1ANNUAL GENERAL MEETING26 OCTOBER 2004CEO’S ADDRESSGood morning...

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ANNUAL GENERAL MEETING
26 OCTOBER 2004
CEO’S ADDRESS
Good morning ladies and gentlemen.
I’m pleased to be able to talk with you today and share with you more of what
your Company has been doing and will be doing in the future.
I joined ION as CEO two months ago because, like its other shareholders, I
believed in the long term prospects of ION’s businesses. I still hold that view.
In saying this, I don’t underestimate the challenge we have in driving our way
through our ambitious growth process.
We have a revenue base at around $700 million p.a. which is set to grow in
both our automotive and energy services businesses in the years ahead.
This is a revenue base of good scale from which we can derive decent profits
provided we continue to work, as I want to, on the basics of good business
performance.
Following on from our Chairman’s statement and our 24 September market
update, I want to give you a further insight as to how we are travelling, what
our issues are and what we’re doing to get on with the job.
The Energy Services business grew in F2004 by acquisition, organic growth
and cyclical recovery from the drought. These dynamics should continue this
year, driven by a very committed management team.
The Automotive Group has had a year of real expansion in activity,
investment and costs over calendar year 2004 which is yet to be matched with
commensurate production and revenue. This is what is meant by “greenfield
drag”.
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These large investments offer the promise of a bigger future but they are a
drain on cash in the near term.
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I now want to share with you my analysis of what the issues are facing our
Company, and what are the key drivers for successfully dealing with each
issue.
Central to a growing company is the adequacy of cash to fund that growth.
We have had good bank and share subscription support. Last month we put
in place a $440 million bank facility in this regard. The possible sale of one or
more businesses, which we have grown substantially and can sell at a healthy
capital profit, is also a sensible option we have to reduce our gearing.
Equally, installing discipline to get full value from each dollar of capital spend
is important, as is generating cashflow from our existing operations.
Unnecessary capital expenditure projects will be eliminated.
Obviously our new business projects only have value by successfully being
completed and generating cashflow. The key driver for this is the ability of our
people to cope with the task. Clearly in the past we have had a mixture of
success and failures here.
An example of success was properly resourcing our new 6-speed
development project and rapidly getting prototypes into our customers’ cars.
Conversely, Wingfield was not properly resourced and we have paid a price
there.
This is an area getting close attention from me.
Similarly, supplier performance and ensuring a constructive workplace culture
on new sites is key.
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Current trading profitability is driven by our forward order book and our costs.
Obviously our production quality has a big impact here also.
Our businesses have consistently kept their customers and in fact won new
business. The nature of our industry is that demand volumes do go up and
down in lock-step with our customers’ success in their markets. Just recently
that has hit us in some areas, but that is a short term pain which will swing
back our way in time.
More work is needed in most of our businesses in order to drive down our
costs given the global competitive nature of most of our business. This is
being attacked with renewed vigour by our management.
The bottom line in terms of our corporate performance is the sustainable trend
in earnings per share. Reviewing all our trading terms in the widest sense is a
key to this, as is improving our physical operating performance.
You will see three common threads running through successfully dealing with
these issues are:
Having the right people with the right skills in the right places and well led;
Being disciplined in our management of cash; and
Being “commercial” in our dealings
We operate in very competitive industries with global customers who give
great substance to our revenue stream provided we perform well. Our
businesses are closely coupled with our customers and so we must be able to
work with them at all levels.
In speaking with our staff I constantly remind them that our success relies on:
1. Our “thinking like owners” – what decisions would we take if it were all our
own money; and
2. Working constructively with others at all levels, both inside and outside of
our Company.
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Let me now update you on some specific recent significant events.
A bias for action is nothing new in ION, a company which has built a $700
million revenue base in five years.
However, even by ION’s standards there has been a renewed sense of
energy to “get on with the job of value creation” over the last two months. In
that time we have:
Visited each major location for a site review
Improved the tracking and accountability of businesses
Put in place project management methodologies for the Altona block
business
Completed an engineering time and cost review of all major capital
projects
Secured $440m of bank financing
Conducted substantial discussions with companies interested in buying
divisions from ION
Ramped output at Wingfield
Published our F’04 results and annual report
Finalised our choice of casting processes to be used at Altona for engine
block manufacture and cast trial blocks at our development facility
Road proven prototype 6-speed transmissions in the cars of potential
customers
Substantially completed the first phase of Kentucky equipment installation
Our Energy Services business has recently expanded its scope by
assisting our global petroleum industry customers by consulting to them on
their overseas operations and has been invited to look at business
opportunities with them elsewhere. Its core business levels continue to
firm.
In the next two months we expect to (go into liquidation it should read):
Bring to resolution the possible sale of one division
Commence wheel production at our new Kentucky plant
Complete civil building works at Altona and receive on site a substantial
amount of the machinery
Complete plans for the next IES growth stage
In the third two-month period we plan to:
Ramp up Kentucky production substantially
Commence equipment installation at Altona
Introduce new products to our Auckland wheel plant
Commence training personal for Altona start-up
Secure 6-speed transmission orders
Meanwhile, Wingfield production and quality continue to improve towards our
targets but the efficiency is still a long way from where we need to get it to.
I’m sure this improvement will continue and that we will turn around North
Plympton’s performance.
These are just some of the highlights of what’s going on in your Company.
ION remains a company with growth and performance potential in competitive
industries. We have challenges ahead of us for sure. It remains, though, our
intention to continue to build ION in a way that delivers superior long term
returns to our shareholders, consistent with meeting the reasonable
expectations of our customers, employees and other stakeholders.


Roger Flynn
CEO, ION Limited
26 October 2004