UK's Elementis predicts full-year 2012 profit to beat 2011

26 October 2012 11:22  [Source: ICIS news]

LONDON (ICIS)--UK specialty chemicals producer Elementis is expecting to generate a higher profit this year than in 2011, the company said on Friday.

In an interim management statement, the FTSE-listed company said its operating profit for the year would be “comfortably” ahead of 2011, in spite of weak chromium sales and a slowdown in oilfield drilling.

However, the forecast year-on-year growth for 2012 may be driven by a financial restructuring that stands to reduce the company’s full-year tax rate to around 26%.

Elementis said: “Operating profit for the full year, although comfortably ahead of the previous year, will be adversely impacted by the temporary slowdown in oilfield drilling. However, due to the lower group tax charge, full year earnings per share is anticipated to be in line with market expectations."

In an analyst note, US investment bank JP Morgan also predicted that the company’s full-year earnings before interest and taxes (EBIT) would be around $140m-145m (€108m-112m), down from earlier estimates of $154m. Elementis reported EBITDA earnings before interest, tax, depreciation and amortisation of $157m and a net profit of $124.1m for 2011.

For the first time in this cycle, Elementis has succumbed to a slowdown in its key end markets. The IMS [interim management statement] release, which covers the Q3 [third-quarter] period ending September 30, 2012, was mixed to negative in overall tone,” JP Morgan said.

Sales of the company’s coatings products for the three months to the end of September were up year on year in all markets other than North America, which was affected by a decline in demand from the construction sector. Sales grew by 32% in Latin America, 12% in the Asia Pacific region, and 3% in Europe over the quarter, the company said.

Overall specialty products sales were up 2% compared with the third quarter of 2011, and Elementis hinted that it may be pursuing more mergers and acquisitions activity in the space, after acquiring Brazilian coatings additives company Watercryl for $24m earlier this year. The company also predicts that a new US decorative coatings facility will come on stream by the end of the year.

“We continue to see multiple opportunities to grow our specialty products business,” Elementis said in a statement.

Chromium sales volumes were down 5% year on year during the quarter, because of lower European demand for chrome oxide for use in metal alloys. Sales volumes for the first nine months of the year are similar to last year, the company said, which it attributed to its strategy of running its chromium manufacturing facility at high utilisation rates.

Operating margins in the third quarter were lower than in the preceding two quarters, which Elementis attributed to seasonal shifts in the market, rather to any structural changes in pricing.

($1 = €0.77)


By: Tom Brown
+44 208 652 3214



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