AGM Trading Statement

RNS Number : 2351L

Elementis PLC

29 April 2020

 

Elementis plc

AGM Trading Statement

Solid first quarter performance

Proactive measures taken to mitigate Covid-19 impact

Elementis plc ("Elementis" or the "Group"), a global specialty chemicals company, today issues a trading update for the three months ended 31 March 2020.

First quarter business performance

In the first quarter of 2020, trading has been in line with expectations, with year on year operating profit growth. Our global supply chain operated well with no raw material shortages or plant shutdowns except for, as previously announced, a temporary closure of two sites in China during February.

· Personal Care performance was modestly ahead of the prior year period, with resilient Cosmetics performance.  AP Actives was stable with good volume growth offset by year on year pricing impacts.

· Coatings revenue grew with strong volumes in Asia and the Americas driven by new business wins and good momentum at global key accounts. Margins improved materially driven by cost savings, an improved product portfolio and lower raw material costs.

· Talc performance was broadly in line with the prior year period as robust sales in plastics and coatings were offset by lower ceramics and paper sales.

· Energy had a challenging start to the year with deteriorating market conditions only partially offset by strong global key account sales.

· Chromium sales were in line with the prior year period but margins declined due to lower pricing, notably outside of North America.

Liquidity and balance sheet

Elementis has a proven cash generative business model, with average operating cash conversion of 90% over the last 3 years. In addition, the Group continues to have significant liquidity, with in total over $300m immediately available through committed lending facilities. Total net debt for the Group (excluding lease liabilities under IFRS 16) was $454m at 31 December 2019, representing a ratio of 2.7x EBITDA* compared to a recently relaxed banking covenant of 3.75x*, which will apply for the next two testing periods (i.e. 30 June 2020 and 31 December 2020).

Proactive Covid-19 measures

To safely service customer demand the company has taken proactive steps to protect its people and maintain operations during the Covid-19 situation. The company's 22 operating sites continue to operate well, with the exception of a two week shutdown of our Palmital (Brazil) site in April.  Construction of our new site in Mumbai, India, has been temporarily stopped due to government restrictions on operations. 

In addition to the previously announced suspension of the 2019 final dividend, saving approximately $33m, and the temporary relaxation of banking covenants, the Group has taken the following further actions:

· Stopping all discretionary spend

· Reducing manufacturing costs based on lower demand

· Identifying additional working capital reductions

Outlook

Although first quarter trading was in line with expectations with improved profitability, the macro-economic and end-market outlook is highly uncertain and we have seen an approximate 15% year on year decline in April revenue. Given the uncertain environment no specific guidance is provided for the remainder of the year, although we will update as and when visibility improves. We continue to tightly and actively manage the business in terms of costs and cash flow to address changes in demand.

Commenting on the performance, CEO, Paul Waterman said,

"Elementis has a high quality, advantaged portfolio in premium performance additives with good long term growth opportunities. While our Q1 business performance was in line with expectations, the macro-economic and end-market outlook over the coming months is very uncertain. Having agreed a relaxation of our banking covenants and suspended our dividend to strengthen our financial position, our focus remains on what we can control, namely managing our operations well and optimising both cost and cash management."

Directorate change

Sandra Boss, Non-Executive Director has notified the Board that she wishes to retire from the Board to take up a full-time executive role. Sandra has served as a non-executive director and member of the audit, nomination and remuneration committees since February 2017 and in 2019, Sandra was appointed as designated non-executive director for engagement with the Company's workforce. A selection process for an additional Non-Executive Director has commenced.

Accordingly, Resolution 6 as set out in the Company's Notice of Annual General Meeting dated 19 March 2020 relating to Sandra's re-election as a director will be withdrawn. The withdrawal of this resolution does not affect the validity of the proxy form circulated to shareholders in respect of the 2020 Annual General Meeting or any proxy votes already submitted.

Enquiries

Elementis plc

James Curran, Investor Relations   Tel: [phone]

Tulchan  

Martin Robinson/David Allchurch  Tel: [phone]

Notes

* Pre IFRS-16

 

END

 

 

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