Q3 Trading Update

RNS Number : 3962D

Elementis PLC

28 October 2020

 

Elementis plc

Q3 Trading Update

Resilient performance, in line with management expectations

On track for significant year end net debt reduction

Elementis plc ("Elementis" or the "Group"), a global specialty chemicals company, today issues a trading update for the three months ended 30 September 2020.

Third quarter business performance

While trading improved versus the second quarter, COVID-19 continues to impact the Group with volumes down approximately 13% on the prior year. Pricing remained resilient across all businesses except for Chromium. As a result of cost savings and supply chain efficiencies, overall performance in the third quarter was in line with management expectations.

· Coatings performed well in Q3, with revenue broadly in line with the prior year period, as continued resilience in decorative applications was supported by improved industrial demand. The business remains on track for improved operating margins versus the prior year.

· Personal Care sales were materially lower than both the prior year period and Q2, particularly in higher margin cosmetics, due to the continuation of social and travel restrictions as a result of COVID-19.

· Talc volumes recovered from the Q2 trough but as expected were below prior year. Automotive demand sequentially improved and coatings gained market share.

· Chromium performance was in line with Q2 levels, but materially down on the prior year period, reflective of lower demand at key customers and sustained industry pricing pressure, particularly in the rest of the world. Current Q4 trading indicates some recovery versus a difficult Q3 .

· Energy continues to experience very weak market conditions with rig counts and activity levels remaining at subdued Q2 levels.

In the third quarter we have continued to successfully deliver against our Innovation, Growth and Efficiency strategy. We launched 3 new products, delivered $9m of new business and remain on track for delivery of $15m in year cost savings.

For 2021, our new business and innovation pipelines are encouraging, and we have made good progress underpinning $10m of supply chain cost efficiencies. Our new AP Actives plant in India remains on track for mid-2021 start up.

Liquidity and balance sheet

Elementis has a proven cash generative business model, with average operating cash conversion above 90% over the last 3 years and the Group is on track to deliver a significant reduction in net debt by year end.

The Group continues to operate with ample liquidity, with over $300m immediately available through committed lending facilities. As announced in September, the relaxation of the Group net debt/EBITDA* banking covenant to 3.75x, agreed in Q1 2020 as part of the Group's response to COVID ‐ 19, has now been extended, at minimal cost, to include the two testing points in 2021 (i.e. 30 June and 31 December).

Outlook

Whilst market conditions remain challenging and future visibility is limited, we have seen solid demand in October and have a robust order book for November. We have a clear, focused strategy and we continue to tightly manage the business in terms of fixed costs and working capital to address changes in demand. An action plan to improve the financial performance of Energy is underway.

Commenting on the performance, CEO, Paul Waterman said,

"Overall performance has been resilient and in line with our expectations. Nevertheless, the macroeconomic outlook remains uncertain and our focus remains on managing our operations well and executing our growth, innovation and efficiency agenda.

In recent years we have focused Elementis on high quality, high margin activities in Personal Care, Coatings and Talc as these businesses have enduring positions of strength in structural growth markets. I am confident we will emerge from this crisis well positioned for improved top and bottom line performance and future value creation."

Enquiries

Elementis plc

James Curran, Investor Relations   Tel: [phone]

Tulchan  

Martin Robinson  Tel: [phone]

David Allchurch

Note: * Pre IFRS 16

 

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