Elementis Regulatory News (ELM)

28 October 2011

Elementis - Interim Management Statement

Elementis plc (the "Company") today issues its Interim Management Statement for the period since 1 July 2011 in relation to the Company and its subsidiaries (the "Group").

Commenting on the Company's performance Group Chief Executive, David Dutro, said: "Trading for the third quarter of this year is ahead of the same period in 2010, with all three Group businesses showing improved earnings. Specialty Products has a greater geographic breadth, a more impressive new product pipeline and a stronger team than in prior years, and the new Chromium model is proving to be more resilient than in the past. Consequently, we remain confident that full year earnings, before exceptional items*, will be in line with our expectations."

In Specialty Products, sales in the third quarter were 12 per cent ahead of the same period last year as the business continued to benefit from strong demand in a number of sectors plus newly introduced product sales and market share gains.

·; Sales of coatings additives improved by 11 per cent in North America as Elementis continued to gain share in that region. In Europe, sales increased by 12 per cent helped by positive currency movements which offset some softness in Southern Europe. In Asia Pacific, the business has been engaged in an ongoing programme of portfolio optimisation which has impacted sales, but improved margins, compared to the same period last year. In addition, Chinese Government initiatives to reduce inflation and conserve energy have had a temporary impact on coatings demand. As a consequence, third quarter sales in Asia Pacific were 4 per cent lower than the previous year.

·; Sales to the oilfield drilling sector have continued to grow rapidly and will be supported going forward by the expansion of our Charleston facility. Sales in the third quarter were 48 per cent ahead of last year. Demand for high quality additives and technical service in shale gas and oil drilling has continued to be robust and there has also been solid demand from more traditional North American drilling activity.

·; In Personal Care, sales in our core European market grew by 5 per cent, excluding currency, and the business continues to make inroads in North America and Asia Pacific.

Third quarter operating margins in Specialty Products were above 20 per cent, which is consistent with the first half of the year and ahead of the same period last year, as the business has continued to benefit from pricing discipline and a progression towards a higher value product portfolio.

In Chromium, sales increased by 8 per cent compared to the third quarter of 2010 with all production facilities continuing to run at high operating rates. Global demand for Chromium chemicals has continued to be robust, allowing the business to steadily increase the proportion of its sales going into the core North American market, which represented 63 per cent of Chromium sales in the quarter compared to 56 per cent in the first 6 months of 2011. This positive change in mix combined with the ongoing benefits being realised from the change to natural gas at the Castle Hayne facility, announced earlier this year, has meant that operating margins have continued to improve, exceeding those reported for the first six months of the year.

Group cash flow continued to be strong and it is likely that the balance sheet will show a net cash position at the end of the year.

* Exceptional items consist mainly of the Euro 23.4 million that was refunded with interest on 1 August 2011, following the successful EU Commission appeal

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