Acquisition boosts Elementis in first half

Speciality chemicals company Elementis described a strong first half on Tuesday, with sales rising 24% year-on-year to $414.8m and statutory profit ahead 16% at $43.2m.

The FTSE 250 firm’s statutory basic earnings per share were 15% higher than at the same time last year, at 9.3 cents.

Its operating profit was up across all three of its segments, with group adjusted operating profit up 26% at $67.6m, alongside “short term favourable conditions” in the surfactants division and the inclusion of the acquired SummitReheis business.

Excluding those two items, the company’s adjusted operating profit was said to be “stable”.

“The first six months of 2017 have been positive for Elementis,” said CEO Paul Waterman .

“Operating profit has grown across all our business segments, our ‘reignite growth’ strategy is showing early signs of delivery and the integration of SummitReheis is on track.

“Trading for the group in the first half was underpinned by stronger sales across our end markets.”

Adjusted operating profit in specialty products was up 18%, with strong growth in personal care and energy, and steady revenue in coatings.

Chromium gross revenue was up 18%, with the US market described as “resilient”, along with stronger demand in the rest of the world.

Adjusted operating profit in the division was up 3% as higher sales were offset by higher maintenance costs and lower rest of the world unit margins.

The surfactants unit was boosted by favourable pricing conditions that the board said would not sustain in the second half and beyond, and it was now pursuing the potential sale of the business.

“In specialty products, we made significant progress in personal care and energy,” Waterman commented.

“In coatings, we have been taking pricing action to address margin compression.

“In chromium, our performance benefited from more robust demand and we have implemented price increases in response to higher raw material costs.

“In surfactants, results were exceptionally strong due to short term favourable conditions.”

Elementis said the integration of SummitReheis remained on track, with $3m in cost synergies underpinned and the acquisition said to be proving “highly complementary”, creating a personal care business of scale.

Operating cash flow across the group was up 52% at $52m.

The Elementis board left its outlook unchanged, confirming the company was on track to grow operating profit across all three segments in 2017.

“Our ‘reignite growth’ strategy is gaining momentum,” added Paul Waterman.

“As part of our supply chain transformation we announced the disposal of our US colourants business and the closure of the Jersey City site.

“We are also pursuing the potential sale of our surfactants business.”

Waterman said the group’s innovation pipeline was showing promise, and new product launches were driving sales growth across business lines and geographies.

“New product and capital investment processes, combined with enhanced and standardised management information and reporting, is improving the efficiency and effectiveness of resource allocation.”

He added that the integration of SummitReheis was progressing “very well”, and was on track to conclude by the end of 2017.

As expected, that business had already improved the returns profile of Elementis.

“Looking forward, we see significant potential for Elementis as we focus on delivery of our ‘reignite growth’ strategy,” Waterman explained.

“We remain confident in our ability to make progress in 2017 and beyond.”