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Under pressure Elementis eyes cost savings and margin growth

14th Nov 2023 10:48

(Alliance News) - Elementis PLC on Tuesday set out a lofty margin target and said it plans "above market revenue growth by 2026".

Shares in the company were 3.8% higher at 127.20 pence each in London on Tuesday morning.

The speciality chemicals firm, hosting a capital markets day in the wake of receiving calls from some shareholders for an immediate sale of the company, also said it is eyeing cost cuts.

London-based Elementis is looking for an adjusted operating profit margin above 19% as part of its 2026 financial targets. It achieved an adjusted operating profit margin of 13.6% in 2022, rising from 12.4% in 2021.

"The 19% target operating margin will be achieved through our growth and efficiency programmes based on current market conditions, whilst a modest recovery in the demand environment could see the margin rise above this level," Elementis said.

It is also targetting delivering "USD90 million of above market revenue growth by 2026".

It added: "Following the sale of Chromium earlier this year, Elementis is a higher-quality, less-cyclical, specialty chemicals business. The group has two focused businesses, Performance Specialties and Personal Care, with attractive growth opportunities across a wide range of market segments in which we operate. Going forward we will be focusing on seven growth platforms and deliver USD90 million of above market revenue growth by 2026. This will be driven by innovation, utilising our advantaged technologies, benefiting from key industry trends."

Elementis completed the sale of its chromium chemicals production arm to Yildirim Group in January.

Elementis is looking to be a "more efficient business". A programme will deliver USD20 million in cost savings by 2025. Elementis added that this will involve up to 190 redundancies as it looks to move roles to "lower cost locations" and outsource "back office transactional roles". In addition it expects a further USD10 million in annual savings by 2025 from "supply chain optimisation and procurement savings".

The capital markets day comes after Elementis has faced shareholder scrutiny recently.

In September, Franklin Mutual Advisors LLC, an investment advisory firm parented by Franklin Templeton, published an open letter requesting that the Elementis board "initiate an immediate sale of the company".

Franklin, which controls a roughly 10% stake on behalf of clients, said that while it was initially "impressed with Elementis's healthy market position," its more recent capital allocation decisions have caused "a shocking amount of shareholder value destruction".

It said Elementis has significant strategic value but is currently too small to accomplish its goals, and would therefore benefit from merging with a larger company.

Odyssean Capital, which holds a roughly 3% interests, also said in September that Elementis should be put up for sale.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

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