First-half profits drop by 50% at Elementis

Elementis, the speciality chemicals firm that recently failed to sell itself, will look for potential acquisitions to compensate for the high energy costs and weak US economic conditions that caused first-half profits to halve.

The company, which is the world's biggest chromium producer, has given up hoping that it will find a buyer after breaking off talks with private equity groups in May, because their offers were too low.

Jonathan Fry, chairman of Elementis, said: "We are drawing a line across the page. We feel organic and acquisition opportunities offer the best possibilities of capitalising on our strong position in the chromium and rheological additives businesses."

He was speaking as Elementis reported pre-tax profits before goodwill amortisation and exceptionals for the half-year to 30 June had halved to £15.1m on sales up 3 per cent to £296.7m. Elementis took an exceptional charge of £5.1m, which included costs of £4.6m, to prepare for a possible sale.

Mr Fry said: "High energy costs are our single largest problem. Costs were up by £7m in the first-half compared with the year before and we were unable to recoup costs in the market place because prices were soft and demand was soft."

He expects conditions in the US to remain tough for the rest of the year although the price of gas, which is used at its Texas plant to heat ore to make chromium sulphate, has fallen since spiking earlier this year. The company anticipates energy will cost it £2.5m more in the second-half than in the same period last year.

George Fairweather, the finance director, said Elementis would continue to cut costs but there would be fewer job losses in the second-half than the 130 in the first.

Mr Fairweather said Elementis, which has interest cover of seven times, would continue to look at the idea of returning cash to shareholders provided it can pay the right price.

Elementis said that it would not declare an interim dividend but instead would issue redeemable B shares with a total nominal value of 2.1p per share, as it did last year. This way, the company estimated it would recover £2.3m of pre-paid corporate tax.

The company is still looking for a new chief executive to replace Lyndon Cole who resigned last month. It shares fell 4.5p to 57p.