Reduced drilling activity in the oilfield sector and the economic slowdown in China combined to halt five years of earnings growth at Elementis (ELM).
Demand was mainly steady for the chemical company's core product range, thanks to surging appetite for cheaper decorative coatings in the US and a weaker euro stimulating trading on the continent. But constant currency sales slid 3 per cent at its speciality products unit, due to customer destocking in China and a 42 per cent fall in oilfield drilling volumes.
These factors had a mixed effect on operating margins, which remained at 19 per cent in spite of falling volumes. Whereas waning demand in China hit the group's higher-margin applications, Elementis reported that reduced spending in oil markets affected more lower-margin product sales. Margins were also boosted by cost savings, lower raw material costs and a favourable outcome to a legacy legal case in Elementis's Chromium business.
What's more, cash balances rose more than threefold to $16.1m (£10.3m). That was helped by lower pension deficit obligations, following a chunky one-off payment of $15.2m last year.
Broker N+1 Singer expects adjusted EPS of 21.7¢ for the full year, rising to 22.7¢ in 2016 (from 24.8¢ in 2014).
ELEMENTIS (ELM) | ||||
---|---|---|---|---|
ORD PRICE: | 250p | MARKET VALUE: | £1.2bn | |
TOUCH: | 249.5-250p | 12-MONTH HIGH: | 319p | LOW: 222p |
DIVIDEND YIELD: | 2.2% | PE RATIO: | 11 | |
NET ASSET VALUE: | 143¢* | NET CASH: | $16.1m |
Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
---|---|---|---|---|
2014 | 400 | 72.4 | 12.8 | 2.70 |
2015 | 360 | 65.3 | 11.3 | 2.70 |
% change | -10 | -10 | -12 | - |
Ex-div: 10 Sep Payment: 2 Oct *Includes intangible assets of $370m, or 80¢ a share £1=$1.56 |