Slide 1: 2022 interim results
2022 interim results Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
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: Results agenda
Results agenda INTRODUCTION Paul Waterman HIGHLIGHTS & SEGMENT PERFORMANCE Paul Waterman GROUP FINANCIALS Ralph Hewins OUTLOOK & PRIORITIES Paul Waterman QUESTIONS Paul Waterman & Ralph Hewins Enhanced Performance Through Applied Innovation 3
Slide 4: Highlights
HIGHLIGHTS PAUL WATERMAN, CEO Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 5: Key messages
Key messages 1 2 3 4 5 6 Strong Coatings Challenging Talc Pricing actions Significant Full year guidance Chromium & Personal Care market conditions address rapid leverage reduction towards the top strategic review performance offset underlying cost inflation to 2.4x with further end of update around
Slide 6: Continued focus on safety
Continued focus on safety SAFETY PERFORMANCE HIGHLIGHTS Injuries Recordable Injuries Elementis TRIR TRIR Performance 14 ▪ Improved first half performance 12 2 ▪ 83% of plants with zero employee injuries 10 ▪ India plant 1,200,000 worker hours injury free 8 6 1 4 Safety Initiatives 2 ▪ Global safety
Slide 7: Strong performance
Strong performance H1 2022 FINANCIAL OVERVIEW $m H1 21 H1 22 % Change Sales 452 478 +6% Operating profit* 54 66 +21% Operating margin* 12.0% 13.7% +170bps Profit before tax* 40 53 +34% Diluted EPS* 5.5c 7.1c +29% Net debt 415 393 -5% Net debt / EBITDA 3.0x 2.4x * After adjusting items Paul Waterman
Slide 8: Proactive supply chain actions
Proactive supply chain actions CONTINUED CHALLENGES IN 2022 CHALLENGES ELEMENTIS ACTIONS ✓ Alternative suppliers RAW MATERIALS Raw material shortages ✓ Price increases & ENERGY Cost increases ✓ Hedging ✓ Surcharges Port congestion ✓ Air freight LOGISTICS Lack of rail cars ✓ Pre booked shipping Labou
Slide 9: Strategy implementation on track
Strategy implementation on track ACHIEVEMENTS INNOVATION GROWTH EFFICIENCY 10 new product launches $36m of new business won India AP Actives plant ramp up on track 45 global process New products 14% of Record Coatings improvement projects sales vs 13% in H1 2021 margins at 21% implemented 10+ altern
Slide 10: Segment performance
SEGMENT PERFORMANCE Enhanced Performance Through Applied Innovation
Slide 11: Personal Care performance
Personal Care performance STRONG EARNINGS AND MARGIN IMPROVEMENT H1 22 vs H1 21 % Change Cosmetics & AP Actives volume growth $m H1 21 H1 22 Constant Currency1 Skin care new Sales 89 106 +23% business momentum Operating profit* 19 26 +42% Improved volumes Operating margin* 21.6% 24.5% and price/mix
Slide 12: Personal Care performance
Personal Care performance DEMAND RECOVERY CONTINUES CATEGORY REVENUE BACK TO 2019 LEVELS… …BUT VOLUMES STILL RECOVERING European Retail Volumes Growth (y-o-y) -1% 0% 110 100 European European Cosmetics Deodorants Retail Sales Retail Sales 90 H1 22 vs H1 19 H1 22 vs H1 19 80 70 60 Deodorants Cosmetic
Slide 13: Personal Care performance
Personal Care performance STRATEGIC PROGRESS SKIN CARE AP ACTIVES ASIA 23% revenue growth* India ramp up on track – good 18% revenue growth* progress on customer qualification Strong growth for recent launches New Japan compliant gels Creates resilient & highly $15m NBO pipeline competitive global s
Slide 14: Personal Care performance
Personal Care performance STRONG SKIN CARE MOMENTUM TOWARDS MEDIUM TERM TARGET NEW PRODUCT LAUNCHES… …WITH MARKET LEADING ATTRIBUTES… …DRIVES SKIN CARE GROWTH Sales ($M) PERFORMANCE 25 +$10m vs 2019 BENTONE® Luxurious touch & feel Light texture & easy spreadability 20 17% CAGR LUXE 4 New Products EF
Slide 15: Coatings performance
Coatings performance RECORD EARNINGS & MARGINS H1 22 vs H1 21 % Change Pricing actions offset raw material inflation $m H1 21 H1 22 Constant currency1 $17m of Sales 197 209 +9% NBOs drives improved mix Operating profit* 33 44 +37% Operating margin* 16.7% 20.9% Significant China volume weakness *Afte
Slide 16: Coatings performance
Coatings performance INNOVATION DRIVES SHARE GAIN IN NORTH AMERICA DECORATIVE COATINGS GLOBAL SYNERGY EXPANSION SECTOR GROWTH* DELIVERY REGIONAL GROWTH* AMERICAS EUROPE ASIA +32% +[25]% +47% +20% -27% -5% GLOBAL KEY ACCOUNTS* DECO INDUSTRIAL +45% * H1 22 vs H1 21 constant currency sales growth, excl
Slide 17: Coatings performance
Coatings performance STRATEGIC PROGRESS DRIVES SUSTAINED BUSINESS QUALITY IMPROVEMENT COATINGS PERFORMANCE Adjusted Operating Profit ($M) Margin (%) ACCELERATED INNOVATION 80 20% 73 4 new products launched in H1 22 70 Waterborne industrial & Thixatrol ® expansion 62 18% 18% 60 52 NEW BUSINESS MOMENT
Slide 18: Coatings performance
Coatings performance CONTINUED GLOBAL KEY ACCOUNT GROWTH SIX GLOBAL KEY ACCOUNTS – DEDICATED EFFORT DRIVES GROWTH # of joint development projects Sales ($,m) PARTNERSHIP MENTALITY Elementis wide prioritisation 45% y-o-y Global alignment revenue growth in H1 120 20 INNOVATION FOCUS 15 R&D teams integ
Slide 19: Talc performance
Talc performance WEAK FIRST HALF PERFORMANCE AS EXPECTED H1 22 vs H1 21 Successful pricing % Change actions fully mitigate raw material $m H1 21 H1 22 Constant Currency1 increases Automotive Sales 77 73 +4% weakness & paper customer strike impact Operating profit* 8 3 -63% volumes Operating margin*
Slide 20: Talc performance
Talc performance SECOND HALF PERFORMANCE IMPROVEMENT EXPECTED SIGNIFICANT MACRO CHALLENGES… ….BUT SELF HELP TO DRIVE H2 IMPROVEMENT Automotive 2019 2020 2021 H1 2022 Sequential volume improvement Weakness ✓ Paper customer production restart -4% -6% European Auto Production* -12% -22% ✓ Technical cer
Slide 21: Talc performance
Talc performance WELL POSITIONED FOR LONG TERM GROWTH STRONG FUNDAMENTALS UNCHANGED… …AND TRACK RECORD OF GROWTH Attractive industry structure Market Mix Pricing ✓ #2 global player in niche market Share Gains Improvement Power Strong customer service, quality & consistency +7% CAGR ✓ High customer l
Slide 22: Chromium performance
Chromium performance PRICING MOMENTUM OFFSET BY REDUCED PRODUCTION VOLUMES H1 22 vs H1 21 Unplanned % Change maintenance impacts H1 production – now resolved $m H1 21 H1 22 Constant currency1 Sales 90 91 1% Margins broadly flat – pricing offset by weak volumes Operating profit* 5 4 -9% Operating mar
Slide 23: Chromium performance
Chromium performance FIRST HALF HEADWINDS BUT INDUSTRY FUNDAMENTALS IMPROVING MAINTENANCE IMPACTS VOLUMES GLOBAL UTILISATION IMPROVING INPUT COSTS ACCELERATING Elementis Chromium Volumes Chromium Industry Capacity Utilisation Raw Material Index 190 110 100% 170 100 +60% 90% 150 90 80% 130 80 70% 110
Slide 24: Group financials
GROUP FINANCIALS RALPH HEWINS, CFO Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 25: Group revenue
Group revenue STRONG PRICE/MIX DRIVES 9% UNDERLYING GROWTH REVENUE $m +5% 478 452 -3% +15% 437 -11% Chromium Production China Talc Auto Coatings Talc Paper H1 21 FX VOLUME PRICE MIX H1 22 Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation 25
Slide 26: Group operating profit
Group operating profit PRICING ACTIONS MORE THAN OFFSET COST INFLATION ADJUSTED OPERATING PROFIT $m +35% -38% +28% 66 54 -4% 52 H1 21 NET PRICE/COST MIX VOLUMES H1 22 FX IMPACT Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation 26
Slide 27: Proactive margin management
Proactive margin management PRICING ACTIONS FULLY MITIGATE COST INFLATION BREAKDOWN OF SPEND & TREND ACTIONS TAKEN ELEMENTIS REALISED PRICING Energy Packaging 17% Plant & 14% vegetable oils 11% Quaternary 5% amines 2% Freight & logistics ~20% unit Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 2
Slide 28: Ongoing cost savings
Ongoing cost savings $10M OF SAVINGS BY 2023 ON TRACK INDIA AP ACTIVES PLANT CONTINUOUS IMPROVEMENT PROCUREMENT ▪ Lower unit cost of production ▪ Process automation ▪ Logistics optimisation ▪ Avoid tariffs ▪ De-bottlenecked production lines ▪ Increased global purchasing strategy ▪ Improved access to
Slide 29: Cash flow
Cash flow FURTHER DELEVERAGING PROGRESS $m H1 21 H1 22 EBITDA 80 90 Change in working capital (27) (49) Capital expenditure (24) (22) Working capital outflow to Operating Cash Flow 30 20 secure critical inventories Pensions 1 0 Interest (12) (9) Tax related payments (24) (11) FY 22 capex guidance Ot
Slide 30: Financial leverage
Financial leverage FURTHER DEBT AND LEVERAGE REDUCTION EXPECTED IN H2 NET DEBT AND LEVERAGE EVOLUTION H2 DEBT REDUCTION DRIVERS Net Debt ($m) Net Debt / EBITDA* Working capital 540 improvement 509 Net Debt Net Debt / EBITDA 5 490 4 453 4 440 4 415 393 3 EBITDA delivery 390 3 3.1x 3.0x 2.8x 2 340 2.4
Slide 31: Debt refinancing
Debt refinancing SUCCESSFUL REFINANCING OF TERM LOAN Debt maturity profile $m Revolving Credit Facility (RCF) Term Loan 400 $300m term loan refinanced and maturity extended from 2023 to 2026* 300 200 $375m RCF unchanged 100 Blended interest rate of ~4% 0 2022 2023 2024 2025 2026 * Additional one yea
Slide 32: Disciplined capital allocation
Disciplined capital allocation CAPITAL • ~6% of sales INVEST FOR INVESTMENTS • Typical returns 20%+ IRR GROWTH on growth & productivity capex STRONG DEBT • Medium term ambition below 1.5x CASH FLOW REDUCTION SHAREHOLDER • Reinstate once further progress made on RETURNS reducing financial leverage Pa
Slide 33: Outlook & priorities
OUTLOOK & PRIORITIES PAUL WATERMAN, CEO Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 34: Strategic priorities
Strategic priorities FOCUSED ON DELIVERY OF THE HIGHEST VALUE OPPORTUNITIES INNOVATION GROWTH EFFICIENCY Over 20 new product launches Secure $50m of new business Complete India AP Actives ramp annually wins annually up Accelerated GKAM joint Complete Coatings capacity $10m of cost savings by 2023 de
Slide 35: 2022 Outlook
2022 Outlook ON TRACK FOR IMPROVED FULL YEAR FINANCIAL PERFORMANCE & DELEVERAGING PRIORITIES & GUIDANCE 1 2 3 FY 22 performance expected to be Focus on strategy External supply Steady demand towards the top end of consensus implementation chain & cost at present, but expectations* & continued self h
Slide 36: Q&A
Q&A Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 37: Medium term Group performance objectives
Medium term Group performance objectives 2019 TODAY OBJECTIVE MARGIN IMPROVEMENT ADJUSTED OPERATING PROFIT MARGIN 15.2%* 13.7% 17% CASH CONVERSION OPERATING CASH CONVERSION*** 83%^ 97% ^ 90% plus DE-LEVERAGING NET DEBT / EBITDA 2.8x* 2.4x** Under 1.5 x * Last twelve months to 30 June 2019 ** Last tw
Slide 38: Tax charge
Tax charge $m H1 21 H1 22 Underlying tax charge 7.5 11.9 FY 22 tax guidance 22-23% Tax charge: adjusting items (0.6) (5.1) Medium term P&L adjusted effective tax rate guidance remains 22-23% until 2023, and 25-26% thereafter Reported tax charge 6.9 6.8 due to anticipated increase in UK corporation t
Slide 39: Adjusting items
Adjusting items $m Expense/(Income) H1 21 H1 22 Amortisation of intangibles arising on acquisition 8 8 $8m amortisation of acquired intangibles Environmental provisions (2) - Business transformation 3 3 Non cash fixed asset impairment– nickel bio-leaching plant Impairment of PPE 0 23 Net P&L adjusti
Slide 40: FY22 Technical Guidance
FY 22 Technical Guidance P&L CASH ▪ Depreciation – c.$50m ▪ Net interest $20m to $25m (of which c.$5m is IFRS 16 related) ▪ Capex $50-55m ▪ Amortisation – c.$15m (of which majority is amortisation of acquired intangibles) ▪ Tax – Adjusted effective rate 22-23% Enhanced Performance Through Applied In