Elementis Regulatory News (ELM)

26 October 2012

Elementis plc (ELM.L) ("Elementis" or the "Group"), the FTSE 250 Global Specialty Chemicals Company, today issues its Interim Management Statement for the three months ended 30 September 2012.

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.

Business highlights

Specialty Products

·; Overall sales in Specialty Products, on a constant currency basis, were 2 per cent higher than the same period last year.

·; North America coatings sales for the third quarter were 3 per cent lower than the same period last year, largely due to a decline in sales to the construction sector, otherwise sales continued to show strong growth. Overall we regard this as good progress against a strong comparative period. It is of particular note that coatings sales to Latin America increased by 32 per cent.

·; Asia Pacific coatings sales grew by 12 per cent as the business continued to benefit from its leading market position, strong technical service and broad product offering in the region.

·; European coatings sales showed resilience in the face of a weak economic climate, growing by 3 per cent, after adjusting for the weaker Euro.

·; Sales in personal care were 18 per cent higher than the same period last year, with good growth in all major regions of the world, reflecting the Group's strong niche position and innovative product offering in this market, together with our investment in key industry personnel earlier in the year.

·; In oilfield drilling, which year to date represents 15 per cent of sales, the third quarter saw a reduction in demand reflecting a slowdown in shale drilling activity in North America and a late start to the Canadian drilling season. This combined with some short term inventory adjustments by the major oil service companies, led to sales in the quarter being 23 per cent 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.

Chromium

·; The Chromium business has continued to utilise its flexible North American manufacturing base to optimise its product mix in order to deliver stable earnings and cash flow.

·; Sales volumes were 5 per cent lower than the same period last year, largely due to lower sales of chrome oxide for use in metal alloys in Europe. However sales volumes for the first nine months of the year are similar to last year, reflecting a core component of the strategy, which is to run the manufacturing facility at high utilisation rates.

Operating margins in both businesses were seasonally lower in the third quarter than was reported for the first six months of the year, but this does not reflect any structural changes in pricing or contribution margin.

Financial position and cash flow

Strong cash generation has continued to be a key characteristic of the Group during the third quarter and current expectations are that the Group balance sheet will show a net cash position at the end of 2012 in the region of $50 million. As previously announced, in addition to the existing progressive dividend, the Board intends to distribute up to 50 per cent of this amount as a special dividend.

Following a financial restructuring to enhance the utilisation of Group cash flow, the Group's overall tax rate in 2012 is likely to be lower than previously indicated, at approximately 26 - 27 per cent.

Outlook

We continue to see multiple opportunities to grow our Specialty Products business and the Group is continuing to invest in the growth and diversification of this business. This is demonstrated by the recent completion of the Watercryl acquisition in Brazil and the new US facility that will produce highly innovative and patent protected products for the decorative coatings market. This new facility is expected to start production by the end of the year.

Operating profit for the full year, although comfortably ahead of the previous year, will be adversely impacted by the temporary slowdown in oilfield drilling. However, due to the lower Group tax charge, full year earnings per share is anticipated to be in line with market expectations.

ENDS

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