Matching last year's record results was always going to be a tough task for Elementis (ELM), and so it proved. Revenue fell and operating profit slumped by 10 per cent to $72.8m (£47.5m). However, a planned maintenance shutdown at its chromium plant in January is almost entirely to blame, and given that will not be repeated in the second half, management is confident of meeting full-year expectations.
Still, Elementis has it all to do. Sales fell 18 per cent at the chromium division and profit tumbled 24 per cent to $25.3m. Volumes there are typically fixed, and it's just a matter of targeting markets offering the best returns. A softer North American leather tanning market and difficult conditions outside the US made that harder, although an operating margin of 24.5 per cent was still within management's target range. Volumes were back to the average run rate in the second quarter, too, says finance director Brain Taylorson, and the second half will get the full volume from the plant there.
Moreover, it's the cash from the chromium business that's funding growth in the larger speciality products division. There, revenues rose 5 per cent, driven by Asian coatings additives, personal care and the oilfield business, where demand for additives used in shale drilling bounced back in the second quarter. Still, extra costs hit margins and profit was flat at $51.6m.
Broker N+1 Singer expects full-year adjusted pre-tax profit of $138.7m and adjusted EPS of 23.3¢ (from $133.4m and 21.8¢ in 2012).
ELEMENTIS (ELM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 246p | MARKET VALUE: | £1.13bn | |
| TOUCH: | 246-247p | 12-MONTH HIGH: | 277p | Low: 194p |
| DIVIDEND YIELD: | 2.1%* | PE RATIO: | 17 | |
| NET ASSET VALUE: | 112¢** | NET DEBT: | 2% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 401 | 75.1 | 11.7 | 2.45 |
| 2013 | 388 | 67.5 | 11.5 | 2.57 |
| % change | -3 | -10 | -2 | +5 |
Ex-div: 4 Sep Payment: 4 Oct *Excludes special dividends **Includes intangible assets of $380.7m, or 83¢ a share £1=$1.53 | ||||
