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Elementis conserves cash as core businesses struggle

Core markets remain under pressure
Elementis conserves cash as core businesses struggle

 

  • The focus is on cash conservation ahead of any recovery in demand
  • The company is hostage to aggregate demand levels in the economy

Elementis (ELM), the specialty chemicals and personal care business, posted a predictably downbeat set of results after a pandemic-ravaged year sent the group tumbling to a big pre-tax loss. Management remained cautious about the outlook and placed the emphasis for the year ahead on balance sheet repair and cash conservation.

The source of the decline was in the company’s core divisions – with personal care and coatings (which supplies additives to a range of industrial customers) falling by 9 per cent and 7 per cent respectively on an underlying basis. Recovery in both markets is dependent on a general improvement in overall economic activity.

By any measure, Elementis has endured a torrid year in its core markets and a recovery, when it comes, will depend on the eventual level of consumer demand. There is a cyclical recovery story here, but given the need to deleverage further, we remain cautious for now. Sell.

Last IC view: Sell, 71p, 28 Jul 2020

ELEMENTIS (ELM)   
ORD PRICE:121pMARKET VALUE:£ 703m
TOUCH:120-121p12-MONTH HIGH:134pLOW: 42p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:148ȼNET DEBT:56%
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (p)
201661776.113.77.77
201778378.523.38.10
201882265.47.908.40
201987361.08.008.55
2020751-68.8-11.5nil
% change-14---
Ex-div:-   
Payment:-   
£1=$1.38