Elementis H1 Earnings Call Highlights

Elementis LON: ELM reported higher first-half revenue, profit and margins as the specialty chemicals company advanced its Elevate Elementis strategy, while management said it remains confident of meeting full-year 2026 expectations despite mixed market conditions.

Chief Executive Officer Luc van Ravenstein said organic constant-currency revenue rose 5% in the first half, while profit increased 16% and adjusted operating margins reached 23%. The company also completed the sale of its pharmaceutical manufacturing business in June, acquired skincare business Alchemy, and began a share buyback program.

“We now have the right portfolio,” van Ravenstein said, describing Elementis as a pure-play specialty chemicals company focused on additives, rheology, Hectorite and formulation expertise for coatings and personal care markets.

Revenue and Profit Growth

Chief Financial Officer Kath Kearney-Croft said reported group revenue increased 9.4% to $318.2 million, including a favorable foreign-exchange contribution of about $9.8 million and a $3.5 million contribution from Alchemy. On an organic constant-currency basis, revenue rose 4.7%.

Volume growth contributed $16 million of revenue, led by coatings demand in Asia and EMEA. That growth was partly offset by weaker conditions in North America, where construction activity remained soft. Personal care growth in the Americas was also affected by isolated weak demand during the first quarter.

Pricing added $6.8 million across the company’s businesses, as Elementis responded to inflationary effects associated with the Middle East war. However, mix reduced revenue by $8.7 million, largely in coatings. Kearney-Croft said the company’s local-for-local strategy supported volumes, profits and margins, but lower local pricing in certain markets created pressure on reported revenue mix.

Adjusted operating profit rose 16.4% to $73.2 million. Higher volumes generated $6.4 million of profit contribution, equivalent to 40% drop-through, while the overall price-and-mix effect was broadly neutral after pricing offset inflation-related costs. Adjusted operating margin improved by 140 basis points to 23%.

Adjusted earnings per share increased 28.8% to $0.085, supported by profit growth, lower net finance costs and a reduced share count following prior and current buybacks.

Segment Performance

Personal care revenue increased 2.9% organically at constant currency to $109.2 million. The company cited strong cosmetics growth, particularly in Asian skincare, and good performance in EMEA. North American growth was muted, while antiperspirant actives revenue was flat as higher volumes were offset by a lower-priced product mix.

Personal care adjusted operating profit grew 3.1% organically at constant currency, and segment margin increased 30 basis points to 38.1%. The divestment of pharmaceutical manufacturing also improved the reported personal care margin by roughly 380 basis points compared with the prior year, Kearney-Croft said.

Alchemy, acquired in November 2025, has been fully integrated and is on track for sustainable double-digit growth, according to the CFO.

Coatings revenue rose 5.6% organically at constant currency to $209 million. Asia and EMEA delivered particularly strong growth, offsetting ongoing North American weakness tied to construction markets. Coatings adjusted operating profit increased 18.7% organically at constant currency to $43.2 million, while margin climbed 250 basis points to 20.7%.

Van Ravenstein said growth in coatings reflected new applications as well as regional expansion. He pointed to CHARGUARD, a product designed to prevent burning cables from dripping, which generated $1.5 million of business in the first half. The company also cited demand in energy markets, aided by improvements at its St. Louis facility.

Cash Flow, Capital Returns and Investment

Adjusted operating cash flow declined to $29.8 million from $41.3 million a year earlier, reflecting a seasonal working-capital outflow. Receivables increased alongside second-quarter revenue growth and the absence of factoring in June, while inventory rose due to raw-material pre-buys and inflation.

Net debt declined to $163.8 million from $185.4 million at the start of the year, reducing leverage to 1.1 times. The pharmaceutical manufacturing sale and related cash movements contributed $32.7 million of combined net proceeds and cash benefit during the period.

The company spent $6.7 million on share repurchases, including $4.1 million under the buyback program launched in early June. Kearney-Croft said Elementis expects to complete the program toward the end of 2026 or early 2027. The board approved an interim dividend of $0.015 per share, up 15.4% from the prior year.

Elementis reported return on capital employed of 29.4%, up 100 basis points from the prior year’s continuing operations figure and nearing its minimum 30% target. The company is also increasing research and development spending, with the aim of raising R&D investment from 2% of revenue to 3% by the end of 2027.

Strategy and Outlook

Management highlighted Hectorite, a mineral used in applications ranging from cosmetics and coatings to drilling fluids, as a central growth area. Hectorite now represents about one-third of sales, up from roughly one-quarter previously, due to the pharmaceutical divestment and underlying growth, van Ravenstein said.

Skincare sales increased 12% in the first half, and Elementis said more than 800 new skincare and sun-care products containing its Hectorite were launched during the period. The company had about 3% of an estimated $800 million skincare rheology market last year, leaving what management described as substantial room for growth.

Elementis also reported operational progress, with on-time, in-full delivery improving to 88% in the first half from 76% at the end of 2024. At St. Louis, approximately 99% of production is now right first time following leadership changes and the application of best practices.

While the company cited a solid order book entering the third quarter and said it had not seen sequential weakening in demand, van Ravenstein emphasized continued uncertainty around consumer spending and the macroeconomic backdrop. Management therefore maintained its full-year outlook and cautioned that first-half margin strength is expected to moderate in the second half because of normal seasonal weighting.

About Elementis (LON:ELM)

Elementis 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.

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