Elementis is confident it will achieve full-year targets after a strong first quarter
- The chemical company makes ingredients for deodorants and skin creams
- Sales were boosted by rising demand for cosmetics and coatings products
Elementis remains optimistic about whether annual results will be in line with expectations after a solid start to the year.
The chemical company, which makes ingredients for deodorants and skin creams, said adjusted operating profit rose by double digits in the first three months of 2024, while operating margin saw “material improvement.”
Revenues also rose 3 percent at constant exchange rates due to rising demand for cosmetics and coatings products, the latter supported by better inventory replenishment.
Chemical company Elementis makes ingredients for deodorants and skin creams
Sales growth was dampened by lower quantities of talc, a common material in ceramics, due to industrial action by the Finnish Transport Workers’ Union.
The AKT union strike led to port closures and a four-week halt to rail freight transport in Finland, as well as weaker sales and higher logistics costs for Elementis.
Nevertheless, the company said it delivered a “good” first quarter result and expects to deliver full-year performance in line with expectations, including an operating margin of 15.8 percent and adjusted operating profit of $117 million.
Paul Waterman, CEO, said: ‘I am confident that our clear strategy, focused on innovation, growth and efficiency, will enable us to deliver a significant improvement in our full-year performance and further expand margins .’
Elementis’ latest trading update comes a day after a prominent shareholder called on Waterman to resign, claiming he had experienced a long period of poor results caused by “self-inflicted management mistakes.”
Gatemore Capital Management criticized Elementis in a public letter due to ‘persistent and significant underperformance’ compared to its peers and spends too much money on acquisitions.
It mainly reserved criticism for the takeover of talc producer Mondo Minerals, which Elementis bought from private equity giant Advent International in 2018 for $500 million.
Gatemore said the “promised synergies” of the Mondo deal failed to materialize and contributed to worsening debt and cash flow problems, leading to a reset of the covenant and the elimination of dividends.
The activist investor suggested the company replace Waterman because he is “no longer trusted as an individual” to correct “past missteps.”
It also wants Elementis to accelerate its cost-cutting program and conduct a strategic review to “make it more attractive to a strategic buyer.”
Elementis shares were down 0.3 per cent at 141.8p late on Tuesday afternoon, but have still grown by around 16 per cent over the past year.