Slide 1: 2020 interim results
2020 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 PERFORMANCE SUMMARY & 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 Swift COVID-19 May volume trough, Accelerating strategy response modest sequential implementation improvement Resilient operational Significant balance sheet liquidity New sustainability performance targets 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* ▪ Six recordable injuries 18 2 ▪ One lost time accident 16 14 Safety Initiatives 12 10 ▪ Proactive COVID-19 response 1 8 ▪ Global TogetherSAFE campaign 6 4 2 0 0 2014 2015 2016 2017 2018 2019 H1 20 Note: T
Slide 7: COVID-19 response
COVID-19 response ADDRESSING THE NEEDS OF ALL OUR STAKEHOLDERS Employees Shareholders Customers Health & safety focus $10m in year cost interventions Reliable customer service Home working where possible Cash conservation measures Resilient operational performance Enhanced communications & Covenant
Slide 8: Digital connectivity
Digital connectivity SUPPORTING OUR CUSTOMERS REMOTELY ONLINE INNOVATION & TRAINING SESSIONS BY NUMBERS “The online seminars have allowed us to initiate new projects and develop existing opportunities in a 7,000+ Customer employees difficult environment” Sales Director, Fitz Chem 400 Customers “Than
Slide 9: H1 20 achievements
H1 20 achievements STRATEGY IMPLEMENTATION ON TRACK – DESPITE COVID-19 CHALLENGES INNOVATION GROWTH EFFICIENCY Coatings & Personal Care 2019 organisation $20m of NBOs closed new products restructuring; $5m savings Accelerated global supply AP Actives product development Talc sales up 22% in China ch
Slide 10: Segment performance
SEGMENT PERFORMANCE PAUL WATERMAN, CEO Enhanced Performance Through Applied Innovation
Slide 11: Monthly trading
Monthly trading MAY VOLUME TROUGH, MODEST SEQUENTIAL IMPROVEMENT ELEMENTIS GROUP - REVENUE DEVELOPMENT Y-O-Y Volume Price 120 Q2 volume weakness: 100 COVID-19 impact 80 60 Modest improvement from May 40 20 Resilient pricing 0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Note: Graph shows change
Slide 12: Personal Care performance
Personal Care performance COSMETICS AND AP ACTIVES RESILIENT H1 20 vs H1 19 % Change Cosmetics sales down 2% on $m H1 19 H1 20 Like for like1 prior year Sales 101 90 0% Continued AP Active volume growth Operating profit* 23 20 -11% Operating margin* 23.0% 22.4% Operating profit impacted by product m
Slide 13: Cosmetics performance
Cosmetics performance DECLINE REFLECTS WEAKER MARKET DEMAND CHALLENGING MARKET CONDITIONS STRATEGIC PROGRESS New business at direct customers Global Personal Care Market Growth (y-o-y) 6% Marketing & technical hires to drive Asia growth 4% Good momentum in new skin care products 2% ▪ BENTONE® LUXE a
Slide 14: AP Actives performance
AP Actives performance CONTINUING TO OUTPERFORM CATEGORY ELEMENTIS VOLUME GROWTH INDIA PLANT – KEY STRATEGIC PILLAR STRONG INNOVATION OPPORTUNITIES AP business wins and competitive New India plant materially Strong innovation pricing recapturing volume improves competitiveness pipeline - Mitigate ta
Slide 15: Coatings performance
Coatings performance RESILIENT PERFORMANCE DESPITE DEMAND HEADWINDS H1 20 vs H1 19 % Change Margins strong despite weaker $m H1 19 H1 20 Constant Currency1 sales Sales 164 148 -7% Transformation benefits offset volume declines Operating profit* 24 23 -1% Operating margin* 14.6% 15.5% Deco robust, in
Slide 16: Coatings performance: transformation drives margin improvement
Coatings performance TRANSFORMATION DRIVES MARGIN IMPROVEMENT SELF HELP ACTIONS ADJUSTED OPERATING PROFIT MARGIN BRIDGE 15.5% 14.6% Asia restructuring Product portfolio Fixed cost re-positioning savings H1 19 FX Volume Price/ Cost H1 20 Mix savings Paul Waterman Ralph Hewins Enhanced Performance Thr
Slide 17: Focus on growth platforms
Focus on growth platforms 3% GROWTH IN H1 2020 NEW BUSINESS OPPORTUNITIES - $10m delivered in H1 - Strong H2 pipeline PREMIUM WATERBORNE DECO INDUSTRIAL ADDITIVES ACCELERATED INNOVATION - 3 new products launched in H1 ORGANIC - 19 new products scheduled for next 12 months PERFORMANCE THIXATROPES HEC
Slide 18: Talc performance
Talc performance CHALLENGING Q2 VOLUME ENVIRONMENT, RESILIENT PRICING H1 20 vs H1 19 % Change Sales impacted by COVID-19 auto & paper plant $m H1 19 H1 20 Constant Currency shutdowns Sales 75 61 -16% Coatings broadly stable Operating profit* 10 6 -37% Operating margin* 14.0% 10.2% Pricing resilient,
Slide 19: Macro headwinds
Macro headwinds MATERIAL NEGATIVE IMPACT FROM AUTO PLANT SHUTDOWNS GLOBAL LIGHT VEHICLE PRODUCTION Europe North America Global Q1 20 Q2 20 Q3 20 Q4 20 Talc revenue c.25% auto exposure 0% – Plastics & Technical Ceramics -10% -20% -30% Y-o-Y -40% Material Q2 volume impact -50% -60% -70% Q3 auto plant
Slide 20: Healthy fundamentals
Healthy fundamentals WELL POSITIONED TO RESUME LONG TERM GROWTH BUSINESS FUNDAMENTALS CONSISTENT INDUSTRIAL TALC GROWTH Attractive industry structure ✓ #2 global player in niche market Market Share Gains Mix Improvement Pricing Power Strong customer service, quality & consistency ✓ High customer loy
Slide 21: Chromium performance
Chromium performance WEAK DEMAND AND INDUSTRY CAPACITY UTILISATION H1 20 vs H1 19 % Change Weak Q2 industrial demand $m H1 19 H1 20 Constant Currency Sales 88 78 -12% COVID-19 related shutdowns – auto Operating profit* 11 3 -72% & leather tanning Operating margin* 12.7% 4.0% Margins impacted by rest
Slide 22: Chromium
Chromium NORTH AMERICA MARGINS STABLE, RETURNS AT HISTORICAL TROUGH WEAKEST UTILISATION SINCE 2009 NORTH AMERICA REMAINS STABLE RETURNS AT TROUGH LEVELS Chromium Industry Capacity Utilisation Elementis Contribution Margin % Indexed ROCE Adjusted Operating Profit ROCE $m 90% 120 60% 70 North America
Slide 23: Energy performance
Energy performance SIGNIFICANT DEMAND DETERIORATION H1 20 vs H1 19 % Change North American rig count down $m H1 19 H1 20 Constant Currency ~50% in H1 Sales 28 14 -50% Small operating profit loss due to Operating profit* 3 (2) n/s weak volumes Operating margin* 11.1% (17.1%) Restructuring in progress
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 WEAK Q2 VOLUMES DRIVE 11% ORGANIC REVENUE DECLINE REVENUE $m 450 (10) (7) 433 - (12) (12) (11) (11) 387 H1 19 PORTFOLIO FX PERSONAL COATINGS TALC CHROMIUM ENERGY/ H1 20 CHANGE* CARE OTHER * Portfolio change includes the disposal of the Dental gypsum plant Paul Waterman Ralph Hewins Enh
Slide 26: Group operating profit
Group operating profit DEMONSTRABLE PROFIT RESILIENCE IN COATINGS & PERSONAL CARE ADJUSTED OPERATING PROFIT $m 64 - (2) 62 (2) (4) - (8) (6) 42 H 19 PORTFOLIO FX PERSONAL COATINGS TALC CHROMIUM ENERGY/ H1 20 CHANGE* CARE OTHER * Portfolio change includes the disposal of the Dental gypsum plant Paul
Slide 27: Cost savings
Cost savings A CONTINUOUS IMPROVEMENT FOCUS COVID-19 IN YEAR COST INTERVENTIONS ORGANISATION RESTRUCTURING SUPPLY CHAIN SAVINGS ▪ Travel & entertainment ▪ Increased spans of control, ▪ Ongoing efficiency agenda costs close to zero reduced management layers ▪ Delivery accelerated from ▪ Trade shows c
Slide 28: Supply chain savings
Supply chain savings $10M OF SAVINGS BROUGHT FORWARD TO 2021 VOLUME REALLOCATION CHROMIUM EFFICIENCY PROCUREMENT INDIA PLANT Internal volumes optimised Implement best practices to Optimise warehouse & Lower cost to serve OPPORTUNITY Third parties reduced lower operational costs logistics Tariff neut
Slide 29: Cash flow
Cash flow POSITIVE NET CASH GENERATION IN A TOUGH ENVIRONMENT $m H1 19 H1 20 EBITDA 85 67 Change in working capital 1 (24) Temporary working Capital expenditure (23) (16) capital outflow Operating Cash Flow 63 28 Pension deficit payments - - Interest (12) (12) Tax & Other - (9) Free Cash Flow 51 8 T
Slide 30: Financial leverage
Financial leverage HIGHLY CASH GENERATIVE BUSINESS MODEL TO DRIVE DEBT REDUCTION OPERATING CASH FLOW OVER THE CYCLE USD, m 200 160% Op Cash Flow Cash Conversion Net debt expected to significantly reduce 140% in H2 20 150 120% Over $300m of liquidity 100% immediately available 100 80% 60% Going conce
Slide 31: Lower capex, improved mix
Lower capex, improved mix COMMITTED TO OUR GROWTH AND PRODUCTIVITY PROJECTS CAPEX SPEND ON GROWTH & PRODUCTIVITY 2020 CAPEX PRIORITIES - $45M TOTAL SPEND USD ($m) Maintenance & HSE Growth & Productivity 60 50 India plant – strategy enabler 40 30 Vuonos ball mill – improved reliability 20 10 Newberry
Slide 32: Adjusting items
Adjusting items $m Expense/(Income) H1 19 H1 20 Amortisation of intangibles arising on acquisition 9 10 $60m goodwill impairment - Energy $27m: challenging market outlook; Talc $33m: WACC increase & COVID-19 Environmental provisions - 4 impact on timing of profit delivery Business transformation - 2
Slide 33: Performance summary & priorities
PERFORMANCE SUMMARY & PRIORITIES PAUL WATERMAN, CEO Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 34: Performance summary
Performance summary Employee health May volume trough, Strategy on track Cash focus November 2019 & safety modest sequential CMD performance recovery commitments unchanged Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation 34
Slide 35: A focus on premium performance additives
A focus on premium performance additives… HECTORITE PREMIUM TA L C PERFORMANCE ADDITIVES DISTINCTIVE RESOURCES FORMULATION & CUSTOMER QUALITY SERVICE & PROCESSING CO-DEVELOPMENT AND SUPPORT Enhanced performance through applied innovation Paul Waterman Ralph Hewins Enhanced Performance Through Applie
Slide 36: …with a strong platform for growth
…with a strong platform for growth ELEMENTIS OPPORTUNITIES PERSONAL CARE Asia Cosmetics | Skin Care | AP Actives | Talc Rheology modifiers and AP actives TALC Globalisation | Long Life Plastics | Talc based additives Technical Ceramics | Barrier Coatings COATINGS Premium Deco | Waterborne Industrial
Slide 37: Medium term Group performance objectives
Medium term Group performance objectives MARGIN IMPROVEMENT ADJUSTED OPERATING PROFIT MARGIN 12.5%* 17% CASH CONVERSION OPERATING CASH CONVERSION*** 93%** 90% plus DE-LEVERAGING NET DEBT / EBITDA 3.1x* Under 1.5 x * Last twelve months to 30 June 2020 ** Last three year average *** Calculated as (adj
Slide 38: Sustainability focus
Sustainability focus ELEMENTIS ENABLING CHANGE SUSTAINABILITY PROGRESS NATURAL PERSONAL CARE INGREDIENTS Hectorite replacing synthetics REDUCED VEHICLE EMISSIONS Talc for vehicle light weighting LOWER COATINGS VOCs Additives enabling waterborne transition UN Global New Elementis New innovation Intro
Slide 39: 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 40: Q&A
Q&A Paul Waterman Ralph Hewins Enhanced Performance Through Applied Innovation Enhanced Performance Through Applied Innovation
Slide 41: Debt facilities & liquidity
Debt facilities & liquidity STRONG LIQUIDITY POSITION DEBT MATURITY PROFILE AT 30 JUNE 2020 USDm RCF (Drawn) RCF (Undrawn) 500 $200m Term Loan EUR172m Term Loan Over $300m of immediately available liquidity including 400 c.$100m of cash & c.$200m of undrawn RCF 300 Banking covenants: 200 1) Net debt
Slide 42: Tax charge
Tax charge EFFECTIVE TAX RATE 29% $m H1 19 H1 20 Tax rate above guidance Underlying tax charge 10.7 8.0 due to impact of withholding taxes Tax charge: adjusting items (2.3) (10.5) Medium term P&L tax rate guidance remains of around 22% Reported tax charge/(credit) 8.4 (2.5) Tax rate 21.9% 28.5% Enha
Slide 43: FY 20 Technical Guidance
FY 20 Technical Guidance P&L CASH ▪ Depreciation – c.$50m ▪ Net interest c.$25m (of which c.$5m is IFRS 16 related) ▪ Capex c.$45m ▪ Amortisation – c.$20m (of which majority is amortisation of acquired intangibles) ▪ Tax – Effective rate around 26% Enhanced Performance Through Applied Innovation 43