Penrice Soda Holdings Limited : Market Update

• Penrice continues transformation to new business model

• Difficult trading in Australian manufacturing and construction sectors

• New soda ash contract in the mining industry to start mid 2012

• Sodium bicarbonate export earnings grow with new contract in Japan

• SSR pilot plant commissioned and producing saleable product

• Strategic review progresses: all options remain on table

Penrice Managing Director & CEO Guy Roberts said that, "Penrice is strengthening its current business focused on commodity chemical sales to Australian manufacturing in two ways. Penrice is leveraging its innovative technology to supply specialty chemicals to expanding food and consumer product markets in Asia and second to supply technology and marketing services to the fast growing coal seam gas industry in Australia."
Mr Roberts said that, "Meanwhile, the external environment remains difficult with lower Australian customer demand due to manufacturing and construction downturns. The high Australian dollar continues to constrain Penrice's export earnings and encourage import competition. In spite of these negative effects, benefits from a broad range of technology and operational initiatives are providing material performance improvements."

Chemicals

In Penrice's chemicals business, demand for soda ash from Penrice's largest market segment, glass packaging, has declined considerably over the last three years, but has recently stabilised
with the industry tentatively forecasting low growth over the medium term, depending largely on the exchange rate. Demand for soda ash from the construction industry (for flat glass) has
also declined considerably over the last three years and has recently stabilised, with its future prospects dependent on the performance of Australian residential and commercial construction sectors.
Reflecting the impact on Australian manufacturers of high labour costs and the exchange rate, soda ash usage from the detergent segment continues its long term decline with recent announcements by two international detergent manufacturers, Reckitt Benckiser and PZ Cussons of closure of their respective Australian manufacturing operations.
A positive development for the company is the continuing increase in soda ash requirements from the mining industry, following active pursuit of opportunities there. The company has secured new export business with an international mining company with supply to commence from July 2012. This new contract supplies soda ash for use in the mineral processing plant of a large mine. It means mineral processing becomes Penrice's third largest soda ash market segment behind glass packaging and construction and ahead of the detergent segement.

Soda ash pricing, while higher than last year, remains constrained. However, expectations are that regional pricing will continue to gradually increase, and with lower input costs and operational efficiencies making an impact, margins are anticipated to gradually improve.
Demand for the other major product manufactured by the company, sodium bicarbonate, continues to be robust with strong domestic and export sales into Asia, limited only by capacity constraints. Price increases have been achieved across the customer base.
The Number 6 lime kiln reline, originally planned for late March 2012, has been shifted to better fit the company's capital expenditure plan and will now be completed at the end of May 2012.

Quarry and Mineral

Demand for quarry aggregates has recently softened further than expected. However, Penrice is benefiting from its supply position to the Urban Superway JV managed South Road Superway project for which a supply contract is now in place. Sales of quarry aggregates under this major road project are expected to continue until project completion in December 2013.
Elsewhere in Penrice's quarry business, the South Australia construction sector has continued to decline. Demand for construction materials are around 30% below last year, reflecting the national construction sector downturn, but Penrice's like-for-like sales are around 10% behind last year, reflecting a higher success rate in tenders.
The company is actively pursuing a new round of cost saving initiatives to offset the short term loss of sales revenue from construction activities.
Demand for chemical grade products from the business (such as limesand) remains steady.

The SA Government's Gawler Rail revitalisation project was completed in late March and Penrice has recommenced its daily rail service transport of limestone from its Angaston mine to its
Adelaide chemicals plant. The full financial impact on the company is now estimated at $5 million, up from the previous guidance of $4 million. Penrice is continuing discussions with the SA Government, pursuing its legal rights and seeking compensation for these costs.

As a result of a continuing difficult trading environment and the increased costs of the Gawler rail closure impacts on Penrice, the company's lenders have agreed to an increase of $4 million
in short term loan facilities to support the business through this period. The company's drawn down term bank debt currently stands at $93.8 million.

Penrice Chairman David Trebeck said that, "The Company has made considerable progress with its strategic review. Price increases, now bedded down, cost and labour reduction measures
already taken, have improved the company's earnings profile. Additional cost reduction projects are being implemented as the company commits to improving efficiency further in this most difficult of business environments. However, the board remains conscious that debt needs to be reduced significantly and it continues to evaluate a range of options to achieve this while being
mindful of delivering long term benefits for shareholders."

The company has already flagged the potential sale of the Angaston mine as an option; however, before this could be progressed, the company first required a comprehensive JORC compliant mine plan to provide greater long term certainty regarding the size and quality of the limestone resource and its asset value. That mine plan is well advanced, having completed drilling and assaying already. A Resource and Reserves Model is being developed. Early indications are that the limestone resource will be proven at least in line with previous expectations, providing long term competitive limestone supply to Penrice's own chemicals business. Also indicated is a large resource of construction aggregates, well in excess of
previous estimates, making it a substantial and well located resource of construction aggregates for metropolitan Adelaide. The company expects to complete its modeling soon and issue a
JORC compliant Resource and Reserves statement.
The board believes that the proven uplift in construction aggregates resource in its Angaston mine will further encourage investor interest, making the sale of the mine an option which the company will pursue further with interested parties. A mine sale will only be undertaken with Penrice retaining its competitive position with a long term "life of mine" limestone supply agreement to underpin the competitiveness of its chemical business for the long term.
Mr Trebeck said that "The planned reduction of debt will place the company on a more secure financial footing, so that it can focus on the considerable growth opportunities in its core chemicals business. Long term, the company intends to focus on its two main growth strategies
- namely supplying specialty chemicals into food and pharmaceutical markets in Asia and leveraging its Selective Salts Recovery (SSR) technology to supply equipment, technology and
services to the coal seam gas industry in Australia."

At its Adelaide chemicals facility, Penrice has now successfully built and commissioned a multi- million dollar pilot plant for a coal seam gas (CSG) industry client to demonstrate the commercial application of its SSR technology to selectively recovering soda ash and salt from CSG water. Further trials are in progress for other clients.
This innovative Penrice-developed technology cleans brine-rich CSG water and extracts soda ash and salt from the residual brine for sale. The CSG projects, in which very substantial investment has already been committed by the industry is unable to proceed unless there is an acceptable methodology available that deals effectively with its waste streams waters.
Penrice believes that successful commercialisation is potentially company transforming, with the potential to earn income from the technology and associated technical and marketing services.

In 2010 a shareholder, LCE, demanded access to a substantial range of company records and communications (dating back to the time of the listing of the company). Given the work involved in identifying and locating those documents and in the interests of avoiding unnecessary costs and distractions, the company offered to make a number of documents available to LCE for inspection. LCE declined the offer and declined to meet with Penrice to discuss the situation. Last year, the Court granted LCE the right to inspect a limited range of documents but ruled that LCE was not entitled to many of the documents it sought. The company provided copies of the documents to LCE in accordance with the Court's ruling.

The documents produced for inspection were unexceptional and primarily comprised board packs and minutes from meetings of the company's board. Another recent application by LCE to obtain further documents was dismissed by the Federal Court on 5 April 2012 with costs orders against LCE and in favour of the company. Penrice is pleased the Court has refused LCE's attempt to re-open its earlier application.

Given continuing uncertainty with domestic and international economies together with the high
Australian dollar, the company is unable to provide specific guidance at this time. As previously advised, the company expects to make a loss for FY2012. However, also as previously noted,
second half performance will be stronger than the first half, reflecting the benefits of actions taken by the company in the first half, further cost saving initiatives in the second half, and fee
income from its SSR pilot project.
Mr Trebeck said that, "The board recognises the importance of the strategic review and in particular the possible sale of its quarry and mineral business and will seek the best outcome to deliver value for shareholders. It is anticipated that an announcement regarding a Resources and Reserves statement for its Angaston mine will be made around the end of May 2012."

Penrice Soda Holdings Limited (ASX: PSH) is Australia's only manufacturer of soda ash and sodium bicarbonate and one of the world's largest sodium bicarbonate marketing companies. It also operates a limestone mine and is a significant supplier of industrial minerals and civil products.

The Company is committed to driving shareholder value through the manufacture and supply of a range of world-class products across a variety of industries and countries including packaging, building and construction, mining, detergents, food and personal care, stockfeed and environmental control/water purification.

For further information on Penrice Soda Holdings visit the company's website at www.penrice.com.au

For more information, contact:

Guy Roberts, Managing Director & CEO Penrice Soda Holdings

+61 8 8402 7239

This document includes forward looking statements. Forward looking statements can be identified by the use of terminology such as 'believe', 'expect', 'anticipate', 'will', 'could', 'would', 'should', 'may', 'plan', 'estimate', 'intend', 'predict', 'potential', 'continue' or similar words. Forward looking statements are not guarantees or predictions of future performance and involve known and unknown risks many of which are beyond the Company's control and differ materially from those expressed in the forward looking statements. Some of the important factors that may cause actual results to differ materially from those of the forward looking statements include, among others, foreign currency or interest rate fluctuations; economic and competitive conditions in Australia and other relevant markets and countries; disruptions in the supply chain; changes in tax rates and laws; consumer and product demand; fluctuations in availability and cost of raw material, labour, energy, electricity and transportation; actions of competitors and customers; unanticipated regulatory expenditure; and, the Company's ability to further develop plans, strategies and objectives of management. Except as required by applicable regulations or by law, the Company does not undertake any obligation to publicly update or review any forward looking statements whether as a result of new information or future events.

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