Elementis remains on track to profit from reopening
Elementis (ELM) 120.6p
Loss to date: 4%
Original entry point: Buy at 125.9p, 18 February 2021
Chemicals firm Elementis (ELM) is cautiously optimistic on demand for its products in the months ahead, which combined with the firm’s cost saving measures should drive better financial performance this year and reduce operational leverage.
The firm said it has made an ‘encouraging’ start to 2021 with demand improving as Covid-19 restrictions start to get lifted, and it expects further steady demand improvement from its levels in the second half of 2020, augmented by self-help actions which will save $10 million, driving improved financial performance and a reduction in leverage.
Elementis’ management also communicated new 2023 cost saving targets of $10 million as well as a $10 million working capital reduction.
Last year wasn’t the best for Elementis as it reported a pre-tax loss of $68.8 million compared with a profit of $61 million for 2019, with revenue down 14% to $751 million. Performance was hit across sectors, though coatings and personal care held up best with falls in revenue of just 7% and 9% respectively in 2020.
On a more positive note, Elementis managed to get net debt down to $408 million, below the $417 million analysts had expected, which should help shift the firm’s investment case from deleveraging to recovery going forward.
SHARES SAYS: Elementis is still on track to profit from the reopening. Keep buying.