Jefferies has increased its price target for Elementis (EMNSF, Financial) from 175 GBp to 180 GBp, while maintaining a Buy rating on the stock. This adjustment comes in the wake of Elementis's sale of its Talc unit, a move deemed crucial for enhancing the company's overall quality in terms of margin and market reach. Despite the price target hike, Jefferies remains cautious, projecting lower-than-consensus forecasts due to a conservative stance on market demand. The analyst highlighted the importance of this strategic change as a positive development for the company's future.
EMNSF Key Business Developments
Release Date: March 06, 2025
- Revenue: Increased 3% to $738 million.
- Adjusted Operating Profit: Up 24% to $129 million.
- Adjusted Operating Margin: Improved to 17.4% from 14.6% in the prior year.
- Adjusted Earnings Per Share: Increased 23% to $0.133.
- Net Debt: Reduced to $157 million with a net debt to EBITDA ratio of 1.0 times.
- Final Dividend: Up 38% to $0.029 per share, totaling $0.04 per share for the year.
- Cost Savings: Achieved $18 million, exceeding the initial expectation of $12 million.
- Talc Impairment: Recorded at $126 million for the year.
- Adjusted Operating Margin (Personal Care): Increased to 28.3%, up 420 basis points.
- Revenue from Innovation Sales: Accounted for 15% of sales, up from 14% in the prior year.
- Operating Cash Conversion: Three-year average at 88%, with annual performance at 104%.
- Return on Capital Employed (Excluding Goodwill): Increased to 23%, excluding Talc impairment at 19%.
- Personal Care Revenue Growth in Asia: Up 18%.
- Coatings Revenue: Increased 5% to $386 million.
- Coatings Adjusted Operating Margin: Improved to 20.3% from 15.3% last year.
- Free Cash Flow: $56 million after cash impact of $33 million adjusting items.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Elementis PLC (EMNSF, Financial) reported strong revenue and earnings growth across both coatings and personal care businesses in 2024.
- The company achieved $18 million in annual cost savings, surpassing the initial expectation of $12 million.
- Net debt was reduced significantly, with a year-end net debt to EBITDA ratio of 1.0 times.
- The final dividend increased by 38% compared to the prior year, reflecting a strong balance sheet.
- Elementis PLC (EMNSF) launched 22 new products, contributing to innovation sales growth, with new products accounting for 15% of sales.
Negative Points
- Elementis PLC (EMNSF) recorded a Talc impairment of $126 million for the year.
- The Talc business faced challenges due to a nationwide strike in Finland and weak demand across key markets.
- The European automotive sector saw a 5% reduction in light vehicle production, impacting the Talc segment.
- Despite revenue growth, the Talc segment's adjusted operating profit reduced to $8 million, with a decline in operating margin to 5.9%.
- The company faces ongoing regulatory uncertainty regarding the classification of Talc as carcinogenic by the European Commission.
