Slide 1: Preliminary Results
PRELIMINARY RESULTS Year ended 31 December 2016
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT This presentation, the presentation materials and discussion may contain certain forecasts, projections and forward looking statements – that is, statements related to future, not past events - in relation to, or in respect of the financial condition, operations or businesses of
Slide 3: Agenda
AGENDA 2016 HIGHLIGHTS Paul Waterman 2016 FINANCIALS Ralph Hewins STRATEGIC PROGRESS Paul Waterman & 2017 OUTLOOK Q&A Paul Waterman & Ralph Hewins 3
Slide 4: 2016 Highlights
2016 HIGHLIGHTS Paul Waterman CEO
Slide 5: 2016 Safety Performance
2016 SAFETY PERFORMANCE Recordable Incident rate 13 recordable incidents 3 2.5 Excellent performance at 3 sites – US Chemicals time without RI: Recordable Incidents per 200,000 hours worked 2 - Newberry Springs, CA – 25 years 1.5 - Corpus Christi, TX – 13 years Elementis - Changxing, China – 14 year
Slide 6: 2016 Results
2016 RESULTS $m 2015** 2016 % Sales 677.2 659.5 (3)% Operating profit* 121.5 94.2 (22)% Operating margin* 18% 14% Profit before tax* 115.2 89.7 (22)% Net cash 74.0 77.5 5% Diluted EPS* 20.6c 16.8c (18)% Dividends per share 16.45c 16.80c 2% *After adjusting items **Restated 6
Slide 7: 2016 Accomplishments
2016 ACCOMPLISHMENTS OUR ACCOMPLISHMENTS Organisation Strategic review Personal Care team restructured – flatter, completed increased by more than 50% simpler, more accountable Strengthened Initiated Key Account Strong cash distribution in Chromium Management generation North America 7
Slide 8: 2016 Performance – Operating Profit
2016 PERFORMANCE – OPERATING PROFIT* Full Year % Change $m 2015** 2016 Reported Constant Currency Specialty Products 79.9 78.8 (1)% 4% Chromium 48.0 27.1 (44)% (44)% Surfactants 4.5 (0.6) (113)% (113)% Central Costs (10.9) (11.1) 2% 8% Total 121.5 94.2 (22)% (20)% *After adjusting items **Restated 8
Slide 9: Specialty Products
SPECIALTY PRODUCTS 2015** 2016 H1 H2 Full year H1 H2 Ful year Sales $m 244.1 209.1 453.2 237.4 223.0 460.4 Operating profit* $m 44.8 35.1 79.9 41.8 37.0 78.8 Operating margin* 18% 17% 18% 18% 17% 17% Constant currency sales increased 3% Constant currency operating profit +4% H2 2016 operating profit
Slide 10: Specialty Products – Sales Growth Driven by Coatings & Personal Care
SPECIALTY PRODUCTS – SALES GROWTH* DRIVEN BY COATINGS & PERSONAL CARE H1 H2 FULL YEAR % CHANGE $m 2015** 2016 2015** 2016 2015** 2016 H1-o-H1 H2-o-H2 Y-o-Y Coatings 186 188 162 173 348 361 1% 7% 4% Personal Care 30 32 25 31 55 63 7% 23% 14% Energy 23 17 20 19 43 36 -26% -5% -16% Total 239 237 207 22
Slide 11: Coatings – Steady Growth
COATINGS – STEADY GROWTH COATINGS SALES COATINGS – NEW PRODUCTS AS % OF SALES Reported currency Constant currency ($m) 14% 400 +4% 12% 350 300 10% 250 8% 200 6% 150 4% 100 2% 50 0 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Source: Elementis 11
Slide 12: Global Coatings – Sales Growth Across All Regions
GLOBAL COATINGS – SALES GROWTH ACROSS ALL REGIONS ASIA + 6%* EMEA + 3%* AMERICAS + 2%* China revenue increased Y-o-Y Newly launched Organic Continued decorative coatings growth Thixatropes in Q4 behind New Martinsville investment Strong growth in Organic Thixatropes Strengthened route to market Lati
Slide 13: Personal Care – Record Sales
PERSONAL CARE – RECORD SALES PERSONAL CARE SALES DOUBLE DIGIT GROWTH ($m) Reported currency Constant currency +14% 60 50 40 30 Investment in team paying off 20 Expanded distribution and deepened penetration 10 2016 growth of 14%* over a weaker 2015, higher than 12-16 CAGR of 12% 0 2012 2013 2014 201
Slide 14: 2016 Personal Care – Deeper Penetration, Broader Distribution
2016 PERSONAL CARE – DEEPER PENETRATION, BROADER DISTRIBUTION KEY ACCOUNTS ASIA GROWTH Double digit growth* with our top 3 accounts GLOBAL KEY ACCUNTS China Up > 50% South Korea Up > 30% India Up > 100% *Constant currency 14
Slide 15: Energy – Cautiously Optimistic
ENERGY – CAUTIOUSLY OPTIMISTIC ENERGY SALES HIGHLIGHTS 2017 ACTIVITY INCREASING Reported currency Constant currency Volumes down, margins stable US & Canada Rig Count ($m) 80 Drilling activity increasing 1200 70 Hectorite technology supports +46% 1082 60 most difficult drilling applications 50 800 -
Slide 16: Chromium
CHROMIUM
Slide 17: Chromium – Overall Decline, North America Resilient
CHROMIUM – OVERALL DECLINE, NORTH AMERICA RESILIENT 2015** 2016 Chromium locations in the US H1 H2 Full year H1 H2 Ful year Sales $m 91.8 89.3 181.1 82.2 86.6 168.8 Operating profit* $m 27.0 21.0 48.0 14.5 12.6 27.1 Operating margin* 29% 24% 27% 18% 15% 16% Strong US dollar negatively impacted 2016
Slide 18: Chromium – Competitive Environment
CHROMIUM – COMPETITIVE ENVIRONMENT CHROME ORE SPIKING – US $ STRONG BUT STABLE MARKET SHARE TRIGGERING PRICE INCREASES Foreign exchange Chrome ore price $/t 100% 120 450 Other USD 400 80% 100 Russian Ruble 350 80 300 Kazak Tenge 60% Turkish Lira 250 Other 60 200 40% Elementis 40 150 100 20 20% 50 0
Slide 19: Surfactants
SURFACTANTS
Slide 20: Surfactants
SURFACTANTS 2015 2016 H1 H2 Full year H1 H2 Ful year Sales $m 29.7 24.1 53.8 21.8 21.3 43.1 Operating profit* $m 2.4 2.1 4.5 (0.2) (0.4) (0.6) Strategic review of business targeting resolution in early 2018 *After adjusting items 20
Slide 21: 2016 Financials
2016 FINANCIALS Ralph Hewins CFO
Slide 22: 2016 Group Results
2016 GROUP RESULTS $m 2015** 2016 % Sales 677.2 659.5 (3)% Operating profit* 121.5 94.2 (22)% Operating margin* 18% 14% Profit before tax* 115.2 89.7 (22)% Net cash 74.0 77.5 5% Diluted EPS* 20.6c 16.8c (18)% Dividends per share 16.45c 16.80c 2% *After adjusting items **Restated 22
Slide 23: Adjusting Items
ADJUSTING ITEMS Business Credit/(charge) Review & Environmental Acquisition Total Strategy review and $m Provisions & Other Restructuring restructuring costs Specialty Products (1.3) - - (1.3) Lower discount rate used to value environmental provisions Surfactants (0.3) - - (0.3) Chromium - (5.5) - (
Slide 24: Tax Charge
TAX CHARGE $m 2015 2016 2016 underlying rate 12%, mostly due to reduced US earnings Underlying 19.0 11.1 tax charge 2017 tax rate expectations ~ 20% Tax charge: 7.2 (3.7) adjusting items Beyond 2017 tax rate low 20s, Reported with cash tax convergence 26.2 7.4 tax charge Tax rate 16% 12% Cash tax ra
Slide 25: Cash Flow
CASH FLOW* NET CASH/(DEBT) $m $m 2015** 2016 100 EBITDA 148.4 122.2 74.0 77.5 80 Working Capital (11.8) 13.4 60 54.1 44.0 Capital Expenditure (31.3) (35.3) 40 26.2 Adjusting Items 20.1 (5.1) 20 0 Pensions (22.8) (4.7) 2011 2012 2013 2014 2015 2016 -20 Dividends (71.1) (76.2) -40 Interest, Tax, Other
Slide 26: Capital Spending
CAPITAL SPENDING $m 2015 2016 Increased spending in 2016 due to HSE compliance projects Specialty Products 15.8 21.5 Estimated 2017 - up to $40 million Chromium 10.1 9.3 Other 5.4 4.5 Total Group Capital Spending 31.3 35.3 Depreciation 26.9 28.0 26
Slide 27: Dividends
DIVIDENDS DIVIDEND Cents per ordinary share 18 Per Share 2015 2016 16 Interim Paid 2.70c 2.70c Maintained 14 12 Proposed Final 5.75c 5.75c Maintained 10 Special Special Special Special Special 8.00c 8.35c +4% 8 Special Dividend 6 Total Dividends 16.45c 16.80c +2% 4 Ordinary Ordinary Ordinary Ordinar
Slide 28: Strategic Progress & 2017 Outlook
STRATEGIC PROGRESS & 2017 OUTLOOK
Slide 29: How Will We Reignite Growth? – Strategic Priorities in Action
HOW WILL WE REIGNITE GROWTH? – STRATEGIC PRIORITIES IN ACTION PURSUE PURSUE INNOVATE FOR CREATE A BEST GROWTH SUPPLY CHAIN DISTINCTIVENESS CULTURE OF HIGH OPPORTUNITIES TRANSFORMATION & HIGH MARGINS PERFORMANCE 29
Slide 30: How Will We Reignite Growth? – Strategic Priorities in Action
HOW WILL WE REIGNITE GROWTH? – STRATEGIC PRIORITIES IN ACTION PURSUE PURSUE INNOVATE FOR CREATE A BEST GROWTH SUPPLY CHAIN DISTINCTIVENESS CULTURE OF HIGH OPPORTUNITIES TRANSFORMATION & HIGH MARGINS PERFORMANCE Systematic pilot Distribution expansion Double digit growth achieved & engagement with Sa
Slide 31: How Will We Reignite Growth? – Strategic Priorities in Action
HOW WILL WE REIGNITE GROWTH? – STRATEGIC PRIORITIES IN ACTION PURSUE PURSUE INNOVATE FOR CREATE A BEST GROWTH SUPPLY CHAIN DISTINCTIVENESS CULTURE OF HIGH OPPORTUNITIES TRANSFORMATION & HIGH MARGINS PERFORMANCE Progressing options St Louis / Charleston Targeting resolution plants Eliminated 10% in e
Slide 32: How Will We Reignite Growth? – Strategic Priorities in Action
HOW WILL WE REIGNITE GROWTH? – STRATEGIC PRIORITIES IN ACTION PURSUE PURSUE INNOVATE FOR CREATE A BEST GROWTH SUPPLY CHAIN DISTINCTIVENESS CULTURE OF HIGH OPPORTUNITIES TRANSFORMATION & HIGH MARGINS PERFORMANCE Consolidating technical Focusing on biggest, support and technical Supporting emerging ke
Slide 33: How Will We Reignite Growth? – Strategic Priorities
HOW WILL WE REIGNITE GROWTH? – STRATEGIC PRIORITIES PURSUE PURSUE INNOVATE FOR CREATE A BEST GROWTH SUPPLY CHAIN DISTINCTIVENESS CULTURE OF HIGH OPPORTUNITIES TRANSFORMATION & HIGH MARGINS PERFORMANCE Standardised New discipline Through Workday Focusing on coatings and centralised system implementat
Slide 34: SummitReheis Acquisition
SUMMITREHEIS ACQUISITION WHY THIS DEAL? SUMMITREHEIS MARKETS SUMMITREHEIS PRODUCTS The global leader in growing anti-perspirant Product Applications actives market AP ACTIVES Aluminium Anti-perspirant aerosols Long standing relationships with consumer Chlorohydrate (ACH)* and roll-ons products compa
Slide 35: SummitReheis – Attractive Earnings and Value Creation Opportunity
SUMMITREHEIS ATTRACTIVE EARNINGS AND VALUE CREATION OPPORTUNITY TRANSACTION Enterprise Value of $360 million on a cash free, debt free basis TERMS 11.8x SummitReheis expected underlying 2016 EBITDA (including run rate cost synergies) Immediate adjusted earnings per share accretion - double digit in
Slide 36: 2017 Outlook
2017 OUTLOOK comparable steady growth fast growth cautiously reviewing to 2016 optimistic strategic options; resolution by 2018 for 2017 and beyond integration by year end 36
Slide 37: Q&A
Q&A Paul Waterman and Ralph Hewins