Bolt-ons deliver 11% revenue growth for Imerys

By Laura Syrett
Published: Friday, 27 November 2015

Imerys' sales rise masked a like-for-like income decline as proppants revenues plunge but graphite is boosted by Li-ion battery demand.

Imerys SA’s CEO Gilles Michel described the demand environment for industrial mineral products as "sluggish and lacklustre" when delivering the company’s third quarter earnings at the end of October, pointing to particular weakness in the oilfield and European construction markets.

The France-headquartered company clocked revenues of €3.08bn ($3.39bn*) in the first nine months of 2015, a rise of 10.9% from the same period last year. On a like-for-like basis, excluding the impact of recent acquisitions, revenue was down by 4.4% for the first three quarters and lower by 5.6% for Q3 year-on-year (y-o-y).

Imerys attributed the current, inclusive revenue increase partly to "group structure effect", referring to the integration since 1 March 2015 of Greek miner S&B and bolt-on acquisitions in monolithic refractories and carbonates, which it said added around €238.3m to its sales. A positive exchange rate effect of €188.1m, related to the decline of the euro against the US dollar in particular, also boosted revenue. "The performances achieved to the end of September show that external growth is earnings-enhancing and that S&B’s integration has started to deliver the expected synergies," Michel said.

Imerys’ drop in comparable y-o-y sales was partly blamed on deterioration in geographical areas such as China and Brazil, as well as softer demand for ceramic proppants. Olivier Pirotte, Imerys’ chief financial officer, said that the proppant business was likely to deliver a negative contribution in the region of €25-30m to the company’s overall income this year.

Revenue for Imerys’ energy solutions and specialities segment, which includes its proppants business, dropped by 6% on a like-for-like basis so far this year to €950.2m, from €963.1m last year. For Q3, the decline was even sharper, at 9.7%, to €314.1m from €338.9m a year ago.

In response to analyst questions about the future of Imerys’ proppants business, Michel said that "nobody had overlooked the fact that the [oilfield industry] is cyclical", but said that the cycles were hard to predict. He brushed off questions about plans for Imerys’ idled proppant plants in the US, saying simply that the company would evaluate the business at the end of the year.

Michel also pointed out that conditions in the oil and gas industry could change very quickly. "We’re not going to project the idea that [everything] is rosy," he said. "It’s been like this for nine months (…) we still have some growth prospects [and I] am convinced it will come back one day (…) What we don’t know is when."

Segment performance varied

Imerys’ other businesses yielded mixed results for the first nine months of the year.

In its energy solutions division, aside from proppants, the company said that sales of carbonates benefitted from the development of speciality applications in plastics, although revenue from paper fell. Monolithic refractories sales were strong in cement and foundry markets while sales to the steel industry fell. Graphite and carbon revenues benefitted from growth in lithium-ion batteries, conductive polymers and refractories.

In its filtration and performance additives segment, the company recorded a 2.1% rise in revenue on a like-for-like basis and a 64.3% increase on a current basis for quarters one to three, to €809.6m compared to €492.6m a year ago, thanks to strong sales to automotive, cosmetic and pharmaceutical markets. On a third quarter comparison, the figure was stable like-for-like but increased to €284.5m from €167.8m last year on a current basis.

Ceramic materials sales fell 4.1% like-for-like for the first nine months of the year but were more or less stable on an inclusive basis, at €878.1m against €877.1m. The third quarter figure was down 4.4% like-for-like and 3.1% lower currently, to €285.8m from €295.1m in Q3 2014.

High resistance materials, which covers products Imerys sells mainly into steel, glass, foundry and aluminium markets, recorded a 7.2% drop in like-for-like revenue and a 0.6% rise in current revenue for the first three quarters of 2015 to €486.2m, from €483.1m last year. Third quarter revenue fell 3.4% like-for-like but increased 1.1% on a current basis to €156m from €154.2m a year ago.

Acquisitions

Imerys’ revenue growth continued to come chiefly from the contribution of acquisitions. The company noted that it expects higher sales income from a number of recent purchases. Michel said that the current deflationary environment presented a number of acquisition opportunities as well as the chance to "optimise purchase prices". "When there are opportunities, [they] need to be seized," he said.

The company recently completed the acquisition of Belgian rival Solvay’s precipitated calcium carbonate (PCC) business, which generated €59m in revenue in 2014, and BASF’s paper hydrous kaolin (PHK) operations in the US, which is expected to generate revenue of $60m on a full-year basis

Imerys said it had also recently acquired Matisco, a specialised manufacturer of metal profiles, which would enable it to broaden its offering for the roofing market in France. Matisco posted revenue of €23m in 2014.

Outlook

The company said that the first nine months of this year had shown North America, India and Southeast Asia as relatively "vibrant" markets for mineral products and that demand was positive generally in the automotive and consumer goods sectors.

"For the rest of the year, several of Imerys’ markets should remain weak overall, particularly construction in France, paper and steelmaking," the company said in its earnings statement. "Based on the results for the first nine months (…) we confirm our objective of achieving firm growth in our net income from current operations this year," Michel added.

*Conversion made November 2015