Kanoria Chemicals & Industries Limited (KCI)
announces improved performance for Q4, FY '05 and FY 2004-05

Q4 FY '05 Net Profit up by 62% to Rs. 8.4 crores; Net Sales up by 21.5% to Rs. 77.3 crores; Declares dividend of 30%-

KCI bags TERI Corporate Environment Award 2003-04
New Delhi, May 28, 2005: Kanoria Chemicals & Industries Limited (BSE: KANORIAC; NSE: KANORICHEM), one of the leading Indian manufacturers of chemical intermediates, today announced its financial results for the fourth quarter and full year ended March 31, 2005.

Net profit for Q4, FY '05 has risen by 62% to Rs.8.4 crores from Rs. 5.2 crores in the previous year on the back of an increase of 21.5% in Net Sales to Rs. 77.33 crores from Rs. 63.65 crores in the previous year. EPS on basic and diluted earnings for the quarter is Rs. 4.96 against Rs. 2.94.

Net Profit for the year ended March 31, 2005 has increased by 14.4% to Rs. 22.7 crores from Rs. 19.8 crores in the previous year. Net Sales for FY '05 has increased by 13.6% to Rs. 287.43 crores from Rs. 252.92 crores in the previous year. EPS on basic and diluted earnings for FY '05 is Rs. 13.10 against Rs. 11.07.

The Board of Directors has recommended a dividend of 30% (previous year 25%) on equity shares and 13.5% on Cumulative Redeemable Preference Shares for the year 2004-05, subject to shareholders approval at the Annual General Meeting.

KCI has also bagged the prestigious TERI Corporate Environment Award for 2003-04 for outstanding achievement in environment management for its programme 'Waste to Wealth'. The TERI Award is in recognition of KCI's pioneering use of Reverse Osmosis technology for treatment of distillery effluent and recycling water in India at the company's integrated Alco-chemical manufacturing facility in Ankleshwar, Gujarat.
Commenting on the company's performance for the full year 2004-05, Mr. R.V. Kanoria, Chairman & Managing Director, Kanoria Chemicals & Industries (KCI), said:

"The company continues to reap benefits from its strategy to reduce costs, improve efficiencies in operations and enhancement in production capacity of certain product lines. The upturn in the Chlor-Alkali cycle was severely impacted by high raw material cost for our Alco Chemical division, the company has yet been able to maintain its topline and bottomline growth during the year.

Progress on the company's Rs. 180 crore twin expansion projects is satisfactory. Upon completion these projects will help de-risk the company's manufacturing, add to Chlor Alkali capacity and add additional revenue stream from the power facility. This will result in a significant improvement of our profitability in the current financial year and fully reflect in FY 07."

Growth Strategy and Outlook for FY 2006

Kanoria Chemicals and Industries (KCI) aims to emerge as a leading manufacturer of chemical intermediates in India. KCI has been aggressively investing in technological innovations to improve plant level efficiencies and adding capacity based on user industry demand. The company also acquired and re-located the Poly Aluminium Chloride plant in Renukoot to manufacture most modern water treatment chemicals.

KCI's Rs. 180 crore twin-complimentary expansion project is at an advanced stage of implementation is scheduled for completion by December 2005. These projects will add a 110 TPD modern, environment friendly Membrane Cell Chlor Alkali plant and double the power plant capacity to 50 MW. This project is focused towards de-risking the company and ensuring sustainability, the core ethos of the company.

Earlier in 2003, KCI had completed its financial re-structuring, which released resources for fresh investment in existing product capacities and new products. The company continues to focus on cost control and operational optimisation across all product categories. As a result, KCI has emerged as a low cost manufacturer of Chlor Alkalis and Alco Chemical intermediates backed by conscious backward and forward integration in production line. KCI also enjoys proximity to both raw materials and power giving the company a definite competitive advantage.

Currently, the Chlor - Alkali cycle is on the upswing with excellent growth in demand and firm prices. The cycle is expected to peak in the current financial year and likely to remain stable in FY '07. The company is well poised to benefit from this upturn both from the existing capacity as well as from the addition of capacity based on Membrane Cell Technology.

On the other hand, prices of molasses, the key raw material for the Alco Chemical, is on an upswing and is expected to remain so for the next couple of months. This has severely impacted the Alco Chemical unit, but the company is geared to face this challenge.

The company expects to considerably improve both its topline and bottomline during FY '06, with the full impact of the expansions being reflected in FY '07.

In addition, KCI will be adding new revenue streams to its topline with-:
Poly Aluminium Chloride (PAC): Demand for this next generation water treatment chemical is growing and the company aims to leverage this by virtue of being one of the largest manufacturers of PAC.
Power: Around 10 MW surplus power will be available with the doubling of the present power generation capacity by December 2005. KCI has already entered into a contract with PTC India to sell this surplus power, and wheeling into power deficient but revenue yielding locations.
Fly ash utilization: In line with KCI's core ethos of sustainability, the company aims to commercialise utilization of fly ash generated by the power plant. Significant progress has been achieved in this area. Currently the company is utilizing 100% of the fly ash of which 25% is being used in-house. It is expected that this potential problem area would eventually emerge as an environment-friendly, revenue yielding activity for the company.