ALS LIMITED — AGM Information 2014

Jul 28, 2014

Greg Kilmister Managing Director ALS Limited

Annual General Meeting 11am on 29 July 2014

Thank you Nerolie.

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Ladies and gentlemen.

I stand before you here today with a little more scar tissue than I had this time last year. Last year in July 2013, we were reporting on a record year for the Company. The 2014 financial year was very different. The 2014 year was characterised by quite substantial changes in many of the markets we service. We saw significant changes in the resources sector; particularly in relation to metals and coal. Those markets were characterised by falling commodity prices, a reduction in capital investment as companies focused on shareholder returns, a focus on driving down costs and increasing tonnage from existing mines, and poor investor appetite for new projects or green-field exploration. All of that said, the current mining downturn feels very normal to me and your

company has been through these downturns many times before. In fact history has shown that ALS’ strongest growth phases always coincide with a recovery in the mining sector and each day we inch closer to that recovery.

Our Environmental businesses also had challenges; with our Canadian and Australian businesses facing pricing pressure in mine monitoring work, and our laboratories servicing the water sector seeing reduced work volumes due to government spending cutbacks. Prices for those services have now been rebased and the large global environmental markets in the USA and Europe that were somewhat sluggish last year, are now showing consistent signs of recovery as economic activity picks up in those markets.

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In summary it was a challenging year and that is reflected in the financial results of the company. But it was also a year that forced us to very carefully examine our own cost base and make adjustments. It was a year where we stayed on track with our long term vision and 2017 goal of diversifying into the Food and the Oil and Gas markets. It was a year where our staff stepped forward and went the extra yard to do the very best they could for a company that they are passionate about.

And we must remember that it was a year where we outperformed the results of the period from 2006 to 2009 that at the time we saw as a boom period for this company and its markets. ALS is a high performance company, we set the bar quite high and that is why we are disappointed in last year.

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All laboratory businesses saw a decrease in operating margin through the year, mostly because of the reasons discussed earlier; sluggish or contracting markets, pricing pressure from both clients and competitors, underperformance of our businesses as we entered new market sectors to diversify our base, and higher initial operating costs as we moved acquisitions across to ALS systems and doing things the ALS way. Relative to our global peers, ALS remains close to best in class in regards to operating margin but certainly down on where we were last year and where we want to be. Our growth strategy has always been built around keeping Group operating margin above 20 percent. At 18.8 percent last year, this is disappointing and our efforts in the current year, despite market conditions, are geared to returning to that target.

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During the year we made a number of significant acquisitions.

Those acquisitions included the Reservoir Group, EarthData, Reliance, OilCheck, and BMP Enterprises.

All of these acquisitions were part of executing our long term strategy of geographic and market sector diversification in areas where we have, or can develop, an enduring competitive advantage. As the slide on the screen shows, this strategy of acquisitions and divestments has been in train for the last decade.

In discussing our strategy internally, I often talk to staff about the importance of colour in the pie. In looking at the three pie charts on the screen, you will note that as we have built the company from around $450 million in revenue only ten years ago to the $1.5 billion in revenue today, we have put colour into the pie. This diversification is very important in smoothing out economic cycles and building the underlying strength of the company. Ten years ago our laboratory business consisted of three business streams (geochemistry, environmental and tribology) turning over $150 million. Today our laboratory business is ten business streams turning over $1.4 billion.

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Ten years ago we had operations in 28 countries whilst today we have a presence in 60 countries. All evidence of our commitment to our long term strategy of geographic and market sector diversification, and more importantly the successful execution of that strategy. That journey still has a way to go.

From a corporate perspective our diversification strategy is currently firmly focused on two significant markets; those being the global food analytical markets and of course the Oil & Gas markets. We have been talking about these opportunities for two years now, and I want to give you an update on our progress.

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We estimate the market globally for food analytical services to be between three and five billion dollars. This is a significant market by our standards and of a size similar to the global environmental analytical market and certainly a number of times the size of the current geochemical market. Food analytical markets are driven by international trade in food products (especially the increase in fresh food trade), increases in the number of food brands not owned by the food manufacturer, better awareness of longer term health impact of foods from both contaminants and naturally occurring compounds in the food, a move towards outsourcing more complex analytical requirements and a general consolidation of smaller independent food laboratories.

Eighteen months ago we put in place a strategy to develop the building blocks that will allow us to develop a significant, genuinely global, food analytical business. I am pleased to advise that those building blocks are now substantially in place.

We have built a new food chemistry centre in Chatteris in England to service the United Kingdom. That centre is now fully operational and processing samples. The shell of a new building on our site in Copenhagen (Denmark) is now complete. This will be a new food chemistry and microbiology laboratory to service the Scandinavian market. Food analytical services now represent 21

percent of revenue going through our Prague hub laboratory in central Europe. We now have standard equipment lists across all our food laboratories, a global knowledge sharing system, standard methods, new high end analytical services including LC triple quads as a standard, and most importantly have developed and deployed a new client portal and Laboratory Information Management System (LIMS) that will operate globally. All these initiatives are designed to provide a solid base on which to build a global food business of $200 million in revenue as our first target.

Tomorrow I am travelling to Europe to participate in an ALS global food strategy meeting that will develop the next stage of this exciting opportunity. Those strategies will now move from being internally focused to an external focus all about pursuing revenue growth.

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Our other big strategic diversification strategy has of course been in Oil & Gas. Last year I went through the rationale for that move and also outlined the underlying businesses that the Reservoir and EarthData acquisitions brought to ALS. Those acquisitions were about providing a global footprint, recognisable brands that gave us legitimacy in the sector, and a platform to develop our laboratory services.

The slide on the screen shows Oil & Gas revenue by business line by location. As you can see we have access to all of the major global Oil and Gas markets; the North Sea, Middle East, West Africa, Australia, North America and a developing presence in north-eastern South America.

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Our strategy is to complete the full integration of the Reservoir Group into ALS so that we are on common systems, have a true and accurate insight into the businesses, and can drive consistency and discipline across the global footprint. That journey is well progressed but is not yet complete. We are also shifting the operational centre for the business to Houston, Texas; the global “capital” for the Oil & Gas industry. By Christmas this year all four global heads of our Oil & Gas business streams will be based in Houston. Historically these executives were scattered across Houston, Edmonton, Aberdeen and Dubai. By all being based in Houston we will get better cross fertilisation and leverage across the business streams, a more common culture, and better access to the client base.

We are also developing the business to shift the revenue streams more toward production services than exploration services to flatten the potential volatility in revenue. Although services around exploration will always remain a very important area for us, ideally we would like to see the division having one third of its revenues from exploration and two thirds from production services.

Development of our Oil & Gas businesses will take years not months; but we have started that journey. The market is very substantial, the opportunity significant, and we are now a player in that market; a small player yes but a legitimate player nonetheless. I would not be surprised if a decade from now Oil & Gas was by far the biggest division in ALS, and perhaps that day may come sooner than we think.

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In the year under review, our Minerals Division operated in a declining market environment as we went further into the cyclical downturn. I reiterate that this cyclical downturn feels very normal to us and started some two years or more ago. We are believers in the mineral cycle and were never disciples of the “stronger for longer” or “we have entered an entirely different market dynamic” views. Our hub and spoke model is designed to operate through the cycle and we pulled the appropriate levers through the year. The depth of the exploration downturn at greater than 50 percent is a little deeper than we predicted in 2012 but we have reacted appropriately to that challenge.

I believe Brian Williams and his team managed the business well through a very tough year where we saw revenues decrease by 30 percent. Operating margin at 24 percent for the division was commendable, and more importantly the geochemical margin at 26 percent in a rapidly declining market and pricing pressure from both clients and competitors was a good outcome.

We believe we are at the bottom of the cycle and perhaps very close to a gradual improvement in market conditions. There are a number of small but positive signs of a market improvement but to date we are yet to see that translated to activity on the ground and increased sample flow over that achieved last year. Importantly our laboratory network remains in place, we have not exited any geographical markets, our laboratories and assets remain first class, and we have continued to develop new and unique services. All of these things hold us in good stead for the eventual upturn in market.

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Our Life Sciences Division had a solid year; increasing both revenue and operating profit in a very competitive and price conscious market. During the year we announced the closure of our GLP laboratory in Edmonton Canada and exited the Taiwan market by selling our share in a joint venture there. We built a new laboratory in Beijing, China in order to expand our Shanghai based business. We also rebuilt many of our environmental labs in South America as we rationalised the acquisitions made there over recent years.

I have talked about the progress we have made in the food business stream of the Life Sciences Division but we have also not neglected the development of the traditional environmental business. A three year development of a new environmental LIMS is close to completion, we restructure the North American Management team and just today approved the building of a new expanded

facility in Stockholm, Sweden. We are also looking to expand both the environmental and food businesses into other parts of Europe. It is worth noting that we have built our Life Sciences business in Europe from $44 million in revenue just five years ago to $135 million in the year under review, and we see further significant growth potential in that region.

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The Energy Division includes our coal operations and the newly acquired Oil and Gas businesses.

The coal industry globally and in particular here in Australia has seen significant changes over the past two years.

• Coal prices (metallurgical, PCI and thermal) have decreased by 20 to 50 percent in that time

• Cash production costs for many mines are now well in excess of the price achieved for the coal and yet producers are locked into take or pay arrangements

• There is a strong focus on Return on Investment in the industry which is putting significant pressure on reducing costs and that is flowing through to very aggressive price negotiations for our services. The industry has moved from value buyers to price buyers.

• Exploration activities have all but stopped and pre-production planning timelines of operating mines have been shortened

• Global development of shale gas production which is seen as a cleaner energy source is also impacting the industry

All of these factors significantly impacted our coal business. However we believe the market bottomed some six months ago and whilst we do not see any significant recovery in the short term, things have stabilised and there has been some slight improvement in some sectors. On a brighter note we recently commissioned the on-site laboratory at Tavan Tolgoi in Mongolia. We are operating the laboratory under a long-term contract and this will be a substantial new mine as it ramps production up to 15 million tonnes per annum.

We continue to deal with the reality of today’s market, consolidating operations where possible by reducing the number of laboratories we operate and focusing on efficiency initiatives to drive down operating costs. The goal is to try to operate the coal business at a margin no lower than 20 percent regardless of the market environment.

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The Industrial Division operates two business streams; tribology and asset care.

The Tribology business had a very solid year. Particularly in North America where we saw modest revenue growth of 2.9 percent but more importantly saw the operating margin improve from 19.9 percent to 21.3 percent as a

result of investing in new facilities and equipment over more recent years. When we acquired the tribology business in North America in 2008, it was operating at a margin of 6 percent.

The Asset Care business in Australia saw revenues grow by 6 percent but the operating margin decrease from 16.1 percent the previous year to 12.0 percent in the year under review. This was obviously extremely disappointing after the steady improvement seen in the preceding three years. The poorer than expected performance resulted from higher operating costs in a price focused market but mostly as a result of a shift in strategy from pursuing services around existing infrastructure to new major CAPEX projects including the LNG plants at Curtis Island and large capacity expansion projects in the iron ore sector. These large CAPEX projects exposed a weakness in our ability to effectively manage large longer term capital projects. We had problems around mobilisation times, workload ramp-ups and productivity with new technologies. All of these issues are now behind us and we have now embedded the skills needed to handle these projects. Those skills will hold us in good stead for the future.

The Asset Care part of our Industrial Division has been restructured along market sector lines as opposed to geographies to ensure our service offerings are tailored to market needs and we can better leverage new and unique technologies introduced by the division.

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Over more recent years we have taken a very prudent approach to CAPEX. A conservative approach to funding and not overextending the company have also been hallmarks of ours over many decades. However, we do have to balance that against ensuring our assets are first class and state of the art. We also need to ensure we have the Balance Sheet capacity to keep executing our growth strategy.

CAPEX in the year under review was less than our depreciation and amortisation. This is testament to the quality of our assets and a reflection of the low or negative market growth in our traditional businesses. Over the next twelve months I expect CAPEX levels to be similar to those of last year as we invest in building the analytical laboratories for the Oil and Gas business and ramp up volumes and site locations in the food business.

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Cash flow at $346 million in the year under review was very strong as the finance team ensured debtor days was well managed in an environment where some of our clients were under significant cash flow pressure.

Our funding mix remains appropriate for a company such as ours, with all borrowing covenants being within a comfortable range. However following the acquisition of the Reservoir Group during the year, our net borrowings have grown from $413 million to $719 million today. Most of these borrowings are through the US Private Placement markets which provide us

with long term low interest access to capital. The Board is not comfortable in pushing borrowings too much higher under the current market conditions and it is likely that acquisition activity for ALS will remain subdued at least through the next twelve months as we concentrate on existing operations and strengthening the Balance Sheet in preparation for future diversification opportunities. We know what new market sectors we would like to enter it is simply a matter of preparing the company to execute on those opportunities at the right time.

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Before concluding, I want to make some comments around what might be classified as the “softer side of business”.

Firstly our staff. ALS employs over 12,000 people around the world. We are a service company and service comes from people. We have genuine diversity in our people with 40 percent female. We have staff just starting their working careers and staff in the twilight of their careers. We have staff working in laboratories in the Arctic Circle and in the jungles of Africa. We have staff with basic primary education and staff with PhDs. We have staff working in offices in major world cities and staff working on oil rigs in the deserts of the Middle East. More than 3,500 or 30 percent of our staff do not have English as their primary language. And yet all of this people share a common ALS culture; a belief in our collective ability, a passion for what we do, a pride in the ALS

brand, and a commitment to being the very best. On behalf of shareholders, I thank all staff for their efforts through what was an extremely challenging year.

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In an environment when our earnings were under pressure we as a company did not lose sight of our social responsibilities. This remains an important activity for your company and I recommend pages 34 and 35 of the annual report to you, so that you can see the many things we achieved in this area during the year. Added to this, staff right around the globe, with the support of the company, contributed to scores of charitable causes both financially and by giving their own time,.

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The Chairman has provided guidance for the September 2014 half year. I do not wish to comment further on that guidance except to reiterate what I said last year.

ALS operates in a number of cyclical markets; including minerals, coal and also of course the oil & gas markets that we have just entered. There are pros and cons in operating in cyclical markets. Good companies thrive in cyclical markets whilst poor companies tend to be short lived. There is a natural process of survival of the fittest that keeps rejuvenating the market place, creating opportunities, and ensuring we remain very cost focused. ALS’ operating model is unique in that out of all of our competitors we can cope best in a downturn or unpredictable market, pulling the levers on our hub and spoke model and increasing market share.

In closing I would like to say that I do feel truly honoured to be the CEO of this great company. It is easy to lead such a great team and again I acknowledge the support of not just the executives and managers but all 12,200 staff.

And again to the Board, I thank you for your guidance, understanding, enthusiasm, and support in what has probably been the most challenging year for the company in the last decade, as we dealt not just with integrating the largest acquisition in the history of the company but also in dealing with very

volatile markets for our traditional businesses whilst not losing sight of how we want the company positioned five and ten years from now.

To the Chairman – I think we make a pretty good team and I look forward to working with you over the next twelve months regardless of what challenges we may have to deal with.

Shareholders, I look forward to reporting back to you in July 2015 on another year where regardless of external influences we will have delivered further on the strategic vision for ALS.

Thank you.