Elementis Plc · LSE:ELM
Elementis — H1 2012 Earnings Presentation
21 slides from Elementis's earnings presentation, July 2012
Slide 1: Elementis plc Interim Results
Elementis plc Interim Results Six months ended 30 June 2012
Slide 2: Interim Results
Interim Results $ millions H1 2012 H1 2011 change Revenue 401.3 396.0 +1% - Specialty Products 246.6 237.2 +4% - Chromium 125.8 115.1 +9% Operating profit 80.7 72.2 +12% Operating margin 20.1% 18.2% +190bps Profit before tax 79.0 70.6 +12% Diluted EPS 12.2c 10.6c +15% Net cash/(debt) 29.9 (54.4) +$8
Slide 3: Highlights: Financial and strategic progress
Highlights Financial and strategic progress Specialty Products • Record operating profit • Investing in growth Chromium • Financial performance validating new business model • Sustainable competitive advantage Strong cash flow • Net cash of $29.9m • Special Dividend programme announced 3
Slide 4: Strategic Direction
Strategic Direction Phase 1: Transformation More profitable, more resilient company Sales $401.3m H1 2012 2007 2007-12 2007-12 2008-12 2009 2008-9 $286.4m Sale of Strengthen Margin Delden Chromium Acquisitions: H1 2006 Pigments Team Focus Refocus Restructure Deuchem - Asia Anji - Asia Operating Marg
Slide 5: Specialty Products
Specialty Products $ millions H1 2012 H1 2011 % Change Sales 246.6 237.2 +4% Operating profit 52.0 49.4 +5% Operating margin 21.1% 20.8% ROCE* 49% 48% Improved margins and solid growth in uncertain economic environment Strong performance in North America coatings and oil field drilling Strategic inv
Slide 6: Oil Field – Growth through Innovation
Oil Field – Growth through Innovation • Balanced range of drilling applications • Shale – Deep water – Cold climate – High Temp/High pressure • Leveraging unique capabilities • Hectorite and polymer architecture • Favourable market dynamics • Multiple capacity expansions • Positioned to benefit glob
Slide 7: Innovation Driven Investment
Innovation Driven Investment • New technology centre commissioned in April • $15 million initial investment to support North American growth of water based Rheology and Dispersants • IP protected products and technology • Speed to market improved by innovative manufacturing model • Support from majo
Slide 8: Watercryl Acquisition
Watercryl Acquisition • Expanding into Latin America coatings market • Growth in Brazil driven by: • Infrastructure investments • Growing middle class • Football World Cup 2014 • Olympic Games 2016 76% Decorative • New channels for existing products and technologies Coatings Watercryl São Paulo site
Slide 9: Growth in Decorative Coatings
Growth in Decorative Coatings Watercryl acquisition and new North American facility complete global manufacturing footprint required to drive and support growth Projected Decorative Coatings Industry Annual Growth Rates, 2012-2016 Manufacturing Assets Europe Netherlands & UK Asia China & Taiwan
Slide 10: Surfactants
Surfactants $ millions H1 2012 H1 2011 Sales 36.9 51.6 Operating profit 2.4 3.0 Operating margin 6.5% 5.8% • Successfully transitioning Delden facility to higher value coatings additives • Weaker demand in Europe offset by pricing discipline and product portfolio management 10
Slide 11: Chromium
Chromium $ millions H1 2012 H1 2011 % Change Sales 125.8 115.1 +9% Operating profit 33.4 26.2 +27% Operating margin 26.6% 22.8% ROCE* 73% 66% Strong financial performance Business running at high capacity utilisation Margins improved due to conversion to natural gas in 2011 Energy project implemente
Slide 12: Chromium – Optimising Business Performance with Reduced Volatility
Chromium – Optimising Business Performance with Reduced Volatility H1 2012 Sales Markets Geography ROW Leather Other 9% 11% 15% Refrac. Timber 6% Asia Pacific Treatment 16% 15% Pigments/ N America Ceramics Europe 60% 15% Metal 15% Finishing 31% Metal Alloys 7% Product portfolio serves diverse end ma
Slide 13: Interim Results
Interim Results $ millions H1 2012 H1 2011 change Revenue 401.3 396.0 +1% - Specialty Products 246.6 237.2 +4% - Chromium 125.8 115.1 +9% Operating profit 80.7 72.2 +12% Operating margin 20.1% 18.2% +190bps Profit before tax 79.0 70.6 +12% Diluted EPS 12.2c 10.6c +15% Net cash/(debt) 29.9 (54.4) +$8
Slide 14: Capital Spending
Capital Spending $ millions H1 2012 FY 2012 Est FY 2011 New plants 3.8 7.1 5.7 Technical facility 7.0 7.0 - Maintenance & productivity 2.8 5.5 5.0 Total Specialty Products 13.6 19.6 10.7 Energy project - - 2.0 Maintenance & productivity 2.5 5.5 5.8 Total Chromium 2.5 5.5 7.8 Other 2.0 4.5 2.3 Group
Slide 15: Working Capital
Working Capital • Average working capital to sales ratio 17.9%, well within target range of 17 – 20% • Increase in working capital in H1 2012 due to supply chain strategy and seasonal sales patterns 15
Slide 16: Retirement Plans
Retirement Plans $ millions H1 2012 H1 2011 FY 2011 FY 12 Est. Net deficit 111.2 56.5 94.8 Deficit contributions UK plan 9.5 9.1 15.6 19.8 US/other 2.0 2.8 6.4 5.2 11.5 11.9 22.0 25.0 Deficit volatile due to changes in corporate bond yields Review of current UK funding plan to be completed by end of
Slide 17: Tax Charge
Tax Charge $ millions H1 2012 H1 2011 Underlying tax charge 21.5 21.2 Deferred tax adjustment 1.5 1.2 Net tax charge 23.0 22.4 Tax rate 29% 32% H1 includes deferred tax adjustment following reduction in UK tax rate to 24% Overall rate for H1 2012 is therefore 29% Estimated tax rate for full year 201
Slide 18: Cash Flow
Cash Flow $ millions H1 2012 H1 2011 EBITDA 91.3 82.0 Working capital (29.3) (15.6) Capital expenditure (18.1) (9.7) Pensions (11.5) (11.9) Dividend (21.1) (11.5) Interest and tax (7.9) (6.3) Other 0.3 (2.1) Net cash flow 3.7 24.9 Net balance sheet cash/(debt) 29.9 (54.4) 18
Slide 19: Dividend
Dividend 2012 Interim 2011 Interim FY 2011 Per share 2.45c 2.34c 7.0c Interim dividend increased by 5% Board is announcing a Special Dividend programme • Current progressive dividend policy will continue – approx. 1/3 of EPS • In addition, Special Dividend of up to 50% of year end net cash, after ta
Slide 20: Summary
Summary Strong, resilient businesses with sustainable market advantage Specialty Products – capitalising on growth opportunities Strong cash flow generation and balance sheet • Flexibility to invest in growth • Special Dividend programme announced Outlook Confident in our ability to maintain margins
Slide 21: Thank you
ELEMENTIS A global specialty chemicals company Thank you