27th Mar 2006 07:03
Elementis PLC27 March 2006 27 March 2005 Elementis plc Second Phase of Strategic Review Elementis plc is today announcing the results of the second phase of the Board'sStrategic Review. In October 2005 the Board, having reviewed the businesses and operations of theCompany, decided to implement a number of changes in order to achieve three keyobjectives as follows: • Improve the base earnings level of the Company • Reduce the volatility of Chromium earnings • Focus attention on Specialties, which is the largest and most profitable business. Progress so far Progress has been made in implementing the actions announced in October toaddress the first two of these objectives. The reorganisation of certaincorporate and administrative functions in order to improve base earnings,together with certain actions announced in the first half of 2005, have beencompleted and will lead to a reduction in fixed costs in 2006 versus 2005 of£11.1 million, with a further £1.9 million in 2007. In Chromium the announcedclosure of 50% of capacity in the UK, in order to reduce earnings volatility, ison course to be completed by around the end of the March 2006, and 60% of theremaining UK production is being sold under twelve month contracts. The Grouphas taken some additional actions to stabilise earnings in 2006 by fixing 40% ofits electricity costs and 60% of its gas costs for the year, and hedgingapproximately 80% of its US Dollar and Euro cash flows against sterling. Focusing attention on Specialties The third objective is to focus attention on Specialties, and this has been themain theme of the second phase of the Board's Strategic Review. Specialties,excluding surfactants which are related to the Servo acquisition, alreadygenerates attractive returns, but going forward the Group believes it canleverage its' portfolio of rheology modifiers and dispersions, which had salesof £139.7 million in 2005, to increase sales growth rates without compromisingmargins. Opportunities in personal care, low solvent thickeners and plasticadditive niches will be pursued via a refocused R&D group to enhanced mediumterm performance. In the near term Specialties will also benefit from further efficienciesidentified during phase two of the Review. Improvements in manufacturingefficiencies, as well as reductions in selling and administration costs willreduce costs in 2007 by a further £2.2 million. When combined with savingsannounced in October 2005 and changes in US pension benefits to be implementedby the end of the first half, the Group will benefit from total cost reductionsof £5.3 million in 2007 compared to 2006. Current Trading Trading for the first quarter of 2006 has been satisfactory in all categories,with the coatings markets showing an improvement over 2005. Commenting on phase two of the Strategic Review, Edward Bramson, ExecutiveChairman said: "Today's announcement is consistent with our strategy of improving the Group'slong term earnings quality and consistency, and we are confident that theSpecialties business will provide an excellent platform for future growth andcash flow generation. We are now taking steps to improve 2007 earningsconsistency and we intend to provide further updates on segment performance andthe outlook for trading at the time of our Interim announcement." - ENDS - Enquiries: Elementis plc Tel: +44 (0)1784 227000Ed Bramson, ChairmanBrian Taylorson, Finance Director Financial Dynamics Tel: +44 (0)20 7831 3113Andrew DowlerGreg Quine This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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