Main trends – Q1 2003

In the first quarter of 2003, the Group reported a net loss of € 2 million, for a net loss per share of € 0.03, compared with net income of € 37 million in the first quarter of 2002. Adjusted net income¹ per share was € 0.48 versus € 0.62 in the first quarter of 2002.

At € 2,820 million, consolidated net sales in the quarter were generally stable compared with the first quarter of 2002. Net sales from manufacturing activities (excluding International Trade) decreased by 5% from the same period in 2002, and by 6% on a comparable basis. International Trade benefited from the consolidation of Pechiney Far East, as division net sales rose 9% during the period and declined 14% on a comparable basis.

Earnings from operations in the period totaled € 72 million, down 31% from the first quarter of 2002. This decrease was mainly due to external causes (depreciation of the U.S. dollar, rise in the cost of raw materials and energy), while all three sectors showed marked improvement in operating performance, particularly Aluminum Conversion, a sector in which results climbed rapidly in the first quarter.

The Primary Aluminum sector was mainly affected by the considerable depreciation of the U.S. dollar vis-à-vis the euro, a trend which continued throughout the first quarter. The average realised price of aluminum on the LME improved slightly compared with the first quarter of 2002.

The Aluminum Conversion sector was characterized, as in 2002, by the contrasting situation of activities in Europe and in the United States. Despite the absence of an upswing in demand in the most cyclical end-user markets (industrial production linked to investment, construction, aerospace), European activities benefited from a rise in shipments to the aerospace market in Europe in the first quarter (related to the end of destocking and to the initial deliveries for Airbus’ A380 plane) and from sustained demand for can stock. In the United States, the aerospace market remained flat, and industrial investment markets continued to stall.

Lastly, as the Group predicted, the Packaging sector was confronted by a squeeze effect in the first quarter as the price of resins rose sharply. The sector was also affected by the negative impact of the translation of its American profits into euros as a result of the depreciation of the U.S. dollar in the last 12 months. Market conditions in beauty and cosmetics packaging remained difficult, particularly

¹ See the definition of adjusted net income in the note on page 1.

in luxury markets where pricing pressure remains strong.

Continuous Improvement System – Q1 2003

In addition to the cumulated gains, gross of inflation, of € 130 million reported at the end of 2002, € 24 million were generated in the first quarter of 2003. Cumulated gains since January 1, 2002, thus total € 154 million.

Cumulated Continuous Improvement gains at the end of March 2003

During the first quarter of 2003, Primary Aluminum benefited from its first significant gains in volume as a result of a 0.7% rise in the Group's consolidated production of primary aluminum (+ 3.1% excluding its Dutch plant, PNL), compared with the first quarter of 2002. Conversely, in Packaging, cost reduction measures were masked by current restructuring, with a negative impact on costs that could last until the end of the first half.

Finally, beyond its impact on costs, Pechiney’s Continuous Improvement System demonstrated its effectiveness in the area of customer service and has allowed a strong rise in higher added value products volumes in European Conversion.

Recent developments – Q1 2003

•  January 17: Projected construction of a plastic tube plant in Mexico. The new entity will manufacture plastic tubes for the North American cosmetics market. This operation enables Cebal Americas, a division in the Group's Packaging Sector, to focus on its priority markets to improve service and competitiveness and to take advantage of growth opportunities in the region.
• February 28: Proposed resolution by two Pechiney   shareholders (ABN AMRO Contrepartie France SNC and ABC   Arbitrage) to convert preferred shares "B" into common   shares "A", on the basis of 11 common shares " A" for 10   preferred shares "B". This resolution was adopted by the Annual   Shareholders' Meeting of April 3, 2003. Conversion will therefore   take place if the special meeting of holders of preferred shares   "B" approves this measure by a two-thirds majority. First call for   this special meeting is on May 27, 2003, at 3:00 p.m. in Paris.
• March 13: Decision by the Corus Group plc not to proceed   with the sale of its aluminum conversion assets to Pechiney   subsequent to the veto by the Supervisory Board of its Dutch   subsidiary, in spite of the preliminary agreement signed in   October 2002 by Pechiney and Corus.
• March 19: Production idled at the Auzat smelter for reasons   of safety.

Net Sales (Millions of euros)

Earnings from Operations (Millions of euros)

Compared with the fourth quarter of 2002, earnings from operations were down € 7 million, primarily owing to the high level in billing on major technology sales contracts recorded at the end of last year.

For the second quarter of 2003, while the realised price of aluminum is likely to remain at a level close to that of the first quarter, the sector will be confronted by the full effect of the accelerated depreciation of the U.S. dollar since January 2003, the impact of which was only partially felt in the first quarter since it typically takes two months to manifest itself.

Aluminum Conversion

Earnings from operations in the Aluminum Conversion sector went from € 4 million in the first quarter of 2002 to € 15 million in the first quarter of 2003, representing a solid increase from one period to the other.

Earnings from operations in European activities went from € 15 million in the first quarter of 2002 to € 26 million, reaching the highest level since the first quarter of 2001. In the fourth quarter of 2002, earnings from operations totaled € 15 million.

This good performance compared with the first quarter of 2002 was mainly due to the following factors.

• The good industrial performance of the Neuf-Brisach facility (Cans, Automotive, Standard Rolled Products division), which succeeded in debottlenecking operations and thereby benefited from strong demand for can stock throughout the first quarter. The plant continued to improve its product mix thanks to a 50% increase in sales volume in car body sheets. The volume of standard rolled products also rose significantly (+ 26%).
•  Good management at the Issoire facility (Aerospace, Transport, Industry division), led to a considerable reduction in production costs since the beginning of 2002, to a better balance in the product mix to the advantage of engineering plates, and to a significant rise in sales volume in the first quarter of 2003 linked to a 15% increase in shipments to the aerospace market in Europe, marking the end of the destocking seen at Airbus in 2002.

Foil and Strip (Foil and Strip / Specialties division) continued to capitalize on the much improved operating performance and strong increase in volume at the Rugles plant, thanks to the integration of the Eurofoil teams in 2002.

On the other hand, operating results in Extrusions (Extrusions, Casting Alloys, Automotive division) were affected by the depressed economic environment in France and Germany in industry and construction.

Segment Information – First quarter 2003

Primary Aluminum (Aluminum Metal, Bauxite–Alumina and Ferroalloys) At € 43 million, earnings from operations in the first quarter of 2003 were down € 26 million from the same period in 2002.

This decrease was entirely linked to the impact of the depreciation of the U.S. dollar vis-à-vis the euro on the translation of both LME prices and geographic premiums. The $/€ parity realised by primary aluminum activities moved from 0.88 to 1.04, representing a decrease of 15.3% in the value of the dollar vis-à-vis the euro. The realised price of aluminum on the LME rose slightly during the period (+ 1%), while the sector was confronted by an increase in energy costs. Altogether, the negative impact of external factors was € 31 million.

The good operating performance reported in the sector made it possible to offset this impact to some degree. Sales volume of primary aluminum increased by 0.7% in the period, in spite of persistent production problems at PNL in the Netherlands. Excluding PNL, production at Group smelters rose 3.1% over the first quarter of 2002. It will most likely be necessary to wait until the end of 2003 before the PNL smelter reestablishes an optimal production rate and stabilizes its production costs after the weather related breakdown that occurred in the fourth quarter of 2002.

In the United States (Ravenswood, Vernon and Aluminum Lithium), the operating loss totaled € 11 million in the first quarter, stable compared with the first quarter of 2002, and € 4 million better than in the fourth quarter of 2002.

The recovery plan at the Ravenswood plant launched in September 2002 led to a significant improvement in the plant’s operating results. In the first quarter of 2003, the result of American activities included a loss of more than € 3 million linked to the resetting of the aluminum lithium activity (Chicago), which partially masked the improvement in results at Ravenswood, where losses stood at € 8 million for the quarter.

Order books, with the exception of extrusions, remain satisfactory in Europe and should allow a good performance in the second quarter. However, it should be noted that there is limited visibility in the aerospace sector from the summer. In the United States, there are still no signs of a pick-up in final demand.

Packaging

Earnings from operations from Packaging activities totaled € 26 million, down € 7 million from the first quarter of 2002 and up € 2 million from the previous quarter.

As the Group had announced in January, the increase in the price of plastic resins in the first quarter had a strong negative impact on results in the Packaging sector, since the selling price / raw materials price squeeze effect alone explains more than the drop in earnings from operations compared with the first quarter of 2002. This impact was primarily concentrated on flexible packaging activities in Europe and in the United States, where resins account for almost 50% of production costs. Raw materials price increases are progressively passed through to selling prices, often in application of pass-through clauses in the United States. These price increases can nevertheless take several months to go through. Overall, the squeeze impact from higher raw material prices should therefore be significantly reduced in the second half of this year.

In addition to this impact, there was the negative effect of translating the results of the sector's American activities linked to the depreciation of the U.S. dollar vis-à-vis the euro.

Excluding the parity impact and the raw materials squeeze, the Packaging sector’ earnings from operations would have been significantly higher versus 2002.

From the point of view of business, the markets for flexible packaging and plastic tubes in beauty and cosmetics benefited from the anticipated rise in volumes, whereas demand in the aerosol and luxury

markets remained sluggish. Techpack International, which serves beauty and luxury markets, was also confronted by cost overruns linked to strikes at the Lir France plants likely to be closed (Avallon, Provins) and to the shutdown of its Watertown facility in the United States. These incidents could continue to disrupt Techpack's cost structure through to the end of June. Finally, while selling prices in the beauty sector declined from the first quarter of 2002, they have remained stable since the fourth quarter of 2002.

In the second quarter of 2003, the negative impact of the increase in the price of resins will undoubtedly continue to make itself felt. Resins prices in the second half will depend on the level of the price of oil. In addition, as in the first quarter, the current period will be marked by numerous cases of industrial restructuring, the Continuous Improvement benefits of which are mostly expected in the second half. Finally, the luxury market (approximately 20% of sales in the Packaging sector), which has continued to decline since the end of 2001, shows no signs of recovery.

International Trade

Earnings from operations in International Trade declined € 5 million from the first quarter of 2002, from € 19 million to € 14 million, and was down € 6 million from the previous quarter. The positive impact of the integration of the copper trading activities of Pechiney Far East did not offset the lesser performance of the other trading activities and the decrease in the result of distribution activities linked to the lackluster economic environment. In addition, the division was affected by the negative effect of the depreciation of the U.S. dollar for more than € 3 million compared with the first quarter of 2002. This impact should continue to weigh on the division's results in 2003, which are expected to be closer to their historical average after a record year in 2002.

Other statement of income items

Income from operations totaled € 11 million in the first quarter of 2003, versus € 88 million in the first quarter of 2002. This figure included € 48 million in restructuring expense and other (expense) income linked to the restructuring of the Group's manufacturing base (total or partial closings: Auzat, Aubagne, Sabart, Lir France). Additional expense related to these closings should be charged by the end of the year in the amount of approximately € 15 million and bring the total to a level in line with what was announced in January (€ 50 million to € 70 million).

Net financial expense totaled € 11 million in the first quarter of 2003, stable compared with the first and fourth quarters of 2002.

Current and deferred income taxes represented income of € 6 million in the first quarter of 2003 versus a charge of € 28 million in the same period in 2002.

Cash flow

The cash flow generated by operations was down 33% from the first quarter of 2002 to € 179 million, but rose sharply compared with the previous quarter when it totaled € 24 million. Net of investments and divestitures, the Group's cash flow stood at € 54 million in the first quarter of 2003.

Financial structure

As of March 31, 2003, net indebtedness totaled € 1,366 million, down € 71 million from December 31, 2002. Compared with shareholders' equity and minority interests of € 3,120 million, the debt-to-equity ratio was 0.44, compared with 0.45 as of December 31, 2002.

As of March 31, 2003, the total number of outstanding shares was 82,513,683, of which 4,716,938 were owned by the Company.

Amortisation of goodwill

The Group continues the regular amortisation of its goodwill on the basis of French accounting standards. A charge of € 7 million was recorded in the first quarter of 2003.

Certain statements in this press release that describe Pechiney’s intentions, expectations or projections may constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Pechiney’s actual results, performance or achievement to be materially different from its intentions, expectations or projections. The forward-looking statements in this press release speak only as of its date and Pechiney undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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Press Contacts:
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Stephan Giraud: Tel: 33 1 56 28 24 19
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E-mail : Pechiney-IR-Team@pechiney.com Internet : http://www.pechiney.com

The accounting principles applied by the Group in the preparation of its financial statements differ in certain points from generally accepted accounting principles in the United States. The impact of these differences is presented in the accompanying tables.

Accounting for derivatives and hedging operations

Pechiney's financial statements prepared in accordance with US GAAP reflect the application of SFAS 133, which requires that derivative instruments (foreign exchange, interest rates, commodities) be recognized in the balance sheet at fair value, and sets criteria to define transactions that may be accounted for as hedging operations.

On the basis of these criteria, certain hedging operations, although efficient from an economic point of view, are not recognized as hedging activities As a result, gains and losses resulting from the mark to market of certain hedging instruments are to be recorded in net income or in equity, with no recognition of the inverse effect of the mark to market of the hedged items.

For this reason, the impact of this standard on results varies according to market conditions and is difficult to forecast. The application of SFAS 133 generated a net accounting charge (with no impact on cash flow) of € 1 million in the first quarter of 2003.

Amortisation of goodwill

In Pechiney's financial statements prepared in accordance with US GAAP, business combinations are recorded in compliance with the accounting standard SFAS 142, which requires that goodwill be no longer amortised on a recurring basis, but be regularly tested for impairment, leading, if necessary to non-recurring amortisation.

The application of SFAS 142 led to the cancellation of recurring amortisation in the first quarter of 2003

The differences in the balance sheet as of March 31, 2003, included the impacts of SFAS 133, SFAS 142 and SFAS 87 (reduction in shareholders' equity due to the different way complementary retirement provisions are recorded in US and in French GAAP). These differences amounted to a net reduction in shareholders’ equity of 79 million as of March 31. 2003 in US GAAP, down from 105 million as of December 31. 2002.