Elementis (ELM) H1 2024 earnings summary

Executive summary

• Revenue rose 5% year-over-year to $383 million, with strong growth in Personal Care and Coatings offsetting Talc weakness and a flat demand environment.

• Adjusted operating profit increased 24% to $65 million, with margin up to 17% from 14.4%, reflecting cost management and product mix improvements.

• Net debt reduced to $196 million (1.3x EBITDA), and an interim dividend of 1.1 cents per share declared.

• Statutory operating loss of $11 million due to a $66 million impairment of Talc assets; strategic review of Talc business announced, considering divestment.

• Efficiency and innovation initiatives drove above-market growth, with closure of Middletown plant and new NISAT facility in China.

Financial highlights

• Adjusted operating profit up 24% to $65 million; margin improved to 17% from 14.4% year-over-year.

• Adjusted EPS increased 9% to 6.1 cents per share; free cash flow improved to $15.5 million from an outflow of $11.6 million.

• Net debt reduced by $59 million year-over-year to $196 million; net debt/EBITDA at 1.3x.

• Interim dividend of 1.1 cents per share declared.

• Return on capital employed improved to 18% from 15% last year.

Outlook and guidance

• Full-year performance expected slightly above the top end of current market expectations ($115–120 million adjusted operating profit).

• Annual cost savings of $15 million expected in 2024, with a further $15 million in 2025.

• Confidence in achieving 2026 targets: adjusted operating margin of 19%+, three-year average operating cash conversion above 90%, and ROCE (excluding goodwill) above 20%.

• No material improvement in demand assumed for H2 2024; one-off restocking benefits not expected to recur.

• 2024 technical guidance: depreciation ~$40 million, amortisation ~$10 million, net finance costs ~$27 million, capex ~$40 million, adjusted tax rate ~27%.