ELEMENTIS PLC - Elementis Trading Update

Cash generation continues to be an important component of the Group’s performance and, as previously stated, the net cash balance at the end of the year is likely to be higher than at the same time last year which, under our progressive dividend policy, will have a positive effect on the special dividend.”

Specialty Products’ sales were 6 per cent higher than in the same period last year on a constant currency basis, and 4 per cent on a reported basis. The remainder of this business commentary refers to constant currency sales.

In Coatings, Asia Pacific sales were 5 per cent ahead of the prior year as demand in China continued to reflect solid underlying growth. Sales in Latin America showed significant growth in the period, despite ongoing economic challenges in Brazil. The business benefited from new business wins at key accounts in Brazil, Mexico and Chile, which resulted in sales being 38 per cent higher than in the same period last year. Sales in North America were at a similar level to the comparator period, as overall demand continued to be negatively influenced by the impact of the strong dollar on North American exporters. In Europe, following a relatively strong second quarter (+4 per cent), sales in the period were 5 per cent lower than in the same period last year. We saw reduced consumption across Europe through our distributor channel whilst sales to Eastern Europe were also lower.

In Personal Care, where the Group has recently added more resources, sales were 38 per cent higher than in the same period last year. Excellent progress was made in growing sales of hectorite products in colour cosmetics and antiperspirants, while expanding sales geographically also showed good progress, particularly in Italy, China, India and Brazil.

In Oilfield Drilling, sales were 4 per cent lower than in the same period last year as demand patterns continued to remain relatively stable.

In Chromium, sales were 4 per cent lower than in the same period last year, on 3 per cent higher volumes, which was due to a continuation of the more challenging environment outside of North America, as reported in previous announcements. Compared to the second quarter, contribution margins in the period were relatively stable in North America and improved for sales outside of the region, as a result of a better product mix.

Consistent with the strategy to reduce activity in Surfactants over time, sales in the period were 14 per cent lower than in the same period last year and operating profit was consistent with the previously reported near break-even run rate in the first six months of the year.

The Group’s tax rate for the full year is expected to be lower than it was for the first six months of the year, due to changes in the geographic mix of profits, but overall Group earnings per share for 2016 are expected to be in line with market expectations. The Group’s balance sheet remains strong, with robust operating cash generation continuing to be a positive feature of the Group’s performance. Consequently, the Group’s year end net cash balance is expected to be higher than the $74 million reported at the end of 2015.

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