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Chromium sales take the shine off Elementis

The speciality chemicals group is focusing on the growth segments of the business in the face of faltering energy and chromium markets
August 4, 2016

Elementis (ELM) posted reported figures in line with its recent trading update for the June half year, while the new executive team reiterated guidance for 2016 as a whole. Both oilfield revenue and adjusted group operating profit were down a quarter from the 2015 half year, but the unfavourable comparatives might actually belie a reported "return to stability" in some of its key markets.

IC TIP: Buy at 212p

It's undoubtedly been an arduous trading period for the speciality chemicals group, due primarily to the prolonged downturn in oilfield drilling and the impact of dollar strength on chromium sales. The coatings business could benefit from more favourable inventory levels in China following a period of destocking. But the focus is now squarely on those parts of the business with the best prospects for medium-term growth; the personal care and decorative coatings segments chief among them. Indeed, sales within the former business grew by 7 per cent, at constant currencies, on the back of new product launches, while a double-digit rise in North American decorative coatings sales also bodes well.

Analysts at N+1 Singer anticipate adjusted pre-tax profit of $97.5m for the year to December 2016, giving EPS of 17.1p, against $116.2m and 20.8p in 2015.

 

ELEMENTIS (ELM)
ORD PRICE:212pMARKET VALUE:£982m
TOUCH:212p-212.4p12-MONTH HIGH:256pLOW: 180p
DIVIDEND YIELD: 3%†PE RATIO:16
NET ASSET VALUE:135¢*NET CASH:$37.5m

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢) **
201536065.311.32.7
201633444.77.92.7
% change-7-32-30-

Ex-div: 8 Sep

Payment: 30 Sep

£1=$1.33 *Includes intangible assets of $365m, or 79¢ a share

**Equivalent to a sterling amount of 2.0537p per share

†Yield takes no account of 8¢ special dividend in 2015