Elementis sets down efficiency and cost savings goals

Speciality chemicals company Elementis outlined its 2026 group performance objectives on Tuesday, aimed at achieving an adjusted operating profit margin of 19% or higher, maintaining a three-year average operating cash conversion rate above 90%, and securing a return on capital employed, excluding goodwill above 20%.

The FTSE 250 firm, which was hosting its capital markets day, was aiming to reach the 19% operating margin through growth and efficiency initiatives, with the potential for even greater margins in the event of a demand environment recovery.

Following the sale of Chromium earlier in the year, the company said it had transformed into a higher-quality, less-cyclical speciality chemicals business with two main divisions - performance specialities and personal care.

The company said it was now focused on seven growth platforms and aimed to achieve $90m in above-market revenue growth by 2026, leveraging its advantaged technologies and capitalising on key industry trends.

In pursuit of greater efficiency, Elementis said it was implementing its ‘Fit for the Future’ programme, targeting $20m in cost savings by 2025.

That would involve up to 190 redundancies, relocation of roles to lower-cost locations, and outsourcing back-office transactional roles.

Additionally, Elementis said it was establishing a new global support base and research and development lab in Porto, Portugal.

Supply chain optimisation and procurement savings were expected to contribute an additional $10m annually by 2025.

“Today, we are excited to share an update on our strategy, focused on innovation and growth across seven growth platforms, which will deliver $90m above market growth by 2026,” said chief executive officer Paul Waterman.

“Furthermore, we have two efficiency programmes underway, leading to a $30m cost reduction by 2025.

“The combination of improved performance, strong cash generation and continuing leverage reduction will support attractive, sustainable shareholder returns.”

At 1130 GMT, shares in Elementis were up 2.61% at 125.8p.

Reporting by Josh White for Sharecast.com.