Elementis Plc · LSE:ELM
Elementis — Investor Day (November 2023)
78 slides from Elementis's investor day presentation, Nov 14, 2023
Slide 1: Capital Markets Day
Unique chemistry, sustainable solutions Capital Markets Day 14 November 2023 Unique chemistry, sustainable solutions
Slide 2: Agenda
Agenda Introduction and strategy update 14:00 Performance Specialties Personal Care Breakout sessions Sustainability Financial framework Conclusions and Q&A Unique chemistry,17:00 sustainable solutions End of formal session; reception Unique chemistry, sustainable solutions 2
Slide 3: Corporate video
ELEMENTIS Corporate video
Slide 4: Introduction and strategy update
Unique chemistry, sustainable solutions Introduction and strategy update Paul Waterman 4
Slide 5: Key messages
Key messages A high quality, less cyclical specialty chemicals business Personal Care ~45% of operating profit November 2019 CMD objectives not yet achieved – but strategy is working Performance Specialties ~55% of operating profit Two focused businesses well positioned for growth Unique chemistry,
Slide 6: Our purpose and values
Our purpose and values Unique chemistry, SAFETY Our way of life sustainable solutions TEAM The power of collaboration At Elementis, we bring a distinctive combination of expertise, innovation and teamwork to every formulation challenge. AMBITION Passion for excellence We create high-value specialty
Slide 7: Elementis transformed
Elementis transformed A higher quality, less cyclical, specialty chemicals business Surfactants Sold Chromium Sold Acquired AP Actives Specialty Personal Care Specialty chemicals Asia resource investment chemicals ~50% ~90% of earnings Unique chemistry, sustainable solutions Personal Care of earning
Slide 8: What makes Elementis special?
What makes Elementis special? Formulation expertise Rheology Hectorite Holistic optimisation of Rheology is “a science of flow” Natural white clay mineral formulation to achieve What is it? desired functionality and end Critical to end product Superior rheology in water and product performance perfo
Slide 9: What makes Elementis special?
What makes Elementis special? Experienced leadership Increased capabilities Paul Waterman Arthur Norman Sales and marketing SVP Supply Chain and Chief Executive Officer Marketing excellence | Product management Manufacturing ELM tenure: 8 years ELM tenure: 1 year Supply chain Eric Waldman Ralph Hewi
Slide 10: November 2019 CMD objectives not yet achieved
November CMD 2019 objectives not yet achieved November 2019 2023 CMD objectives 2020 2021 2022 consensus Margin improvement Adjusted operating profit margin1 17% 12% 12% 14% 14% Cash conversion2 Unique>90% chemistry,105% sustainable solutions87% 111% 72% Operating cash conversion Unique chemistry, s
Slide 11: Turbulent market environment
Turbulent market environment 25% Industrial recession 20% 15% Global pandemic / supply destruction 10% 5% 0% Russia / Ukraine war -5% Unique chemistry, sustainable solutions -10% Surging inflation / rising interest rates -15% 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
Slide 12: Resilient financial performance
Resilient financial performance Sales ($m) Operating profit ($m) 800 700 736 703 709 713 600 604 500 15% 120 14% 14% 14% 14% 100 12% 400 14% 80 101 12% 88 102 101 Unique chemistry, sustainable solutions71 300 13% 60 13% 200 40 12% 100 20 12% 0 11% 0 2019 2020 2021 2022 Consensus 2019 2020 2021 2022
Slide 13: Strategic progress
Strategic progress Innovation Growth Efficiency: 2020-2023 $59m Two Doubled Innovation revenue increase from Innovation labs opened Coatings GKAM2 revenue natural products1 New products launched New business won $m 400 NBO pipeline $m 25 65 350 20 362 Growth Unique chemistry, sustainable solutions 2
Slide 14: Strategy delivering sustainability progress
Strategy delivering sustainability progress Less carbon intensive1 More natural Reduced water usage Cleaner energy GHG emissions Natural products 2 Water withdrawal intensity % of renewable / low-carbon (kt CO2e) % of sales (m3/t produced) energy purchased 72% 349kt 84% Chromium 50% 4.53 55% 3.49 C
Slide 15: Elementis today
Elementis today Two focused businesses positioned for growth ~1,300 23 17 14% 72% Employees Locations across Manufacturing Adjusted operating Revenue from 1 2 three continents facilities margin naturally-derived products Adjusted revenue Adjusted operating profit Revenue by market Unique chemistry,
Slide 16: Personal Care
Personal Care High-margin business, ~45% of group profit1 Personal Care Financials2 $221m $55m 25% revenue operating profit operating profit margin Key markets Colour cosmetics and skin care rheology leader and our Global anti-perspirants actives leader positioning Innovation and Customised High-qua
Slide 17: Performance Specialties
Performance Specialties Leading supplier of rheology modifiers Performance and additives to consumer and industrial markets Specialties Financials1 $492m $67m 14% revenue operating profit operating profit margin Key markets Deco and industrial coatings, auto plastics and our Global rheology additive
Slide 18: Coatings
Coatings Coatings $354m of revenue, 72% of Performance Specialties Despite period of aggressive de-stocking… …a transformed business with a bright future European decorative coatings volumes sales (bn litres) • Global leadership team 5,400 5.3 5.3 5.2 • Simplified product portfolio 5,200 5,000 • Inn
Slide 19: Talc
Talc Talc $138m of revenue, 28% of Performance Specialties European demand decline… …but financial recovery on track European auto production (units) 15 • Margin recovery on track -23% 13 • Strong customer loyalty 10 8 • Manufacturing cost optimization 5 2019 2020 2021 2022 • Sales and distributor i
Slide 20: Talc
Talc Talc $138m of revenue, 28% of Performance Specialties Strong business fundamentals… Focus on higher-margin Unique flotation process High-quality, vertically applications integrated operating model …with good growth potential going forward Additional Coatings Barrier coatings Vehicle Technical c
Slide 21: Material growth and efficiency opportunities
Material growth and efficiency opportunities Innovation 50+ new products Leveraging broader, more valuable growth platforms $90m above market revenue Growth growth by 2026 Efficiency Near-term, larger $30m Unique chemistry, sustainable solutions efficiency platforms of savings by 2025 Performance Fi
Slide 22: Industry trends providing tailwinds
Industry trends providing tailwinds Sustainability Technology Demographics / digital • Natural ingredients • New / clean technologies • Rapid urbanization • Renewables and Unique chemistry, sustainable • Electrification solutions • Aging population and automation recycled materials • Carbon reductio
Slide 23: $90m above market revenue growth
$90m above market revenue growth Growth platforms aligned to industry trends Growth platforms Trends Opportunity Technology / Sustainability Demographics Digital Skincare Natural solutions to replace synthetic ingredients Colour cosmetics Skinification, individualisation, speed-to-market Personal Ca
Slide 24: Efficiency platforms
Efficiency platforms $30 million cost savings by 2025 Fit for the Future organisational restructuring Unique chemistry, sustainableGlobal Supply Chain and Procurement solutions • Supports strategy implementation • Global Supply Chain: optimizing manufacturing network and scaling continuous improveme
Slide 25: 2026 financial targets
2026 financial targets Adjusted operating Operating Return on profit margin cash conversion capital employed 2026 19%+ >90% >20% excl. goodwill Unique chemistry, sustainable solutions H1 2023 14% 73% 13% excl. goodwill Unique chemistry, sustainable solutions Note: Operating cash conversion is calcul
Slide 26: Performance Specialties
Unique chemistry, sustainable solutions Performance Specialties Luc van Ravenstein Unique chemistry, sustainable solutions 26
Slide 27: Performance Specialties at a glance
Performance Specialties at a glance Leading supplier of rheology modifiers and additives to consumer and industrial markets Financials1 $492m $67m 14% revenue operating profit operating profit margin Innovators through unrivalled rheology leadership Asia Direct Americas 73% 22% Unique 35% chemistry,
Slide 28: Resilient performance
Resilient performance Performance Specialties created in 2022 Coatings: More resilient post transformation Talc: Turnaround driven by self-help actions Trough volumes 450 20% 18% 17% 18% 400 14% 16% 18% 14% 16% 350 13% 16% 13% 12% 14% 14% 300 12% Unique chemistry, sustainable solutions 12% 250 155 9
Slide 29: How we win
How we win We solve our customers’ formulation challenges Unique chemistry Sustainable solutions globally Customer intimacy / proximity Unique chemistry, • The only high-quality hectorite clay mine in the world sustainable solutions • Multipurpose plants on each continent • Multi-application labs in
Slide 30: Doubling addressable market
How we win Doubling addressable market Architectural Industrial Adhesives, sealants and coatings 0.8 coatings construction additives $bn $bn $bn 300 Deco China 0.5 0.5 0.5 Powder 80 Tile mortars 200 coatings Water-based 0.3 200 adhesives and 540 0.2 clear sealants Premium Water-based 300 Hybrid deco
Slide 31: Advantaged technologies addressing market needs
How we win Advantaged technologies addressing market needs Growth platforms Key technologies Benefits Architectural coatings Improved hiding and stain resistance; NISAT, dispersants, biobased defoamers safer and more sustainable paint Industrial coatings Organoclays, organic thixotropes, dispersants
Slide 32: Architectural Coatings
Growth platform Architectural Coatings Opportunity How we win Expand share in premium sector • Gain further market share in US and EMEA Our ambition • Asia decorative market Additives for premium deco: - Premium synthetic rheology and dispersant Grow at The market 2x $1bn growing at 4% production in
Slide 33: Rheolate Powder
Rheolate® Powder Combining premium performance and sustainability benefits Market Market leading performance Elementis Rheolate® Powder need: and enhanced sustainability solution: Performance Efficiency Sustainability Excellent paint 2x reduction in 80% CO2 reduction performance storage space in tra
Slide 34: Industrial Coatings
Growth platform Industrial Coatings Opportunity How we win Our ambition Expand sustainable coatings • Superior solutions for green industrial coatings - Additives for water-based systems Add $30m - Hectorite in powder coatings The market $800m growing at 4% - Bio-based organic thixotrope and defoame
Slide 35: Hypomer-MT
MARKET CHALLENGE: ELEMENTIS SOLUTION: • Market requires matte, • Matting with crystal Hypomer-MT ® transparent and natural look • Silica solution causing opacity clarity delivering premium look • Safer to handle and handling issues • Adopted by leading electric Unique chemistry, sustainable solution
Slide 36: Adhesives, sealants and construction additives
Growth platform Adhesives, sealants and construction additives Opportunity How we win Our ambition Offering more sustainable product solutions • Replace fumed silica with superior Thixatrol® technology - Natural technology; >75% biobased The market Rheology additives: $700m growing at 5% • New rheol
Slide 37: BENAQUA 5000
BENAQUA® 5000 MARKET CHALLENGE: Larger tiles more sagging issues = time and material waste ELEMENTIS SOLUTION: Hectorite-based BENAQUA 5000 delivers up to 50% better sag resistance* Unique chemistry, sustainable solutions * Elementis insight Performance Financial Unique chemistry, sustainable soluti
Slide 38: Talc
Growth platform Talc Opportunity How we win Gain share in selected target segments Our ambition • Lightweighting: Our ambition high-end participation Grow at Grow • Technical ceramics: 1.5x $800m, growing at 4% $15m The market multiply valuable position Market above market • Synergies through Unique
Slide 39: Finntalc M65LV
MARKET CHALLENGE: ELEMENTIS SOLUTION: Corrosion in aggressive Finntalc M65LV excellent barrier Finntalc® M65LV environments as marine generates high-maintenance cost properties for cost-efficient upgrading of corrosion resistance Unique chemistry, sustainable solutions Performance Financial Unique c
Slide 40: Summary
Summary Performance Innovative solutions Doubling Quadrupled Specialties is a resilient addressing key addressable pipeline to $290m Unique chemistry, sustainable solutions and high-quality business industry challenges markets to $2bn Performance Financial Unique chemistry, sustainable solutions Int
Slide 41: Personal Care
Unique chemistry, sustainable solutions Personal Care Stijn Dejonckheere Unique chemistry, sustainable solutions 41
Slide 42: Personal Care at a glance
Personal Care at a glance A leading supplier of rheology modifiers and active ingredients to the Personal Care market Financials1 $221m $55m 25% revenue operating profit operating profit margin Antiperspirants: Americas Distribution Leader in AP actives 37% Unique chemistry, 30% sustainable solution
Slide 43: Track record of profitable growth
Track record of profitable growth 250Sales ($m) Operating profit ($m) 200 212 221 195 175 26% 60 25% 150 161 23% 25% 50 22% 24% 40 21% 21% 49 55 100 23% 42 30 34 37 22% 50 20 Unique chemistry, sustainable solutions 21% 10 20% 0 19% 0 2019 2020 2021 2022 Consensus 2019 2020 2021 2022 Consensus FY 202
Slide 44: Increasing capability in key locations to underpin growth
How we win Increasing capability in key locations to underpin growth Existing locations Extended Capabilities Laboratory Marketing Sales Manufacturing Unique chemistry, sustainable solutions Unique chemistry, sustainable solutions Performance Financial Unique chemistry, sustainable solutions Introdu
Slide 45: Advantaged technologies addressing market needs
How we win Advantaged technologies addressing market needs Growth platforms Key technologies Benefits Natural, luxurious touch and feel, Skin care Hectorite, hectorite derivatives, natural oils formulation stability Natural, suspension of actives and Colour cosmetics Hectorite derivatives, natural o
Slide 46: Doubling addressable market
How we win Doubling addressable market Natural rheology AP Actives Film formers1 $m $m for sun care and make up 500 $m 380 80 Deodorant 300 Actives 230 500 120 300 120 Unique chemistry, sustainable solutions 2022 2026 2022 2026 2022 2026 Note: 1. Film formers are key ingredients in cosmetics that cr
Slide 47: Skin care
Growth platform Skin care Opportunity How we will win Our ambition Natural solutions to replace • Continue penetration and innovation for natural rheology Grow at synthetic ingredients The market Natural rheology and film • Build new natural functionalities: 2-3x - Water-resistant film formers for s
Slide 48: Example market solution
Example market solution New positioning: L’Oreal featuring hectorite as active ingredient Hectorite Clay Unique chemistry, sustainable solutions Unique chemistry, sustainable solutions https://www.cerave.com.au/ceramides-skin- care/cleansers/blemish-control-cleanser-for-acne-prone-skin Performance F
Slide 49: Colour Cosmetics
Growth platform Colour Cosmetics How we will win Our ambition Opportunity Skinification, individualisation, • Promote hectorite as speed-to-market multifunctional and natural solution Add The market $310m market growing at 4% • Innovation: 7-10 new product launches $10m • New functionalities: natura
Slide 50: Supporting global customers
Supporting global customers Emerging markets Indie brands Global Key Accounts Unique chemistry, sustainable solutions Unique chemistry, sustainable solutions Performance Financial Unique chemistry, sustainable solutions Introduction Personal Care Sustainability Summary 50 Specialties framework
Slide 51: Antiperspirants
Growth platform Antiperspirants Opportunity How we will win Our ambition High efficacy and natural products • Leverage best supply resilience • Grow in Asia through lower cost and local supply Mid-single digit The market $230m for AP Actives revenue growth • Innovation focusing on sustainability and
Slide 52: Hectorite in antiperspirant aerosols
Hectorite in antiperspirant aerosols Hectorite Hectorite Unique chemistry, sustainable solutions Hectorite Unique chemistry, sustainable solutions 52
Slide 53: Summary
Summary Leading supplier 80%+ revenues 20 new product Expanded global of rheology and from natural launches by 2026 capabilities to capture Unique chemistry, sustainable solutions AP Actives products material growth Performance Financial Unique chemistry, sustainable solutions Introduction Personal
Slide 54: Breakouts
Unique chemistry, sustainable solutions Breakouts 54
Slide 55: Sustainability
Unique chemistry, sustainable solutions Sustainability Dr Phil Blakeman Unique chemistry, sustainable solutions 55
Slide 56: Our purpose
Unique chemistry, sustainable solutions Our purpose Unique chemistry, sustainable solutions Performance Financial Introduction Personal Care Sustainability Summary 56 Specialties framework
Slide 57: An industry in transition
An industry in transition Our market drivers Our focus Climate Lowering emissions; resilience Circularity Renewable materials; efficient material use Nature Unique Reducing chemistry, pollution sustainable solutions Health Safer products Social Safety, engaged employees Unique chemistry, sustainable
Slide 58: Elementis post Chromium divestment
Elementis post Chromium divestment Improved sustainability profile 265 Less carbon intensive1 67 GHG emissions (kt CO2e) 2022 2022 w Chromium w/o Chromium Unique chemistry, sustainable solutions 3.84 Unique chemistry, sustainable solutions Reduced water usage Water withdrawal (million m3) 1.57 2022
Slide 59: Focussed efforts are delivering results
Focussed efforts are delivering results Lower environmental impact Elementis ESG ratings More natural reduction in Scope 1 and 2 revenue increase from 58% (market based) absolute GHG emissions vs 2019 C C B- B $59m natural and naturally derived products vs 2019 2030 targets 2022 change 2019 2020 202
Slide 60: Sustainability at the core of our strategy
Sustainability at the core of our strategy Our market drivers Innovation Growth Efficiency Climate Bio-based replacing fossil chemicals Lightweight vehicle components Lower temperature formulating Circularity Recycled raw materials Durable coatings Single-layer coatings Nature Unique chemistry, sust
Slide 61: Sustainability in action
Sustainability in action Example consumer product label: Innovation Growth Efficiency Unique chemistry, sustainable solutions Recycled aluminium for antiperspirant Talc for vehicle lightweighting 100% active Powder Rheolate • Less resource use • Stronger, lighter plastic components • No shipping wat
Slide 62: Achieving Net Zero by 2050
Achieving Net Zero by 2050 2022 Key timeline 2025 Early 2030s 2050 Other Publish validated Science-based target Net Zero value chain Operations science-based target ~40% reduction vs baseline Up to ~90% emission reduction 11% 11% Reduction levers Operations (Scope 1) Operations (Scope 2) Purchases (
Slide 63: Fulfilling our purpose
Fulfilling our purpose Positive impacts on sustainable growth drivers though Strategy • Innovation Our future • Efficiency Net zero • Clear targets • Evidence-based Unique Framework chemistry, Unique chemistry, sustainable solutions • Systematic More natural • Risk-based sustainable • Collaborative
Slide 64: Summary
Summary Lower-footprint Well positioned Sustainability Foundation Updated business naturally-derived market drivers established to sustainability targets, Unique chemistry, sustainable solutions product portfolio embedded in business strategy capture greater sustainability value including SBT, in 20
Slide 65: Financial framework
Unique chemistry, sustainable solutions Financial framework Ralph Hewins 65
Slide 66: 2026 financial targets
2026 financial targets Adjusted operating Operating Return on profit margin cash conversion capital employed 2026 19%+ >90% >20% excl. goodwill Unique chemistry, sustainable solutions H1 2023 14% 73% 13% excl. goodwill Unique chemistry, sustainable solutions Note: Operating cash conversion is calcul
Slide 67: Growth and efficiency platforms
Growth and efficiency platforms Operating margin expansion • Skincare • Colour cosmetics • Antiperspirants Growth • Architectural coatings $90m platforms • Industrial coatings above market revenue growth • Adhesives, sealants and construction additives by 2026 margin improvement 19%+ adjusted • Talc
Slide 68: Fit for the future
Fit for the future Efficiency platform: New operating model for Elementis Outsourcing and global Optimising structure Elementis Porto process efficiency • Right-sizing post Chromium • New R&D and support centre • Outsourcing transactional roles to – eliminating c.80 roles India – c.20 roles • Proven
Slide 69: Fit for the future
Fit for the future Efficiency platform: Material restructuring of workforce outside of plant-production roles 800 750 ~700 700 650 ~25% of functional roles, primarily in USA ~600 and Western Europe, impacted 600 550 500 Up to 190 redundancies 450 • ~80 roles eliminated 400 350 Unique chemistry, sust
Slide 70: Operational and procurement efficiencies
Operational and procurement efficiencies Efficiency platform: supply chain and procurement improvements Supply chain improvements Procurement • Continuous improvement • Improved use of digital tools - Process automation • Further reduce single sourced purchasing - De-bottlenecked production lines •
Slide 71: Working capital
Working capital Clear focus to unlock value and drive cash conversion $m Higher inventories due to global supply chain disruption and inflation Future focus 250 200 Receivables Stronger AR processes with service delivery partner 150 Total working capital 100 BetterUnderlying earnings inventory data
Slide 72: Disciplined capital allocation
Disciplined capital allocation Priorities for sustainable growth Organic growth Progressive dividend Additional returns Capex c.$40m p.a. Look to restart dividend – Return surplus focusing on growth and sustainable and progressive capital via appropriate productivity – payback mechanisms of 2-3 year
Slide 73: Debt reduction on track
Debt reduction on track Net debt/EBITDA1 evolution 3.5x 3.0x 3.2x 2.5x 2.6x 2.0x 2.2x 1.5x Unique chemistry, sustainable solutions 1.0x 1.6x 0.5x 0.0x Unique chemistry, sustainable solutions FY 2020 FY 2021 FY 2022 Consensus FY 2023 Note: 1. Leverage is net debt/EBITDA on a pre IFRS 16 basis. FY 202
Slide 74: Return on capital employed
Return on capital employed Targeting >20%, driven by capital discipline and earnings growth Disciplined capital allocation Improving return on capital employed Future focus >20% Goodwill No material M&A 15% 14% 13% Working capital Unique chemistry, Optimisation sustainable solutions 10% Fixed assets
Slide 75: Summary
Summary 2026 targets Growth and Capital discipline and efficiency platforms cash generation create 19%+ >90% >20% Unique chemistry, sustainable solutions drive operating margin expansion scope for material shareholder distributions operating profit margin operating cash conversion return on capital
Slide 76: Key messages
Key messages A high quality, less cyclical specialty chemicals business Personal Care ~45% of operating profit November 2019 CMD objectives not yet achieved – but strategy is working Performance Specialties ~55% of operating profit Two focused businesses well positioned for growth Unique chemistry,
Slide 77: Q&A
Unique chemistry, sustainable solutions Q&A 77
Slide 78: 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