Slide 1: 2019 Interim results
>> ELEMENTIS t ® Aglobal specialty chemicals company 2019 Interim results Enhanced Performance Through Applied Innovation
Slide 2: Cautionary statement
Cautionary statement JULY 2019 This presentation, any oral briefing and any question and answer session in connection with it (‘Presentation’) do not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any shares or other securities in Elementis plc (the ‘Compan
Slide 3: Results agenda
Results agenda INTRODUCTION Paul Waterman FINANCIAL HIGHLIGHTS Ralph Hewins PERFORMANCE & OUTLOOK Paul Waterman QUESTIONS Paul Waterman & Ralph Hewins 3
Slide 4: Safety
Safety FOCUSING ON CONTINUOUS PERFORMANCE IMPROVEMENT RECORDABLE INCIDENT RATE (TRIR) HIGHLIGHTS Injuries TRIR Recordable Injuries TRIR Performance 18 1.2 Four recordable injuries 16 1 Zero lost time accidents (LTAs) 14 12 0.8 No reportable spills 10 0.6 8 6 0.4 Safety investments to reduce op
Slide 5: Interim results
Interim results IMPROVED MOMENTUM AND MANAGEMENT ACTIONS TO DRIVE STRONGER H2 PERFORMANCE 1 Challenging demand environment 2 Q1 destocking, Q2 recovery 3 H2 underpinned by self help and strong cash generation 4 Compelling growth opportunities 5
Slide 6: Financial Highlights
Financial Highlights Ralph Hewins 6
Slide 7: 2019 interim results
2019 interim results WEAK DEMAND ACROSS ALL SEGMENTS, Q2 OPERATING PROFIT* $40M H1 19 vs H1 18 $m H1 18 H1 19 % Change Sales 421 450 + 7% Operating profit* 68 64 - 5% Operating margin* 16.0% 14.3% - 170ps Diluted EPS* 9.1c** 6.5c -29% Dividends per share 2.70c** 2.80c + 4% Net debt 260 509 *Continui
Slide 8: Group revenue
Group revenue REVENUE DOWN 7% ON UNDERLYING BASIS REVENUE $m 70 (12) 480 (22) (7) (2) 1 450 421 H1 18 PORTFOLIO FX COATINGS PERSONAL CHROMIUM ENERGY H1 19 CHANGE* CARE * Portfolio change includes six months contribution from Talc and the impact of business disposals (i.e. product portfolio eliminati
Slide 9: Group operating profit
Group operating profit OPERATING PROFIT DOWN 21% ON UNDERLYING BASIS ADJUSTED OPERATING PROFIT $m 13 (2) 79 (7) (6) 68 (3) - 1 64 H1 18 PORTFOLIO FX COATINGS PERSONAL CHROMIUM ENERGY OTHER H1 19 CHANGE* CARE * Portfolio change includes six months contribution from Talc and the impact of business dis
Slide 10: Cost savings
Cost savings $10M OF SAVINGS TO BENEFIT 2019 PERFORMANCE $10m cost savings implemented Other Timing 10% $3m realised in H1 Supply Headcount Headcount: Corporate and support functions Chain 50% 40% Sources Supply chain: Plant efficiencies, warehouse closures 10
Slide 11: Working capital optimisation
Working capital optimisation WORKING CAPITAL TARGET INCREASED FROM $25M TO $30M BY 2020 ACTIONS IN H1 19 WORKING CAPITAL REDUCTION COMPLEXITY Reduced SKUs SKU elimination complete 30 & products 23 SERVICE LEVEL Rolled out AGREEMENTS 97% compliance across accounts 12 $4m of inventory reduction, New d
Slide 12: Cash flow
Cash flow STRONG OPERATING CASH FLOW OFFSET BY ONE-OFF EFFECTS $m H1 18 H1 19 EBITDA 81 85 Change in working capital (28) 1 Capital expenditure (21) (23) Strong operating cash flow Other (3) (2) – close to 100% cash conversion Operating Cash Flow 29 62 Pension deficit payments - - ___________ Intere
Slide 13: Financial leverage
Financial leverage CASH GENERATION TO IMPROVE IN H2 Net debt* / EBITDA 33 (51) H2 cash generation improvement driven by 29 $509m Improved business performance $498m Working capital savings Absence of cash one offs 2.8x < 2.4x Good deleveraging going forward 2.5x – 0.4 turns per annum on averag
Slide 14: Performance & Outlook
ELEMENTIS Performance & Outlook
Slide 15: Coatings performance
Coatings performance DESTOCKING COMPLETE, MARGINS RESILIENT H1 19 vs H1 18 % Change All regions weak, particularly China $m H1 18 H2 18 H1 19 Like for like1 Sales 198 165 164 -11% Material Q1 de-stocking impact – now completed Operating profit* 30 22 24 -22% Margins resilient – portfolio improvement
Slide 16: Coatings performance
Coatings performance Q1 DESTOCKING COMPLETE, Q2 VOLUME RECOVERY PERFORMANCE CONTEXT Q2 VOLUME RECOVERY Sales excluding portfolio rationalisation decisions down 7% y-o-y 103 100 97 89 Asia margins up from 13% to 17% Sales to global key accounts maintained in EMEA & Americas Q3 18 Q4 18 Q1 19 Q2 19 16
Slide 17: Coatings – Transformation on track
Coatings – Transformation on track 1 New leadership and global organisation since mid 2018 2 Self-help: $5m cost savings, $8m new business confirmed in 2019 3 Strong new product pipeline – 10 new products to launch in the next year OUTLOOK H2 performance improvement, underpinned by self help 17
Slide 18: Personal Care performance
Personal Care performance COSMETICS GROWTH, SHORT TERM CHALLENGES IN AP ACTIVES H1 19 vs H1 18 % Change Cosmetics sales up 5% on L-f-L basis $m H1 18 H2 18 H1 19 Like for like1 Sales 112 99 101 -6% AP Actives impacted by $2m absorption of new US tariffs, and volume effects of 2018 price increases Op
Slide 19: Cosmetics performance
Cosmetics performance A GROWTH BUSINESS, DRIVEN BY MANAGEMENT ACTIONS IMPROVED H1 PERFORMANCE MANAGEMENT ACTIONS H1 19 6.5000 +5% y-o-y Investments in emerging markets driving growth: 6.4000 – Sales in China +5%, Latam +25% 6.3000 6.2000 New products launched in April 2019 targeting skin care: 6
Slide 20: AP Actives performance
AP Actives performance EXPECTED VOLUME IMPROVEMENT DRIVEN BY MANAGEMENT ACTIONS VOLUME RECOVERY BUILDING INDIA PLANT - KEY STRATEGIC PILLAR STRONG INNOVATION OPPORTUNITIES Business wins and competitive New India plant to produce c. 70% Strong innovation pipeline, pricing recapturing volume of
Slide 21: Talc performance
Talc performance RESILIENT SALES IN CHALLENGING DEMAND ENVIRONMENT H1 19 vs H1 18 % Change Constant $m H1 18** H2 18** H1 19 Currency Sales 87 72 75 -8% Operating profit* 14 11 10 -16% Operating margin* 15.7% 15.3% 14.0% * After adjusting items ** 6 month pro forma numbers. Acquisition completed on
Slide 22: Talc performance
Talc performance GOOD INDUSTRIAL TALC PERFORMANCE DESPITE MACRO HEADWINDS Industrial Talc +1%* Plastics Coatings Other Diversified Resilient industrial talc performance SALES (y-o-y)* -6% +5% +4% Paper volumes impacted by temporary customer pricing differential; volume Auto demand Technical decline
Slide 23: Talc - Integration & cost synergies on track
Talc - Integration & cost synergies on track 1 Integration On track to complete by Q4 19 All key staff retained $2m annual cost reduction identified 2 Synergies Early revenue synergy progress: distributor expansion, multiple innovation projects in action, customer testing 3 New business $6
Slide 24: Chromium performance
Chromium performance RESILIENT US PERFORMANCE, REST OF THE WORLD WEAKER H1 19 vs H1 18 % Change Resilient US performance, RoW impacted by lower industry capacity utilisation Constant $m H1 18 H2 18 H1 19 Currency Investment in plant reliability Sales 91 94 88 -2% - strong operational performance Ope
Slide 25: Energy performance
Energy performance SALES UNDERPINNED BY NEW BUSINESS WINS H1 19 vs H1 18 % Change $5m of 2019 new business, $1m in H2 Constant $m H1 18 H2 18 H1 19 Currency Outperforming soft North American drilling Sales 27 28 28 + 4% environment Operating profit* 3 4 3 - India plant to support eastern hemisphere
Slide 26: H2 outlook
H2 outlook IMPROVED MOMENTUM AND MANAGEMENT ACTIONS TO DRIVE STRONGER H2 PERFORMANCE 1 Market conditions consistent with Q2 2 Talc integration complete by Q4 – synergies confirmed Improved performance underpinned by $10m of secured cost savings 3 and $22m of confirmed new business 4 New product laun
Slide 27: Elementis fundamentals
Elementis fundamentals A HIGH QUALITY, ADVANTAGED PORTFOLIO WITH SIGNIFICANT GROWTH OPPORTUNITIES 1 Transformed portfolio with distinctive positions in attractive markets 2 Material growth opportunities in Talc, Personal Care and Coatings 3 Innovation focus on sustainable, differentiated new product
Slide 28: November CMD
November CMD 19 NOVEMBER 1 Introduce business & technology leaders 2 Organic growth initiatives 3 Additional cost efficiency 4 Specific financial metrics 28
Slide 29: Q&A
Q&A Enhanced Performance Through Applied Innovation 29
Slide 30: Tax charge
Tax charge UNDERLYING H1 19 TAX RATE OF 21.9% $m H1 18 H1 19 Underlying tax charge 11.5 10.7 Underlying H1 19 tax rate of 21.9% _______________ Full year P&L tax rate of Tax charge: adjusting items 4.4 (2.3) around 22% Reported tax charge/(credit) 15.9 8.4 Tax rate* 19.8% 21.9% *underlying tax rate,
Slide 31: Adjusting items
Adjusting items $m H1 18 H1 19 $9m of amortisation of M&A related activity 3 - acquired intangibles Amortisation of intangibles arising 7 9 _______________ on acquisition Release of contingent consideration - (9) $9m release of Talc contingent consideration Other 1 - Net adjusting items 11 - 31
Slide 32: Income Statement – Six months to 30 June 2019
IFRS 16 Impact Operating lease Depreciation on Interest on lease $m Pre IFRS 16 Post IFRS 16 expense assets liabilities months to 30 June 2019 Income Statement – Six Revenue 449.7 - - - 449.7 Cost of sales (285.6) - - - (285.6) Gross profit 164.1 - - - 164.1 Net operating costs (100.8) 3.8 (3.3) - (
Slide 33: FY 19 Guidance
FY 19 Guidance P&L CASH Depreciation – c.$50m Net interest c. $25m (of which c.$6m is IFRS 16 related) Capex c.$50m Amortisation – c.$20m (of which majority is amortisation of acquired intangibles) Tax – Effective rate around 22% 33