# STRATEGIC REPORT

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/LSE_ELM.L_2020/LSE_ELM.L_2020.mmd` · pages 1-7_

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STRATEGIC REPORT

Elementis today 01
2020 highlights 01
Our business at a glance 02
Elementis in everyday life 04
Chairman's statement 06
CEO's review 08
Responding to COVID-19 12
Market review 14
Our stakeholders 16
Our business model 18
Section 172 20
Our strategy 22
Key performance indicators 30
Environmental, Social and Governance overview 32
Non-financial information 44
Financial review 45
Operating review 51
Risk management 56
Principal risks and uncertainties 59
Viability and going concern statement 63

## CORPORATE GOVERNANCE

Chairman's corporate governance statement 64
Board of Directors 66
Executive Leadership Team 68
Corporate Governance report 70
Division of responsibilities 70
Board leadership and company purpose 71
Shareholder engagement 75
Composition, succession and evaluation 76
Nomination Committee report 79
Diversity policy 82
Audit Committee report 83
Directors' Remuneration report 87
Directors' report 114
Directors' responsibilities 117

## FINANCIAL STATEMENTS

Independent auditor's report 118
Consolidated income statement 128
Consolidated statement of comprehensive income 128
Consolidated balance sheet 129
Consolidated statement of changes in equity 130
Consolidated cash flow statement 131
Notes to the consolidated financial statements 132
Parent Company balance sheet 175
Parent Company statement of changes in equity 176
Notes to the company financial statements of Elementis plc 177

## SHAREHOLDER INFORMATION

Alternative performance measures and unaudited information 183
Five year record 185
Shareholder services 186
Corporate information 188
Glossary 189

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For more information
https://www.elementis.com/

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# Well positioned for
sustainable growth

Elementis is a global specialty chemicals company. We deliver Enhanced Performance Through Applied Innovation; our products make our customers' formulations look, feel and perform at their best.
OPERATIONAL HIGHLIGHTS
The COVID-19 pandemic has had a significant impact on many businesses around the world. In response we have focused on the safety of our workforce, maintaining a reliable supply to our customers, and optimising our financial performance through a clear self-help agenda focused on proactive cost and cash management.

## STRATEGIC HIGHLIGHTS

While the demand environment was challenging in 2020, the implementation of our Innovation, Growth and Efficiency strategy has continued at pace. The launch of 12 new products, generation of \(30m of new business opportunities and delivery of \)15m ($10m temporary) of cost savings demonstrates the Group has a robust foundation from which to grow and deliver on our medium term financial objectives.

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1 After adjusting items – see Note 5

2 Rebased for the effects of the Rights Issue in 2018

3 Please see the Alternative Performance Measures section on page 183

## Cautionary statement

The Annual Report and Accounts for the financial year ended 31 December 2020, as contained in this document ('Annual Report'), contains information which viewers or readers might consider to be forward looking statements relating to or in respect of the financial condition, results, operations or businesses of Elementis plc. Any such statements involve risk and uncertainty because they relate to future events and circumstances. There are many factors that could cause actual results or developments to differ materially from those expressed or implied by any such forward looking statements. Nothing in this Annual Report should be construed as a profit forecast.

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# Working with our
customers and
their industries to
solve product
performance and
sustainability
challenges

## WHO WE ARE

Elementis is a specialty chemicals company with over 1,300 employees and operating at 23 manufacturing sites across the globe.

Founded in 1844, we are listed on the London Stock Exchange and are a constituent of the FTSE 250.

## WHAT WE DO

We create, make and sell specialty chemicals that deliver real benefits to a range of diverse products including cosmetics, coatings, long life plastics and many more. In all areas of our business our focus is on creating innovative ingredients that deliver performance improvements and enhanced sustainability credentials.

## HOW WE DO IT

Combining our access to unique natural materials with our leading rheology and technological expertise, we deliver Enhanced Performance Through Applied Innovation to all our customers around the world in a timely and sustainable manner.

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## SALES

Personal Care – 21% Chromium – 19%
Coatings – 39% Energy – 3%
Talc – 18%

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## ADJUSTED OPERATING PROFIT

Personal Care – 33% Talc – 16%
Coatings – 45% Chromium – 6%

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Calculations adjusted for intersegmental sales, corporate costs and the Energy business

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## PERSONAL CARE

## OVERVIEW

We are a leading global supplier of rheology modifiers, based on natural and synthetic ingredients, and antiperspirant actives to personal care manufacturers. Our products help make skin creams smooth and antiperspirants work.

$161m

Sales

$34m

Adjusted operating profit

Read more on page 51

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## COATINGS

## OVERVIEW

We supply our rheology modifiers and additives to industrial and decorative coatings manufacturers. Our products help make industrial coatings last longer and decorative coatings apply evenly and with enhanced stain resistance.

$296m

Sales

$47m

Adjusted operating profit

Read more on page 52

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## WHERE WE OPERATE

AMERICAS
Total number of sites:

12

7 Personal Care, Coatings and Energy
5 Chromium

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## TALC

## OVERVIEW

We are the second largest global supplier of talc based additives to industrial end markets including long life plastics, coatings and technical ceramics. Talc additives help make long life plastics lighter and stronger, and deliver enhanced anti-corrosion characteristics to coatings.

$133m
Sales

$17m
Adjusted operating profit

Read more on page 53

## EUROPE
Total number of sites:

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4 Personal Care, Coatings and Energy
4 Talc

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## CHROMIUM

## OVERVIEW

We supply a range of chromium chemicals that are used across a broad range of industrial applications to make products more durable. We are the only producer in North America and have a unique delivery system that generates significant customer safety benefits.

$147m
Sales

$6m
Adjusted operating profit

Read more on page 54

## Manufacturing sites

Personal Care, Coatings & Energy
Chromium
Talc

## ASIA

Total number of sites:

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3 Personal Care, Coatings and Energy

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## ENERGY

## OVERVIEW

We supply clay and synthetic based rheology modifiers for oil and gas drilling, and stimulation activities. These products are formulated to lubricate the drill bit, control formation pressure and remove cuttings in drilling fluids.

$24m
Sales

$(6m)
Adjusted operating profit

Read more on page 55

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# The world of
Elementis

Combining our access to unique natural resources with our market leading innovation expertise, we create performance driven additives that can be found in many products used in everyday life.

## BATHROOM

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1. HAIR CONDITIONER FANCO \( ^{®} \)  natural oils help condition and repair damaged hair

2. SUNSCREEN BENTONE GEL \( ^{®} \)  and BENTONE HYDROCLAY \( ^{™} \)  help improve sunscreen application and boost SPF

3. ANTIPERSPIRANT High performance ANTIPERSPIRANT ACTIVES help keep you fresher for longer

4. NAIL POLISH BENTONE® organoclays make nail polish apply smoothly and evenly

5. ANTACIDS Elementis ANTACID ACTIVES help ease the discomfort of stomach indigestion

6. FABRIC SOFTENER RHEOCLEAN® rheology modifiers make towels softer for longer

7. CERAMICS BENTONE® hectorite clay provides excellent flow of ceramics to create mirror-like gloss and smoothness

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8. TILES THIXATROL \( ^{®} \)  helps bind large tiles to a surface faster and for longer

9. TILE ADHESIVES FINNTALC improves water resistance and lowers shrinkage of tile adhesives

10. MIRROR FINNTALC in the coating of your mirror protects the silver for longer
11. TOILET PAPER FINNTALC prevents formation of sticky impurities in paper making

12. TOILET SEAT Our PLUS-TALC increases the durability of your toilet seat
13. SHOWER HEAD CHROMIC ACID provides metallic shine, corrosion and wear resistance

14. TOWEL RACK CHROMIC ACID provides metallic shine, corrosion and wear resistance

15. GREEN TILES CHROME OXIDE provides vivid colour pigmentation for green, brown and black tiles

## KITCHEN

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1. KITCHEN FLOOR BENTONE® thickeners create a smooth concrete levelling surface for tiles, carpets or parquet

2. WALL PAINT RHEOLATE® thickeners ensure premium paints apply evenly, smoothly and with complete cover

3. TILES BENAQUA® spray dried hectorite clay prevents sagging of wall tiles

4. KITCHEN CABINET RHEOLATE® thickeners create a uniform and high quality finish on kitchen cabinets

5. WALL PAINT FINNTALC ensures that your kitchen wall paint is washable and stains can be wiped off

6. PAPER CUP FINNTALC replaces plastic as a barrier coating, making paper cups environmentally friendly and biodegradable

7. OLIVE OIL MICROTALC improves the yield and clarity of extra virgin olive oil

8. KITCHEN PAPER FINNTALC prevents formation of sticky impurities in paper making
9. KITCHEN FURNITURE FINNTALC in the edge protection of your kitchen furniture supports durability

10. WASHING MACHINE TALC ensures that your washing machine parts can resist damage

11. REFRIGERATOR SODIUM DICROMATE helps refrigerant coils withstand corrosion

12. STEEL KETTLE CHROME SULPHATE makes your kettle shine, provides corrosion resistance and eases cleaning procedures

13. SINK TAP CHROMIC ACID provides metallic shine, enhanced corrosion and wear resistance

14. DETERGENT SODIUM SULPHATE is used for enhancing performance of clothing detergents

15. NATURAL GAS FOR COOKING BENTONE® hectorite allows for more efficient discovery and extraction of natural gas

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## KEY

PERSONAL CARE

Colour cosmetics
Skin care
Haircare
Antiperspirants
Bath & Soap

COATINGS

Industrial finishes
Architectural
Construction

TALC

Automotive
Household uses
Electronics
Food & Pharma
Paper

CHROMIUM

Finishes
Leather

ENERGY

Oil
Gas

## BEDROOM

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1. FACE MASK BENTONE HYDROCLAY™ keeps your skin healthy, silky and smooth

2. LIPSTICK BENTONE GEL \( ^{®} \)  makes lipsticks pop with colour

3. SKIN CREAM BENTONE \( ^{®} \)  LUXE delivers moisture to your daily skin care routine

4. FACIAL MAKEUP BENTONE HYDROCLAY™ suspends colours evenly throughout makeup

5. LEATHER SEAT RHEOLATE \( ^{®} \)  thickeners provide the required flow to apply flexible and transparent leather coatings

6. WALL PAINT DAPRO \( ^{®} \)  deoamers remove trapped air and ensure a smooth paint film

7. MAGAZINES BENTONE \( ^{®} \)  provides excellent flow in publication inks for high gloss pictures and sharp letter printing
8. MOBILE PHONE SUPREAD \( ^{®} \)  wetting agents help protective coatings cling to difficult to coat plastics

9. VITAMINS MICROTALC keeps your nutritional supplements dry and prevents tablets from sticking

10. WALL PAINT FINNTALC adjusts gloss, binding and colour of decorative coatings

11. SMART SPEAKER FINNTALC increases the strength of your smart speaker frame

12. CHROME HANDLES CHROMIC ACID provides metallic shine, enhanced

corrosion and wear resistance

13. LEATHER HEADBOARD CHROME SULPHATE preserves and strengthens leather, making it softer for longer

14. CHROME LAMP CHROMIC ACID provides metallic shine, enhanced corrosion and wear resistance

## LIVING ROOM

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1. MAGAZINES BENTONE \( ^{®} \)  provides excellent flow in publication inks for the high gloss pictures and sharp letter printing

2. LEATHER CUSHIONS DAPRO \( ^{®} \)  slip agents provide excellent scratch resistance

3. WALL PAINT RHEOLATE \( ^{®} \)  thickeners ensure premium paints apply evenly, smoothly and with complete cover

4. CABINET RHEOLATE \( ^{®} \)  thickeners ensure excellent paint coverage and durability for furniture cabinets

5. FLOORING FINNTALC improves the printability of your laminate flooring so you can enjoy more designs

6. CLOCK FRAME PLUSTALC increases the strength and durability of your clock frame
7. TELEPHONE FINNTALC strengthens plastic parts so your telephone can be made lighter

8. CHEWING GUM TALC helps make chewing gum soft

9. FLATSCREEN FINNTALC ensures the dimensional stability of your large TV frame

10. WINE BOTTLE CHROME OXIDE provides a vivid green colour and prevents product spoilage from UV rays

11. LEATHER SOFA CHROME SULPHATE preserves and strengthens leather, making it softer for longer

12. WINDOW SODIUM SULPHATE is used as a fining agent to remove small air bubbles from molten glass

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# A high quality business, well positioned for the future

Dear Shareholders

This year has posed unprecedented challenges for all of us. The COVID-19 pandemic has brought personal hardship and suffering to many of our communities, colleagues and customers. Paul Waterman, his Leadership Team and everyone at Elementis has risen to the task – their rapid and decisive actions have helped the Company to navigate safely through these turbulent times.
Our greatest concern has been the safety and welfare of our employees and I am immensely grateful for the efforts of every single one of them. Through their hard work we have maintained effective operations in our supply chain, manufacturing, innovation and customer support, such that every customer has continued to receive the products they need. This has been achieved with unprecedented levels of digitally enabled remote working and enhanced safe working practices. I have been impressed by the resilience of the organisation; it is a testament to the quality of our people and the work that has been done over recent years in transforming the business.

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Looking to the future, we have a clearer path towards returning to a more normal environment with the vaccine roll out, although uncertainties remain including the impact on the way we live and work. Our strong values have supported us well and we all look forward to re-establishing personal contact and relationships with colleagues and customers.

## BUSINESS PERFORMANCE

In 2020, our financial performance was materially impacted by COVID-19, with weaker demand across all our businesses, although encouragingly, we have seen quarter-on-quarter recovery from the lows of Q2. While Personal Care has been affected by restrictions limiting social interaction and travel, our more industrial focused businesses were impacted by weak demand in areas such as industrial coatings, manufacturing and long life plastics.

In response, we have focused on the things that we can control through active cost and cash management, while continuing to innovate for our customers. As a result, we have delivered a resilient level of performance and cash flow in 2020, while continuing to invest in growth projects and improvements to our supply chain. It is expected that further benefits from these improvements will be evident in 2021 and beyond, and that they will be reinforced by our structural growth opportunities as we emerge from COVID-19. Despite the economic challenges in our end markets, it has been particularly pleasing to see our Coatings business respond so effectively to the management changes implemented over recent years with an encouraging increase in operating profit margins.

## OUR STRATEGY

Over the last few years, we have made significant progress repositioning Elementis as a premium performance additives business with advantaged positions in growing markets such as Personal Care, Coatings and Talc. The delivery of the benefits of recent acquisitions has been held back by business specific challenges and the impact of COVID-19. However, we have a clear strategic framework and set of priorities in place to improve returns and create shareholder value.

In November 2019, we outlined Innovation, Growth and Efficiency as the pillars of our new strategic agenda. They remain our core drivers. In 2020 we captured new business representing $30m of revenue, launched 12 new products and delivered $15m of cost savings. These successes demonstrate our strategy in action.

Elementis is fit for the future and well positioned to deliver sustainable long term growth through our distinctive and competitively advantaged assets and technologies. Our strategic priorities and medium term Group performance objectives remain unchanged albeit delayed by the impact of the pandemic