Elementis keeps cash promise

Elementis (ELM) nearly doubled capital expenditure last year, but the chemicals company generates so much cash it’s paying a chunky special dividend, in line with its promise to return half of year-end net cash back to shareholders. This time it’s an extra 4.79¢ (3.15p), increasing the dividend yield to over 3.5 per cent.

A 5 per cent increase in underlying operating profit to $144m, or 7 per cent at constant currency, made that possible. Adjusted operating margin of 19 per cent was up on last year, too, although down slightly on the first half; blame here lies on the seasonal coatings market and the well-flagged third quarter downturn in demand for additives used in North American shale drilling. That undid good work done earlier in the year and left annual sales there down 6 per cent. Still, they're back to monthly averages seen before the dip, which should improve returns. Overall, profits at the speciality division rose a fraction to $90.1m, driven by North America and Asia. An "opportunistic" approach in Europe meant sales there leapt 8 per cent in the second half, although finance director Brian Taylorson doesn’t expect a repeat in 2013.

A big drop in energy costs enabled double-digit profit growth at the smaller Chromium division, helped by demand from European aerospace customers and Chinese car makers.

Broker N+1 Singer expects 2013 adjusted pre-tax profit of $150m and EPS of 24¢ (from $141m and 23.3¢ in 2012).

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