Elementis PLC (LON:ELM) is rethinking its proposed acquisition of Mondo Minerals after a number of its major shareholders expressed concerns about the transaction.
The speciality chemicals company revealed in late June it proposed to spend US$600mln on the acquisition of Dutch talcs additive producer, Mondo, prompting the shares to take a bath.
READ: Elementis in big acquisition of Dutch producer of talc additives
Elementis said the board is exploring its options in relation to the transaction.
The shares perked up 1.7% to 265.8p on the news, which was announced alongside the company’s interim results.
Revenue in the first six months of 2018 rose 10% to US$421.4mln from US$383.5mln in the corresponding period of 2017.
Adjusted profit before tax edged up 4% to US$46.8mln from US$44.9mln.
The group declared an interim dividend of 2.95 cents, up 9% from the 2.70 cents paid out last year.
Net debt at the end of the period had narrowed to US$295.6mln from US$313.3mln a year earlier. The group had been planning to take on new committed debt facilities of US$775mln and raise US$280mln through a rights issue to finance the acquisition of Mondo but given the objections raised by some shareholders, the situation may now have changed.
#Elementis PLC#ELM
good top + bottom lines (both +10%)
net debt to adjusted EBITDA¹ reduces to 1.7x (2.3x at
30 June 2017).
pe = 10.5x
=> watch / add pic.twitter.com/nlNlLpVOe1
— darren lefcoe (@dlefcoe) July 31, 2018
The group said its outlook for the full-year remained unchanged after it experienced positive momentum moving into the second half of the year.
Board claims the "Reignite Growth" initiative is catching fire
"Our strategy to reignite growth at Elementis is delivering and there is strong momentum in the business. The work we have been doing to focus the business portfolio, drive working capital initiatives, and simplify our supply chain have enabled us to focus our capital and resources on higher margin growth opportunities. Adjusted operating profit growth of 16% to US$68m, driven by Personal Care and Coatings, is a good first half performance,” declared Paul Waterman, the chief executive officer of Elementis.
Numis Securities said the interims were in line with expectations and reiterated its ‘buy’ recommendation and 340p target price.
“The company has moved to a new reporting structure based on the four divisions of Personal Care, Coatings, Chromium, and Energy, which highlights the margin attractions of Personal Care and a robust performance in Coatings in the period,” the broker noted.
“As anticipated, Chromium's profitability & growth was negatively impacted by the previously highlighted outage in Q1, and profit growth in Energy was also negatively impacted,” it added.
The broker said it did not expect to make any changes to its full-year forecasts.