Elementis is gradually progressing with the debt burden

  • Improvement in the operating margin of the Personal Care activity
  • Minimal debt reduction since last year’s results

It would seem that the end of the Covid restrictions has led consumers to take a new interest in their personal hygiene. In its half-year results, the specialty chemicals company Elementis (ELM) Reported revenue from its personal care business rose 19% to $106m (£87m).

That’s increasingly rare good news for the company, which supplies key chemicals for color cosmetics and antiperspirant deodorants, among other things. With an operating margin of 24.5%, Personal Care is a key profitability driver for Elementis. The company’s other three businesses – Coatings, Talc and Chromium – each posted single-digit revenue growth figures.

While it is encouraging to see that improving demand is bringing Personal Care margins back to historic levels, Elementis remains a highly leveraged business. Net debt at the end of June was $393 million, down very slightly from $401 million at the end of last year.

The company said it was on track to achieve $10 million in annual savings by next year and would continue to implement price increases as needed to protect its margins from the burden of inflation.

“We expect continued demand coupled with our self-help program to drive improved financial performance, above expectations, alongside further deleveraging,” said Elementis CEO Paul Waterman. .

FactSet broker consensus puts the forward price-to-earnings ratio at 11.2x for this year, which is admittedly an improvement from 2021’s 16.6x figure. However, the company still hasn’t revived its dividend program, which shows that it still has a long way to go before it is on a stable footing. Sale.

ELEMENTIS (ELM)
ORDER PRICE: 117p MARKET VALUE: £681 million
TO TOUCH: 116-117p TOP OF 12 MONTHS: 159p LOW: 96p
DIVIDEND YIELD: nil P/E RATIO: n / A
NET ASSET VALUE: 154p* NET DEBT: 48%
Half-year to June 30 Revenue ($M) Profit before tax ($M) Earnings per share (¢) Dividend per share (¢)
2021 452 34.5 4.80 nil
2022 478 27.6 3.60 nil
% change +6 -20 -25
Ex div: n / A
Payment: n / A
*Includes intangibles of £785 million or 135 pence per share

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