Information  X 
Enter a valid email address

Elementis PLC (ELM)

  Print      Mail a friend       Annual reports

Thursday 10 October, 2002

Elementis PLC

Acquisition(s)


ELEMENTIS TO ACQUIRE CHROMIUM BUSINESS OF US CHEMICALS PRODUCER OXYCHEM

Elementis, the international specialty chemicals company, has agreed to acquire
the chromium chemical business of US based Occidental Chemical Corporation
('OxyChem') for an initial cash consideration of $40 million and up to $6
million in deferred consideration contingent on future performance. The
transaction, which will be financed from existing borrowing facilities, is
expected to complete by the end of 2002, subject to regulatory consents.

Elementis believes that the acquisition and integration of OxyChem's chromium
chemical business, located in North Carolina, with its own chromium chemical
operations will generate significant cost savings through optimising
operations, reducing overhead and procurement costs and obtaining supply chain
benefits. Annualised cost savings of at least £10 million will be generated
during the first two years and thus the transaction is expected to be accretive
to Elementis' underlying earnings from 2003 onwards. One-time cash costs of
restructuring the combined business are estimated to be £4 to £5 million in
2002.

The transaction will create a single US producer able to compete more
effectively in a market that is subject to significant import penetration and
inefficient capacity utilisation as a result of the expected restriction on the
use of chromated copper arsenate (CCA) for consumer applications announced by
the US Environmental Protection Agency (EPA) earlier this year.

OxyChem states that its chromium chemical business generated sales in 2001 of
$80.3 million (£51.1 million), operating profit of $12.6 million (£8.0 million)
and net assets of the business being acquired at 31 December 2001 were $58.6
million (£37.3 million). The comparable figures for Elementis Chromium were
sales of £126.9 million, operating profit £2.6 million and net assets of £118.0
million. To reflect current market conditions Elementis anticipates that it
will record an impairment charge against the net asset value of the existing
Elementis Chromium assets of approximately 25-30 per cent in the accounts for
the year ending 31 December 2002.

Commenting on today's announcement, Geoff Gaywood, Chief Executive of Elementis
plc said, 'This acquisition enables us to address the potential adverse effect
of the US EPA's action to limit the use of CCA which is manufactured using one
of our products, chromic acid.

'By lowering our cost base and increasing our ability to compete more
effectively in North and South American markets, this move will strengthen our
chromium chemicals business for the future, provide benefits to our customers
and allow us deliver value to shareholders by focusing on the longer term
strategic development of Elementis.'

- Ends -

An interview with Geoff Gaywood in video/audio format can be viewed on 
www.elementis.com and www.cantos.com

There will be a conference call today for analysts at 08.45 GMT on 020 8240
8244 with the reference Elementis. This call will be hosted by Geoff Gaywood,
Chief Executive and Brian Taylorson, Finance Director.

Enquiries

Elementis plc                01784 224212                         
                                                                  
Geoff Gaywood                Chief Executive                      
                                                                  
Brian Taylorson              Finance Director                     
                                                                  
Anna Passey                  Head of Corporate Communications     

Brunswick                    020 7404 5959                        
                                                                  
Andrew Fenwick                                                    
                                                                  
Fiona Fong                                                        

Notes to Editors

1 Elementis Chromium produces the full range of chromium chemicals including
sodium dichromate, chrome sulphate, chromic acid, chromic hydrate and sodium
sulphate. These products are used in a wide variety of end-use consumer and
industrial applications such as timber treatment; leather tanning (producing
high quality leathers for garment and footware manufacture) and metal finishing
(providing metals and plastics with a strong tarnish resistant finish).
Chromium chemicals are also used in metal alloys, ceramics and magnetic media.

Elementis Chromium has two main manufacturing plants, one in the northeast of
England and one in southern Texas, US.

2 Occidental Chemical Corporation (OxyChem), is a wholly owned subsidiary of
Occidental Petroleum Corporation (NYSE:OXY). Together with its subdivisions and
affiliates, OxyChem is one of the world's largest chemical producers.
Headquartered in Dallas, Texas, OxyChem operates 30 manufacturing facilities
worldwide. OxyChem's principal products are commodity chemicals such as
chlorine and caustic soda, vinyl chloride monomer (VCM), ethylene dichloride
and polyvinyl chloride (PVC) that are produced and sold in large volumes,
primarily to industrial customers for use as raw materials. OxyChem also
produces performance products chemicals.

3 OxyChem has a single chromium plant located at Castle Hayne, North Carolina,
US.

4 On 12 February 2002, the US Environmental Protection Agency (EPA) announced
restrictions, from 2004, on the use of chromated copper arsenate (CCA) as a
wood preservative in the US, affecting CCA treated timber for consumer use.
Elementis Chromium supplies chromic acid which is used in the manufacture of
CCA and acts primarily as a binding agent. Elementis estimates that as a result
of the EPA's decision, the global and US demand for chromium chemicals would
reduce by around 5 and 30 per cent respectively.

5 Elementis Chromium's sales for industrial applications of CCA, such as
utility poles, rail sleepers and marine pilings are relatively strong and are
not affected by the EPA ruling. Nevertheless, its global sales of chromium
chemicals could be adversely affected by around 15 per cent by 2004. As
previously stated, Elementis does not expect its sales in 2002 to be materially
affected by the EPA ruling. Following a public consultation period, the EPA is
now considering its final position.

6 Chromium occurs naturally in the form of chromite ore. Chromium is a trace
nutrient essential to the human body for a number of functions including the
normal metabolism of glucose.

7 This announcement has assumed an exchange rate of US$1.57 to the UK pound.