Elementis Regulatory News (ELM)

26 April 2012

AGM / Interim Management Statement

Elementis plc (ELM.L, "the Company" or "the Group") today issues its Interim Management Statement for the three months ended 31 March 2012.

Commenting on the Company's performance Group Chief Executive, David Dutro, said: "Trading for the first three months of the year is ahead of the same period last year reflecting excellent progress in a number of key markets, which more than offset an anticipated general slowdown in Europe. The trend of robust margins, in combination with a solid order book, has continued and we expect full year earnings to be in line with market expectations."

In Specialty Products, sales in the first quarter were 7 per cent ahead of the same period last year as the business continued to benefit from its strategy of supplying high value products and technical service to a diversity of markets and high growth sectors.

·; Sales of coatings additives grew by 22 per cent in North America as the business benefited from improving customer demand and market share gains. Additives sales in Asia Pacific grew by 2 per cent, with improved margins. Sales in Europe were 8 per cent lower than the same period last year, reflecting the anticipated slowdown.

·; Sales to the oil and gas drilling sectors continue to show very strong growth, with sales up 42 per cent compared to the same period last year. Additives sales for both shale drilling and unconventional, high temperature, high pressure drilling continued to be the main contributors to the rapid growth and the business is investing in additional manufacturing capacity to support customer demand.

·; Sales in personal care were 3 per cent higher than the same period last year, reflecting further steady progress.

In Chromium, sales were 13 per cent higher than the same period last year. The increase in sales in the current period was partly the result of a planned plant closure in the early part of last year, in order to convert the US plant from heavy fuel oil to natural gas. Otherwise the business operated at high rates of capacity utilisation in both periods and, as such, we expect the rate of sales growth to be more modest across the remainder of the year. This key project was completed in April of last year and, together with a steady fall in US gas prices, resulted in energy costs being approximately $3 million lower in the first quarter of 2012 compared to the same period last year. The business has continued to optimise its flexible North American based operating model to generate stable earnings and cash flow. This flexibility ensured that the business has been able to replace softer European export sales with sales to more robust markets in North America. As a consequence sales to the domestic North American markets represented 65 per cent of Chromium sales, compared to 58 per cent in the same period last year.

The Group has an ongoing programme to invest in new products and manufacturing capacity to support growth in Specialty Products, and will continue to seek acquisitions that would enhance the geographic diversity and product offering of the business. In the meantime the Group continues to benefit from high levels of cash flow generation and a strong balance sheet, with a net cash position. The Board is in the process of reviewing the appropriate balance between cash reinvestment and shareholder returns and expects to provide an update on this at the time of the announcement of its Interim Results.

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