Elementis shares tumble 10 per cent after profits warning

Click to follow
The Independent Online

Shares in Elementis dived 10 per cent yesterday after the speciality chemicals firm warned it would make only a "negligible" profit in the second half of 2001.

The company, which issued a profits warning in October, blamed falling demand for chromium, which is used in a range of industries from aerospace to timber treatment. Its shares fell 4.5p to 40p, accelerating a trend that has wiped £260m from its market capitalisation.

Elementis said it expected chromium sales in the second half of the year to be down by about 12 per cent. It added that results from its pigments business had been particularly impacted by the cost of temporary plant closures.

"As a result, it is likely that the group will make a negligible profit before goodwill amortisation and exceptionals in the second half of 2001," it said.

Elementis, which was hit by a spike in US gas prices earlier this year, remained cautious about next year. "Visibility remains poor and trading conditions across the group are likely to continue to be difficult," it said. In October, the group had warned that second-half profits before amortisation and exceptionals would be "less than half" the £15.1m achieved in the first six months.

George Fairweather, the finance director, said that capital expenditure would be kept under "tight control" next year, in an attempt to reduce net borrowings. The full-year dividend payout could be affected, he added. However, the company remains well within its debt covenant requirements.

The only glimmer of light on the horizon came from the company's expectation that cost savings, including lower energy bills, would provide some benefits. It said that "lack of further downstream destocking and selected volume improvements" should also provide support.

The company, which is the world's biggest chromium producer, has had a turbulent year. It resigned itself to an independent future in May after breaking off months of talks with private equity groups because their offers were too low.