Elementis Regulatory News (ELM)

21 April 2011

AGM / Interim Management Statement

Elementis plc ("the Company") today issues its Interim Management Statement for the three months ended 31 March 2011 in relation to the Company and its subsidiaries ("the Group").

Trading for the first three months of the year is significantly ahead of the same period last year due to strong demand in our key end markets and improved margins in all businesses. Our order book remains strong with robust demand continuing into the second quarter. As a result, Group earnings for the full year are expected to be at the upper end of market expectations.

In Specialty Products, sales in the first quarter were 9 per cent ahead of the same period last year, which is particularly notable given that the first quarter of 2010 was positively impacted by heavy customer restocking in coatings.

·; Sales of coatings additives have continued to grow in all geographies with underlying demand being enhanced by product innovation and market share gains. In North America signs of economic recovery helped drive an improvement in coatings sales of 12 per cent over the same period last year, while Europe and Asia Pacific recorded gains of 9 per cent and 7 per cent respectively.

·; Personal care continued to benefit from the product optimisation exercise undertaken as part of the integration of Fancor, leading to lower sales volumes but improved margins and profitability.

·; Sales to the oilfield drilling sector have also continued to show the strong growth trend exhibited throughout 2010 with an increase of 15 per cent, driven by the expansion in shale gas activity and a strong drilling season in Canada.

Operating margins in Specialty Products continued to improve due to growth in higher margin products and ongoing pricing initiatives. Consequently operating margins are significantly ahead of those experienced in the second half of 2010.

Our Chromium business has continued to operate at consistently high rates of capacity utilisation during the first three months of the year, sustaining sales volumes at the levels seen during the same period last year. Global demand for chromium products has continued to be robust and this is allowing the business to optimise its production and to increase the proportion of its sales into the more differentiated North American market. At the same time raw material cost increases have been successfully passed on through pricing initiatives. Consequently operating margins are slightly ahead of the second half of 2010. Going forward margins will benefit from the completion, during the second quarter, of the flexible energy project at the main US facility. This will allow the use of natural gas as well as fuel oil as the facility's energy source, with a consequent cost saving for the balance of the year of approximately $4 million.

The strong sales growth and low capital intensity of the Group's businesses is continuing to generate positive cash flow, leading to further reductions in debt levels.

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