Elementis (ELM) felt the brunt of the US-Sino trade war in 2019, along with slowdowns in the automotive and construction sectors. While the dispute looks as if it is nearing resolution and some construction purchasing managers' indices are signalling improvement, the group’s woes look likely to continue into 2020.
The chemicals group’s coatings division, which is subject to an ongoing overhaul, was particularly impacted by weak industrial production and destocking, causing a 12 per cent fall in revenue. Since Asia represents around 40 per cent of coatings sales, Numis analysts fear coronavirus will delay the segment’s recovery and cut its 2020 adjusted earnings forecast by 4.5 per cent.
Elementis' chromium business was also hit by poor industrial demand, while its energy segment fell victim to slowing drilling activity. While operating cash conversion levels of 130 per cent helped bring the group’s net debt down from $498m (£392m) to $454m, lower earnings in personal care, coatings, chromium and energy meant that leverage rose, with net debt to pro-forma adjusted cash profits rising to a multiple of 2.7, from 2.5 in 2018. This time last year, Elementis had targeted a reduction in leverage to around a multiple of 2 by the close of 2019.
Numis forecasts full-year 2020 pre-tax profits and earnings per share of $97.1m and 12.9¢, rising to $107m and 14.1¢ in 2021.
| ELEMENTIS (ELM) | ||||
| ORD PRICE: | 81.2p | MARKET VALUE: | £613m | |
| TOUCH: | 81.15-81.3p | 12-MONTH HIGH: | 183p | LOW: 81.2p |
| DIVIDEND YIELD: | 8.4% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 156¢* | NET DEBT: | 55%** | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2015 | 677 | 121 | 18.9 | 7.77 |
| 2016 | 617 | 76.1 | 13.7 | 7.77 |
| 2017 | 783 | 78.5 | 23.3 | 8.1 |
| 2018 | 822 | 65.4 | 7.9 | 8.4 |
| 2019 | 874 | 61.0 | 8.0 | 8.55 |
| % change | +6 | -7 | +1 | +2 |
| Ex-div: | 30 Apr | |||
| Payment: | 29 May | |||
| £1=$1.26 *Includes intangible asset of $958m, or 165¢ a share **Includes lease liabilities of $46.9m | ||||
