Elementis Share Price (ELM)

Elementis, the FTSE 250 speciality chemicals group, has agreed, through its wholly owned subsidiary Elementis Specialties, to acquire the assets of Hi-Mar Specialty Chemicals, a US coatings additives company. The $33m purchase has been made to further expand the company's product and technical service offering in these high value segments. Group Chief Executive, David Dutro, said: "The acquisition of Hi-Mar Specialty Chemicals broadens our capabilities in value added, higher margin defoamer markets. Our two businesses share a common commitment to serving customers with innovative solutions and technologies, and Hi-Mar's complementary product portfolio, customer service culture and the opportunity to leverage newly acquired technologies globally make it an excellent addition to our Specialty Products business. "This is an exciting time for Elementis and, due to the cash generative nature of our company, we are able to comfortably finance both organic growth and these bolt-on acquisitions. Consequently, this transaction will not affect the special dividend to be announced with the preliminary results on February 26th 2013." For the 12 months ended December 31st 2012, the acquired business reported, on an unaudited basis, sales of $14.5m and earnings before interest, tax, depreciation and amortisation of $3.5m.

Elementis: Barclays moves target price from 188p to 203p and retains an underweight rating.

Elementis: Goldman Sachs cuts target from 278p to 255p, neutral ratin kept.

Mixed trading on the whole Overall, sales in Speciality Products rose by 2% on a constant currency basis in the quarter, while the Chromium business experienced a 5% decline in sales volumes due to lower sales of chrome oxide for use in metal alloys in Europe. Both divisions have seen operating margins decline in the third quarter, with the first half, but this does not reflect any structural changes in pricing or contribution margin, the firm said. Elementis said: "Elementis continues to benefit from its strategy of supplying high value products and technical service to a broad range of end markets, while progressively expanding its portfolio of high value products and its geographic presence in high growth regions. "This strategy continues to enable the group to deliver resilient earnings in the current environment of global economic uncertainty and dynamic end market demand."

Speciality chemicals group Elementis said it remains on track to hit earnings per share (EPS) forecasts this year due to a lower tax rate, but headline operating profits will be hit by a temporary slowdown in oilfield drilling. The company, which provides functional additives to many markets including architectural and industrial coatings, personal care and oilfield drilling, said it saw a reduction in demand in oilfield drilling during the third quarter on the back of a slowdown in shale drilling activity in North America and a late start to the Canadian drilling season. Oilfield drilling - part of the Speciality Products division - accounts for 15% of group sales. Elementis said: "This combined with some short term inventory adjustments by the major oil service companies, led to sales in the quarter being 23% lower than the previous year. However, the underlying fundamentals for this sector remain positive and the group expects to continue to benefit from attractive growth rates going forward." As such, the company said that group operating profit for the full year, "although comfortably ahead of the previous year", will be adversely affected by this slowdown. However, due to a lower-than-initially-expected group tax charge of 26-27%, full-year EPS will be in line with market expectations. Despite the disappointment, the company reassured that investors will continue to see benefits of its strong cash generation. The firm currently expects to have a net cash position at the year-end of $50m and, as previously announced, intends to distribute up to 50% of this as a special dividend.

Specialist chemicals company Elementis said it had completed its purchase of Brazilian firm Watercryl Quimica, giving it a bigger foothold in a rapidly growing market. Elementis bought the coatings additives company for $24m in cash, in a deal announced in June. The British firm hopes to combine the market positions, technical capabilities and product portfolios of Watercryl and its Specialty Products division to expand sales of Watercryl products beyond Brazil and to accelerate the growth of Elementis products within the country. Watercryl generated sales of $9.3m and EBITDA (earnings before interest, tax, depreciation and amortisation) of $2.3m in the year to May 31st. The company was formed in 1993 and supplies additives to the Brazilian coatings industry, with manufacturing and technical facilities based in Palmital, São Paulo.