- The chemicals business makes ingredients for deodorants and skin creams
- Turnover was boosted by rising demand for cosmetics and coatings products
Elementis remains optimistic of its annual results aligning with forecasts following a solid start to the year.
The chemicals business, which makes ingredients for deodorants and skin creams, said its adjusted operating profits rose by double-digits in the first three months of 2024, while its operating margin experienced a ‘material improvement.’
Its revenues also increased by 3 per cent at constant currency levels thanks to rising demand for cosmetics and coatings products, with the latter bolstered by improved restocking.
Chemicals firm Elementis makes ingredients for deodorants and skin creams
Turnover growth was muted by lower orders of talc, a common material in ceramics, due to industrial action by the Finnish transport workers’ union.
The AKT union’s strike led to port closures and a four-week halt to rail freight traffic in Finland, as well as weaker sales and higher logistics costs for Elementis.
Nonetheless, the company said it recorded a ‘good’ first-quarter result and expects to post a full-year performance in line with expectations, including a 15.8 per cent operating margin and $117million adjusted operating profit.
Paul Waterman, its chief executive, said: ‘I am confident that our clear strategy focused on innovation, growth and efficiency will allow us to achieve a significant improvement in our full-year performance and continued margin expansion.’
Elementis’ latest trading update comes a day after a prominent shareholder called on Waterman to resign, claiming he had overseen a long period of poor results caused by ‘self-inflicted management failures.’
Gatemore Capital Management criticised Elementis in a public letter for ‘persistent and significant underperformance’ when compared to its peers and spending too much on acquisitions.
It reserved particular criticism for the takeover of talc producer Mondo Minerals, which Elementis bought in 2018 for $500million from private equity giant Advent International.
Gatemore said the ‘promised synergies’ from the Mondo deal failed to materialise and contributed to worsening debt and cash flow problems, leading to a covenant reset and the axing of dividends.
The activist investor suggested the firm replace Waterman because he is ‘no longer trusted to be the individual’ to correct ‘past missteps.’
It also wants Elementis to accelerate its cost savings programme and conduct a strategic review to make it ‘more attractive for a strategic buyer.’
Elementis shares were 0.3 per cent lower at 141.8p during the late afternoon on Tuesday but have still grown by around 16 per cent over the past year.