Speciality chemicals firm Elementis PLC (LON:ELM) is to “rapidly deleverage” after its net debt almost doubled last year on the back of its contentious US$500mln (£380mln) acquisition of talc additives maker Mondo Minerals.
Elementis had to go back and negotiate a US$100mln discount with Mondo bosses last summer after investors voiced their concerns at the original US$600mln price tag.
READ: Elementis cuts up-front price of Mondo acquisition
Shareholders backed the deal at the lower price, but it has still left Elementis with a net debt of US$498mln – not far off double what it was at the end of 2017 (2017: US$291mln).
“Looking forward we plan to rapidly deleverage the group through organic cash generation and self-help initiatives,” said the FTSE 250 group in its full-year results statement this morning.
“Our debt repayment profile will also be accelerated by the 2018 triennial review of the UK pension scheme which concluded that no cash top-up payments will be required from Elementis until at least 2021. We anticipate net debt-to-EBITDA to be around 2x by the end of 2019.”
As for its 2018 results, revenue climbed 5% to US$822mln (2017: US$783mln), while adjusted pre-tax profits edged 3% higher to US$113mln (2017: US$110mln), with the personal care business the standout performer.
Conditions remain challenging
“Elementis delivered good overall results for 2018 in a challenging operating environment,” said chief executive Paul Waterman.
“The acquisition of Mondo in 2018 is a major step to further improve the quality of our portfolio.”
He added: “In 2019, whilst global market conditions remain challenging, particularly in coatings, we will seek to capture synergies as we integrate Mondo, transform Coatings and grow Personal Care. This will reduce leverage via the group's inherently strong cash generation.”
Shares dipped 0.8% to 175.6p early on Tuesday, valuing the firm at just over £1bn.