We’ve long had a soft spot for Elementis, even when a wave of de-stocking during the financial crisis plunged shares in the chemicals company below 40p. So, with the valuation now looking a little more challenging, it is with a heavy heart that we call time on our long-standing and highly profitable buy tip (110p, 28 Oct 2010).
Elementis had a strong first quarter in 2012. Sales of additives used in decorative paints and other coatings jumped 22 per cent in North America, making up for deteriorating sales in Europe, down 8 per cent compared with 10 per cent growth in 2011. Revenue from additives used in shale drilling swelled again and Elementis is adding extra capacity to cope. That has easily made up for more modest growth in demand for ingredients found in shampoo and cosmetics. Overall, revenue at the core speciality chemicals division nudged up 7 per cent. Comparisons were easier at the chromium business this time round, yet selling chemicals that improve durability to carmakers and aerospace manufacturers, increasingly in the US, meant sales there were up 13 per cent.
