Elementis H1 2026 Earnings Report

Elementis EPS Results

• Actual EPS: GBX 8.60
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Elementis Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Elementis Announcement Details

• Quarter: H1 2026
• Date: 7/30/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 4:00AM ET

Elementis (LON:ELM) is a global specialty chemicals company listed on the London Stock Exchange. The Group employs c.1,000 across 20 global locations. As recognised innovation leaders with deep expertise in rheology (the science of flow), and formulation solutions, we develop distinctive solutions and products to improve performance, achieve smoother production, and enhance sustainability credentials for customers across a range of industries. The Group also owns and operates the largest high-quality hectorite mine in the world. Hectorite is a rare, high-purity clay mineral rich in magnesium and lithium, known for its ability to control viscosity, stabilise formulations, and deliver smooth, consistent textures that make it ideal for clean-label, high-performance formulations. Elementis is composed of two focused, high-margin businesses: Personal Care and Coatings. The Personal Care business manufactures natural and synthetic rheology modifiers to deliver premium product performance for personal care applications in skin care and cosmetics, as well as active ingredients for antiperspirants. Within Coatings, Elementis develops and manufactures rheology modifiers and premium performance additives for decorative and industrial paints and coatings. The Coatings business also includes our Energy and Adhesives, Sealants and Construction additives businesses.

Elementis H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong H1 performance: Organic constant-currency revenue rose 4.7% to $318.2 million, adjusted operating profit increased 16.4% to $73.2 million, and margins expanded 140 basis points to 23%. Adjusted EPS rose 28.8% to $0.085.
• Positive Sentiment: Management remains confident of meeting its full-year 2026 expectations, citing a solid Q3 order book despite uncertain macroeconomic conditions. Coatings led growth at 5.6%, supported by Asia, EMEA, new applications, and improved St. Louis operations.
• Positive Sentiment: The portfolio transformation advanced through the pharma sale, an ongoing share buyback, and the acquisition of Alchemy, which is performing well and tracking toward sustainable double-digit growth. Hectorite now represents roughly one-third of sales, with management targeting double-digit through-cycle growth and highlighting applications such as skincare and PFAS removal.
• Negative Sentiment: The company expects margins to moderate in the second half because of normal seasonality, with H2 margins expected to be broadly similar to last year. North American demand remains weak, while first-half operating cash flow fell to $29.8 million from $41.3 million due to working-capital investment, higher taxes, and capital spending.

Presentation

[Luc van Ravenstein, CEO at Elementis]

Thank you for joining us. I'm Luc van Ravenstein, CEO of Elementis, and you know Kath, our CFO. It's great to share Elementis' results for the first half of 2026. There are a lot of good things happening. Here's the agenda. I'll give a summary of the progress at H1. Kath will then cover the financials. I'll then talk about how we are driving growth. Then there'll be a Q&A at the end. Let's get straight into it. It is a strong performance. One year into Elevate Elementis, a strategy we launched last year, we're making great progress on all fronts. Revenue up 5% at organic constant currency, profit up 16%, a significant increase, and margins at 23%. In terms of portfolio, we're making great strides. We completed the pharma sale in June and started a share buyback. We acquired Alchemy, a fast-growing, high-margin skincare business.

[Luc van Ravenstein, CEO at Elementis]

We now have the right portfolio, an excellent global manufacturing footprint that gives us supply resilience, so we can fully focus on growth. This all means we're confident of meeting expectations for 2026 full year. The order book into Q3 is solid, and that's in mixed markets. This is the new Elementis. You can see the transformation over the last years. We've sold Talc, chromium, and pharma. This gives us a unique high-quality portfolio. Elementis today is a pure-play specialty chemicals leader in large and growing markets. Additives are a small part of formulations, typically one to 2%, but they're critical for performance. Think strong margins. Also think growth. We focus on areas that make us special and where we can win. That's hectorite, rheology, and formulations. Rheology is critical for our customers' products. That's about getting the right stability and texture.

[Luc van Ravenstein, CEO at Elementis]

Hectorite is a unique and versatile mineral that enhances performance in a wide range of applications. Our formulations are the expertise we've built up over a long period for our customers. That's our secret sauce. This is Elevate Elementis, the strategy we launched this time last year. We talked about three strategic priorities to create value. Accelerating top line growth is the first one. The second is getting closer to our customers so we are their first choice. The third one is creating a simpler and leaner Elementis. We're taking big strides forward in all of these areas. I'll come back to that later. On the right side, you see our financial ambitions. We're now hitting a lot of these targets. Mid-single-digit growth through the cycle. We are at 4.7% organic constant currency revenue growth. Adjusted operating profit margins of 23%+.

[Luc van Ravenstein, CEO at Elementis]

We're there at the half year, but that doesn't mean it's job done. Kath will go into more details on this. Three-year operating cash conversion greater than 90%. We are at 95%. ROCE greater than 30%. We're getting very close there. That's our priorities and our progress. It's early days, but the strategy is working. You see that in our numbers, but you also feel it when you talk to our Elementis colleagues. Our people know this is a special time here, and they feel the freedom to win. On that, over to Kath.

[Kath Kearney-Croft, CFO at Elementis]

Thank you, Luc, and good morning, everyone. Firstly, I'd like to say we're pleased that we're able to present a strong set of financials in the first half. A couple of housekeeping points around the presentation of the financials. Following the sale of the pharmaceutical manufacturing business, this is now reported as discontinued operations. The 2025 H1 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes. I wanted to briefly show and overview the key metrics for H1 2026. Most of these items we'll cover in the following slides, so we won't go into detail here other than highlighting. Mid-single-digit revenue growth contributed to strong growth in adjusted operating profit and a 140-basis improvement in margins.

[Kath Kearney-Croft, CFO at Elementis]

In combination with lower net finance costs and a lower number of shares following the buyback last year and the start of the current share buyback, adjusted earnings per share was up 28.8% to $0.085. We've experienced mixed conditions in the first half, but the team's focus on performance and delivery is evident, and we're starting to see the delivery of the Elevate Elementis strategy. As we turn to look at group revenue, you'll see that despite the mixed backdrop, we've delivered a strong performance with overall revenue up 9.4% on a reported basis and 4.7% on an organic constant currency basis to $318.2 million. Bridging from 2025, we had a favorable FX tailwind of approximately $9.8 million. The contribution of Alchemy was $3.5 million.

[Kath Kearney-Croft, CFO at Elementis]

Volumes were up $16 million, primarily in coatings, with strong demand in Asia and EMEA, partially offset by the weak demand environment in North America. The muted growth in personal care was also impacted in Americas due to isolated weak demand in Q1. On pricing, we delivered $6.8 million across both businesses, a testament to the specialty nature of our portfolio and ability to price accordingly in response to the inflationary impacts of the Middle East war. Turning lastly to mix. This was down $8.7 million, primarily in coatings, as we see the benefit of our local-for-local strategy. For example, NiSAT in China. NiSAT are additives for premium decorative coatings. This strategy has benefited volumes, absolute profit, and margin improvement, but comparatively lower prices result in downward pressure on revenue mix.

[Kath Kearney-Croft, CFO at Elementis]

In personal care, the negative mix was due to a product mix weighted towards lower price but higher margin products. We anticipate that we are slightly more weighted in H1 than recent years due to the strong Asia demand in both personal care and coatings, and the timing of customer promotional activity in AP Actives alongside the ongoing macroeconomic uncertainty. Moving on to operating profit. We delivered strong operating profit growth, which increased by 16.4% to $73.2 million. Within this, we benefited from favorable FX of $2.6 million and the contribution of Alchemy. Higher volumes resulted in $6.4 million drop-through to operating profit, representing a 40% drop-through. The net price mix impact was broadly neutral after pricing offset inflationary cost increases.

[Kath Kearney-Croft, CFO at Elementis]

Our ongoing self-help savings initiatives resulted in savings of $1.3 million in the first half, bringing the total since Elevate Elementis was launched this time last year to $7.3 million. As part of the strategy, we also stated that we would invest an incremental $6 million in R&D over 2026 and 2027. We started this in H1 with an additional spend of $0.8 million and expect more to come in the second half. Taking the savings and incremental R&D spend together, the first half savings are a net $0.5 million of the $4 million we committed to in 2026. We are on track to complete this by year-end. As noted earlier, our strong profit performance helped drive higher margins, increasing 140 basis points to 23%. The anticipated H1 weighting will moderate this margin in H2 and for the full year.

[Kath Kearney-Croft, CFO at Elementis]

Now let's take a deeper look into the reporting segments. Starting with personal care. Revenue was up 2.9% on an organic constant currency basis to $109.2 million, with strong growth in cosmetics, particularly in skincare in Asia. EMEA saw good growth, whilst North America growth was muted, particularly due to the isolated weaker demand in Q1. AP Actives revenue was flat, with volume increases offset by mix due to a lower price product mix. In addition, there was the benefit of the Alchemy acquisition and FX tailwinds. Good progress was made in adjusted operating profit, with a 3.1% organic constant currency improvement, with pricing offsetting inflationary increases, improved profitability from product mix despite the downward pressure on revenue, and cost savings contributing. In addition, there was the benefit of the Alchemy acquisition.

[Kath Kearney-Croft, CFO at Elementis]

The higher profits in turn helped to drive a higher margin, which was up 30 basis points to 38.1%. Compared to the reported margins last year, personal care now includes a circa 380 basis point improvement due to the sale of the pharmaceutical manufacturing business. Lastly, on this slide, I wanted to highlight that Alchemy, acquired in November 2025, is performing well, fully integrated into Elementis, and on track for sustainable double-digit growth. Progress is also being made with the wider portfolio. Now moving on to the coatings segment. We delivered a strong performance in revenue, particularly compared to the mixed market backdrop, with 5.6% organic constant currency growth to $209 million. We saw particularly strong growth in Asia and EMEA, partially offset by continued weak demand in North America, linked to weak construction activity.

[Kath Kearney-Croft, CFO at Elementis]

Our local-for-local strategy, which I referenced earlier, primarily benefited coatings and especially our Asia and LATAM regions. We also saw good growth in the energy sector, which was helped by the ongoing improvements in the last year at St. Louis. The combination of higher volumes, profitable mix, and cost savings has driven a strong profit and margin uplift in this segment. With organic constant currency operating profit up 18.7% to $43.2 million and a 250 basis point increase in margins to 20.7%. Taking a look at free cash flow. A key feature of this business is its strong cash flow generation, and I'm pleased to report that we've continued to generate good free cash flow whilst investing for growth. Looking at the key components, the seasonal working capital outflow in the first half has been driven by a combination of higher receivables and inventory.

[Kath Kearney-Croft, CFO at Elementis]

Higher receivables are due to the revenue growth, particularly in Q2, which was up circa 7%, alongside no factoring in June 2026 compared to $16 million in June 2025. Inventories are higher, reflecting raw material pre-buys and inflation linked to the Middle East conflict. We've had a specific focus on inventory in the last six months, and I'm pleased to say that the quality of inventory mix has improved, and we continue to take actions to manage inventory closely. CapEx increased fastest last year as we have continued to invest in growth CapEx and complete our new Porto office and labs, which the team moved into last week. As a result of these movements, our adjusted operating cash flow was $29.8 million compared to $41.3 million last year. As we move down the cash flow statement, it's worth calling out two items.

[Kath Kearney-Croft, CFO at Elementis]

Firstly, our cash taxes were higher due to an IRS refund in 2025 relating to a claim to utilize net operating losses for prior periods. Adjusting items were $7.1 million lower following a lower level of restructuring, implementing Elementis' simplification and leaner strategy, for which actions have finished at the end of H1. There will be some P&L charges in H2 and cash outflow in H2 and 2027. In addition, we sold the Middletown site in N.Y., which was closed in 2024, resulting in a circa $3.5 million net cash inflow for the half. Our balance sheet remains robust, and net debt has reduced to $163.8 million and 1.1x leverage. Looking at the key movements from left to right, we started the year with a net debt balance of $185.4 million.

[Kath Kearney-Croft, CFO at Elementis]

Adding back the free cash flow generated of $13.3 million, as well as the $32.7 million of the combined net proceeds from the sale of the pharma manufacturing business and its cash outflow during our ownership, we had an increase in cash available for distribution of $46 million. Of this amount, we used $6.7 million to repurchase shares, $4.1 million from the share buyback program started in early June, and the remainder for the purchase of 1.3 million shares by the employee share options trust. The 2025 final dividend was paid in May, and there's a small FX impact on net debt. The share buyback program is ongoing, and we expect to finish towards the end of the year or early next year. Turning to capital allocation. Our aim is to maximize return on invested capital while maintaining a strong balance sheet and strategic optionality.

[Kath Kearney-Croft, CFO at Elementis]

In relation to investments, our CapEx program continues to be focused on investing for growth and productivity. We're continuing to invest in R&D and are in progress to increase total spend from 2% of revenue to 3% by the end of 2027. To complement these organic growth investments, we will selectively pursue bolt-on acquisitions, and we continue to look for opportunities in this area whilst being mindful of our Elevate Elementis targets. Return on capital employed at the end of June was 29.4%, a 100 basis point improvement on the prior year continuing operations ROCE and close to our minimum 30% target. On dividends, our policy is for a payout ratio of around 30% of adjusted earnings on a full year basis. As we announced this morning, the board has approved an interim dividend of $0.015, representing a 15.4% increase on last year.

[Kath Kearney-Croft, CFO at Elementis]

In considering future additional returns, we will assess several factors, including prevailing market conditions, our existing progressive dividend policy, the investment requirements of the business, and our desire to maintain leverage at around one times net debt to EBITDA over time, which we continue to anticipate we will achieve by the end of 2026. I'd now like to hand you back to Luc, who'll take you through the rest of the presentation. Thank you.

[Luc van Ravenstein, CEO at Elementis]

Thank you, Kath. All right. I'm going to get into the three priorities for our strategy, Elevate Elementis. Growth, customers, and a leaner platform to move forward. Before I do, let me come back to why Elementis is unique, and these are the winning differentiators that I mentioned before. Going from right to left, formulation solutions. This is our expertise we've built up over years for our customers' formulations. It's about how we deliver value to help our customers day in, day out, make better cosmetics or paints. Then rheology, where Elementis is the global leader. We have the broadest portfolio in the industry. This is about 2/3 of our business, and it is a crucial component of any formulation. Then Hectorite. It's unique, highly efficient. It's very versatile. It's being used in mascara, drilling muds, lipsticks, and self-leveling coatings.

[Luc van Ravenstein, CEO at Elementis]

That's the red piece of the pie underneath. It's now one-third of our sales, and that's good for our margins. Also Hectorite has given us exciting growth. What's so special about it? Hectorite is natural, pure, and unique. I won't go through all of these benefits here, but we're confident that Hectorite will deliver double-digit growth through the cycle. This is why. We have a unique access to pure Hectorite. We own the largest commercially viable, high-grade deposit in the world. Our current known resources will last for more than 50 years, and this is a competitive advantage to us. But it's not an asset only. We don't typically sell straight Hectorite. We formulate it, blend it, and this is where we innovate and add value. We're building three-in-one systems to bring together rheology with other functional additives, such as skincare, for example.

[Luc van Ravenstein, CEO at Elementis]

Customers get easier-to-use products. Also Hectorite has a unique composition that allows us to get into a lot of new exciting opportunities, also outside of coatings and personal care. For example, it removes PFAS, the forever chemical, from wastewater. We've demonstrated on a pilot scale that it's highly efficient. That's a snapshot of Hectorite. We're just scratching the surface here on Hectorite, we're going to do much more of this. These are our three strategic priorities. We have some key deliverables to advance in these three areas. Let me talk you through them. Let's start with growth. I want to give you a feel for how Hectorite launches are driving growth, because we're always obsessing about finding new applications, and a great example is skincare. This is a large market, $800 million for rheology, and sustainability is critical here.

[Luc van Ravenstein, CEO at Elementis]

Premium textures are a sweet spot for Hectorite. A few years ago, we had hardly any sales here, so we invested in resources. We hired sales and R&D people from the skincare industry that talk our customer's language. We launched new products such as Hydroclay that are a great fit for this application. Last year we had about 3% share here, so plenty of room to grow. This year we've seen a significant uptick. We've had a sales increase by 12% in the first half, but maybe even more exciting is the amount of end products launched, including Hectorite, that jumped up by 25%. There were more than 800 new skincare and sun care products on the shelves in H1 that include our Hectorite, and that is a great leading indicator for expected sales. We brought some samples for you, self-tanning cream that includes Hectorite.

[Luc van Ravenstein, CEO at Elementis]

Think of that as an early Christmas present. We developed that with a regional champion. We benefit from our local-for-local model. We've got great customer relationships, and this has gone from zero to millions in one year. First choice for customers. This is something that's critical to accelerate growth. We want to be best in class in terms of service levels for our customers. Let me come back to the targets we set last year. There were two areas that needed our attention, OTIF, on time and in full, improving that performance, and St. Louis, our biggest site in the U.S. where we make organoclays. One year on, this is a snapshot of the early benefits. On OTIF, at the end of 2024, we were at 76%. We moved it up to 88% this H1, so we're getting close.

[Luc van Ravenstein, CEO at Elementis]

On St. Louis, we've made leadership changes to add know-how. We're applying best practices from other sites. That's not rocket science, but it's working. About 99% of our production is right first time now. That's a big improvement, and it supported our growth. It's critical for the confidence of our people on the road with customers, and a great example is CHARGUARD. That's a product that stops wires and cables from burning by preventing dripping. You see an image on the right-hand side here. This is a totally new application coming out of St. Louis. It's generated $1.5 million of business in H1, and it's all self-help. The focus for us is on sustainable growth, but there was also a significant opportunity to simplify Elementis, making it a leaner, more agile company. The structure now is leaner.

[Luc van Ravenstein, CEO at Elementis]

For example, a much smaller top management team, but we also streamlined several functions. On the other hand, we've invested in growth, particularly in innovation and sales. The net cost savings were about half a million towards our target of $4 million for the year. That's a run-through of how this Elevate Elementis program works in practice, and we're very excited by the early results we're seeing. We're bringing this all together. This is a strong performance in H1. We're on track for Elevate Elementis. We are now a pure-play leader in specialty chemicals, and you see that coming through in our results. We're confident of hitting our full year 2026 expectations, and that's in spite of mixed markets. Let me end where I started: growth. I said earlier, people ask me what makes us different. They ask me what about our growth agenda?

[Luc van Ravenstein, CEO at Elementis]

That's exactly what we'll get into for our product innovation day. Date in the diary is November 3rd. It's at our new state-of-the-art lab in Porto, Portugal. We want you to get a better feel for how Elementis will accelerate growth. We'll go deeper into how our products work, innovation, how we work with our customers. We partner up with them. It's also a great opportunity for all of you to meet our teams. With that, we'll take your questions. Thank you very much.

[Angelina Glazova, Analyst at JPMorgan]

Good morning. Thank you very much for taking my questions. Angelina Glazova from JPMorgan. I'll have two questions, please. My first one is on the full-year guidance and current developments. We have seen strong first half results. Congratulations on that. You have mentioned a strong momentum in the order book into Q3. At the same time, you have opted to maintain the full-year guidance, which one might read as somewhat cautious. Could you give us a bit more color as to how you think about the second half? Obviously, external environment might be difficult to predict, but when you look between the businesses, where do you think there might be a deceleration at some point in the second half? Then secondly, my question is on Hectorite.

[Angelina Glazova, Analyst at JPMorgan]

You have mentioned today that it's already a third of group sales, yet I remember that when we spoke at the full year results, it was closer to a quarter of sales. If you could give us a bit more color on what drove this change and to what extent it is a change in the scope for the sale of pharma manufacturing business, and to what extent this is acceleration between segments. You have mentioned skincare, so that's maybe one to focus on. If you could just remind us the split of the personal care business between different buckets, so skincare, AP Actives, because there might have been some change as well in recent years. Thank you.

[Luc van Ravenstein, CEO at Elementis]

Thank you for those questions. I'll start with your first one. Look, we're very pleased with our H1 performance, and the advancement of our Elevate Elementis strategy. Let's be clear, I think that the macro environment is still very uncertain. Consumer spending is still not great. We prefer to be cautious and not get ahead of ourselves. Indeed, look, we're very pleased with our performance and we're very confident of delivering our strategy medium term. Let's not get ahead of ourselves there. On your second point, Hectorite. Yes, it has gone from a quarter to a third. You're absolutely right. This has been basically driven by two aspects. One is indeed the pharma sale, and the other one is great growth for Hectorite. We've mentioned that we are going to grow Hectorite double digits through the cycle.

[Luc van Ravenstein, CEO at Elementis]

That's definitely been helping us in the first half as well. Skincare has grown 12%, a lot of that from Hectorite. We foresee that that's going to continue. Split of the businesses, for us, the personal care business, we've got the AP, anti-perspirant actives business, and then we've got, let's say, the cosmetics business, which consists of color cosmetics, skincare, and some other smaller bits and pieces. Skincare, we just mentioned, for us, we have about 3% of that $800 million market that was last year. We had 12% growth in the first half, so it's still quite small for us, but it's growing fast. Color cosmetics still the largest part of the cosmetics business and the AP actives business. I don't have the exact numbers in front of me, but still $75-ish million of revenue, yeah.

[Angelina Glazova, Analyst at JPMorgan]

On a full year basis?

[Luc van Ravenstein, CEO at Elementis]

On a full year basis, yeah. Thank you.

[Angelina Glazova, Analyst at JPMorgan]

Thank you.

[Luc van Ravenstein, CEO at Elementis]

Vanessa.

[Vanessa Jeffriess, Analyst at Jefferies]

My name, Vanessa Jeffriess from Jefferies. Congratulations on the results and the share price, which hasn't been here in a long time. You set these growth and margin targets last year, and now you're already here, which is nice for you. Can we expect any kind of further margin target or anything now that you're there, or is the focus really on accelerating growth?

[Luc van Ravenstein, CEO at Elementis]

Thank you for your support, Vanessa. Look, first of all, 23%+ is our margin targets. We're only one half in. As Kath mentioned, typically, we have a bit of a stronger first half than the second half. Let's first get there. Let's demonstrate quarter after quarter, half after half growth on top line margin delivery and results delivery. We're one half in. We're very confident that we're doing the right things and delivering our strategy. Let's deliver. I don't know, Kath, if you have anything to add to this?

[Kath Kearney-Croft, CFO at Elementis]

I think that's fair. One half doesn't mean that we've achieved the target.

[Kath Kearney-Croft, CFO at Elementis]

Just on the margin points, as I said, we do expect that to moderate in the second half just because of the H1 and H2 weighting.

[Vanessa Jeffriess, Analyst at Jefferies]

You talked about 12% skincare growth in the first half. You didn't give numbers on cosmetics, but I imagine that was pretty good as well. AP Actives, I think you've said it's flat. I think when we spoke a couple of months ago, there was a comment about the World Cup maybe being a tailwind with people sweating. I'm not sure if that came through.

[Vanessa Jeffriess, Analyst at Jefferies]

You said on page 29, there's double-digit growth from high efficacy actives, which represent the majority of the portfolio.

[Vanessa Jeffriess, Analyst at Jefferies]

I'm not sure that we've seen that growth in AP Actives come through for a while. I guess if you could talk about that, and then I'm sorry if this is an off-base question.

[Vanessa Jeffriess, Analyst at Jefferies]

I guess given what you've achieved in pharma and Talc, is AP Actives actually central to the strategy anymore, and does it actually fit as part of the portfolio?

[Luc van Ravenstein, CEO at Elementis]

If you look at AP Actives, and indeed you're right about that one-off event, which I wish had ended in a different way, but if you look at the business, at the AP Actives business and the portfolio, it has changed fundamentally from where we were in 2018 when we acquired it to where we are now. These high-end, high-efficacy actives have grown fast. The shape of the business, although indeed performance has been relatively flat from a revenue and top-line perspective, the shape of the business is different, and it's a profitable business. We're, in that sense, happy to have it also because it gives us a better foot in the door, a stronger personal care business, and it helps us in conversation with large customers. We're moving towards new applications, innovations, et cetera. We talked about new natural actives.

[Luc van Ravenstein, CEO at Elementis]

We've had our first sale there, actually, in the first half. Small, but still, I think, significant to demonstrate proof of concept. We're actually happy of where this business is going. Thank you for the questions.

[Vanessa Jeffriess, Analyst at Jefferies]

Thank you.

[Kevin Fogarty, Analyst at Deutsche Numis]

Morning, Kevin Fogarty from Deutsche Numis. Two if I could do. Just on coatings, pretty strong performance if we think about the backdrop in global coatings markets, et cetera. Could you just provide a bit of detail in terms of how much of that is perhaps penetrating newer markets for coatings, perhaps as a driver there rather than industrial and deco markets? Secondly, on innovation, there's clearly quite a lot going on. You're pulling out 25% in terms of skin care. I just wondered what's the speed of innovation like, I guess, and how does that suit a player like you guys? Perhaps wrapping into that, how does it change the customer base perhaps you're working with?

[Luc van Ravenstein, CEO at Elementis]

Thank you, Kevin. Your first question, coatings indeed. I mean, a bit of a mixed backdrop. First half in the U.S., people are not moving houses. Mortgage rates are still 6% to 7%, so the underlying market has been relatively soft. Globally, a bit of a mixed bag. Our growth has come from a couple of areas. Indeed, one is, to your point, entering into new applications. We have given the example of CHARGUARD. This is reported under coatings. It is ending up in wiring cables, think data centers. There we've seen some nice growth in the first half, and we expect that to continue. We also sell to new applications such as defense. We sell a ultra matting agent that helps military vehicles not to be detectable by infrared. You can imagine that's an interesting application as well.

[Luc van Ravenstein, CEO at Elementis]

Other areas in existing coatings areas, Asia has done very well. Although the underlying market has been tough, we've grown very fast there. Like Kath mentioned, we have this new site that we installed two years ago, and the growth has really started to come from that area. I'd say underlying market's still relatively soft, but our coatings business has done well because we've penetrated new markets plus grown in Asia. On your second question, innovation and Hectorite and skin care. Look, I think you're spot on. If you look at our customer base and where we've been very successful in innovation, it's exactly with these kinds of customers that need our formulation expertise, need our help. The example that you have in your bag there is a local Greek manufacturer of sun and skin care products. They were looking for a new formulation.

[Luc van Ravenstein, CEO at Elementis]

These kinds of customers are able to move very fast. Within months of working together, "Hey, we're looking for this kind of formulation," we've brought guide formulations to them, and this has gone from, as I mentioned, zero to millions in about 12 months. This is the kind of innovation we love because it's where Elementis can really add value. Not just because we have fantastic products, but because we can help our customers innovate, help them make better products. To your point on customer base, I do believe that our sweet spot in customers is in that indeed those local and regional champions, where we can definitely add lots of value through our local presence, through our innovation, through our formulation knowledge. Counts for both customers and personal care and coatings.

[Kevin Fogarty, Analyst at Deutsche Numis]

Great. Very helpful. Thank you.

[Luc van Ravenstein, CEO at Elementis]

Thank you, Kevin.

[Analyst at ABN AMRO]

Hi, Cara from ABN AMRO. Nice to see you guys again. AI is obviously quite a buzzword in the world right now. I guess linking into the innovation point, how are you seeing AI benefit the business? Are you utilizing it to your full potential right now?

[Luc van Ravenstein, CEO at Elementis]

Yeah. Thank you for the question. I'll give a couple of thoughts on AI. I don't think we're there yet, but we have benefited in a couple of areas. One, I mentioned OTIF, on time in full. We used to have a bunch of salespeople filling in data for forecasting models. Salespeople are always wrong in terms of forecasting. I used to be one, by the way. Now we use AI to actually understand looking at millions and millions of data from the last years to have a better forecasting model. That's actually driven our OTIF up. We're now at 88%. Been a big driver. Your point was more around innovation. I think we haven't really cracked that yet, but there's a few examples we gave here about new applications for Hectorite.

[Luc van Ravenstein, CEO at Elementis]

One of the things we've done is utilizing AI, large language models, understanding where Hectorite could potentially be used in a new application. Actually, some of the things we've talked about today are a result of that. I think utilizing the full force of AI, multiplying the knowledge of the folks in our labs by AI is something that we'd love to understand better and do more of. I don't know, Kath, if you have something to add to that.

[Kath Kearney-Croft, CFO at Elementis]

Well, I think part of it is also making sure that your data's in the right format and place so that you can leverage the AI. We have projects ongoing at the moment and some investment to support that so that we can utilize the AI further in the future.

[Luc van Ravenstein, CEO at Elementis]

Thank you.

[Company Representative at Elementis]

Hi there. We've got a couple of questions that have come in online. The first question is from Sebastian Bray at Berenberg. Well, it's three questions, I should say. First one is, are there any signs of sequential weakening in demand into the second half of the year? Second question is on the coatings business. How did prices and volumes evolve in the first half of the year in coatings? The third part of the question is on the energy business. How did the energy business perform in the first half of the year? Again, is that price or volume driven?

[Luc van Ravenstein, CEO at Elementis]

Thank you, Sebastian, for those questions. First one on demand. No, we haven't seen a weakening of demand. Actually, we've seen a solid start of Q3, a solid order book. Back to the question that was asked earlier, macro is still uncertain, we prefer to not get ahead of ourselves here, but solid order book into Q3. Second question, coatings. We've actually had quite some success in volumes. I mentioned China, Asia. Yep. $15.8 million driven by volume, indeed, in the group revenue. Price has gone up a little bit as well in coatings, but I think the vast majority has been driven by volumes. We always look to price for inflation, as well as in personal care, also in coatings. Energy, we've benefited there as well from volumes.

[Luc van Ravenstein, CEO at Elementis]

Partly because our St. Louis plant has been debottlenecked, which is where if you compare H1 this year versus H1 last year, we're still struggling in the first quarter to get product out of St. Louis, which is a very heavily energy-driven plant. There again, I'll make the same comment as in coatings, we price for inflation.

[Kath Kearney-Croft, CFO at Elementis]

I think if you look as a group, from the presentation, that pricing is offsetting the inflationary cost that we've seen, we're about net neutral.

[Company Representative at Elementis]

Next question was from Matthew Yates at Bank of America. Matthew says, "Can you remind me and elaborate on what drives the seasonality in personal care margins? H1 margins were well above consensus, how much fade would we expect in the second half of the year?

[Luc van Ravenstein, CEO at Elementis]

Maybe one comment, Matthew, thanks for that question. If you look at the margins in personal care, obviously, they've been increased significantly through the sale of the pharma business, which used to be reported under personal care. Growing Hectorite is beneficial for our personal care margins, we've grown Hectorite quite nicely. You've seen skincare going up 12%. That's good for our margins. Kath, I don't know if you have anything to add to that.

[Kath Kearney-Croft, CFO at Elementis]

Yeah. I think, if you look back in the history, you do see the H1, H2 weighting, both on revenue. From a fixed cost recovery perspective, that also supports margins in H1. I think we'll expect broadly similar margins to last year in H2.

[Company Representative at Elementis]

Thanks. There's no more questions online.

[Luc van Ravenstein, CEO at Elementis]

We're good? Thank you very much, everybody.

[Kath Kearney-Croft, CFO at Elementis]

Thank you.

[Luc van Ravenstein, CEO at Elementis]

That was efficient, yeah.

Participants

Executives

• Luc van Ravenstein, CEO
• Kath Kearney-Croft, CFO
• Company Representative

Analysts

• Angelina Glazova, Analyst at JPMorgan
• Vanessa Jeffriess, Analyst at Jefferies
• Kevin Fogarty, Analyst at Deutsche Numis
• Analyst at ABN AMRO