- Adjusted operating profit was up 21 per cent on an adjusted basis.
- Personal care revenue was down 5 per cent on an underlying basis.
Elementis (ELM) has almost clawed itself back to its pre-Covid levels after being badly impacted by the pandemic. Compared to H1 2019 its revenue is up 0.4 per cent, while adjusted operating profits were down 15.6 per cent down. These are green shoots but it should focus on personal care for sustained growth.
The strong rebound in industrials has meant that the chromium, talc and coatings products have led the business. In coatings, revenue rose 15 per cent on an underlying basis, while talc was up 14 per cent and Chromium was up 16 per cent - progress all around. The problem child at the moment is personal care. The segment's revenue was down 5 per cent on an underlying basis. The company said there was weakened demand for cosmetics and deodorant because of social distancing.
The performance of the personal care segment is key in terms of driving profitability, as it boasts a 22.4 per cent operating margin. For comparison, coatings has just a 17 per cent margin and talc only 10.3 per cent. Elementis said it is aiming for “$10m of incremental sales over the medium term” in its skin care products. It has launched Bentone Luxe, a new emulsifying gel, that is apparently less irritating to the skin. The hope is that it will be popular with people that have more sensitive skin due to a year of incessant sanitising.
Numis is expecting EPS of 9.7p, rising to 10.8p in 2022. The broker might be overly optimistic about prospects for the personal care business. In Unilever’s (ULVR) recent half year results, it announced that “skin care grew double digits and deodorants returned to growth” for the same six months despite the same social distancing issues Elementis faced. Sell.
Last IC view: Sell, 121p, 23 Mar 2021
|ORD PRICE:||142p||MARKET VALUE:||£ 825.2m|
|TOUCH:||130-149p||12-MONTH HIGH:||151p||LOW: 141p|
|DIVIDEND YIELD:||NIL||PE RATIO:||93|
|NET ASSET VALUE:||158ȼ||NET DEBT:||49%|
|Half-year to 30 Jun||Turnover ($m)||Pre-tax profit ($m)||Earnings per share (ȼ)||Dividend per share (ȼ)|
|£1 = $1.38. *Includes $882m in intangible assets or 152ȼ a share.|