Elementis maintains expectations amid broader slowdown

(Sharecast News) - Specialty chemicals company Elementis updated the market on its trading for the three months ended 30 September on Thursday, reporting that while the slowdown in broader macroeconomic conditions had continued, its self-help actions were expected to result in an improved second half performance, broadly in line with expectations.
The FTSE 250 company said its "strong" free cash generation continued in the third quarter.

It said the integration of Talc was now complete, with functional teams embedded and delivery of synergies said to be on track.

The group remained focussed on executing its plans to transform its Coatings unit, grow its Personal Care business and expand Talc.

That strategy, supported by its self-help measures focussed on cost efficiency and cash delivery, would provide a "robust" financial platform to deliver future growth and shareholder value creation, the board said.

Looking at its business performance, Elementis said Personal Care had a "steady" third quarter, with solid performance in cosmetics and further sequential volume improvement in antiperspirant actives, although margins were impacted by tariffs.

The company said it was continuing to make progress on new product launches targeting the skin care market.

In Coatings, demand conditions were in line with expectations, with the company explaining that while activity "modestly improved" in the North American and Asian architectural markets, industrial coatings demand remained sluggish across all geographies.

Margins were resilient, supported by cost savings, new product launches and price-mix improvements.

For Talc, Elementis said performance was in line with expectations, with "strong demand" for high value industrial applications such as technical ceramics and coatings, offsetting weak plastics.

A "much improved" second half performance was still expected, the board said, driven by new business, cost synergies and nickel sales phasing.

While the Energy unit was a small part of the company, performance was weaker than expected due to a further slowdown in North American drilling activity.

As a result, second half performance was anticipated to "significantly decline" on the first six months.

Finally, in the Chromium division, pricing in the rest-of-world operations further weakened, which the board said reflected lower global industry capacity utilisation and increased competitive intensity.

Performance in North America, where its operations enjoyed "significant" structural advantages, remained relatively robust.

As a result, performance in the second half was anticipated to be broadly in line with the first six months of 2019.

"Whilst market conditions remain challenging, overall performance in Personal Care, Coatings and Talc has been in line with expectations due to our self-help actions," said chief executive officer Paul Waterman.

"Although there are no signs of improvement in global economic conditions, the fundamentals of our business remain strong.

"We are confident about our significant medium term innovation, growth and efficiency opportunities."

As at 1017 GMT, shares in Elementis were down 2.42% at 145p. Elementis