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Element Solutions Inc., a global and diversified specialty chemicals company, announced its financial results for the three and nine months ended September 30, 2021.
Executive Commentary
President and Chief Executive Officer Benjamin Gliklich said, “Despite a problematic supply chain environment and turbulence in the automotive market, Element Solutions had a terrific third quarter. We grew net sales, maintained strong margins, and generated substantial free cash flow. This is a testament to the persistence of our excellent team all over the world delivering daily for our customers in the face of challenges in raw material procurement, logistics, and ongoing COVID-related matters. It is also a reflection of the powerful secular trends in next generation wireless technology and vehicle electrification propelling our electronics business to record performance. We are off to a running start with the Coventya integration, and the expected benefits of this combination in terms of growth opportunities and cost savings are becoming increasingly tangible just two months after closing.”
Gliklich continued, “While last year we had a very strong sequential and overall performance in the fourth quarter driven by the catch up in production post-COVID shutdowns and delayed mobile launches, the fourth quarter is traditionally slower than the third, and, with headwinds from supply chain disruptions, this year should be no different. Despite a far weaker automotive market, our full-year 2021 adjusted EBITDA guidance today remains in the range we communicated last quarter even before any contribution from our Coventya acquisition. To support top-line growth and build adequate safety stock, we have invested a significant amount in working capital this year. Nonetheless, we expect to grow free cash flow year over year. With the benefit of a full twelve months' contribution from Coventya, our net debt ratio at the end of the quarter would have been below 3.0x, providing us with flexibility to continue to invest in growth and return capital in the forms of buybacks and/or cash dividend increases. Given this dynamic backdrop, it is early to comment on 2022, but our expectations are for robust growth. With the secular trends in our electronics business, an anticipated cyclical recovery in our industrial businesses, and our proven ability to outgrow both of these markets through strong execution, we expect another record year in 2022.”
Third Quarter 2021 Highlights (compared with third quarter 2020)
Net sales on a reported basis for the third quarter of 2021 were $616 million, an increase of 29% over the third quarter of 2020. Organic net sales, which exclude the impact of currency changes, certain pass-through metal prices and acquisitions, increased 13%.
- Electronics: Net sales increased 30% to $399 million. Organic net sales increased 11%.
- Industrial & Specialty: Net sales increased 27% to $218 million. Organic net sales increased 15%.
Third quarter of 2021 earnings per share (EPS) performance:
- GAAP diluted EPS was $0.15 for the third quarter of 2021 and 2020, respectively.
- Adjusted EPS was $0.35, as compared to $0.22 per share in prior year.
Reported net income was $36 million for the third quarter of 2021 and 2020, respectively.
Adjusted EBITDA for the third quarter of 2021 was $132 million, an increase of 29%. On a constant currency basis, adjusted EBITDA increased 25%.
- Electronics: Adjusted EBITDA was $92 million, an increase of 28%. On a constant currency basis, adjusted EBITDA increased 24%.
- Industrial & Specialty: Adjusted EBITDA was $39 million, an increase of 31%. On a constant currency basis, adjusted EBITDA increased 27%.
- Adjusted EBITDA margin remained flat at 21.3% on a reported basis. On a constant currency basis, adjusted EBITDA margin decreased 20 basis points.
Net debt to adjusted EBITDA ratio of 3.1x on a trailing twelve months basis.
2021 Guidance
The Company updated its full-year 2021 guidance and now expects adjusted EBITDA in the range of $515 million to $525 million, and adjusted EPS of greater than $1.35. In addition, the Company expects fourth quarter 2021 adjusted EBITDA to be approximately $118 million and full-year 2021 free cash flow of at least $265 million.
