Elementis Reports Strong 2024 Performance Despite Talc Impairment
Why we think this is neutral
Elementis delivered a mixed performance in 2024. On the positive side, the company reported revenue growth of 3%, a significant improvement in adjusted operating profit (up 24%), and a reduction in net debt. The adjusted operating margin improved to 17.4% from 14.6%, and the company expressed confidence in achieving its 2026 targets. However, these positives are balanced against significant challenges, particularly in the Talc business. The company reported a statutory operating loss of $27 million, primarily due to a $126 million impairment of Talc assets. The ongoing strategic review of the Talc business and potential regulatory risks add uncertainty. While the core business seems to be performing well, the Talc segment's issues and the overall statutory loss prevent a more positive outlook. The company's ability to navigate these challenges while maintaining growth in other segments will be crucial for future performance.
Key Points
- Revenue up 3% to $738 million
- Adjusted operating profit increased 24% to $129 million
- Statutory operating loss of $27 million due to Talc impairment
- Adjusted operating margin improved to 17.4% from 14.6%
- Net debt reduced to $157 million, with net debt to EBITDA at 1.0x
- Final dividend of 2.9 cents per share, full-year dividend of 4.0 cents
- $60 million of new business delivered
- Strategic review of Talc business ongoing
- Confidence expressed in achieving 2026 Capital Markets Day targets
- Efficiency programs on track to deliver additional $12 million savings in 2025
Summary
Elementis reported a strong adjusted performance for 2024, with revenue up 3% to $738 million and adjusted operating profit increasing 24% to $129 million. The company saw a significant improvement in adjusted operating margin to 17.4% from 14.6%. However, the company faced challenges, particularly in its Talc business, resulting in a statutory operating loss of $27 million due to a $126 million Talc impairment. Despite these challenges, Elementis reduced its net debt to $157 million and improved its net debt to EBITDA ratio to 1.0x. The company expressed confidence in achieving its 2026 Capital Markets Day targets, supported by a strong new business pipeline and ongoing efficiency programs. The strategic review of the Talc business is progressing, with potential regulatory challenges on the horizon. Broker targets suggest a positive outlook, with several maintaining 'Buy' recommendations and price targets above the current share price.