period		26.5			26.0			51.9			102.9

CONSOLIDATED PROFIT AND LOSS ACCOUNTS (UNAUDITED)


	Three-Month Period						Six-Month Period
	Ended June 30,						Ended June 30,
	2003			2004			2003			2004
	(€ in millions)						(€ in millions)
Turnover		682.8			779.9			1,332.3			1,450.7
Cost of sales		(577.5	)		(671.6	)		(1,129.0	)		(1,243.1	)

Gross profit		105.3			108.3			203.3			207.6
Distribution costs		(36.7	)		(38.3	)		(75.3	)		(73.9	)
Administrative expenses		(9.5	)		(8.8	)		(21.3	)		(15.7	)
Other operating income		8.5			—			8.5			—

Operating profit		67.6			61.2			115.2			118.0
Share of operating profit of associate		0.2			0.1			0.3			0.2
Profit on disposal of subsidiary		0.1			—			0.1			—
Net interest payable and similar charges		(17.2	)		(13.4	)		(31.3	)		(34.4	)

Profit on ordinary activities before taxation		50.7			47.9			84.3			83.8
Taxation on profit on ordinary activities		(4.5	)		(4.7	)		(7.4	)		(9.0	)

Profit on ordinary activities after taxation		46.2			43.2			76.9			74.8
Equity dividends		—			(44.1	)		—			(44.1	)

Profit/(loss) for the financial period		46.2			(0.9	)		76.9			30.7

The accompanying notes are an integral part of these consolidated financial statements.

Page 2

INEOS GROUP HOLDINGS ~~CONSOLIDATED BALANCE SHEETS~~

	December 31, 2002			September 30, 2003
	(Audited)			(Unaudited)
	(€ in millions)
Fixed assets
Investments		1.4			1.6
Tangible fixed assets		987.8			898.6
Intangible fixed assets		14.0			12.8
Negative goodwill		(282.3	)		(243.3	)
		720.9			669.7
Current assets
Cash at bank and in hand		108.9			135.0
Stocks		162.4			154.9
Debtors: amounts falling due within one year		326.3			351.8
Debtors: amounts falling due after one year		64.0			60.0
		661.6			701.7
Creditors : amounts falling due within one year		(439.9	)		(415.7	)
Net current assets		221.7			286.0
Total assets less current liabilities		942.6			955.7
Creditors : amounts falling due after one year		(786.1	)		(734.5	)
Provisions for liabilities and charges		(70.1	)		(54.4	)
Net assets		86.4			166.8
Capital and reserves
Share capital		17.7			17.7
Share premium		51.1			51.1
Profit and loss account		17.6			98.0
Equity shareholders’ funds		86.4			166.8

CONSOLIDATED BALANCE SHEETS


	December 31, 2003			June 30, 2004
	(Audited)			(Unaudited)
	(€ in millions)
Fixed assets
Investments		1.7			2.0
Tangible fixed assets		855.8			837.1
Intangible fixed assets		12.1			11.8
Negative goodwill		(217.4	)		(201.9	)

		652.2			649.0
Current assets
Cash at bank and in hand		153.3			81.6
Stocks		151.0			160.3
Debtors : amounts falling due within one year		370.0			475.2
Debtors : amounts falling due after one year		73.7			72.5

		748.0			789.6
Creditors : amounts falling due within one year		(520.0	)		(523.2	)

Net current assets		228.0			266.4
Total assets less current liabilities		880.2			915.4
Creditors : amounts falling due after one year		(650.6	)		(633.4	)
Provisions for liabilities and charges		(50.4	)		(52.7	)

Net assets		179.2			229.3

Capital and reserves
Called up equity share capital		17.7			17.7
Share premium account		51.1			51.1
Profit and loss account		110.4			160.5

Equity shareholders’ funds		179.2			229.3

The accompanying notes are an integral part of these consolidated financial statements.

Page 3

INEOS GROUP HOLDINGS ~~CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)~~

	Nine-Month Period Ended
	September 30,
	2002			2003
	(€ in millions)
Operating profit		126.3			178.5
Depreciation of tangible assets		67.4			75.1
Amortization of goodwill/(write back of negative goodwill)		(6.6	)		(21.7	)
(Increase)/decrease in stocks		(4.2	)		0.2
(Increase)/decrease in debtors		(68.7	)		(36.5	)
Increase in creditors and provisions		4.6			(13.6	)
Net cash flow from operating activities		118.8			182.0
Returns on investments and servicing of finance
Interest received		1.6			1.7
Interest and other financing charges paid		(58.9	)		(60.5	)
		(57.3	)		(58.8	)
Taxation paid		(9.1	)		(8.1	)
Capital expenditure and financial investments
Payments to acquire tangible fixed assets		(26.9	)		(35.0	)
Receipts from sales of tangible fixed assets		—			3.3
		(26.9	)		(31.7	)
Acquisitions and disposals
Purchase of business		(4.6	)		—
Disposal of subsidiary undertaking		—			1.4
		(4.6	)		1.4
Equity dividends paid		—			(10.0	)
Net cash flow before financing		20.9			74.8
Financing
Repayment of previous borrowings		(0.8	)		—
Repayment of bank loans		(58.7	)		(44.8	)
Repayment of Senior Secured Notes		(1.6	)		—
Capital repayment on finance leases		(1.9	)		(1.9	)
		(63.0	)		(46.7	)
Increase/(decrease) in cash		(42.1	)		28.1

CONSOLIDATED CASH FLOW STATEMENTS (UNAUDITED)


	Six-Month Period
	Ended June 30,
	2003			2004
	(€ in millions)
Operating profit		115.2			118.0
Depreciation of tangible assets		50.6			58.2
Amortization of intangible assets		(14.5	)		(21.1	)
(Increase)/decrease in stocks		2.9			(5.5	)
(Increase)/decrease in debtors		(75.9	)		(98.3	)
Increase in creditors and provisions		14.7			49.7

Net cash flow from operating activities		93.0			101.0
Returns on investments and servicing of finance
Interest received		1.1			1.3
Interest and other financing charges paid		(37.9	)		(28.1	)

		(36.8	)		(26.8	)
Taxation paid		(6.3	)		(12.0	)
Capital expenditure and financial investments
Payments to acquire tangible fixed assets		(23.3	)		(25.4	)
Acquisitions and disposals
Purchase of business		—			—
Disposal of subsidiary undertaking		1.4			—

		1.4			—
Equity dividends paid		—			(39.8	)

Net cash flow before financing		28.0			(3.0	)
Financing
Repayment of bank loans		(44.9	)		(70.1	)
Other loans		—			0.1
Loan to associate undertaking		0.1			—
Capital repayment on finance leases		(1.7	)		(0.2	)
		(46.5	)		(70.2	)

Increase/(decrease) in cash		(18.5	)		(73.2	)

The accompanying notes are an integral part of these consolidated financial statements.

Page 4

INEOS GROUP HOLDINGS ~~RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS FUNDS~~

	Equity
	Shareholders Funds
	(€ in millions)
At January 1, 2003		86.4
Retained profit for the current period		102.9
Currency translation differences		(22.5	)
At September 30, 2003		166.8

RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS FUNDS


	Equity
	Shareholders Funds
	(€ in millions)
At January 1, 2004		179.2
Retained profit for the current period		30.7
Currency translation differences		19.4

At June 30, 2004		229.3

The accompanying notes are an integral part of these consolidated financial statements.

Page 5

INEOS GROUP HOLDINGS ~~NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)~~

NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PREPARATION

Ineos Group Holdings plc (Ineos Group Holdings or the “Company”), was incorporated on May 14, 2001 as a holding company to house the ownership interests in certain chemical businesses acquired and controlled by a common owner. These businesses are comprised of Ineos Oxide (formerly Ineos plc), Ineos Fluor, Ineos Silicas and Ineos Phenol. ~~With effect from January 1, 2001,~~ ~~the financial statements present the results of operations and financial~~ ~~position of Ineos Oxide, Ineos Fluor and Ineos Silicas. Ineos Fluor and Ineos~~ Silicas were acquired on January 9, 2001. Our results of operations reflect the purchase of Ineos Fluor and Ineos Silicas from an effective acquisition date of January 1, 2001. The financial statements include the results of Ineos Phenol from May 23, 2001, the date on which it was acquired from Degussa AG.

The accompanying consolidated financial statements have been prepared on a historical cost basis in accordance with generally accepted accounting principles in the United Kingdom (“''UK GAAP”’’).

The consolidated financial statements include all subsidiaries of the Company. Intra-group transactions and balances have been eliminated on consolidation.

The financial and operating results for any period less than a year are not necessarily indicative of the results that may be expected for a full year.

The accompanying consolidated financial statements of the Company are unaudited, with the exception of the balance sheet as at December 31, ~~2002~~2003 which has been extracted from audited financial statements.

In the opinion of the management of the Company, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. All adjustments are of a normal recurring nature unless otherwise disclosed. Management believes that the disclosures made are adequate for a fair presentation of results of operations, financial position and cash flows.

2. PRINCIPAL ACCOUNTING POLICIES

The financial information has been prepared using accounting policies in accordance with UK GAAP. The financial information has been prepared under the historical cost convention and in accordance with the accounting policies set out in the Company’s annual report on Form 20-F for the year ended December 31, ~~2002~~ 2003. Certain prior year amounts have been reclassified to conform with the current year’s presentation.

3. SEGMENTAL INFORMATION

Class of business

The Company’s business comprises the production and distribution of intermediate and speciality chemicals and is made up of four business segments: Ineos Oxide, Ineos Fluor, Ineos Silicas and Ineos Phenol.

Page 6

INEOS GROUP HOLDINGS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (Continued)

3. SEGMENTAL INFORMATION (Continued)

The turnover and operating profit attributable to each different class of business as measured under UK GAAP is as follows:

	Three-Month Period Ended				Nine-Month Period Ended
	Three-Month period				Six-Month period ended
	September 30,				September 30,
	ended June 30,				June 30,
	2002		2003		2002		2003
	2003		2004		2003		2004
	(€ in millions)				(€ in millions)
Turnover
Ineos Oxide		~~134~~129.89		~~127~~144.79		~~377~~251.73		~~379~~281.07
Ineos Fluor		7277.73		6582.78		~~235~~148.93		~~214~~149.05
Ineos Silicas		5655.12		5452.02		~~178~~109.31		~~163~~106.12
Ineos Phenol		~~322~~420.14		~~347~~500.0		~~894~~823.46		~~1,170~~913.63
		585.7		594.4		1,686.3		1,926.7
		682.8		779.9		1,332.3		1,450.7
EBITDA
Ineos Oxide		2123.52		2523.38		5740.80		6548.39
Ineos Fluor		1217.98		1118.80		4733.73		4531.10
Ineos Silicas		1011.15		9.5		3120.4		2919.94
Ineos Phenol		2133.51		3428.24		6757.79		9256.10
		66.0		80.8		204.6		232.4
		85.6		79.7		151.6		155.3

Reconciliation of earnings before operating exceptional items, interest, taxation, depreciation and amortisation (‘EBITDA’) to operating profit:

	Three-Month Period Ended						Nine-Month Period Ended
	Three-Month period						Six-Month period ended
	September 30,						September 30,
	ended June 30,						June 30,
	2002			2003			2002			2003
	2003			2004			2003			2004
	(€ in millions)						(€ in millions)
EBITDA		6685.06			8079.87			~~204~~151.6			~~232~~155.43
Depreciation and amortisation		(1817.8	)		(1718.34	)		(6036.81	)		(5337.41	)
Exceptional restructuring costs		(1.2	)		—			(17.3	)		—
Operating profit (including share of operating profit of associate)		67.8			61.3			115.5			118.2
Operating profit (including share of operating profit of associate)		46.0			63.5			126.5			179.0

4. INCOME TAXES

The income tax charge for the three-month and ~~nine~~six-month periods ended ~~September~~ June 30, 2003 ~~2002~~ and ~~2003~~2004, is calculated based on the expected effective tax rate for the year.

Page 7

INEOS GROUP HOLDINGS
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (Continued)

5. INVENTORY

	December 31, 2002		September 30, 2003
	December 31, 2003		June 30, 2004
	(€ in millions)
Raw materials and consumables		5447.52		5362.23
Work in progress		1213.71		1215.56
Finished products		9590.27		8982.24
		162.4		154.9
		151.0		160.3

6. BORROWINGS

Long-term obligations as of December 31, ~~2002~~2003 and ~~September~~June 30, ~~2003~~2004 are as follows:

	December 31, 2002			September 30, 2003
	December 31, 2003			June 30, 2004
	(€ in millions)
Senior Credit Agreement		~~623~~515.26			~~564~~450.95
10 1/2% Senior Notes		260.0			260.0
10½% Senior Notes		260.0			260.0
Unamortised debt issue costs		(2116.49	)		(1814.59	)
		861.8			806.4
		758.7			695.6
Less: amounts falling due within one year		(77110.91	)		(7464.14	)
		783.9			732.3
		648.6			631.2
Finance leases		21.27			21.27
		786.1			734.5
Other loans		0.3			0.5
		650.6			633.4

Senior Notes

On July 19, 2001, the Company issued €260 million in ~~10 1~~101/2% Senior Notes due 2010 pursuant to a private offering. On June 21, 2002 the Company issued €260 million ~~10 1~~101/2% Senior Notes due 2010 pursuant to an exchange offer whereby holders of the original notes received new notes which have been registered under the US Securities Act of 1933 as amended, but are otherwise identical to the original notes. The Senior Notes are listed on the Luxembourg Stock Exchange.

The Senior Notes bear interest at ~~10 1~~101/2% per annum, payable semi annually in arrears on February 1 and August 1 of each year. Unless previously redeemed as noted below, the Senior Notes will be redeemed by the Company at their principal amount on August 1, 2010.

Page 8

INEOS GROUP HOLDINGS
NOTES TO THE FINANCIAL STATEMENTS (Continued)

6. BORROWINGS (Continued)

The Senior Notes will be subject to redemption at any time prior to August 1, 2004, at the option of the Company, in whole but not in part, at a redemption price equal to 100% of the principal amount thereof, plus the applicable redemption premium and accrued and unpaid interest to the redemption date.

The Senior Notes will be subject to redemption at any time on or after August 1, 2004, at the option of the Company, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount), if redeemed during the 12-month period beginning August 1 of the years indicated below:


	Redemption
Year	Price
2004		110.500	%
2005		107.788	%
2006		105.250	%
2007		102.625	%
2008 and thereafter		100.000	%

In each case, the redemption premium will be in addition to accrued and unpaid interest, if any, to the redemption date (subject to the rights of holders of record on relevant record dates to receive interest due on an interest payment date).

In addition, at any time on or prior to August 1, 2004, the Company or the direct or indirect parent of the Company, at its option, may use the net cash proceeds of one or more public equity offerings to redeem Senior Notes in an amount up to an aggregate of 35% of the sum of the initial aggregate principal amount of Senior Notes originally issued under the Indenture at a redemption price equal to 110.50% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date; provided that Senior Notes in an amount equal to at least 65% of the sum of the initial aggregate principal amount of Notes originally issued under the Indenture remains outstanding immediately after the occurrence of such redemption.

The Senior Notes are unsecured. The Senior Notes are guaranteed by Ineos Holdings on a senior subordinated basis. Such a guarantee only becomes due 179 days after an event of default on the Senior Notes has occurred or earlier under certain circumstances.

The Senior Notes are stated net of debt issue costs of €4.62 million (~~2002~~2003: €54.36 million). These costs are allocated to the profit and loss account over the term of the Senior Notes in accordance with FRS 4.

The Indenture contains a number of operating and financial covenants including limitations on indebtedness, restricted payments, transactions with affiliates, liens, sale of assets and dividend payments.

Senior Credit Agreement

The Company has outstanding borrowings under a credit agreement (the “Senior Credit Agreement”) which consists of Term Loans (“Term Loan A”, “Term Loan B” and “Term Loan C”) and a revolving credit facility (the “Revolving Credit Facility”). The Term Loans outstanding at ~~September~~June 30, ~~2003~~2004 were €~~564~~450.9 5 million, of which €7464.14 million is due within one year. The total amounts outstanding on Term Loan A were €~~271~~181.79 million (~~2002~~2003: €~~312~~233.47 million), Term Loan B were €~~169~~158.5 7 million (~~2002~~2003: €~~172~~168.46 million) and Term Loan C were €~~123~~109.7 9 million (~~2002~~2003: €~~138~~113.43 million).

Page 9

INEOS GROUP HOLDINGS
NOTES TO THE FINANCIAL STATEMENTS (Continued)

6. BORROWINGS (Continued)

Term Loan A is repayable in 12 semi-annual ~~instalments~~installments beginning on December 31, 2001 ranging from 1.14% to 9.73% of the principal amount of the loan up until the final repayment in June 2007. Term Loan B is repayable in 14 semi-annual ~~instalments~~installments beginning on December 31, 2001 ranging from 0.56% to 46.64% of the principal amount of the loan up until the final repayment in June 2008. Term Loan C is repayable in 16 semi-annual ~~instalments~~installments beginning on December 31, 2001 ranging from 0.56% to 46.08% of the principal amount of the loan up until the final repayment in June 2009.

The Term Loans bear interest at a rate equal to a margin plus either EURIBOR or LIBOR. The applicable per annum margins for the Term Loan A, Term Loan B and Term Loan C are 2.25%, 2.75% and 3.50% respectively. The margins on Term Loans A and B are subject to a reduction based on certain financial tests. The Company pays a commitment fee of 0.75% per annum on the undrawn amounts of the revolving credit facility.

Ineos Holdings Limited and substantially all of its material subsidiaries are guarantors of the Senior Credit Agreement. Their obligations are secured by fixed and floating charges over all of the assets of Ineos Holdings Limited and substantially all of the assets of those material subsidiaries.

The Senior Credit Agreement contains numerous operating and financial covenants including requirements to maintain minimum coverage of interest expense, minimum coverage of total debt service and a maximum leverage ratio. In addition, the Senior Credit Agreement includes covenants relating to, among other things, limitations on indebtedness, ability to give guarantees, creation of security interests, making acquisitions and investments, disposing of assets and paying dividends.

The Term Loans are stated net of unamortised debt issue costs of €1310.97 million (~~2002~~2003: €1612.13 million). These costs are allocated to the profit and loss account in accordance with FRS 4.

7. CONTINGENCIES

The company is subject to various proceedings instituted by governmental authorities arising under the provisions of applicable laws or regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment. In management’s opinion, none of the proceedings is material to the financial condition or results of operation of the company.

8. RECENT ACCOUNTING DEVELOPMENTS

In ~~June~~January ~~2001~~2004, the FASB issued ~~SFAS~~FASB ~~143,~~Staff Position (“FSP”) 106-1, Accounting and ~~for~~Disclosure ~~Asset~~Requirements ~~Retirement~~Related to Medicare Prescription Drug, Improvement ~~Obligations.~~and Modernization Act of 2003 (the “Act”). ~~The~~This ~~standard~~FSP ~~provides~~addresses the accounting implications ~~requirements~~of ~~for~~the ~~retirement obligations~~newly ~~associated~~issued ~~with~~Act ~~tangible~~to ~~long-lived~~an ~~assets.~~entity ~~The~~that ~~standard~~sponsors ~~requires~~a ~~that~~postretirement ~~the~~health ~~obligation~~care ~~associated~~plan ~~with~~that ~~the~~provides ~~retirement~~prescription ofdrug ~~tangible~~benefits. ~~long-lived~~This ~~assets~~Act, besigned ~~capitalized~~ into ~~the~~law ~~asset~~in ~~cost~~December 2003 atin the ~~time~~United ofStates, ~~initial~~introduces ~~recognition.~~a ~~The~~prescription ~~liability~~drug isbenefit ~~then~~under ~~discounted~~Medicare toas ~~its~~well ~~fair~~as ~~value~~a atfederal ~~the~~subsidy ~~time recognition~~to ~~using~~sponsors ~~the~~of ~~guidance~~certain ~~provided~~retiree byhealth ~~that~~care ~~standard~~benefit plans. The ~~Company~~FSP isincludes ~~required~~an election to ~~comply~~ ~~with~~defer ~~SFAS~~accounting ~~143~~for inthe ~~its~~implications ~~financial~~of ~~statements~~this ~~for~~new law until specific authoritative guidance to address the ~~year~~accounting ~~ending~~treatment ~~December 31,~~has ~~2003~~been issued. ~~The~~As ~~Company~~such, isas ~~currently~~a ~~assessing~~result of the ~~impact~~lack of ~~SFAS~~the ~~143~~existence onof ~~its~~such guidance, ~~financial~~any ~~position~~measures ~~and~~included ~~results~~in these financial statements of ~~operations~~the ~~and~~accumulated postretirement ~~does~~benefit ~~not~~obligation ~~believe~~(APBO) or net periodic post retirement benefit cost in the financial statements ~~will~~or beaccompanying ~~materially~~notes ~~impacted~~do bynot ~~its~~reflect the ~~adoption~~effects of the Act on the plan. Authoritative guidance, when issued, could require a change in previously reported information.

Page 10

INEOS GROUP HOLDINGS
NOTES TO THE FINANCIAL STATEMENTS (Continued)

8. RECENT ACCOUNTING DEVELOPMENTS (Continued)

In ~~April~~January ~~2002~~2003, the FASB issued ~~SFAS~~FASB Interpretation No. ~~145~~46, ~~“Rescission~~Consolidation of Variable ~~FASB~~Interest ~~Statements~~Entities ~~No. 4,~~(“FIN 4446”), ~~and~~which ~~64,~~was ~~Amendment~~amended ofin ~~FASB~~December 2003 ~~Statement~~when the ~~No. 13,~~FASB ~~and~~issued ~~Technical~~FIN ~~Corrections~~46-R.~~” This~~ ~~statement~~Under ~~eliminates~~ the ~~automatic~~interpretation, ~~classification~~as ofamended, ~~gain or loss on~~certain ~~extinguishment~~entities ofknown ~~debt~~ as an“Variable ~~extraordinary~~Interest ~~item~~Entities” of(VIE) must ~~income~~be ~~and~~consolidated ~~requires that~~by ~~such~~the ~~gain~~“primary orbeneficiary” ~~loss~~of bethe ~~evaluated~~entity. ~~for~~The ~~extraordinary~~primary ~~classification~~beneficiary ~~under~~is ~~the~~generally ~~criteria~~defined ofas ~~Accounting~~having ~~Principles~~the ~~Board~~majority ~~No. 30 “Reporting Results~~ of ~~Operations.”~~ ~~This~~the ~~statement~~risks ~~also~~and ~~requires~~rewards ~~sales-leaseback~~arising ~~accounting~~from ~~for~~the VIE. ~~certain~~FIN ~~lease~~46-R ~~modifications~~is ~~that~~effective ~~have~~immediately ~~economic~~for ~~effects~~entities ~~that~~created ~~are~~after ~~similar~~February 1, to2003. ~~sales-leaseback~~For ~~transactions,~~entities ~~and~~created ~~makes~~prior ~~various other technical corrections~~ to ~~existing~~ ~~pronouncements.~~February 1, ~~This~~2003 ~~statement~~FIN 46-R will be effective for the Company’s ~~for the year ending~~ December 31, ~~2003~~2004 financial statements. The ~~provisions of this statement relating to sale-leaseback accounting became effective for the~~ Company ~~in the previous~~has ~~fiscal~~determined ~~year,~~that the adoption of ~~which had no impact on our results of operations or financial position. The provisions of~~ this statement ~~relating~~will tohave ~~the classification~~no ofmaterial ~~gains~~impact ~~or losses arising~~ on ~~debt extinguishment will become~~ ~~applicable~~its ~~for~~results ~~the~~of ~~Company~~operations ~~for the year ending December 31, 2003~~ and ~~the Company does not believe the~~ financial ~~statements will be materially affected by its adoption~~position.

In ~~July~~December ~~2002~~2003, the FASB issued SFAS ~~No. 146~~132 ~~“Accounting~~(revised) ~~for~~Employers’ ~~Costs Associated~~Disclosures ~~with~~about ~~Exit~~Pensions orand ~~Disposal~~Other ~~Activities”~~Post Retirement Benefits (“~~SFAS~~FAS ~~146~~132(R)”). ~~SFAS~~FAS ~~146~~132(R) requires isadditional ~~effective~~disclosures ~~for~~about ~~exit or~~the ~~disposal~~plan ~~activities~~assets, ~~initiated after December 31~~obligations, ~~2002. This standard will~~investment ~~require~~strategies ~~Companies~~and torate ~~recognise costs associated with exit or disposal activities when they are incurred rather than at the date~~ of areturn ~~commitment~~assumptions tofor ~~an exit~~defined orbenefit ~~disposal plan~~plans. ~~The~~In ~~standard~~2003, we ~~replaces~~adopted the ~~existing~~revised ~~guidance~~disclosure ~~provided~~requirements ~~by EITF~~of ~~Issue~~this ~~No. 94-3~~standard, ~~“Liability~~except ~~Recognition~~ for ~~Certain Employee Termination~~ ~~Benefits~~certain ~~and~~disclosures ~~Other~~about ~~Costs~~non-UK toplans ~~Exit~~and anestimated ~~Activity~~future ~~(including~~benefit ~~Certain Costs Incurred~~payments inthat aare ~~Restructuring).”~~not ~~The~~required ~~Company~~until ~~does~~the ~~not~~year ~~have~~ended ~~any~~December 31, ~~immediate~~2004. ~~plans~~These toadditional ~~initiate~~disclosures ~~any~~are ~~activities~~not inrequired ~~2003~~for ~~that~~interim ~~would~~financial ~~be included within the scope of this standard~~statements.

OnThe ~~November 25,~~European ~~2002,~~Parliament ~~the~~and ~~FASB~~Council ~~issued~~of ~~FASB~~the ~~Interpretation~~European ~~No. 45~~Union ~~(“FIN~~issued ~~45”~~a orregulation ~~the~~in ~~“Interpretation”),~~2002 ~~Guarantor’s~~that ~~Accounting~~will ~~and~~require ~~Disclosure~~all ~~Requirements~~EU ~~for Guarantees,~~listed ~~Including~~companies ~~Indirect~~to ~~Guarantees~~prepare oftheir ~~Indebtedness of Others (an~~consolidated ~~interpretation~~financial ofstatements ~~FASB~~in ~~Statements~~accordance ~~No. 5,~~with 57International ,Financial ~~and 107 and rescission of FASB~~Reporting ~~Interpretation~~Standards ~~No. 34~~(“IFRS”). ~~FIN~~rather 45than ~~clarifies~~ the ~~requirements~~existing ofnational ~~FASB Statement No~~GAAP. 5 ~~(FAS~~This ~~5),~~regulation applies ~~Accounting~~to ~~for~~Ineos ~~Contingencies,~~Group ~~relating~~Holdings toas aour ~~guarantor’s accounting~~Senior ~~for,~~Notes ~~and~~are ~~disclosure~~listed ~~of,~~on the Luxembourg ~~issuance~~Stock ~~of certain types of guarantees~~Exchange. The ~~Interpretation’s~~regulation ~~provisions~~takes effect for ~~initial~~the ~~recognition and measurement are to~~accounting beperiods ~~applied~~beginning onafter aJanuary 1, ~~prospective~~2005 ~~basis~~and toconsequently ~~guarantees~~the ~~issued or modified after~~accounting ~~December 31,~~framework ~~2002,~~under ~~irrespective~~which of the ~~guarantor’s~~Company ~~fiscal~~reports ~~year-end~~will change. The Company will ~~guarantor’s~~produce ~~previous~~its ~~accounting~~consolidated ~~for~~financial ~~guarantees~~statements ~~that~~in ~~were~~accordance ~~issued~~with ~~before~~IFRS ~~the~~for ~~date~~the ofyear ~~FIN~~ended ~~45’s~~December 31, ~~initial~~2005. ~~application~~We ~~may~~are ~~not~~currently beevaluating ~~revised~~the orareas ~~restated~~that towill be ~~reflect~~most ~~the effect~~affected ofby the ~~recognition~~adoption ~~and measurement provisions~~ of ~~the~~IFRS, ~~Interpretation. The~~including ~~Company is currently~~ assessing the impact ~~that~~on ~~the~~our underlying ~~recognition~~systems and ~~measurement~~ ~~requirements~~financial ~~will~~statements ~~have~~and onour ~~future~~US ~~reporting~~GAAP reconciliations.

On January 17, 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46” or the “Interpretation”), Consolidation of Variable Interest Entities, an interpretation of ARB 51. The primary objectives of FIN 46 are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (“variable interest entities” or “VIEs”) and how to determine when and which business enterprise should consolidate the VIE (the “primary beneficiary”). This consolidation model applies to an entity which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. The effective date relating to implementation and disclosure requirements included in the Interpretation are for VIEs created before February 1, 2003, effective no later than the beginning of the first interim or annual reporting period beginning after June 15, 2003 and for VIEs created after January 31, 2003, effective immediately. The Company is currently assessing the impact of FIN 46 on its financial position and results of operations and does not believe the financials statements will be materially impacted by its adoption.

Page 11

INEOS GROUP HOLDINGS NOTES TO THE FINANCIAL STATEMENTS (Continued)

8. RECENT ACCOUNTING DEVELOPMENTS (Continued)

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective prospectively for contracts entered into or modified after June 30, 2003 and prospectively for hedging relationships designated after June 30, 2003. The Company is currently analysing the impact of this Statement but does not believe that it will have a material impact on its results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, “Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity.” The Statement improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity and requires that these instruments be classified as liabilities in statements of financial position. This Statement is effective prospectively for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. This statement shall be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. The Company is currently analysing the impact of this Statement.

Page 12

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

FORWARD-LOOKING STATEMENTS

The Company includes “forward-looking statements”, within the meaning of the US securities laws, based on our current expectations and projections about future events, including:

•

Our high degree of leverage and significant debt service obligations as well as future cash flow and earnings;

•

Our sales growth across our principal businesses and our strategy for controlling costs, growing margins, increasing manufacturing capacity and production levels and making capital expenditures;

•

Raw material costs or supply arrangements;

•

Our technological and manufacturing assets and our ability to utilise them to further increase sales and the profitability of our businesses;

•

Our ability to retain existing customers and obtain new customers;

•

Our ability to develop new products and technologies successfully;

•

The cyclical and highly competitive nature of our businesses;

•

Risks related to environmental costs, liabilities or claims; and

•

Currency fluctuations.

All statements other than statements of historical facts included in this report including, without limitation, statements regarding our future financial position, risks and uncertainties related to our business and the notes, strategy, capital expenditures, projected costs and our plans and objectives for future operations, may be deemed to be forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties. Words such as “believe”, “expect”, “anticipate”, “may”, “intend”, “will”, “should”, “estimate” and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. In addition, from time to time we or our representatives, acting in respect of information provided by us, have made or may make forward-looking statements orally or in writing and these forward-looking statements may be included in but are not limited to press releases (including on our website), filings with the US Securities and Exchange Commission, reports to our security holders and other communications. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Page 1312

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

We are a leading global chemical manufacturer of speciality and intermediate chemicals. Our company is comprised of Ineos Oxide, Ineos Phenol, Ineos Fluor and Ineos Silicas.

Our products include a wide range of ethylene-based, fluorine-based and inorganic speciality chemicals, as well as intermediate chemicals, such as phenol, acetone and ethylene glycol (EG). We believe our businesses are distinguished by the broad experience of our shareholders and our management teams, leading market positions, high quality and low-cost production facilities and operating diversity.

Ineos Group Holdings — Results of Operations

The results of ~~operations of~~ Ineos Group Holdings for the three-month and ~~nine~~ six-month periods ended ~~September~~June 30, ~~2002~~2003 ~~include the results of Ineos Oxide, Ineos Fluor, Ineos Silicas~~ and ~~Ineos~~2004 Phenol as well as the results of the acetate esters business acquired by Ineos Oxide from BP Belgium on March 1, 2002 for the period March 1, 2002 to September 30, 2002. The results of Ineos Group Holdings for the three-month and nine-month periods ended September 30, 2003 are comprised of Ineos Oxide, Ineos Fluor, Ineos Silicas and Ineos Phenol.

Discussions of the results of operations of each of Ineos Oxide, Ineos Phenol, Ineos Fluor and Ineos Silicas for the three-month and ~~nine~~six-month periods ended ~~September~~June 30, ~~2002~~2003 and ~~2003~~2004 are presented herein.

The following table sets forth, for the periods indicated, our turnover and expenses and such amounts as a percentage of turnover.

	Three-Month Period Ended												~~Nine~~Six-Month Period Ended
				September 30,												September 30,
	June 30,												June 30,
	2002						2003						2002						2003
	2003						2004						2003						2004
	€m			%			€m			%			€m			%			€m			%
Turnover		~~585~~682.78			100.0			~~594~~779.49			100.0			1,~~686~~332.3			100.0			1,~~926~~450.7			100.0
Cost of sales		(~~481~~577.25	)		(8284.26	)		(~~483~~671.56	)		(8186.31	)		(1,~~375~~129.40	)		(8184.67	)		(1,~~612~~243.51	)		(8385.7	)
Gross profit		~~104~~105.53			1715.84			~~110~~108.93			1813.79			~~310~~203.93			1815.43			~~314~~207.26			1614.3
Distribution costs		(4036.87	)		(65.93	)		(3938.18	)		(65.60	)		(~~120~~75.3	)		(75.17	)		(~~114~~73.49	)		(5.91	)
Administrative expenses		(169.5	)		(21.84	)		(138.48	)		(21.31	)		(4721.03	)		(21.86	)		(3415.7	)		(1.81	)
Exceptional administrative expenses		(1.2	)		(0.2	)		—			—			(17.3	)		(1.0	)		—			—
Other operating income		8.5			1.2			—			—			8.5			0.6			—			—
Other operating income		—			—			4.9			0.8			—			—			13.4			0.7
Operating profit		67.6			9.9			61.2			7.8			115.2			8.6			118.0			8.1
Operating profit		46.0			7.9			63.3			10.6			126.3			7.5			178.5			9.3
Share of operating profit of associate		0.2			—			0.1			—			0.3			—			0.2			—
Share of operating profit of associate		—			—			0.2			—			0.2			—			0.5			—
Profit on disposal of subsidiary		0.1			—			—			—			0.1			—			—			—
Profit on disposal of subsidiary		—			—			—			—			—			—			0.1			—
Net interest payable		(17.2	)		(2.5	)		(13.4	)		(1.7	)		(31.3	)		(2.3	)		(34.4	)		(2.3	)
Profit on disposal of fixed assets		—			—			1.3			0.3			—			—			1.3			0.1
Profit on ordinary activities before taxation		50.7			7.4			47.9			6.1			84.3			6.3			83.8			5.8
Net interest payable		(15.0	)		(2.6	)		(15.9	)		(2.7	)		(55.2	)		(3.3	)		(47.2	)		(2.5	)
Taxation		(4.5	)		(0.6	)		(4.7	)		(0.6	)		(7.4	)		(0.5	)		(9.0	)		(0.6	)
Profit on ordinary activities before taxation		31.0			5.3			48.9			8.2			71.3			4.2			133.2			6.9
Profit on ordinary activities after taxation		46.2			6.8			43.2			5.5			76.9			5.8			74.8			5.2
Taxation		(4.5	)		(0.8	)		(2.1	)		(0.3	)		(19.4	)		(1.1	)		(9.5	)		(0.5	)
Profit on ordinary activities after taxation		26.5			4.5			46.8			7.9			51.9			3.1			123.7			6.4

Page 1413

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Three-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to Three-Month Period ~~Ended~~ ~~September~~Ended June 30, ~~2002~~2003

Turnover

Turnover increased by €897.71 million, approximately 114.52% to €~~594~~779.49 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~585~~682.78 million ~~for~~ for the same period in ~~2002~~2003. This increase largely reflects an increase of ~~volumes~~ volumes sold for speciality and intermediate chemicals in the Ineos Phenol and Ineos Oxide business ~~segment~~segments. Ineos Phenol has also experienced ~~price~~significant price increases in line with the increases in market prices for its products. ~~This has been partially offset by reductions~~ ~~in turnover in Ineos Oxide, Ineos Fluor and Ineos Silicas due to the impact of~~ ~~exchange rate retranslation as a result of the strong Euro compared to the US~~ ~~dollar and sterling, together with reduced sales volumes in Ineos Oxide.~~

Cost of sales

Cost of sales increased by €294.31 million, approximately 016.53% to €~~483~~671.56 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €~~481~~577.2 5 million in the same period in ~~2002~~2003. This increase largely reflects increased ~~sales~~ sales volumes in the speciality and intermediate business ~~segment~~segments of Ineos Phenol and Ineos Oxide. Ineos Phenol has also experienced significant increased raw material prices in line with the increase in market prices for benzene and propylene. ~~This has been partially offset by reductions in cost of sales in~~ Ineos ~~Oxide~~Fluor ~~and~~has ~~Ineos~~also ~~Fluor~~incurred ~~due~~additional toaccelerated ~~the~~depreciation ~~impact~~ of ~~exchange~~€3.6 million ~~rate~~on ~~retranslation~~its asUK aHFC ~~result~~134a ofasset ~~the~~during ~~strong Euro compared to~~ the USperiod ~~dollar~~ended ~~and sterling~~June 30, ~~together with reduced sales volumes in Ineos Oxide~~2004.

Gross profit

Gross profit increased by €63.40 million, approximately 62.18% to €~~110~~108.93 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~104~~105.5 3 million in the same period in ~~2002~~2003. This increase primarily reflects the ~~increase in~~increased ~~sales~~ volumes ~~and~~sold ~~improved margins~~ in the Ineos Phenol, ~~especially~~and inIneos ~~the~~Oxide USbusiness segments, partially ~~together~~offset ~~with~~by ~~higher~~the ~~margins~~additional ~~achieved~~accelerated ondepreciation ~~MEG~~of ~~volumes~~€3.6 million ~~sold~~on bythe Ineos Fluor ~~Oxide~~HFC 134a asset in the UK.

Distribution costs

Distribution costs ~~decreased~~increased by €12.71 million, approximately 45.27% to €3938.18 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4036.8 7 million in the same period in ~~2002~~2003. This ~~decrease~~increase isprimarily areflects ~~combination of~~the ~~reduced~~ increased ~~distribution~~volumes ~~costs~~sold asin ~~a result of our continuing cost saving projects together with~~ the ~~impact~~Ineos ofPhenol ~~exchange~~and ~~rate~~Ineos ~~retranslation~~Oxide asbusiness ~~a result of a stronger Euro against the US dollar and sterling~~segments.

Administrative expenses

Administrative expenses decreased by €30.17 million, approximately 187.84% to €138.48 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €169.5 million in the same period in ~~2002~~2003. This decrease is primarily due to the ~~combined~~ net impact of lower costs incurred as a result of a number of cost saving projects across the group~~, together with the impact of exchange rate retranslation as a result of a stronger Euro against the US dollar and sterling~~.

Exceptional administrative expenses

Exceptional administrative expenses were € nil for the three-month period ended September 30, 2003, as compared to €1.2 million in the same period in 2002. These expenses primarily reflect severance costs incurred in 2002 in connection with our ongoing business reorganisations in Ineos Silicas and Ineos Phenol.

Page 15

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Other operating income

OnOther ~~September 9,~~operating ~~2002~~income ~~there was an explosion and fire at the Ineos Phenol plant~~ in ~~Mobile, USA. The relevant part of the plant was subsequently rebuilt and put back into full operation by January~~ 2003. ~~For~~represented ~~the three-month period ended September 30, 2003 we have recognised~~ insurance proceeds of €48.95 million in in respect of business interruption as a result of the incident at our Ineos Phenol plant in Mobile, USA. This insurance claim was fully settled during 2003.

Operating profit

Operating profit ~~increased~~decreased by €176.34 million, approximately 379.65% to €6361.3 2 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4667.06 million in the same period in ~~2002~~2003. This ~~increase~~decrease primarily reflects ~~the reduction~~increased ~~in exceptional restructuring charges by €1.2 million in 2003 compared~~volumes tosold ~~2002; improved margins achieved~~ in Ineos Phenol and Ineos Oxide, ~~together with~~more ~~the~~than ~~inclusion~~offset ofby the reduction in business interruption insurance proceeds offrom €48.95 million in 2003 to nil in 2004.

Page 14

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Share of operating profit of associate

Share of operating profit of associate ~~increased~~decreased by €0.21 million, ~~approximately 100~~50% to €0.2 1 million in ~~2003~~2004 as compared to ~~nil~~€0.2 million in ~~2002~~2003.

Profit on disposal of ~~fixed assets~~subsidiary

~~Profit~~In onApril 2003, ~~disposal~~Ineos ofSilicas ~~fixed~~Italia ~~assets~~srl ~~represents~~and the ~~impact~~associated ofsilicate ~~the incident at our~~business ~~Ineos~~was ~~Phenol~~sold ~~plant~~to inits ~~Mobile~~management, ~~USA.~~supported Infinancially ~~addition~~by toan ~~the~~Italian ~~amounts received on~~chemical ~~account~~company inMarchi ~~2002,~~Industriali aspa. ~~final~~The ~~amount~~sale ofrealised ~~€1.3 million~~a ~~has~~profit ~~been~~on ~~received~~disposal ~~from~~of ~~the~~€0.1 ~~insurers for property damage~~million.

Net interest payable

Net interest payable ~~increased~~decreased by €03.98 million, approximately 022.61% to €1513.94 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €1517.0 2 million in the same period in ~~2002~~2003. This ~~increase~~decrease primarily reflects the reduction in the variable interest rates on the senior credit facility together with lower debt levels in ~~2003~~2004 compared to ~~2002~~2003 as a result of scheduled ~~and voluntary~~ debt ~~repayments, offset by exchange differences on short term intra~~ ~~group loan funding~~repayments.

Profit on ordinary activities before taxation

Profit on ordinary activities ~~increased~~decreased by €172.98 million, approximately 575.75% to to €4847.9 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to a profit of €3150.07 million in the same period in ~~2002~~2003. This ~~increase~~ ~~primarily~~decrease primarily reflects the ~~reduction~~increased volumes sold in ~~exceptional~~Ineos ~~restructuring~~Phenol ~~charges~~and Ineos Oxide, together bywith ~~€1.2 million~~the reduction in ~~2003~~interest ~~compared~~charges due to ~~2002;~~lower ~~improved~~variable ~~margins~~interest ~~achieved~~rates and lower debt levels in ~~Ineos Phenol~~2004 ~~and~~compared ~~Ineos~~to ~~Oxide~~2003, ~~together~~more ~~with~~than ~~the~~offset ~~inclusion~~by ofthe reduction in business interruption insurance proceeds offrom €48.95 million in 2003 to nil in 2004.

Taxation

Taxation ~~decreased~~increased by €20.42 million, approximately 534.34% to €24.17 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4.5 million in the ~~same~~ same period in ~~2002~~2003. The effective tax rate in ~~2003~~2004 reflects the anticipated ~~rate~~ rate for the year.

Profit on ordinary activities after taxation

Profit on ordinary activities after taxation ~~increased~~decreased by €~~20.~~3.0 million, approximately ~~76.~~6.5% to €4643.82 million in for the three-month period ended June ~~September~~ 30, ~~2003~~2004, as compared to €2646.52 million in the same period in ~~2002~~2003. This decrease ~~increase~~ primarily reflects the ~~reduction~~increased volumes sold in ~~exceptional~~Ineos ~~restructuring~~Phenol and ~~charges~~Ineos byOxide, ~~€1.2 million~~together inwith ~~2003~~the ~~compared~~reduction toin ~~2003;~~interest ~~improved~~charges ~~margins~~due ~~achieved~~to bylower ~~Ineos~~variable ~~Phenol~~interest rates and ~~Ineos~~lower ~~Oxide~~debt levels in 2004 compared to 2003, ~~together~~more than ~~with~~offset by the ~~inclusion~~reduction ofin business interruption insurance proceeds of from €48.95 million in 2003 to nil in 2004.

Page 1615

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

~~Nine~~Six-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to ~~Nine~~Six-Month Period Ended June ~~September~~ 30, ~~2002~~2003

Turnover

Turnover increased by €~~240~~118.4 million, approximately 148.39% to €1,~~926~~450.7 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €1,~~686~~332.3 million in the same period in ~~2002~~2003. This increase largely reflects an increase of of volumes sold toof speciality and intermediate chemicals in the Ineos Phenol and Ineos Oxide business ~~segment~~segments. Ineos Phenol has also experienced significant price increases in line with the increases in market prices for its products. ~~This has been partially offset by~~ ~~reductions in turnover in Ineos Fluor and Ineos Silicas due to the impact of~~ ~~exchange rate retranslation as a result of the strong Euro compared to the US~~ ~~dollar and sterling.~~

Cost of sales

Cost of sales increased by €~~237~~114.1 million, approximately 1710.21% to €1,~~612~~243.51 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to € 1,~~375~~129.4 0 million in the same period in ~~2002~~2003. This increase largely reflects ~~increased~~ increased volumes in the speciality and intermediate business ~~segment~~segments of Ineos Phenol and Ineos Oxide. Ineos Phenol has also experienced significant increased raw material prices in line with market prices for benzene and propylene. ~~This has been partially offset~~ ~~by reductions in cost of sales in Ineos Fluor and Ineos Silicas due to the~~ ~~impact of exchange rate retranslation as a result of the strong Euro compared~~ ~~to the US dollar and sterling.~~

Gross profit

Gross profit increased by €34.3 million, approximately 12.1% to €~~314~~207.26 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~310~~203.9 3 million in the same period in ~~2002~~2003. This increase primarily reflects the ~~impact of higher~~increased volumes ~~and~~sold ~~improved~~in ~~margins~~the ~~achieved by~~ Ineos Phenol, ~~offset~~and byIneos ~~the~~Oxide ~~impact~~business ofsegments, together ~~exchange~~with ~~rate~~€5.0 million ~~retranslation~~compensation asreceived from a ~~result~~supplier ofto ~~the~~settle ~~strong~~a ~~Euro~~commercial dispute ~~compared~~in to2004, partially offset by the USadditional accelerated depreciation of ~~dollar,~~€7.2 million ~~together~~on ~~with~~the ~~lower~~Ineos Fluor HFC ~~prices~~134a ~~achieved~~asset in the ~~period by Ineos Fluor~~UK.

Distribution costs

Distribution costs decreased by €51.94 million, approximately 41.9% to €~~114~~ 73.49 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~120~~75.3 million in the same period in ~~2002~~2003. This decrease is a combination of ~~reduced~~ reduced distribution costs as a result of our continuing cost saving projects, ~~together~~partially ~~with~~offset ~~the~~by ~~impact~~increased ofdistribution ~~exchange~~costs ~~rate~~due ~~retranslation~~to asincreased ~~a result of a~~sales ~~stronger Euro against the US dollar and sterling~~volumes.

Administrative expenses

Administrative expenses decreased by €125.36 million, approximately 26.23% to €3415.7 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4721.0 3 million in the same period in ~~2002~~2003. This decrease is primarily due to the net impact of lower costs incurred as a result of a number of cost saving ~~projects~~ projects across the group, together with ~~the~~additional ~~impact~~amortisation of ~~exchange~~negative ~~rate~~goodwill ~~retranslation~~associated aswith athe ~~result~~Ineos ofFluor aHFC ~~stronger~~134a ~~Euro against the US dollar and sterling~~asset.

Exceptional administrative expenses

Exceptional administrative expenses were € nil for the nine-month period ended September 30, 2003, as compared to €17.3 million in the same period in 2002. These expenses primarily reflect severance costs incurred in 2002 in connection with our ongoing business reorganisations in Ineos Silicas and Ineos Phenol.

Other operating income

OnOther ~~September~~operating income in 2003 represented insurance proceeds of €8.5 9,million in ~~2002~~respect ~~there~~of ~~was~~business aninterruption ~~explosion~~as ~~and~~a ~~fire~~result atof the ~~Ineos~~incident at our Ineos Phenol plant in Mobile, USA. ~~The~~This ~~relevant~~insurance ~~part~~claim ~~of the plant~~ was ~~subsequently~~fully ~~rebuilt~~settled ~~and~~during ~~put back into full operation by January~~2003.

~~Page~~Operating 17profit

Operating profit increased by €2.8 million, approximately 2.4% to €118.0 million for the six-month period ended June 30, 2004, as compared to €115.2 million in the same period in 2003. This increase primarily reflects increased volumes sold in Ineos Phenol and Ineos Oxide, partially offset by the reduction in business interruption insurance proceeds from €8.5 million in 2003 to nil in 2004.

Page 16

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

2003. As at September 30, 2003 we have recognised insurance proceeds of €13.4 million in respect of business interruption as a result of the incident.

Operating profit

Operating profit increased by €52.2 million, approximately 41.3% to €178.5 million for the nine-month period ended September 30, 2003, as compared to €126.3 million in the same period in 2002. This increase primarily reflects the reduction in exceptional restructuring charges by €17.9 million in 2003 compared to 2002, together with the inclusion of business interruption insurance proceeds of €13.4 million in 2003 and the reduction in administrative expenses in 2003 compared to 2002 as a result of cost saving projects across the group.

Share of operating profit of associate

Share of operating profit of associate ~~increased~~decreased by €0.31 million, approximately ~~150~~33.3% to €0.52 million in ~~2003~~2004 as compared to €0.23 million in ~~2002~~2003.

Profit on disposal of subsidiary

OnIn April 172003, ~~2003 contracts were signed for the sale of~~ Ineos Silicas Italia srl and the associated silicate business was sold to its management, supported financially by an Italian chemical company Marchi Industriali spa. ~~After expenses,~~The ~~€1.2 million~~sale ~~sales~~realised ~~proceeds~~a ~~have been received by the Company. After taking into account net assets disposed of and associated goodwill the~~ profit on disposal ~~was~~of €0.1 million.

Profit on disposal of fixed assets

Profit on disposal of fixed assets represents the impact of the incident at our Ineos Phenol plant in Mobile, USA. In addition to the amounts received on account in 2002, a final amount of €1.3 million has been received from the insurers for property damage.

Net interest payable

Net interest payable ~~decreased~~increased by €83.01 million, approximately 149.59% to €4734.24 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €5531.2 3 million in the same period in ~~2002~~2003. This ~~decrease~~increase primarily reflects the reduction in the variable interest rates on the senior credit facility together with lower debt levels in ~~2003~~2004 compared to ~~2002~~2003 as a result of scheduled ~~and~~debt ~~voluntary~~repayments, ~~debt~~more ~~repayments~~than offset by exchange differences on short term intra group loan funding.

Profit on ordinary activities before taxation

Profit on ordinary activities ~~increased~~decreased by €610.95 million, approximately 860.86% to to €~~133~~83.28 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to a profit of €7184.3 million in the same period in ~~2002~~2003. This ~~increase~~ ~~primarily~~decrease primarily reflects the ~~reduction~~increased volumes sold in ~~exceptional~~Ineos ~~restructuring~~Phenol ~~charges~~and Ineos Oxide, more than offset by ~~€17.9 million~~an increase in ~~2003~~net ~~compared~~interest tocosts ~~2002;~~and ~~the~~a ~~inclusion~~reduction ofin business interruption insurance proceeds offrom €138.45 million in 2003 ~~and the reduction in interest charges due~~ to ~~lower~~nil ~~variable interest rates and lower debt levels~~ in ~~2003~~ ~~compared to 2002~~2004.

Taxation

Taxation ~~decreased~~increased by €91.96 million, approximately 5121.06% to €9.50 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €197.4 million in the ~~same~~ same period ~~2002~~2003. The effective tax rate in ~~2003~~2004 reflects the anticipated rate ~~for~~ for the year.

Profit on ordinary activities after taxation

Profit on ordinary activities after taxation ~~increased~~decreased by €712.81 million, approximately ~~138~~2.37% to ~~€123~~74.78 million for the ~~nine~~six-month period ended ~~September~~ June 30, ~~2003~~ 2004, as compared to a profit of €76.9 million in the same period in 2003. This decrease primarily reflects the increased volumes sold in Ineos Phenol and Ineos Oxide, more than offset by an increase in net interest costs and a reduction in business interruption insurance proceeds from €8.5 million in 2003 to nil in 2004.

Page 1817

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

€51.9 million in the same period in 2002. This increase primarily reflects the reduction in exceptional restructuring charges by €17.9 million in 2003 compared to 2003; the inclusion of business interruption insurance proceeds of €13.4 million in 2003; the reduction in interest charges due to lower variable interest rates and lower debt levels in 2003 compared to 2002 and the overall reduction in the effective tax rate in 2003 compared to 2002.

Page 19

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Ineos Oxide

The following table sets forth, for the three-month and ~~nine~~six-month periods ~~ended~~ ~~September~~ended June 30, ~~2002~~2003 and ~~2003~~2004, turnover and expenses of Ineos Oxide and such amounts as percentages of turnover.

	Three-Month Period Ended												~~Nine~~Six-Month Period Ended
				September 30,												September 30,
	June 30,												June 30,
	2002						2003						2002						2003
	2003						2004						2003						2004
	€m			%			€m			%			€m			%			€m			%
Turnover		~~134~~129.89			100.0			~~127~~144.79			100.0			~~377~~251.73			100.0			~~379~~281.07			100.0
Cost of sales		(9997.64	)		(7375.90	)		(90110.23	)		(7076.61	)		(~~281~~191.95	)		(7476.62	)		(~~281~~210.73	)		(74.37	)
Gross profit		3532.25			2625.10			3734.56			2923.49			9559.8			2523.48			9771.34			25.73
Distribution costs		(1311.10	)		(98.75	)		(1311.16	)		(108.30	)		(3623.50	)		(9.72	)		(3623.16	)		(98.54	)
Administrative expenses		(31.45	)		(21.51	)		(2.34	)		(1.87	)		(93.71	)		(21.62	)		(5.4	)		(1.59	)
Operating profit		1820.70			1315.94			2220.16			1714.32			4933.67			13.14			5542.84			1415.70
EBITDA		2123.52			1517.9			2523.38			1916.84			5740.80			15.39			6548.39			17.24

Three-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to Three-Month Period ~~Ended~~ ~~September~~Ended June 30, ~~2002~~2003

Turnover

Turnover ~~decreased~~increased by €715.10 million, approximately 511.35%, to €~~127~~144.79 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~134~~129.89 million ~~for~~ for the same period in ~~2002~~2003. This ~~decrease~~increase reflects aboth ~~decrease~~an increase in volumes ~~sold~~ sold for ~~speciality~~specialty chemicals and intermediate chemicals ~~offset~~and by higher EG selling prices. ~~Across the European business lower volumes can be explained by the~~ ~~aged catalyst in Q3 (to be replaced in Q4) compared to a new catalyst in 2002~~ ~~(replaced at the end of June 2002). The very high EG prices have been offset~~ ~~by decreasing selling prices of EO and EO derivatives and the effect of the weakening dollar on our US business.~~

The average North Western ~~Europe~~European price for EO as per ICIS LOR decreased to ~~€916~~ €945 per tonne for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~962~~992 per tonne for the same period in ~~2002~~2003. The average North Western ~~Europe~~European prices for monoethylene glycol (MEG) as per ICIS LOR increased to €~~663~~788 per tonne for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €~~550 per~~745 per tonne for the same period in ~~2002~~2003.

Cost of sales

Cost of sales ~~decreased~~increased by €912.49 million, approximately 913.42%, to €90110.~~2 million~~3 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €9997.64 million for the same period in ~~2002~~2003. This ~~decrease~~increase primarily reflects ~~decreased~~increased sales volumes in the ~~speciality~~specialty and intermediate businesses~~, decreased~~ ~~ethylene prices~~ and ~~the impact of the weakening of the US dollar~~ ~~against~~increased ~~the~~ethylene ~~euro~~prices.

The average North Western ~~Europe~~European Contract Price for ethylene referenced by ~~ICIS~~ ICIS LOR ~~decreased~~increased to €~~445~~607 per tonne for the three-month period ended ~~September~~June 30, ~~2003~~2004 compared to €~~540~~575 per tonne for the same period in ~~2002~~2003.

~~Page~~Gross 20profit

Gross profit increased by €2.1 million, approximately 6.5%, to €34.6 million for the three-month period ended June 30, 2004, as compared to €32.5 million for the same period in 2003. This increase reflects the increased volumes sold and the stable margins on our intermediates and specialty products compared to last year.

Page 18

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Gross profit

Gross profit increased by €2.3 million, approximately 6.5%, to €37.5 million for the three-month period ended September 30, 2003, as compared to €35.2 million for the same period in 2002. This increase reflects the higher margin MEG sales made due to the global shortage of EG, offset by the decreased volumes sold of intermediates and specialities.

Distribution costs

Distribution costs ~~were~~increased by €130.16 million, approximately 5.5%, to €11.6 million for the three-month period ended ~~September~~ June 30, ~~2003~~2004, as compared to €1311.1 0 million for the same period in ~~2002~~2003. This increase reflects the ~~decrease~~increase in volumes sold, ofpartially ~~intermediate~~offset ~~and~~by ~~speciality chemicals and~~ the impact of continued cost saving exercises to reduce distribution charges~~, offset by higher export sales~~.

Administrative expenses

Administrative expenses ~~decreased~~increased by €10.19 million, approximately ~~32.4~~60%, to €2.34 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €31.4 5 million for the same period in ~~2002~~2003. This ~~decrease~~increase ~~reflects~~is ~~the~~a ~~continued result~~consequence of ~~our~~the impact ~~fixed~~of ~~costs~~other ~~savings~~income ~~programme~~recorded ~~and~~in the ~~profit~~second onquarter ~~disposal~~ of ~~a piece~~2003 for an amount of €0.7 million. ~~land~~Ineos Oxide continues to aadhere ~~third~~to ~~party~~a onvery ~~our~~strict ~~Antwerp~~cost ~~site~~control programme.

Operating profit and EBITDA

Operating profit increased by €30.46 million, approximately 183.20%, to €2220.16 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €1820.7 0 million for the same period in ~~2002~~2003. EBITDA increased by €30.86 million, approximately 172.76%, to €2523.38 million for the three-month period ended ~~September~~ June 30, ~~2003~~ 2004, as compared to €2123.52 million for the same period in ~~2002~~2003.

~~Nine~~Six-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to ~~Nine~~Six-Month Period Ended June ~~September~~ 30, ~~2002~~2003

Turnover

Turnover increased by €130.34 million, approximately 012.31%, to €~~379~~281.07 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~377~~251.73 million for the same period in ~~2002~~2003. This increase reflects ~~the~~an ~~higher~~increase ~~prices~~in ofvolumes EOsold for ~~and~~speciality EGchemicals ~~almost~~and ~~fully~~intermediate ~~compensated~~chemicals byand ~~the~~higher ~~decrease~~selling inprices. The increased volumes ~~sold~~reflect an improvement in demand for ~~speciality~~all products coupled ~~chemicals~~with the expansion of our ethanolamine and ~~intermediate~~alkoxylation ~~chemicals~~units and the ~~effect~~fact ofthat all ~~the~~plants ~~weakening~~were ~~dollar~~operating ~~on our~~at USvery ~~business~~high reliabilities.

The average of the North Western European contract price for EO as per ICIS LOR ~~increased~~decreased slightly to €~~950~~954 per tonne for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003,~~ 2004, as compared to €~~906~~967 per tonne for the same period in ~~2002~~2003. The average of the North Western European contract prices for monoethylene glycol (MEG) as ~~per~~ per ICIS LOR increased to €~~671~~740 per tonne for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €~~505~~675 per tonne for the same period in ~~2002~~2003.

Cost of sales

Cost of sales ~~decreased~~increased by €018.28 million, approximately 09.18%, to €~~281~~210.73 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~281~~191.9 5 million for the same period in ~~2002~~2003. This primarily reflects ~~decreased~~increased sales volumes in the speciality and intermediate ~~business~~businesses and ~~the effect of the weakening dollar on our US business, offset by~~ increased ethylene prices.

The average of the North Western European contract price for ethylene as per ICIS LOR increased to €~~532~~594 per tonne for the ~~nine~~six-month period ended ~~September~~ June 30, ~~2003~~ 2004, as compared to €~~518~~575 per tonne for the same period in ~~2002~~2003.

Page 2119

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Gross profit

Gross profit increased by €111.56 million, approximately 119.64%, to €9771.34 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €9559.8 million for the same period in ~~2002~~2003. The significant increase reflects the ~~higher margins~~increased onvolumes ~~the~~sold ~~MEG~~of ~~business~~intermediates and speciality products due to improved demand coupled with the ~~global~~expansion ~~shortage~~of onour ~~the~~ethanolamine EGand ~~market~~alkoxylation units and all plants operating at very high reliabilities, ~~offset~~together bywith ~~the~~€5.0 million ~~decreased~~compensation ~~volumes~~received ~~sold~~from ofa ~~intermediate~~supplier ~~and~~to ~~speciality~~settle ~~chemicals~~a commercial dispute in the first quarter of 2004.

Distribution costs

Distribution costs ~~decreased~~increased by €0.46 million, approximately 12.16%, to €3623.16 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €3623.5 0 million for the same period in ~~2002~~2003. This ~~decrease~~increase reflects the ~~decrease in~~increase in volumes sold, ofalthough ~~intermediate~~significantly ~~and~~offset ~~speciality~~by ~~chemicals~~our cost saving programme.

Administrative expenses

Administrative expenses ~~decreased~~increased by €42.3 million, approximately 4474.32%, to €5.4 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €93.71 million for the same period in ~~2002~~2003. ~~This~~Excluding ~~reflects~~the ‘other income’ items of €2.3 million in the ~~continuous~~prior ~~efforts~~year (which included €1.4 million for insurance proceeds for business interruption of the ENB unit), administrative expenses remained flat for the six-month period ended June 30, 2004 as compared to the ~~reduce~~same ~~our~~period ~~fixed~~in ~~cost~~2003. ~~base~~This byreflects ~~sharing~~the ~~services~~continuous ~~with~~effort ~~other~~to ~~group~~reduce ~~businesses~~our fixed cost base.

Operating profit and EBITDA

Operating profit increased by €68.27 million, approximately 1225.58%, to €5542.84 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4933.6 7 million for the same period in ~~2002~~2003. ~~EBITDA~~This ~~increased~~increase byreflects ~~€7.5 million,~~the increased ~~approximately~~volumes ~~13.0%,~~sold toat ~~€65.3 million~~relatively ~~for~~stable ~~the~~margins ~~nine-month~~in ~~period~~2004 ~~ended~~compared ~~September 30,~~to 2003, astogether with ~~compared to~~ € 575.80 million ~~for~~compensation ~~the~~received ~~same~~from ~~period~~a supplier upon settlement of a commercial dispute in ~~2002~~2004.

~~Page~~EBITDA increased by €8.9 million, approximately 22.3%, to €48.9 million for the six-month period ended June 30, 2004, as compared to €40.0 million for the same period in 2003.

Page 20

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Ineos Phenol

	Three-Month Period Ended												~~Nine~~Six-Month Period Ended
				September 30,												September 30,
	June 30,												June 30,
	2002						2003						2002						2003
	2003						2004						2003						2004
	€m			%			€m			%			€m			%			€m			%
Turnover		~~322~~420.14			100.0			~~347~~500.0			100.0			~~894~~823.46			100.0			~~1,170~~913.63			100.0
Cost of sales		(~~292~~390.81	)		(9092.98	)		(~~308~~463.72	)		(8992.06	)		(~~808~~760.64	)		(9092.43	)		(~~1,069~~844.13	)		(9192.34	)
Gross profit		2930.3			97.12			3836.38			117.04			8563.82			97.67			~~101~~69.50			8.7.6
Distribution costs		(1514.75	)		(43.94	)		(1516.3	)		(43.43	)		(4830.13	)		(53.47	)		(4530.62	)		(3.93	)
Administrative expenses		(03.25	)		(0.18	)		01.98			0.34			5.7			0.67			65.62			0.65
Exceptional administrative expenses		(1.2	)		(0.4	)		—			—			(3.0	)		(0.3	)		—
Other operating income		8.5			2.0			—			—			8.5			1.0			—			—
Other operating income		—			—			4.9			1.4			—			—			13.4			1.1
Operating profit		27.8			6.6			22.3			4.5			47.1			5.7			44.0			4.8
Operating profit		12.2			3.8			28.8			8.3			40.4			4.5			75.9			6.5
EBITDA		33.1			7.9			28.4			5.7			57.9			7.0			56.0			6.1
EBITDA		21.5			6.7			34.2			9.9			67.7			7.6			92.1			7.9

Three-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to Three-Month Period ~~Ended~~ ~~September~~Ended June 30, ~~2002~~2003

Turnover

Turnover increased by €2479.96 million, approximately 718.79%, to €~~347~~500.0 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~322~~420.14 million ~~for~~ for the same period in ~~2002~~2003. This increase reflects increased sales volumes ~~for~~ ~~both phenol~~ and higher ~~acetone and increased~~ sales prices, ~~except~~ for ~~acetone~~both ~~in Europe~~phenol and acetone.

Western European phenol and acetone prices (per CMAI) increased to €~~655~~923 per tonne and €617 per tonne, respectively, for the three-month period ended ~~September~~ June 30, ~~2003~~2004, as compared to €~~590~~778 per tonne ~~for the~~and ~~same period in 2002. Western European acetone prices (per CMAI) decreased to~~ €~~472~~605 per tonne ~~for the three-month period ended September 30~~, ~~2003~~respectively, ~~as compared to €596 per tonne~~ for the same period in ~~2002~~2003. US phenol and acetone prices (per CMAI) increased to $~~915~~1,135 per ~~metric~~ tonne and $~~551~~705 per ~~metric~~ tonne, respectively, for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to $~~793~~981 per ~~metric~~ tonne and $~~397~~639 per ~~metric~~ tonne, respectively, for the same period in ~~2002~~2003.

Cost of sales

Cost of sales increased by €1573.91 million, approximately 518.47%, to €~~308~~463.~~7 million~~2 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~292~~390.81 million for the same period in ~~2002~~2003. This increase reflects ~~higher~~increased raw material ~~consumption~~prices ~~due~~and to higher ~~plant utilisation mainly in the USA, more than offsetting decreased~~ raw material ~~prices~~consumption ~~and lower depreciation related to fair market value adjustments on acquisition. The utilization increase in the USA is mainly~~ due to ~~the~~higher ~~incident on September 9, 2002, which caused a~~plant ~~production loss in that month compared to full production in the same period of 2003~~utilisation.

Western European benzene ~~and~~prices ~~propylene~~(per ~~contract~~CMAI) increased to €595 per tonne for the three-month period ended June 30, 2004, as compared to €525 per tonne for the same period in 2003. Western European propylene prices (per CMAI) decreased slightly to €525 per tonne for the three-month period ended June 30, 2004, as compared to €~~316~~530 per tonne for the same period in 2003. US benzene and propylene ~~€430~~prices (per CMAI) increased to $723 per tonne, and $709 per tonne, respectively, for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to $445 per tonne and $551 per tonne, respectively, for the same period in 2003.

Page 2321

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

compared to €403 per tonne and €495 per tonne, respectively, for the same period in 2002. US benzene and propylene contract prices (per CMAI) increased to $422 per tonne and $459 per tonne, respectively, for the three-month period ended September 30, 2003, as compared to $413 per tonne and $437 per tonne, respectively, for the same period in 2002.

Gross profit

Gross profit increased by €96.05 million, approximately 3021.75% to €3836.38 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €2930.3 million for the same period in ~~2002~~2003. This increase reflects the increase in ~~sales~~ sales volume and ~~increased~~ sales prices, partially offset by increased ~~costs~~raw ~~of sales~~material ~~due~~prices to and higher raw material consumption, ~~offset~~due byto ~~decreased~~increased ~~raw~~plant ~~material prices~~utilisation.

Distribution costs

Distribution costs ~~decreased~~increased by €01.48 million, approximately 212.54%, to €1516.3 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €1514.7 5 million for the same period in ~~2002~~2003. This ~~decrease~~increase is adue ~~combination~~to ofincreased sales volumes, partially offset by reduced distribution costs as a result of our continuing cost saving projects together with the impact of exchange rate retranslation as a result of a stronger ~~Euro~~euro against the US dollar~~, offset by the increased distribution costs due to increased sales volumes~~.

Administrative expenses

Administrative expenses, including the amortisation of negative goodwill, ~~decreased~~increased by €1.17 million, approximately ~~550~~48.06%, to a credit of €01.98 million ~~for~~ for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to ~~expenses~~a credit of €03.2 5 million for the same period in ~~2002~~2003. This ~~decrease~~increase is ~~primarily~~ due to ~~the~~ ~~impact~~decreased levels of ~~lower~~currency ~~costs~~translation ~~incurred~~gains asmade ain ~~result~~2004 ofas acompared ~~number~~to of2003, ~~fixed cost saving projects. This is~~ partially offset by a reduction in ~~negative~~fixed ~~goodwill amortisation~~costs ~~of €0.7 million~~ as a result of ~~exchange~~our ~~rate~~continuing ~~retranslation~~cost saving projects.

Exceptional administrative expenses

Exceptional administrative expenses decreased by €1.2 million, exactly 100.0%, to €nil million for the three-month period ended September 30, 2003, as compared to €1.2 million for the same period in 2002. These expenses reflect severance costs incurred in 2002 in connection with our business reorganisation following the acquisition of Ineos Phenol from Degussa.

Other operating income

Other operating income ~~increased~~decreased by €48.95 million, ~~for~~exactly 100.0%, to nil for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to no€8.5m ~~such income~~ for the same period in ~~2002~~ 2003. This income represents the business interruption insurance ~~proceeds~~ ~~recognised~~proceeds received in the three-month period ended ~~September~~June 30, 2003, following the incident at the Mobile plant in September 2002.

Operating profit and EBITDA

Operating profit ~~increased~~decreased by €165.65 million, approximately ~~136~~19.18%, to €2822.83 million for the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €1227.2 8 million for the same period in ~~2002~~2003. This increase ~~primarily~~ reflects ~~increased~~ the increase in sales ~~volumes~~volume and sales prices, ~~together~~partially ~~with~~offset ~~the~~by ~~business interruption~~increased ~~insurance~~raw ~~proceeds~~material prices ~~recognised~~and tohigher ~~date~~raw inmaterial ~~2003~~consumption ~~(in~~due ~~relation~~ to ~~the incident~~increased ~~at the Mobile~~ plant ~~in September 2002)~~utilisation, ~~costs savings as a result of~~ ~~various~~together ~~cost~~with ~~saving~~the ~~projects~~reduction asin ~~well~~business asinterruption ~~the~~proceeds ~~impact~~from ~~of exchange rate~~€8.5 million ~~retranslation~~in as2003 ato ~~result~~nil ofin ~~a stronger Euro against the US dollar~~2004.

EBITDA ~~increased~~decreased by €124.7 million, approximately 5914.12%, to €3428.24 million for ~~the~~ the three-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €2133.51 million for the same period in ~~2002~~2003.

Page 2422

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

~~Nine~~Six-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to ~~Nine~~Six-Month Period Ended June ~~September~~ 30, ~~2002~~2003

Turnover

Turnover increased by €~~276~~89.27 million, approximately 3010.9%, to €~~1,170~~913.63 million ~~for~~ for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~894~~823.4 6 million for the same period in ~~2002~~2003. This increase reflects increased sales volumes and higher sales prices for ~~both~~ phenol in Europe and in the US as well as higher sales prices for acetone in the US.

Western European phenol ~~and acetone~~ prices (per CMAI) increased to €~~732~~852 per ~~tonne~~ ~~and €580 per~~ tonne, ~~respectively,~~ for the six-month period ended ~~September~~ June 30, ~~2003~~2004, as compared to €~~513~~770 per tonne ~~and~~for the same period in 2003. Western European acteone prices (per CMAI) decreased to €~~525~~597 per tonne for the six-month period ended June 30, 2004, as compared to ~~respectively~~€634 per tonne for the same period in ~~2002~~2003. US phenol and acetone prices (per CMAI) increased to $~~907~~1,050 per metric tonne and $~~558~~667 per metric tonne, respectively, for the six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to ~~$688~~ $904 per metric tonne and $~~337~~562 per metric tonne, respectively, for the same ~~period~~ period in ~~2002~~2003.

Cost of sales

Cost of sales increased by €~~260~~83.59 million, approximately 3211.20%, to €~~1,069~~844.13 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~808~~760.6 4 million for the same period in ~~2002~~2003. This increase reflects increased ~~raw~~ raw material prices, ~~and~~particularly in the US in combination with higher raw material consumption due to higher plant ~~utilisation,~~ ~~only partially offset by lower depreciation related to fair market value adjustments on acquisition~~utilisation.

Western European benzene ~~and propylene contract~~ prices (per CMAI) increased to ~~€432~~ ~~per tonne and~~ €~~493~~506 per tonne, ~~respectively~~ for the ~~nine~~ six-month period ended ~~September~~ June 30, ~~2003~~2004, as compared to €~~347~~490 per tonne ~~and~~for the same period in 2003. Western European propylene prices (per CMAI) decreased to €~~433~~500 per tonne for the six-month period ended June 30, ~~respectively~~ 2004, as compared to €525 per tonne for the same period in ~~2002~~2003. US benzene and propylene ~~contract~~ prices (per CMAI) increased to $~~467~~646 per tonne and $~~514~~674 per tonne, respectively, ~~for~~ for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to $~~348~~490 per tonne and $~~393~~542 per tonne, respectively, for the same period in ~~2002~~2003.

Gross profit

Gross profit increased by €155.78 million, approximately 189.32%, to €~~101~~69.50 million in in the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €8563.82 million for the same period in ~~2002~~2003. This increase reflects increased sales volumes and sales prices, ~~combined~~and ~~with~~decreased ~~lower~~fixed ~~depreciation~~costs, ~~charges~~only ~~related~~partially ~~to fair market value adjustments on acquisition,~~ offset by increased ~~cost of sales due to higher~~ raw material prices and higher raw material consumption.

Distribution costs

Distribution costs decreased by €20.51 million, approximately 50.23%, to €4530.62 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4830.1 3 million for the same period in ~~2002~~2003. This decrease is a combination of ~~reduced~~increased distribution costs asdue ato ~~result~~higher ofsales ~~our~~volumes, ~~continuing~~offset ~~cost~~by ~~saving projects~~a ~~together~~favourable ~~with the impact of~~ exchange rate retranslation as a result of a stronger ~~Euro~~euro against the US dollar together with cost savings as a result of our continuing cost saving projects.

Administrative expenses

Administrative expenses, including the amortisation of negative goodwill, ~~decreased~~increased by €0.95 million, approximately 158.8%, to a credit of €65.62 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to a credit of €5.7 million for the same period in ~~2002~~2003. This ~~decrease~~increase is primarily due to ~~the~~a ~~impact~~reduction ofin ~~lower~~negative ~~costs~~goodwill ~~incurred~~amortisation of €1.2 million as a result of ~~a number of fixed cost saving~~ ~~projects.~~exchange ~~This~~rate isretranslation, partially offset by acost ~~reduction~~savings ~~in negative goodwill amortisation of €2.0 million~~ as a result of our ~~exchange~~continuing ~~rate~~cost ~~retranslation~~saving projects.

Page 2523

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Exceptional administrative expenses

Exceptional administrative expenses decreased by €3.0 million, exactly 100.0%, to €nil million for the nine-month period ended September 30, 2003, as compared to €3.0 million for the same period in 2002. These expenses reflect severance costs incurred in 2002 in connection with our business reorganisation following the acquisition of Ineos Phenol from Degussa.

Other operating income

Other operating income ~~increased~~decreased by €138.45 million, ~~for~~exactly 100.0%, to nil for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to no€8.5m ~~such income~~ for the same period in ~~2002~~ 2003. This income represents the business interruption insurance ~~proceeds~~ ~~recognised~~proceeds toreceived ~~date~~ in the six-month period ended June 30, 2003, following the incident at the Mobile plant in September 2002.

Operating profit and EBITDA

Operating profit ~~increased~~decreased by €353.51 million, approximately 876.96%, to €7544.90 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €4047.4 1 million for the same period in ~~2002~~2003. This increase ~~primarily~~ reflects ~~higher~~ ~~sales~~the ~~volumes,~~increase ~~combined~~in sales ~~with~~volume ~~increased~~and sales prices, ~~together~~partially ~~with~~offset ~~the business~~by ~~interruption~~increased ~~insurance~~raw ~~proceeds~~material prices ~~recognised~~and tohigher ~~date~~raw ofmaterial ~~€13.4 million~~consumption ~~in 2003~~due ~~(in~~to ~~relation~~increased toplant utilisation, together with the ~~incident~~reduction atin ~~the~~business ~~Mobile~~interruption ~~plant~~proceeds infrom ~~September~~€8.5 ~~2002), and~~million ~~decreased~~in ~~exceptional~~2003 ~~restructuring~~to ~~costs~~nil ~~incurred~~ in ~~2003~~2004.

EBITDA ~~increased~~decreased by €241.49 million, approximately 363.03%, to €9256.10 million for ~~the~~ ~~nine~~the six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €6757.79 million for the same period in ~~2002~~2003.

Page 2624

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Ineos Fluor

	Three-Month Period Ended												~~Nine~~Six-Month Period Ended
				September 30,												September 30,
	June 30,												June 30,
	2002						2003						2002						2003
	2003						2004						2003						2004
	€m			%			€m			%			€m			%			€m			%
Turnover		7277.73			100.0			6582.78			100.0			~~235~~148.93			100.0			~~214~~149.05			100.0
Cost of sales		(5556.39	)		(7673.16	)		(5065.31	)		(7678.6	)		(~~175~~110.13	)		(74.24	)		(~~160~~121.62	)		75(81.01	)
Gross profit		1720.4			2326.94			1517.47			2321.4			6038.80			25.86			5328.43			2518.09
Distribution costs		(5.8	)		(87.06	)		(5.28	)		(7.90	)		(1710.29	)		(7.3	)		(1610.18	)		(7.52	)
Administrative expenses		(32.52	)		(42.8	)		(30.19	)		(41.71	)		(114.59	)		(43.93	)		(82.05	)		(31.87	)
Exceptional administrative expenses		—			—			—			—			(0.2	)		(0.1	)		—
Operating profit		12.4			16.0			12.8			15.5			22.2			15.0			20.0			13.4
Operating profit		8.1			11.1			7.1			10.8			31.9			13.5			29.3			13.7
EBITDA		17.8			23.0			18.0			21.7			33.3			22.5			31.0			20.7
EBITDA		12.9			17.7			11.8			18.0			47.7			20.2			45.1			21.1

Three-Month Period Ended ~~September~~June 30, ~~2003~~2004 Compared to Three-Month Period ~~Ended~~ ~~September~~Ended June 30, ~~2002~~2003

Turnover

Turnover ~~decreased~~increased by €75.05 million, approximately 97.61% to €6582.78 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €7277.73 million for ~~the~~ the same period in ~~2002~~2003. ~~The~~This ~~decrease~~increase reflects ~~the~~increased ~~impact~~volumes of aHFC ~~stronger~~134a ~~euro~~and ~~when~~HFC ~~compared~~Blends tooffset by the USimpact ~~dollar~~of ~~and~~a ~~Japanese~~stronger ~~yen,~~euro ~~lower~~when ~~volumes~~compared onto ~~HFCs,~~the ~~Arcton~~US ~~22 and CFCs, and lower prices on HFCs~~dollar.

Cost of sales

Cost of sales ~~decreased~~increased by €58.02 million, approximately 914.0 4% to €5065.31 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €5556.3 9 million for the same period in ~~2002~~2003. ~~The~~This ~~decrease~~increase reflects ~~the~~accelerated ~~impact~~depreciation of a ~~stronger~~€3.6 million ~~euro~~on ~~when~~the ~~compared~~UK toHFC ~~the~~134a USasset ~~dollar~~ and ~~Japanese~~increased ~~yen,~~volumes of HFC 134a and ~~lower~~HFC ~~volumes~~Blends inoffset ~~HFCs,~~by ~~Arcton~~the 22impact ~~and~~of ~~CFCs~~a stronger euro when compared to the US dollar.

Gross profit

Gross profit decreased by €2.07 million, approximately 1113.52% to €1517.47 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €1720.4 million for the same period in ~~2002~~2003. Gross margins decreased primarily due to additional accelerated depreciation of €3.6 million on the UK HFC 134a asset and the impact of a stronger euro when compared to the US dollar, ~~and~~offset ~~Japanese~~by ~~yen,~~increased ~~lower~~ volumes onof ~~HFCs,~~HFC ~~Arcton~~134a 22 and ~~CFCs,~~HFC ~~and lower prices on HFCs~~Blends.

Distribution costs

Distribution costs ~~decreased~~were byunchanged at €05.68 million, ~~approximately 10.3% to €5.2 million~~ for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €5.8 million for the same period in ~~2002~~2003. ~~The decrease reflects the impact of the~~ ~~stronger euro when compared to sterling, the US dollar and Japanese yen and~~ ~~decreased sales volumes of HFCs, Arcton 22 and CFCs.~~

Page 2725

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Administrative expenses

Administrative expenses, including research and development activities and other operating income, decreased by €03.41 million, approximately 11140.49% to €30.19 million income for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €32.5 2 million costs for the same period in ~~2002~~2003. Administrative expenses include a €2.7 .1 million credit for amortisation of goodwill for the three-month period ended ~~September~~ June 30, ~~2003~~2004 as compared to €32.56 million for the same period in ~~2002.~~ 2003. The ~~decrease~~increase ~~also~~in ~~reflects~~amortisation ~~the~~mainly ~~impact~~reflects of the ~~ongoing~~additional ~~fixed costs savings~~accelerated ~~project~~amortisation ~~and~~of ~~the~~€3.6 million ~~stronger~~on ~~euro when compared to sterling,~~ the USUK ~~dollar~~HFC ~~and Japanese~~134a ~~yen~~asset.

Operating profit and EBITDA

Operating profit ~~decreased~~increased by €1.0.4 million, approximately ~~12.~~3.2% to €712.18 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €812.14 million ~~for~~ for the same period in ~~2002~~2003. EBITDA ~~decreased~~increased by €10.12 million, approximately 8 1.51% to €1118.80 million for the three-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €1217.98 million for the same period in ~~2002~~2003.

~~Nine~~Six-Month Period Ended ~~September~~June 30, ~~2003~~2004, Compared to ~~Nine~~Six-Month Period Ended June ~~September~~ 30, ~~2002~~2003

Turnover

Turnover ~~decreased~~increased by €211.92 million, approximately 90.38%, to €~~214~~149.05 million for the ~~nine~~ six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~235~~148.93 million for the same period in ~~2002~~2003. ~~The~~This ~~decrease~~increase reflects increased volumes of ~~HFCs and~~HFC ~~HCFCs~~ 134a and HFC Blends offset by a stronger euro when compared to the US dollar ~~and Japanese yen, and lower prices on HFCs~~.

Cost of sales

Cost of sales ~~decreased~~increased by €1410.59 million, approximately 89.39%, to €~~160~~121.62 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €~~175~~110.1 3 million for the same period in ~~2002~~2003. ~~The~~This ~~decrease~~increase reflects ~~volumes~~the ofadditional ~~HFCs and~~accelerated ~~HCFCs~~depreciation ~~offset~~of by€7.2 million aon ~~stronger~~the ~~euro~~UK ~~when~~HFC ~~compared~~134a toasset ~~sterling,~~and ~~the~~increased USvolumes ~~dollar~~of HFC 134a and ~~Japanese~~ ~~yen~~HFC Blends.

Gross profit

Gross profit decreased by €79.47 million, approximately 1225.25%, to €5328.43 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €6038.8 0 million for the same period in ~~2002~~2003. ~~The~~Gross ~~decrease~~margins ~~reflects~~decreased ~~increased~~primarily ~~volumes~~due to additional accelerated depreciation of €7.2 million on the UK HFC 134a ~~offset~~asset byand the impact of a stronger euro when compared to the US dollar, ~~and~~offset by increased ~~Japanese~~volumes ~~yen~~of ~~and~~HFC ~~lower~~134a ~~prices~~and onHFC ~~HFCs~~Blends.

Distribution costs

Distribution costs decreased by €10.1 million, approximately 60.49%, to €1610.18 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €1710.2 9 million for the same period in ~~2002~~2003. ~~The decrease reflects the impact of~~ ~~a stronger euro when compared to sterling, the US dollar and Japanese yen,~~ ~~offset by the distribution costs associated with increased volumes.~~

Administrative expenses

Administrative expenses, including research and development activities and other operating income, ~~decreased~~reduced by €37.54 million, approximately 30151.40%, to €82.05 million income for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004, as compared to €114.59 million charge for the same period in ~~2002~~2003. Administrative expenses include a €813.05 million credit for amortisation of goodwill for the ~~nine~~six-month ~~period~~ period ended ~~September~~June 30, ~~2003~~2004 as compared to €95.93 million for the same period in ~~2002~~2003. The ~~decrease~~increase ~~also~~in ~~reflects~~amortisation ~~the~~mainly ~~impact~~reflects of the ~~ongoing~~additional ~~fixed cost savings~~accelerated ~~project~~amortisation ~~and~~of ~~the~~€7.2 million ~~stronger~~on ~~euro when compared to sterling,~~ the USUK ~~dollar~~HFC ~~and Japanese~~134a ~~yen~~asset.

Page 2826

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Exceptional administrative expenses

Exceptional administrative expenses in 2003 were € nil , as compared to €0.2 million for the same period in 2002. These costs in 2002 primarily reflect severance payments and other redundancy-related costs incurred in connection with business restructuring.

Operating profit and EBITDA

Operating profit decreased by €2.62 million, approximately 89.29%, to €2920.30 million for the ~~nine~~six-month period ended ~~September~~June 30, ~~2003~~2004 as compared to €3122.92 million for the same period in ~~2002~~2003. ~~EBITDA~~The ~~decreased~~decrease byreflects ~~€2.6 million, approximately 5.5% to €45.1 million for~~ the ~~nine-month~~impact ~~period~~of ~~ended September~~the ~~30,~~stronger ~~2003,~~euro aswhen compared to ~~€47.7 million~~the ~~for~~US ~~the~~dollar, ~~same~~partially ~~period~~offset inby ~~2002~~increased volumes of blends sales.

~~Page~~EBITDA 29reduced by €2.3 million, approximately 6.9% to €31.0 million for the six-month period ended June 30, 2004, as compared to €33.3 million for the same period in 2003.

Page 27

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Ineos Silicas

The following tables sets forth, for the three-month and ~~nine~~six-month periods ended ~~September~~June 30, ~~2002~~2003 and ~~2003~~2004, turnover and expenses of Ineos Silicas and ~~such~~ such amounts as percentages of turnover.

	Three-Month Period Ended												~~Nine~~Six-Month Period Ended
	September 30,												September 30,
	June 30,												June 30,
	2002						2003						2002						2003
	2003						2004						2003						2004
	€m			%			€m			%			€m			%			€m			%
Turnover		5655.12			100.0			5452.02			100.0			~~178~~109.31			100.0			~~163~~106.12			100.0
Cost of sales		(33.51	)		(5960.70	)		(3433.30	)		(63.52	)		(~~109~~66.8	)		(61.62	)		(~~101~~67.13	)		(6263.04	)
Gross profit		22.61			40.30			19.72			36.58			6842.53			38.48			6238.09			3836.06
Distribution costs		(65.24	)		(119.18	)		(54.56	)		(108.28	)		(1811.51	)		(10.32	)		(169.63	)		(108.28	)
Administrative expenses		(9.43	)		(16.78	)		(8.9.1	)		(1617.5	)		(3119.50	)		(17.64	)		(2718.90	)		(1716.19	)
Exceptional administrative expenses		—						—			—			(14.1	)		(7.9	)		—			—
Operating profit		7.4			13.4			5.5			10.5			12.2			11.2			11.6			10.9
Operating profit		7.0			12.5			5.3			9.8			4.4			2.6			17.5			10.7
EBITDA		11.5			20.8			9.5			18.2			20.4			18.7			19.4			18.3
EBITDA		10.1			18.0			9.5			17.6			31.4			17.6			29.9			18.3

Three-Month Period ended ~~September~~June 30, ~~2003~~2004, Compared to Three-Month Period ~~Ended~~ ~~September~~Ended June 30, ~~2002~~2003

Turnover

Turnover decreased by €23.10 million, approximately 35.74%, to €5452.02 million in ~~2003~~2004, as compared to €5655.12 million in ~~2002~~2003. ~~Excluding~~Silicate sales from our operations in the ~~effect~~UK and USA were lower in the second quarter of 2004 compared to the same ~~translation~~period ~~differences~~last year. In the UK, ~~turnover~~silicate ~~increased~~has bybeen ~~€0.6 million~~used in ~~2003~~several asof ~~compared~~the toconstruction ~~2002~~phases of the Channel Tunnel Rail Link. ~~Global~~From ~~zeolite~~the ~~sales~~end ~~were~~of ~~flat~~the first quarter this year, the ~~reformulation~~silicate inrequirement ~~North~~for ~~America~~this project has been minimal. ~~away~~In ~~from~~the ~~zeolites~~US, bysales to one of our major customers ~~and~~were ~~declining~~lost ~~sales~~from tothe ~~our~~end ~~other~~of last ~~main~~year ~~customer~~following in the USacquisition ~~were~~of ~~offset~~the customer by ~~higher~~one ~~sales~~of inour ~~Europe.~~major ~~Underlying~~competitors. ~~sales~~Sales of silica were also lower this year, ~~excluding~~with most of the shortfall arising from the negative impact of ~~exchange~~Chinese ~~retranslation~~and Indian competition in our desiccants and personal care markets respectively. Zeolite sales were higher in 2004, a ~~increased~~result byof 5supplying Procter and Gamble in the US throughout the current quarter and also the positive impact of zeolite slurry sales to Dalli in Germany.0% This has helped to offset low zeolite sales to Unilever in Europe.

Cost of sales

Cost of sales ~~increased~~decreased by €0.81 million, approximately 20.43%, to €3433.30 million in ~~2003~~2004, as compared to €33.51 million in ~~2002~~2003. The ~~main~~decrease ~~reason for the increase is the decline~~ in ~~stock during~~ the ~~three-month period ended September~~current ~~30,~~quarter ~~2003,~~ compared to the ~~three-month~~same period ~~ended~~last ~~September 30,~~year ~~2002~~is ~~when stocks~~minimal, ~~actually~~despite ~~increased over~~ the ~~quarter.~~fall ~~This was offset by the effect of~~in ~~exchange~~sales. ~~translation,~~The ~~which~~key ~~reduced~~reason ~~cost~~is ofan ~~sales~~increase in ~~2003~~repairs ~~compared~~and tomaintenance ~~the~~activity, ~~same~~both ~~period~~planned ~~last~~and ~~year~~unplanned.

Gross profit

Gross profit decreased by €2.9 million, approximately 1213.81%, to €19.72 million in ~~2003~~2004 as compared to €22.61 million in ~~2002~~2003. ~~The~~Most ~~decrease was a result~~ of the ~~stock~~ ~~decline~~decrease inis ~~the~~due ~~three-month period ended September 30, 2003 and the~~to ~~negative~~the impact of ~~exchange~~lower ~~retranslation~~sales in 2004.

Page 3028

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Distribution costs

Distribution costs decreased by €0.78 million, approximately 1114.38%, to €54.56 million in ~~2003~~2004, as compared to €65.24 million in ~~2002~~2003. ~~Most~~Throughout a significant part of last year, particularly leading up to and following the ~~decrease~~de-bottleneck ~~relates~~of our gel facilities in the US and UK, we were incurring airfreight costs to ensure ~~exchange~~that ~~retranslation~~customers ~~differences~~received product on time. Following the capacity increase, the need to airfreight products has been reduced. The lower silicate volume this year has also contributed to the lower distribution costs.

Administrative expenses

Administrative expenses decreased by €0.52 million, approximately 52.32%, to €8.9.1 million in ~~2003~~2004, as compared to €9.43 million in ~~2002~~2003. The decrease is due to ~~underlying~~ ~~cost savings derived from the restructuring programme and the~~a ~~benefit~~continued offocus ~~exchange~~on ~~rate~~cost ~~retranslation~~control.

Operating profit and EBITDA

Operating profit decreased by €1.79 million ~~in 2003~~, approximately 2425.37%, to ~~a profit of~~ €5.3 5 million in ~~2003~~2004, as compared to ~~a profit of~~ €7.04 million in ~~2002~~ 2003. ~~EBITDA~~This ~~decreased~~decrease byis primarily ~~€0.6 million,~~due ~~approximately~~to ~~5.9%,~~lower tosales ~~€9.5 million~~volumes in ~~2003,~~ 2004 as compared to ~~€10.1 million~~the insame ~~2002~~period in 2003.

~~Nine-Month~~EBITDA ~~Period~~decreased ~~Ended~~by ~~September~~€2.0 30million, ~~2003~~approximately 17.4%, ~~Compared~~ to ~~Nine-Month~~€9.5 million ~~Period~~in ~~Ended~~2004, ~~September~~as compared to €11.5 ~~30,~~million ~~2002~~in 2003.

Six-Month Period Ended June 30, 2004, Compared to Six-Month Period Ended June 30, 2003

Turnover

Turnover decreased by €~~15.~~2.9 million, approximately 82.57%, to €~~163~~106.12 million in ~~2003~~2004, as compared to €~~178~~109.31 million in ~~2002~~2003. OfIn ~~the~~many ~~€15.2 million~~of ~~shortfall compared~~our tokey ~~the~~silica ~~same~~markets segments, ~~period~~particularly in ~~2002~~Asia, ~~approximately~~sales ~~€15.1 million~~volume ~~was~~and ~~due~~revenue continued to ~~the~~grow. However, the competitive impact ofon ~~exchange~~our ~~rate~~personal ~~retranslation~~care ~~differences~~market infrom ~~2003~~Indian competition ~~compared~~has been significant. This has led to ~~2002~~lower pricing and reduced volumes at our key accounts within Unilever. High value, speciality personal ~~The~~care ~~disposal~~sales ofdid ~~the~~however ~~silicate~~continue ~~business~~to grow. Silicate sales were also lower in 2004, ~~Italy~~with the shortfall occurring primarily in ~~April 2003~~the ~~reduced~~second ~~sales~~quarter. byZeolite ~~€1.2 million~~sales in ~~2003~~both asquarters ~~compared~~this toyear ~~2002~~were above the levels achieved last year. This ~~Lower~~is ~~zeolite~~a result of sales to Procter and Gamble in ~~North~~the ~~America were~~US ~~offset~~throughout bythis ~~increased~~year and the sales of zeolite inslurry ~~Europe.~~to ~~Underlying~~Dalli, ~~growth~~both ~~in global~~more ~~silica~~than ~~sales~~offsetting ~~was~~lower ~~approximately~~sales to 4Unilever.~~5%.~~

Cost of sales

Cost of sales ~~decreased~~increased by €80.75 million, approximately 70.97%, to €~~101~~67.13 million in ~~2003~~2004, as compared to €~~109~~66.8 million in ~~2002~~2003. ~~Most~~This ofincrease is due to the higher ~~decrease~~proportion ~~relates~~of lower margin silicate and zeolite sales in 2004 compared to ~~exchange~~the ~~translation~~same ~~differences~~period last year. In addition, repairs and maintenance spend in 2004 has been higher than last year.

Gross profit

Gross profit decreased by €63.54 million, approximately 98.50%, to €6238.09 million in ~~2003~~2004, as compared to €6842.53 million in ~~2002~~2003. ~~Exchange~~The ~~rate~~decrease ~~retranslation differences~~is ~~account~~due ~~for~~to ~~most~~the lower level of ~~the~~sales ~~shortfall~~and higher repair costs.

Distribution costs

Distribution costs decreased by €1.98 million, approximately 1016.32%, to €169.63 million in ~~2003~~2004, as compared to €1811.51 million in ~~2002~~2003. The decrease is ~~mainly~~ due to two ~~exchange~~key ~~rate~~factors, ~~retranslation~~namely ~~and~~ the impact of lower ~~zeolite~~silicate ~~volumes~~volume inand ~~North~~lower ~~America,~~airfreight ~~offset by~~ costs ofincurred ~~additional~~in ~~silica~~2004 ~~sales~~as incompared to 2003.

~~Administrative~~Page ~~expenses~~29

Administrative expenses decreased by €3.6 million, approximately 11.4%, to €27.9 million in 2003, as compared to €31.5 million in 2002. The decrease is a result of the restructuring programme and the benefit of exchange rate retranslation.

Page 31

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

~~Exceptional~~Administrative ~~administrative~~ expenses

~~Exceptional~~Administrative ~~administrative~~ expenses indecreased ~~the~~by ~~first~~€1.0 million, ~~nine~~approximately ~~months~~5.3%, ofto ~~2003 were~~ €18.0 ~~nil~~million in 2004, as compared to €1419.10 million in ~~2002~~2003. The ~~costs~~decrease ~~charged in 2002 reflected~~reflects the ~~anticipated~~continuous ~~severance~~efforts ~~and other redundancy related costs incurred~~ to ~~complete~~ ~~the~~control ~~global~~and ~~restructuring~~reduce ~~programme~~fixed costs.

Operating profit~~/(loss)~~ and EBITDA

Operating profit ~~increased~~decreased by €130.16 million, approximately ~~297~~4.7 9%, to €17 11.56 million in ~~2003~~2004, as compared to €412.42 million in ~~2002~~2003. EBITDA decreased by €1.5 0 million, approximately 4.89%, to €2919.94 million in ~~2003~~2004, as compared to €3120.4 million in ~~2002~~2003.

Financial condition and liquidity

Net cash flow from operating activities was an inflow of €~~182~~101.0 million for the period from January 1, ~~2003~~2004 to ~~September~~June 30, ~~2003~~2004, compared to an inflow of €~~118~~93.8 0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003. The increase was primarily due to improved profitability, ~~reduced levels of working capital outflows,~~ together with ~~insurance~~a ~~proceeds~~slight ~~received~~improvement asin atworking capital ~~September 30, 2003~~outflows.

Interest payments of €6028.51 million were made in the ~~nine~~six months ended ~~September~~ June 30, 2004 ~~2003~~ (€5837.9 million in the ~~nine~~six months ended ~~September~~June 30, ~~2002~~2003). This consisted of €2912.90 million of senior debt interest and €2713.37 million of senior ~~notes~~ notes interest plus other sundry interest payments.

The ~~company~~Company has paid a cash dividend of €1039.8 million out of the declared dividend of €2044.81 million to its immediate parent company in ~~September~~May ~~2003~~2004. ~~The~~ The balance will remain as an ~~inter-company~~intercompany balance for the foreseeable future.

The Company held net cash balances of €~~135~~81.06 million as at ~~September~~June 30, ~~2003~~2004, ~~and~~ and had no drawings under the €75.0 million revolving credit facility. The ~~Company~~ Company has repaid a total of €4470.91 million of the Senior Credit Agreement in ~~the~~ the period ended ~~September~~June 30, ~~2003~~2004. Net debt as at ~~September~~June 30, ~~2003~~2004 was €~~673~~612.75 million (December 31, ~~2002~~2003: €~~757~~607.39 million).

Capital expenditure incurred during the ~~nine~~six months ended ~~September~~June 30, ~~2003 was~~2004 was €3121.27 million analysed as follows:

	(€ in millions)
Ineos Oxide		75.26
Ineos Phenol		7.8.4
Ineos Fluor		4.24
Ineos Silicas		123.03
		31.2
		21.7

Management believes that cash generated from operations, together with borrowings under the revolving credit facility will be sufficient for the operating needs of the business and to meet debt service requirements as they become due in the foreseeable future. The future operating performance and ability to service or refinance debt, will however be subject to future economic conditions and to financial, business and other factors, many of which are beyond management’s control.

Page 3230

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~November~~August 45, ~~2003~~2004.

INEOS GROUP HOLDINGS PLC
Registrant Issuer

/sS/ JOHN REECE ~~John Reece Director~~

~~Page~~John 33Reece Director

~~Table~~Page ~~of Contents~~31

SIGNATURES

INEOS HOLDINGS LTD Registrant Guarantor

/s/ JOHN REECE John Reece Director

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Filing Compare · INEOS GROUP HOLDINGS PLC