2nd Aug 2024 11:27
(Alliance News) - Elementis PLC's first-half earnings beat expectations, and the firm lifted its outlook, in a set of results that even earned "begrudging approval" from an unhappy investor.
For the half-year ended June 30, the London-based chemicals company reported adjusted operating profit of USD65 million, a 24% rise from USD53 million a year before.
This outcome beat the market consensus by 12%, according to Berenberg.
Elementis expects a 2024 adjusted operating profit "slightly above" the top end of current market expectations, which it put between USD115 million to USD120 million. This will be an improvement from the USD103.9 million achieved in 2023.
Berenberg Chemicals analyst Sebastian Bray said: "There are few chemicals firms making high-teens Ebit margins through the cycle with cash flow conversion like Elementis, especially at its valuation."
However, Bray warned: "Given the tribulations of the last five years, we do not want to be overly positive about one excellent set of results from Elementis.
"However, after H1 2024, even the response from activist Gatemore one of management's harsher critics displayed begrudging approval."
Gatemore had previously pushed for strategic change at Elementis, and for change at the top.
Gatemore said on Thursday: "We are pleased to see a stronger-than-expected set of results and improved outlook from Elementis, with the company delivering on two of the key points we demanded in our letters: an acceleration of cost cuts and a strategic review of the Talc business. While heading in the right direction, there is a long way to go to close the gap between the company's share price and its strategic value, and we expect the board to continue to take the corrective actions required to rebuild trust with the investor base."
Elementis swung to a pretax loss of USD25.8 million from a USD34.9 million profit a year before, which Berenberg said was driven by "headwinds" faced by the firm's Talc business.
Elementis announced an interim dividend of 1.1 cents. It did not pay a dividend in 2023.
Elementis shares fell 1.0% to 157.60 pence each in London on Friday morning.
Chief Executive Officer Paul Waterman commented: "Elementis delivered a strong first half performance, reflecting both continued strategic progress and the benefits of self-help actions. We delivered a much-improved operating margin of 17%, which takes us significantly closer to our 2026 target of 19% [and above] and demonstrates the progress we are making as a high quality, high value speciality additives business."
By Lydia Doye, Alliance News reporter
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