Slide 1: 2020 results
2020 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 Weak 2020 Significant net debt 2021: continued self demand reduction help actions & demand recovery Swift COVID-19 Encouraging 2021: Improved response strategic progress financial performance & deleveraging Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation 5
Slide 6: Safety first
Safety first SAFETY PERFORMANCE HIGHLIGHTS TRIR Performance Injuries Recordable Injuries TRIR* ▪ Nine recordable injuries 18 2 ▪ Two lost time accidents 16 14 Safety Initiatives 12 10 ▪ Proactive COVID-19 response 1 8 ▪ Global TogetherSAFE campaign 6 4 2 0 0 2016 2017 2018 2019 2020 Note: Total Reco
Slide 7: Sustainability focus
Sustainability focus TAKING ACTION TO DELIVER 2030 TARGETS WITHIN OUR OPERATIONS… …AND PRODUCT PORTFOLIO NATURAL PERSONAL CARE INGREDIENTS Hectorite replacing synthetics Newberry Springs New Martinsville Solar Panel Installation Solvent Recycling REDUCED VEHICLE EMISSIONS Talc for vehicle light weig
Slide 8: Significant net debt reduction
Significant net debt reduction 2020 FINANCIAL OVERVIEW $m 2019 2020 % Change Sales 874 751 - 14% Operating profit* 123 82 - 34% Operating margin* 14.1% 10.9% - 320ps Diluted EPS* 12.4c 6.5c -48% Dividends per share** 2.80c - - Net debt 454 408 -10% * After adjusting items **2019 final dividend cance
Slide 9: May trough, demand improvement thereafter
May trough, demand improvement thereafter DEMAND EVOLUTION ELEMENTIS GROUP - REVENUE DEVELOPMENT Y-O-Y 120 Volume Price Volumes impacted 100 by COVID-19 80 Continued 60 improvement from May 40 Q1 20 Q2 20 Q3 20 Q4 20 Resilient pricing Note: Graph shows change on prior year comparative (=100). Paul W
Slide 10: Swift COVID-19 response
Swift COVID-19 response ADDRESSING THE NEEDS OF ALL OUR STAKEHOLDERS Employees Shareholders Customers Health & safety focus $10m in year cost Reliable customer service interventions Work from home Operational resilience Cash conservation Enhanced communications measures Digital support & product dev
Slide 11: Strategy implementation on track
Strategy implementation on track 2020 ACHIEVEMENTS INNOVATION GROWTH EFFICIENCY Coatings transformation 2019 organisation restructuring; 12 new product launches complete $5m savings delivered in 2020 New products up from 12% to Working capital - $7m delivered $30m of NBOs closed 14% of sales to reac
Slide 12: Innovation accelerating, improving product quality
Innovation accelerating, improving product quality COMBINATION OF NEW PRODUCTS & OPEN INNOVATION Distinctive new technologies AQDOT partnership • Personal Care – high efficacy AP active • Smart odour control & fragrance release • Coatings – premium deco NiSATs • Supramolecular chemistry • Talc – bar
Slide 13: Segment performance
SEGMENT PERFORMANCE Enhanced Performance Through Applied Innovation
Slide 14: Personal Care performance
Personal Care performance MARGINS RESILIENT DESPITE WEAK MARKET CONDITIONS 2020 vs 2019 % Change Cosmetics sales down double digits $m 2019 2020 Like for like1 Sales 195 161 -9% Continued AP Active volume growth Operating profit* 43 34 -20% Operating margin* 21.9% 20.9% Operating profit impacted by
Slide 15: Personal Care performance
Personal Care performance GROWTH TO RESUME ONCE COVID-19 RESTRICTIONS EASE 2020 SALES IMPACTED… …BY COVID-19 HEADWINDS Sales, $m 200 -21% RETAIL CLOSED Cosmetics Retail Sales 150 100 STAY AT HOME -8% 2017 2018 2019 2020 Deodorants Retail Sales Geographic AP & Skin care Pricing expansion extension po
Slide 16: Personal Care performance
Personal Care performance STRATEGIC PROGRESS NEW PRODUCT NEW AP ACTIVES ASIA CAPABILITY LAUNCHES PLANT - INDIA STRENGTHENED 5 new product launches Mid 2021 start up on track Direct customer focus AQDOT strategic innovation Reduces production costs and Additional sales, marketing partnership mitigate
Slide 17: Coatings performance
Coatings performance STANDOUT MARGIN INCREASE IN A CHALLENGING MARKET ENVIRONMENT 2020 vs 2019 % Change Deco robust, industrial improved from Q2 $m 2019 2020 Constant Currency1 Sales 320 296 -7% Transformation benefits offset volume declines Operating profit* 48 47 -2% Operating margin* 15.1% 15.9%
Slide 18: Coatings performance
Coatings performance CONTINUED SELF HELP DELIVERING IMPROVED PERFORMANCE BUSINESS IMPROVEMENT CONTINUES… … DESPITE COVID-19 HEADWINDS 2020 MARKET PERFORMANCE BY VOLUME (Y-o-Y)* Improved $5m + New product of cost product portfolio savings impact 2% Industrial 16.50% ADJUSTED OPERATING PROFIT MARGIN (
Slide 19: Coatings performance
Coatings performance STRATEGIC PROGRESS NEW BUSINESS OPPORTUNITIES Technology growth platforms volumes +6% $15m delivered in 2020; $15m plus for 2021 PREMIUM WATERBORNE DECO INDUSTRIAL ACCELERATED INNOVATION ADDITIVES 6 new products launched in 2020; over 10 for 2021 NXTLEVVEL Biochem partnership OR
Slide 20: Talc performance
Talc performance RESULTS NEGATIVELY IMPACTED BY Q2 INDUSTRIAL SHUTDOWNS 2020 vs 2019 % Change Significant auto decline related $m 2019 2020 Constant Currency1 impact Sales 151 133 -13% Coatings revenue up 1% - Operating profit* 26 17 -36% synergy delivery Operating margin* 17.1% 12.5% Pricing resili
Slide 21: Talc performance
Talc performance H2 RECOVERY STRONG, WELL POSITIONED TO RESUME LONG TERM GROWTH DEMAND IMPROVEMENT FROM Q2 TROUGH… …AND BUSINESS FUNDAMENTALS REMAIN STRONG 120 Talc Volumes (y-o-y) Attractive industry structure 100 ✓ #2 global player in growing market 80 60 Strong customer service, quality & consist
Slide 22: Talc performance
Talc performance STRATEGIC PROGRESS GLOBAL INNOVATION SYNERGY EXPANSION PROGRESS DELIVERY $10m of new business Barrier coatings $7m revenue delivery 30+ live customer projects 18% China growth Coatings: High grade ceramics for gasoline 60 new customers, 13 new countries Sales resources to support pa
Slide 23: Chromium performance
Chromium performance LOWEST GLOBAL INDUSTRY CAPACITY UTILISATION SINCE 2009 2020 vs 2019 % Change Weak global auto & industrial $m 2019 2020 Constant Currency1 demand Sales 171 147 -14% Improved Q4 volume Operating profit* 18 6 -69% performance Operating margin* 10.6% 3.8% Margins impacted by rest o
Slide 24: Chromium performance
Chromium performance WEAK INDUSTRY PRICING BUT NORTH AMERICA STABLE & Q4 REBOUND WEAKEST UTILISATION SINCE 2009 NORTH AMERICA REMAINS STABLE Q4 VOLUME PICK UP Chromium Industry Capacity Utilisation Elementis Contribution Margin % Indexed Elementis Chromium Volumes (Y-o-Y)* 90% 120 120 North America
Slide 25: Energy performance
Energy performance RESTRUCTURED TO RESTORE FUTURE PROFITABILITY 2020 vs 2019 % Change North American rig count down $m 2019 2020 Constant Currency1 ~50% Sales 47 24 -49% Operating profit loss due to Operating profit* 4 -6 n/a weak volumes Operating margin* 8.2% -24% Charleston plant closure material
Slide 26: Group financials
GROUP FINANCIALS RALPH HEWINS, CFO Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 27: Group revenue
Group revenue COVID-19 IMPACTS VOLUMES REVENUE $m 874 -2% 855 - -9% -1% -2% 751 2019 PORTFOLIO FX VOLUME PRICE MIX 2020 CHANGE* * Portfolio change includes the disposal of the Dental gypsum plant in December 2019 Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation 27
Slide 28: Group operating profit
Group operating profit PROACTIVE COST MANAGEMENT MITIGATES REVENUE DECLINE ADJUSTED OPERATING PROFIT $m 123 -1% - 122 -46% 13% 82 2019 PORTFOLIO FX UNDERLYING REVENUE COSTS 2020 CHANGE* DECLINE * Portfolio change includes the disposal of the Dental gypsum plant in December 2019 Paul Waterman Ralph H
Slide 29: A track record of cost reduction
A track record of cost reduction $20M OF FURTHER EFFICIENCIES 2021 – 2023 GLOBAL SUPPLY CHAIN IMPROVEMENTS… …TO DRIVE $45M OF SAVINGS SINCE 2018 Procurement savings 2018/19 Plant efficiencies, warehouse closures $10m Acquisition synergies 2020 Organisational restructuring $10m* $10m $5m St Louis / C
Slide 30: A track record of working capital reduction
A track record of working capital reduction $10M OF FURTHER REDUCTION 2021 - 2023 OPERATIONAL IMPROVEMENTS… …TO DRIVE $40M OF SAVINGS SINCE 2018 Complexity reduction $10m 2018/19 Service level agreements $7m 2020 Statistical demand planning 2021/23 Inventory management $23m Paul Waterman Ralph Hewin
Slide 31: Growth capex focus
Growth capex focus SPEND FOCUSED ON GROWTH & PRODUCTIVITY INVESTMENTS TYPICAL CAPEX $40-45M TWO PLANT PROJECTS DRIVE 2021 SPEND USD ($m) Maintenance & HSE Growth & Productivity 60 50 Mumbai, India AP Actives plant c. $10m, savings driver & growth enabler 40 30 20 Charleston/St Louis consolidation c.
Slide 32: Cash flow
Cash flow $46M NET DEBT REDUCTION IN A CHALLENGING DEMAND ENVIRONMENT $m 2019 2020 EBITDA 175 133 Change in working capital 32 19 Strong working capital Capital expenditure (47) (40) management Operating Cash Flow 160 112 Pension deficit payments (1) - Interest (25) (24) Tight capex discipline Tax &
Slide 33: Financial leverage
Financial leverage HIGHLY CASH GENERATIVE BUSINESS MODEL TO DRIVE FURTHER DEBT REDUCTION OPERATING CASH FLOW OVER THE CYCLE USD, m 200 160% Op Cash Flow Cash Conversion 140% 150 120% 2020 operating cash conversion: 137% 100% 100 80% Average 3 year operating cash conversion: 105% 60% 50 40% Leverage
Slide 34: Disciplined capital allocation
Disciplined capital allocation CAPITAL • ~5% 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 significant progress RETURNS made on reducing financial leverag
Slide 35: Outlook & priorities
OUTLOOK & PRIORITIES PAUL WATERMAN, CEO Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 36: Elementis today
Elementis today Personal Care Coatings* Talc Chromium #1 #1 #2 #1 Global Supplier Global Supplier Global Supplier North America Rheology modifiers Rheology modifiers Talc based Chromium additives chemicals AP actives High value additives GROWTH CASH GENERATION *Moving forward Energy to be integrated
Slide 37: 2021 Outlook & Priorities
2021 Outlook & Priorities IMPROVED FINANCIAL PERFORMANCE & DELEVERAGING OUTLOOK INNOVATION GROWTH EFFICIENCY 20 + new Secure $30m + Deliver $10m product launches of NBOS of savings Maintain focus on strategy 1 implementation / self help Complete Charleston Leverage open Start up & St Louis innovatio
Slide 38: Medium term Group performance objectives
Medium term Group performance objectives MARGIN IMPROVEMENT ADJUSTED OPERATING PROFIT MARGIN 10.9%* 17% CASH CONVERSION OPERATING CASH CONVERSION*** 105%** 90% plus DE-LEVERAGING NET DEBT / EBITDA 3.2x* Under 1.5 x * Last twelve months to 31 December 20 ** Last three year average *** Calculated as (
Slide 39: Value creation pathway
Value creation pathway PATH TO MEDIUM TERM OPERATING MARGIN % INNOVATION & GROWTH A Increasing proportion of revenue from new products with performance & sustainability benefits 17.0% Revenue growth opportunities of over $100m 16.1% C B Skin Care Premium decorative Global expansion 14.1% Asia Cosmet
Slide 40: Q&A
Q&A Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 41: Appendix
Appendix Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 42: Accelerating sustainability implementation
Accelerating sustainability implementation 2030 TARGETS GHG EMISSIONS ENERGY WATER WASTE 25% Reduction in GHG emissions 20% Increase in energy efficiency 10% Reduction in water usage 10% Reduction of waste Ultimate goal = carbon neutrality Note: Targets are volume based metrics (e.g. joules/tonne of
Slide 43: Debt facilities & liquidity
Debt facilities & liquidity STRONG LIQUIDITY POSITION DEBT MATURITY PROFILE AT 31 DECEMBER 2020 USDm RCF (Drawn) RCF (Undrawn) 500 $200m Term Loan EUR172m Term Loan Over $350m of immediately available liquidity 400 including c.$100m of cash & c.$250m of undrawn RCF 300 Banking covenants: 200 1) Net
Slide 44: Tax charge
Tax charge EFFECTIVE TAX RATE 27% $m 2019 2020 Tax rate in line with 2020 guidance Underlying tax charge 21 14 Medium term P&L effective tax rate Tax charge: adjusting items (6) (16) guidance remains 22-23% until 2023, and 25-26% thereafter due to anticipated increase in UK corporation tax rates fro
Slide 45: Adjusting items
Adjusting items $m Expense/(Income) 2019 2020 H1 2020 goodwill impairment – Amortisation of intangibles arising on acquisition 19 15 Talc ($33m) and Energy ($27m): WACC increase & COVID-19 impact Environmental provisions 5 7 on timing of profit delivery Business transformation & restructuring 7 24 I
Slide 46: FY 21 Technical Guidance
FY 21 Technical Guidance P&L CASH ▪ Depreciation – c.$50m ▪ Net interest c.$25m (of which c.$5m is IFRS 16 related) ▪ Capex $45 - 50m ▪ Amortisation – c.$15m (of which majority is amortisation of acquired intangibles) ▪ One off $20m tax payment in respect EU state aid ▪ Tax – Effective rate 22-23% E