Chemicals specialist Elementis (ELM) has enjoyed a strong year, driven by impressive growth in its Personal Care division, which is now the largest contributor to profitability.

The shares are flat on the news at 281.4p.

Sales in Personal Care soared 186% to $179.3m with existing business growth rising 23% in the year to 31 December 2017. Adjusted operating profit is up 32% at $128.1m.

The $360m acquisition of antiperspirant ingredients manufacturer SummitReheis in February 2017 also contributed to the strong performance.

Elementis says the integration of SummitReheis is now complete and synergies are expected to be greater than anticipated, increasing from $3m to $5m.

PERSONAL CARE SET TO GROW FURTHER

Elementis also paints a promising outlook through its plan to develop Personal Care via geographic expansion and selling more products to existing customers.

The Coatings division is another priority for growth as Elementis aims to focus on key geographies such as China, South East Asia and Latin America.

UBS analyst Andrew Stott is impressed that full year earnings before interest and tax margin was only 10 basis points lower at 15.7% despite higher raw material costs.

He flags net debt to earnings is already down to two times, which could fall further to 1.1 times by the first half of 2018.

EARNINGS FORECAST UP 14%

Stott forecasts 14% earnings per share growth this year, supported by 5% organic sales growth, a favourable gross margin mix, cost savings, extra synergies from SummitReheis and a US dollar tailwind.

‘These tailwinds should significantly outweigh the challenges of generally higher raw material costs and the specific step-up in costs in 2018 due to the absence of Surfactants,’ comments the analyst.

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Issue Date: 27 Feb 2018