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Elementis PLC (ELM)

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Monday 31 October, 2005

Elementis PLC

Strategic Review

Elementis PLC
31 October 2005

31 October 2005

                                 Elementis plc
                                Strategic Review

Elementis plc is today announcing the results of the first phase of its
previously announced Strategic Review, which was undertaken recently following
changes in the composition of the Board.

The Board, having reviewed the businesses and operations of the Company, has
decided to implement a number of changes in order to achieve three key
objectives as follows:

  • Improve the base earnings level of the Company
  • Reduce the volatility of Chromium earnings
  • Refocus attention on Specialties, which is the largest and most profitable
    business.

The results of the review of the strategy for Specialties will be reported upon
during the first half of 2006.  This first phase of the Review has mainly
addressed the first two of these objectives and has led to the following
actions:

Improvement of base earnings

To improve the base level of earnings, there will be a further reduction in Head
Office personnel, with most corporate functions being absorbed into the
businesses.  When added to reductions announced in the first half of 2005, the
combined effect will have been to reduce Head Office personnel costs by
approximately 80% since the beginning of the year.

Further cost improvements will be made by combining the US administrative
functions of the Specialties and Pigments businesses, although they will still
be reported separately and each will continue to have its own business
management.

Specialties will focus resources on improving efficiency and customer service
while reducing costs across several functions.

The combined effect of these changes will be to reduce annualized fixed costs by
approximately £8.5 million, which is in addition to savings already announced in
the first half of the year.

Implementation of these changes has already begun and it is anticipated that 90
per cent of the savings will be achieved during 2006 which, when combined with
the savings already announced, will lead to a year on year improvement in fixed
costs of approximately £11.1 million.

Chromium

Chromium will close around 50 per cent of capacity at its Eaglescliffe, UK
plant, representing 25 per cent of the Company's global capacity, in order to
reduce volatility in its earnings and make the overall business more sustainable
going forward.

Although the Group's global Chromium business is currently benefiting from
improved pricing, the UK business has recorded losses in 2003, 2004 and the
first half of 2005 due to high energy costs, a strong pound and a less
favourable product and customer mix when compared to the business in the US.
This, in turn has led to a higher degree of volatility in earnings and a low
overall return on sales.

The Eaglescliffe plant will cease production of chromic acid and chrome
sulphate, and concentrate on chrome oxide and sodium dichromate, resulting in a
reduction in the workforce and reducing global output by approximately 15%.  As
a result of the closure, Chromium fixed costs will be reduced in the UK by
approximately £11.7 million, offset by a reduction in output, leaving operating
profit essentially unchanged.

Going forward the business will look to further reduce earnings volatility by
additional hedging of input costs and restructuring of sales contracts.

One off charges

As a result of these changes, Elementis will record a one time charge in 2005 of
£37.6 million, of which £25.0 million relates to asset write downs in Chromium
and £12.6 million will be paid in cash for severance and other closure costs,
with approximately one third being paid in 2005.  The cash component will be
financed from a reduction in working capital in Chromium, resulting from the
capacity closure, and net proceeds from the recently announced sale of the
Specialty Rubber business.

Current Trading

As stated at the time of the interim results, the company's current trading
performance is in line with its expectations for continued improvement in the
second half of the year.

Commenting on the outcome of the Strategic Review, Edward Bramson, Executive
Chairman said:

 'We anticipate that this will leave us with a more profitable and less volatile
business going forward, and we look forward to further outlining the strategy
for Specialties in the New Year'

                                    - ENDS -

Enquiries:

Elementis plc                                         Tel: +44 (0)1784 227000
Edward Bramson                                        Chairman
Brian Taylorson                                       Finance Director

Financial Dynamics                                    Tel: +44 (0)20 7831 3113
Andrew Dowler
Greg Quine


                      This information is provided by RNS
            The company news service from the London Stock Exchange