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(Sharecast News) - Specialty chemicals company Elementis said in an update on Tuesday that trading for the March quarter was positive, with revenue increasing around 7% on an underlying basis year-on-year.
The FTSE 250 company said that was driven by pricing actions, new business wins and continued demand recovery in personal care.
It said coatings revenue and margins increased on the prior year, with successful pricing actions and an improved mix more than offsetting lower volumes linked to supply chain disruptions and weaker industrial activity in China, as well as rising raw material, energy and logistics cost inflation.
Personal care performance, meanwhile, improved "materially" as social restrictions eased further and growth initiatives continued to gain momentum.
Elementis said margins in the division were strong due to successful pricing actions, while the ramp-up of its new plant in India was progressing "at pace".
In talc, while successful pricing actions more than offset cost inflation, performance declined on the prior year due to weaker European automotive production and a strike throughout the first quarter at the company's main paper customer in Finland.
Chromium performance declined as an unexpected temporary plant outage impacted volumes.
Pricing in the division continued to show positive momentum, more than offsetting increased costs, the firm reported.
Elementis said cash generation in its first quarter was in line with expectations, adding that the group's business model remained highly cash-generative.
Additionally, Elementis announced that it had launched a strategic review of its chromium business.
The company said the review would establish whether the full potential of chromium could best be delivered as part of Elementis, or via a full or partial divestment.
It said it would "consider the practicality" of all options, while prioritising the best interests of all stakeholders, including employees, customers and shareholders.
Looking ahead, the directors said the year had started well for the firm, with improved profitability driven by self-help actions, positive momentum in personal care and underlying strength in Coatings.
For the full year, the board said it was "confident" that further strategic progress would drive improved financial performance and a reduction in leverage, in line with expectations.
"We have made a good start to the year and will continue to maintain our focus on self-help actions and effectively managing the challenging external supply chain environment, demand uncertainties and rising inflation," said chief executive officer Paul Waterman.
"We remain on-track to deliver $50m of new business opportunities, over 20 new products and progress towards $10m of additional efficiency savings by 2023."
Waterman said in line with the company's 'innovation, growth and efficiency' strategy, Elementis was focussed on the personal care, coatings and talc performance additive businesses, which had "enduring positions of strength" in growing markets, and represented about 90% of group profits.
"In this context we will execute a strategic review of our chromium business to determine whether Elementis remains the best owner."
At 0857 BST, shares in Elementis were up 0.05% at 121.56p.
