Turnover for the year was £21.0 million higher than 2003
at £389.2 million. Our acquisition of Sasol Servo accounted
for £34.2 million of the increase while currency effects
reduced turnover by £24.3 million.
Operating profit for the year, before goodwill amortisation
and exceptional items, was £11.8 million (2003: £24.5 million).
After operating exceptionals of £2.9 million and goodwill
amortisation the operating loss was £2.5 million (2003: profit
of £10.9 million).
Our Chromium business had a turbulent year following the
de-registration of CCA (chromated copper arsenate) in the
US for preserving timber for residential use. Margins were
also affected by increased energy and freight costs and the
weak US Dollar. During 2004 our average chromium chemical
prices began to recover and better margins are expected in
2005 despite increases in input costs.
Elementis Specialties increased underlying sales volumes
by 6 per cent. Profits were 3 per cent lower than 2003 mainly
due to a planned increase in innovation spend and the implementation
of a new ERP system. The integration of Sasol Servo, acquired
on 30 June 2004, is proceeding well, with benefits from the
acquisition now expected to exceed initial estimates. Servo
complements our technology and extends our market coverage.
Continuing investment in R&D in our Specialties business
is the key both to growth and good margins. Our Innovation
Strategy continues to make good progress.
At Elementis Pigments, the commissioning of the new iron
oxide plant at TaiCang, China, is under way and when fully
operational will result in a substantial reduction in manufacturing
cost. Sales turnover grew by 8 per cent in Specialty Rubber
and profits increased as a consequence.
After a tax credit following the resolution of a number
of issues, earnings per share for 2004 before goodwill amortisation
and exceptionals, were 1.4 pence (2003: 3.0 pence). Basic
earnings per share were a loss of 1.8 pence (2003: 1.0 pence).
Capital expenditure for the year was £22.0 million (2003: £21.0
million) compared to depreciation of £15.4 million. With
the acquisition of Servo net debt ended the year at £90.2
million giving an interest cover of 3.1 times.
Distribution to shareholders
Once again, the distribution to shareholders will
take the form of an issue of redeemable B shares. Ordinary
shareholders on the register on 26 April 2005 will receive
redeemable B shares with a total nominal value of 1.1 pence
for each ordinary share held. This compares with 1.1 pence
for the comparable issue last year.
Strategy
Our objective is to create shareholder value by improving
the performance of our businesses and drive them towards
high margin speciality markets for our products. We intend
to intensify our efforts to return our chromium business
to good profitability and have strengthened its top management
to achieve this end. During the course of 2005 we expect
further progress in Specialties led by innovation and cost
reductions in Europe, while the year will be one of transformation
for our Pigments business, with the new plant at TaiCang
substantially impacting Pigments' cost base. With the improved
results at Specialty Rubber confirming its performance potential
we are now considering the strategic options for this business.
Health,
safety and the environment
Environmental and safety performance continues to
improve and is now first class. We are planning further initiatives
to continue this performance. For the second year, we have
published a full Sustainable Development Report. Copies of
the document can be obtained from our Corporate Communications
department at our head office in Staines, UK.
The
Board
Our previous Chairman, Jonathan Fry, retired from
the Board in October 2004, having served as Chairman of the
Group since 1997. Jonathan's leadership guided Elementis
from its creation and helped establish today's solid platform
for growth. We wish him every happiness in his retirement
and thank him for his invaluable contribution to the Group.
We announced in February 2005 that Dr Kevin Matthews, Chief
Executive of Oxonica Ltd, has joined our Board as a non-executive
director. Kevin's experience both of the chemicals industry
and of new technology start ups brings additional strength
to the Board.
People
The progress we have made towards our objectives in
2004 has been realised thanks to the skill, hard work and
commitment of our employees. On behalf of the directors and
shareholders I thank everyone for their contribution.
Outlook
This is my first statement as Chairman. It is clear
that the key elements of the programme to bring about a step
change in financial performance of the Group are in place.
After a challenging year we expect to see improvements from
our businesses in 2005. Signs of the long awaited recovery
in Chromium are evident but there remain the continuing challenges
of higher input costs and a weak Dollar.
Keith Hopkins
Chairman
17 February 2005
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