Annual Report and Accounts 2021

Resilience,

recovery,

progress

Contents

Strategic report

Elementis today 01

2021 highlights 01

Our business at a glance 02

Chairman’s statement 04

Chief Executive Officer’s review 06

Investment case 10

Innovation at Elementis 12

Supply chain in action 14

Our market environment 16

Our business model 18

Our strategy 20

Key performance indicators 28

Sustainable business 30

Non-financial information statement 41

Taskforce for Climate-related

FinancialDisclosures (TCFD) 42

Stakeholder engagement 48

Section 172 statement 52

Finance report 54

Operating review 60

Risk management 64

Principal risks and uncertainties 68

Viability and going concern statement 73

Corporate governance

Chairman’s introduction to governance 74

Board of Directors 76

Executive Leadership team 78

UK Corporate Governance Code 80

Division of responsibilities 81

Board leadership and Company purpose 82

Workforce engagement 85

Shareholder engagement 87

Composition, succession and evaluation 88

Nomination Committee report 92

Audit Committee report 96

Directors’ Remuneration report 101

Directors’ report 128

Directors’ responsibilities 131

Financial statements

Independent auditor’s report 132

Consolidated income statement 140

Consolidated statement of

comprehensive income 140

Consolidated balance sheet 141

Consolidated statement of

changes in equity 142

Consolidated cash flow statement 143

Notes to the consolidated

financial statements 144

Company balance sheet 185

Statement of changes in equity 186

Notes to the company financial

statements of Elementis plc 187

Shareholder information

Alternative performance measures

and unaudited information 193

Five year record 195

Shareholder services 196

Corporate information 197

Glossary 198

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.

For more information

www.elementis.com

P20

Innovation, Growth & Efficiency –

our strategic progress

P14

Global supply

chain challenges –

our response

P30

Sustainability –

integrated into all that we do

Resilience, recovery, progress

Operational highlights

Following the significant impact of COVID-19 in 2020,

strongdemand recovery in 2021 triggered ongoing supply

chainchallenges andcost inflation across the globe. In response,

we focused onmaintaining reliable supply to our customers and

the execution ofour self-help agenda via proactive cost and

pricing actions.

Strategic highlights

The implementation of our Innovation, Growth and Efficiency

strategy continued at pace in 2021 with the launch of 21

newproducts, generation of $50m of new business opportunities,

delivery of $10m of cost savings and the start-up of our new

anti-perspirant actives plant in India. The Group is well positioned

togrow and deliver our medium term financial objectives.

Our year in numbers

Revenue Adjusted operating profit

Adjusted operating margin

$880m $107m 12.1%

2020: $751m

2019: $874m

2020: $82m

2019: $123m

2020: 10.9%

2019: 14.1%

Operating profit/(loss) Profit/(loss) before tax Net debt

$26m $6m $401m

2020: $(28)m

2019: $101m

2020: $(69)m

2019: $61m

2020: $408m

2019: $454m

Diluted earnings per share Adjusted diluted earnings per share

Ordinary dividend per share

0.4c 10.6c 0.0c

2020: (11.3)c

2019: 7.9c

2020: 6.5c

2019: 12.4c

2020: 0.0c

2019: 8.55c

Total recordable incident rate (TRIR) Lost time accidents (LTA) Environmental incidents

0.90 4 0

2020: 0.68

2019: 0.48

2020: 3

2019: 2

2020: 0

2019: 0

1 After adjusting items – see Note 5

2 Please see the Alternative Performance Measures section on page 193

Cautionary statement

The Annual Report and Accounts for the financial year ended 31 December 2021, 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.

Elementis is a global specialty chemical company, delivering Enhanced Performance Through Applied

Innovation. Our solutions make our customers’ products easier to manufacture and perform better,

withenhanced sustainability credentials.

Strategic report

2021 Highlights

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Personal Care Coatings Talc

Overview Overview Overview

We are a leading global supplier

ofrheology* modifiers and anti-

perspirant actives to personal care

product manufacturers. Our products

help make skin creams smooth, nail

polish glow and anti-perspirants work.

We supply rheology* modifiers and

other complementary specialty

additives to manufacturers of

industrial coatings and decorative

paints. Our products help make

industrial coatings last longer,

decorative paints more stain

resistantand sealants applyevenly.

We are the second largest global

supplier of talc based additives to

industrial end markets including long

life plastics, technical ceramics and

packaging manufacturers. Talc helps

tomake long life plastics stronger

andlighter, gasoline particulate filters

work and food packaging recyclable.

Sales Sales Sales

$175m $384m $150m

Adjusted operating profit Adjusted operating profit Adjusted operating profit

$37m $62m $14m

Read more on page 60 Read more on page 61 Read more on page 62

Who we are

Elementis is a specialty chemicals

company with around 1,400

employees, operating at 22

manufacturing sites across

theglobe.

Founded in 1844, we are listed on the

London Stock Exchange and are a

constituent of the FTSE 250 index.

What we do

We create specialty chemicals that

deliver crucial end product attributes

across a range of industries including

cosmetics, coatings and long life

plastics. Innovation is at the heart of

what we do; our focus is on creating

solutions that deliver performance

improvements and enhanced

sustainability credentials.

How we do it

Combining our leading positions in

rheology*, surface modification and

formulation, access to unique natural

materials and global footprint, we

deliver Enhanced Performance

Through Applied Innovation to

ourcustomers around the world.

Working with our customers across the

worldto solve their product performance

andsustainability challenges

Strategic report

Our business at a glance

* Learn more about rheology and our technical expertise on page 12.

2 Annual Report and Accounts 2021 Elementis plc

7 Personal Care and Coatings

5 Chromium

2 Personal Care and Coatings

4 Talc

4 Personal Care and Coatings

Chromium

Overview

We are the only producer of

chromium chemicals in North America

and supply our products to a broad

range of industrial applications

including metal plating, wood

treatment and leather tanning.

Chromium chemicals are essential

toextending the life and improving

the performance of many industrial

components such as wind turbines,

telegraph poles and jet engines.

Sales

$171m

Adjusted operating profit

$14m

Read more on page 63

Sales

20%

Personal Care

29%

Personal Care

44%

Coatings

49%

Coatings

17%

Talc

11%

Talc

19%

Chromium

11%

Chromium

Adjusted operating profit

Where we operate

Total number of sites

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

A resilient business recovering strongly

Strategic report

Chairman’s statement

Business performance

In 2021, our financial performance was much

improved compared to the prior year. Sales increased

17% to $880m, driven by strong new business

momentum, targeted pricing actions to offset

inflationary cost increases and volume recovery

across most of our end markets.

While this demand recovery is welcome, it has triggered

well documented supply chain challenges and

accelerating cost inflation across the globe. In response,

the Group has demonstrated the resilience and agility of

its business model, the strength of its global supply chain

and the importance of its efficiency improvement

projects. In such an environment, I am encouraged by

the Group’s performance and look forward to further

improvement as end markets continue to recover and

we make further strategic and operational progress.

Strategic priorities

The Group’s strategic priorities are clear and

consistent. Innovation, Growth and Efficiency are

thepillars of our strategic agenda. Execution of our

priorities in these areas will drive the delivery of our

medium term financial ambitions, namely a 17%

adjusted operating profit margin, 90% operating cash

conversion and net debt/EBITDA of under 1.5x.

This year our strategic progress has been encouraging.

We launched 21 new products, all ofwhich deliver

enhanced product performance, manufacturing

efficiency and sustainability credentials to our

customers. The start-up of our new anti-perspirant

actives plant in India and the delivery of $10m of cost

savings were key efficiency milestones, and the

achievement of $50m of new business opportunities

isa clear sign that our growth platforms are well

positioned for future success.

Although Talc recognised a $53m non-cash goodwill

impairment, linked primarily to delays in the recovery

of automotive markets, your Board believe the

fundamentals of the business remain strong, built

on afully integrated value chain supported by unique

processing and formulation capabilities. There are

attractive long-term opportunities to grow in Asia and

the Americas, increase market share in high value

industrial applications and deliver $20-25m of revenue

synergies by 2023.

Balance sheet and shareholder returns

Net debt of $401m was broadly unchanged on the prior

year ($408m). Net cash flow from operating activities

reduced from $107m in the prior year to $67m in 2021,

primarily due to $32m working capital outflow to

support growth and a $20m one off EU state aid tax

payment. The recovery in earnings resulted in the

reduction of our financial leverage ratio from 3.2x net

debt to EBITDA (31 December 2020) to 2.6x. The Board

and management remain focused on reducing leverage

as quickly as possible towards the medium term target

of 1.5x net debt to EBITDA.

In 2020, at the height of COVID-19 related uncertainty,

the Group took several steps to provide additional

financial headroom and preserve cash, one of which was

the suspension of the dividend. The Board recognises

the value of dividends to shareholders and will look to

reinstate the dividend in the medium term, conditional

upon further financial deleveraging progress.

Governance and Board

During 2021 Andrew Duff stepped down as Chairman

and as a Director. I would like to thank Andrew for

his strong leadership and guidance of the Board

throughout his tenure. He left a Group with high quality

businesses, good market positions, and a strong

Board and Company leadership.

It is a great honour to be serving as Elementis’

new Chair and to be working with a strong

Board, an impressive team of leaders, and

many hugely dedicated and talented people

all around the world. Since joining the Board in

2020, I have found a group with a clear strategy

built on Innovation, Growth and Efficiency.

It is well managed and run by people who

are hardworking, engaged and enthusiastic.

Elementis has significant potential and, having

witnessed the resilience of the business model

over the last two years, I am encouraged about

its prospects.

“ Elementis’

core asset

is its people

and 2021 has

showcased

theimportance

ofthis”

John O’Higgins

Chairman

4 Annual Report and Accounts 2021 Elementis plc

This year we completed an externally facilitated Board

evaluation. The overall result was positive, concluding

that the Board continues to perform effectively with

good leadership, competent and engaged members,

and with the appropriate focus on both in-year

performance and strategy for the future.

Board succession planning is critical to ensure

wehave the right skills and capabilities to support

strategic delivery. In the coming year, given the current

Board size, we will look to appoint two additional

members to the Board who can help us achieve

ourstrategy and growth ambitions.

Our people

Elementis’ core asset is its people and 2021 has

once again showcased the importance of this.

Ourcolleagues around the world have gone above

and beyond to support our customers and provide

reliable supply. We value our people and have sought

to recognise their dedication throughout the year.

Employee engagement activities are crucial to

understand what we are doing well and where we can

improve. I am pleased to report positive trendlines, with

our key engagement score rising from 55% in 2020 to

63% in 2021. This is reflective of recent improvements

to digital communications, flexible working and an

enhanced overall engagement agenda, which included

our inaugural Women in Leadership forum led by

Christine Soden, our Designated Non-Executive

Director for workforce engagement.

Talent is a key focus for the Board and during 2021

wecontinued to monitor and track our talent

development programmes, focusing on ensuring

thatwe have the right capabilities for the future and

astrong succession pipeline across leadership

positions. The Group is further developing its diversity

programmes with unconscious bias training initiatives

launched across the globe. Whilst gender is not the

only focus for diversity, encouragingly the number of

women in the senior leadership team has increased

from 24% in 2018 to 31% this year, and women

currently represent over 40% of the Board. We are

committed to further developing programmes to

support a diverse workforce.

Sustainability

For consumers the COVID-19 pandemic has brought

the environmental footprint of products and services

into sharp focus. With 53% of our revenue generated

from naturally derived products that are also closely

aligned to megatrends such as the switch to natural

personal care ingredients, water based industrial

coatings and vehicle weight reduction, we are

strategically aligned for the future and our innovation

pipeline is positioned tofurther increase this number.

We also recognise the importance of reducing the

impact of our global supply chain on the environment.

This year we have made good progress towards our

2030 targets thanks to multiple efficiency initiatives

throughout our operations. You can read more about

our sustainability agenda on page 30.

Stakeholder engagement

As a new Chair, I have sought to meet and get the

views of our shareholders and other stakeholders.

This engagement is a valuable way of assessing the

success of our strategic delivery and where we can

improve. During the year we received another unsolicited

takeover offer, which we concluded significantly

undervalued Elementis and its prospects, and therefore

rejected. The Board appreciates the support of our

shareholders and accepts the continued performance

expectations that come with that support.

Looking to the future

Elementis is well positioned; we have differentiated

assets, market leading positions and clear strategic

priorities for growth. We remain mindful of the

continued uncertain external environment and the

ongoing challenges that the COVID-19 pandemic

brings, but we know that Elementis is heading in the

right direction and well positioned to take advantage

of the opportunities we see.

The Board and I are thankful to all our people for their

hard work, commitment and passion in driving our

business recovery and positioning Elementis for

future progress.

John O’Higgins

Chairman

Our People in Action in 2021

Colleagues

Elementis’ people have been on

thefront line during the COVID-19

pandemic, ensuring crucial supply

chains continue tooperate. The

Group has taken appropriate

measures to keep colleagues safe

and ensure their outstanding efforts

are rewarded.

Customers

Elementis’ colleagues have gone above

and beyond to support our customers

during the pandemic and associated

supply chain challenges. They have

worked tirelessly to source and qualify

alternative raw material suppliers, book

alternative transportation modes, and

support our customers’ product

innovation efforts around the world.

Communities

Elementis’ businesses support the local

communities in which they operate in

various ways. Examples include financial

donations in Brazil and India to support

the local response to COVID-19,

volunteering days in Cologne, London,

New Jersey and Shanghai, and the

sponsorship of local amateur sports

teams in Finland and the UK.

1 2 3

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Progress in a challenging environment

Strategic report

Chief Executive Officer’s review

Performance

2021 saw an improved financial performance due

togood new business success and end market

recovery from the weak demand levels of the prior

year, resulting in 17% sales growth. Coatings, our

biggest business, benefitted from strong new

business activity, continued growth in decorative

paint and a recovery in industrial coatings demand.

InPersonal Care, we saw a modest increase in

performance as improved demand for lipsticks,

mascaras and anti-perspirants was somewhat

constrained by continued restrictions on travel and

social interaction. In Talc, sales grew 14%, reflective

of good strategic progress and a well positioned

business, but adjusted operating profit declined

16% due to weak automotive production and

accelerating second half cost inflation ahead of

pricing actions taken towards the end of the year.

While these near term headwinds resulted in a

$53m non-cash Talc goodwill impairment, the

strong fundamentals of the business are unchanged

and there is scope for material performance

improvement from price actions, continued

strategic momentum and market share gains,

alongwith the latent demand recovery in

automotive markets. Finally in Chromium,

thebusiness benefitted from stronger volumes

linkedtothe rebound in industrial activity.

While this demand recovery is welcome, it has created

supply challenges including raw material availability,

logistical disruptions and accelerating inflation. In

response, we qualified alternative suppliers, extended

production runs andpursued alternative

transportation options. In addition we were able to put

through price increases to fully offset material cost

inflation. These actions, combined with our ongoing

self-help agenda on costs and cash management,

resulted in an adjusted operating profit of $107m,

modestly ahead of expectations. You can read more

about our financial performance in the CFO review

on pages 54 to 59.

Safety

Safety is the foundation of our business and at

theheart of our culture. This year we continued the

TogetherSAFE safety campaign roll out and held

ourinaugural global safety week, including webinars

from external speakers and multiple activities at

oursites around the world. Although our safety

performance has been somewhat disappointing

with 12 recordable injuries, I am confident that the

steps we have taken mean we are positioned for

future improvement.

Many sites achieved notable milestones during

theyear, and while I cannot mention them all, let

mehighlight a few. In Mumbai, our team working

onthe new anti-perspirant actives plant reached

over one million hours of safe working, overcoming

multiple obstacles including COVID-19 lockdowns

and monsoons. Congratulations also to our Corpus

Christi and Milwaukee teams for 18 and nine years

of safe working respectively – I am sure there are

many more to come.

Our people

Key to the strength of Elementis is the quality and

commitment of our people. Ongoing engagement

surveys and outreach programmes reflect a motivated

and loyal workforce with improving engagement

metrics. During the COVID-19 pandemic, given the

increased prevalence of home working, one key

While the impact of COVID-19 has started to

recede, 2021 was, in many ways, as challenging as

2020. Strong and sharp demand recovery across

multiple end markets triggered significant global

supply chain challenges and material cost inflation.

In such an environment, the delivery of results

modestly ahead of expectations is testament to the

resilience of our business model, the commitment

of our people and the importance of our self-help

agenda. This performance, combined with our

continued strategic progress, gives me confidence

in our prospects and the delivery ofour medium

term financial objectives.

TOGETHERSAFE

Our team in Mumbai, India

recorded over one million

hours of safe working in

2021

INNOVATION

In 2021 our R&D and

commercial teams

launched 21 new products

Paul Waterman

CEO

6 Annual Report and Accounts 2021 Elementis plc

area of focus has been global communications. We

have invested in digital capabilities, improved our

engagement activities, and increased our employee

recognition and reward schemes.

Elementis aims to be an open and inclusive

workplace. This year our Diversity and Inclusion

Council continued to move forward in shaping our

culture for success through Women in Leadership

events, unconscious bias training and expert

speakers addressing inclusive leadership and

activecultural advocacy skills.

I am incredibly proud of how strong our team is,

both in the care our people have shown each other,

our customers, suppliers and communities, and

howthey have responded so positively in such

adifficult environment.

Sustainability

Sustainability is a key focus at Elementis and I am

pleased to report further progress. This year we

launched 21 new products, all of which have clear

sustainability credentials, including hectorite clay

based additives that are 100% natural and castor

wax derived rheology modifiers for marine and

protective coatings that are 75% bio based. In

addition, we have made good progress towards

our2030 environmental targets including significant

reductions in GHG (-25%) and water withdrawal

(-26%) intensity versus the prior year.

This progress has been recognised by external

agencies. MSCI, Sustainalytics, CDP and EcoVadis

all raised their ESG ratings of Elementis this year.

Iam also pleased we have been recognised with

theResponsible Chromium label, awarded by the

International Chromium Development Association

(ICDA). As the only chromium chemicals holder

ofthis award, it highlights the market leading

standards of our operations in areas such as

safetyand safeguarding of the environment.

While this progress and recognition are

encouraging, it is only the start of our journey.

Toaccelerate our future progress, I am pleased

towelcome Phil Blakeman to Elementis as our first

Global Head ofSustainability. You can read more

about our sustainability activities on pages 30 to 40.

Innovation, Growth & Efficiency

In the last few years, we have made significant

progress positioning Elementis as a premium

performance additives company, based on

uniqueassets and value chains, and with clear

opportunities for growth. Innovation, Growth

andEfficiency represent our strategic pillars,

andthe delivery of our priorities in each of these

areas will ensure we create significant value for

allour stakeholders.

At Elementis, everything starts with innovation.

Wecreate distinctive solutions that increase the

performance of our customers’ products, improve

their manufacturing efficiency, and deliver enhanced

sustainability credentials. While the spread of

Sustainability progress at a glance

Why sustainability matters

Making profit and generating shareholder returns is only the beginning.

Werecognise the importance of making a positive impact in the world and

arecommitted to creating a sustainable future through innovative products

thatenhance the health and wellbeing of society and promote efficient use

ofresources. We are also focused on reducing the impact of our operations

andare working towards the delivery of our sustainability targets.

Progress made in the year

In 2020, we set specific environmental targets for delivery by 2030, and this

year we have made good progress towards these goals, thanks to multiple

efficiency initiatives throughout our supply chain. For example, three

manufacturing sites switched to 100% green electricity, Newberry Springs

lowered the energy intensity of its clay purification processes and our Talc

operations in Finland materially reduced their water usage thanks to

increased water recycling.

We have also put in place additional projects to help us move faster towards

the targets and address our slower progress on waste reduction. You can

read more about our performance on pages 30 and 31.

GHG

emissions

Energy

efficiency

Water

usage

Waste

Target

25%

reduction

Progress

Target

20%

reduction

Progress

Target

10%

reduction

Progress

Target

10%

reduction

Progress

Key – progress towards 2030 targets

On track At risk Behind

Note: 2030 Targets are volume based intensity metrics (e.g. joules/tonnes of

production vs2019baseline.

Priorities for 2022 and beyond

We are conscious that there is a lot more we need to do. In 2022 and beyond

our focus will be on expanding our climate risk management efforts by

continuing to embed the Task Force for Climate Related Financial Disclosures

(TCFD) framework across the organisation and fully quantifying our Scope 3

emissions. These steps will help us to develop our pathway to carbon

neutrality and support the development of a Net Zero transition plan.

Inaddition, we plan to introduce a new target for water usage reduction,

having already achieved our initial goal, and to conduct a materiality

assessment of non-financial topics throughout the organisation.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

COVID-19 limited the time spent in laboratories with

our customers, we have continued to support their

innovation needs. In2021 we opened two new

Personal Care laboratories in Brazil and China,

launched 21 new products and doubled our number

of open innovation partnerships. Innovation

excellence is critical for any specialty chemicals

company, and targeted innovation optimises our

growth and efficiency. To read more about our

innovation efforts, please see pages 22 and 23.

Today, around 90% of Group earnings are

generatedby Personal Care, Coatings and Talc.

These segments are innovation led, competitively

advantaged and with clear opportunities for growth

as a result of structural megatrends. Across our

growth platforms we see approximately $100m of

incremental revenue opportunities in areas such

asnatural skin care, waterborne industrial additives

and talc barrier coatings. The delivery of $50m of

new business opportunities this year demonstrates

that our products are well positioned and have

encouraging momentum.

Improving efficiency is an ongoing focus at

Elementis. In 2021 we delivered $10m of supply

chain savings as part of our medium term efficiency

programme, driven largely by the closure of our

Charleston, West Virginia, production plant and

consolidation of capacity at our St Louis, Missouri,

site. This has offset $10m of temporary COVID-19

related cost savings made in 2020 which have, as

expected, returned to the business in 2021 as the

impact of COVID-19 has receded. An additional

milestone was the start-up of our new anti-perspirant

actives plant in India, which will create anadvantaged

global supply chain that is well positioned to support

our growth ambitions and drive a material AP Actives

performance improvement.

“ In response

to global

supply chain

challenges,

we have

demonstrated

the resilience

of our

business

and the

commitment

of our people”

Read more on

pages 14 and 15

74%

Of manufacturing sites

with no recordable

employee injuries in

2021 (74% in 2020)

63%

Employee engagement

score (55% in 2020)

Strategic report

Chief Executive Officer’s review continued

You can read more about our efficiency gains and

examples of operational flexibility in my interview

opposite and on pages 26 to 27.

The Group has demonstrated its resilience during

the demand downturn in 2020 and subsequent

supply chain and inflation challenges of 2021.

Wehave a strong base from which to progress

anddeliver our medium term financial objectives

ofa 17% adjusted operating profit margin; 90%

plusoperating cash conversion; and a reduction

inleverage to 1.5x net debt/EBITDA.

Outlook

While the last 12 months have been extremely

challenging, the Group has again demonstrated its

resilience and responded with speed and agility. The

fundamentals of the business remain strong, with high

quality assets, differentiated technologies and a clear

strategy. We will continue to maintain our focus on

Innovation, Growth and Efficiency and in 2022 expect

to deliver $50m of new business opportunities, over

20 new products and progress towards $10m of

additional efficiency savings by2023.

We have made an encouraging start to the

year,although the external environment remains

challenging due to global supply constraints and

theimpact of accelerating cost inflation. For the

year ahead, we are confident that with further

steady demand improvement, supported by

ourself-help actions, we will deliver an improved

financial performance and a reduction in leverage.

Paul Waterman

CEO

8 Annual Report and Accounts 2021 Elementis plc

An interview with our CEO

How has the Company responded to the global

supply chain challenges?

Strong demand recovery in 2021 required fast action and

flexibility to increase production at a number of our sites.

Wehired extra workers, increased batch sizes and increased

production runs. Like many industries, we experienced raw

material shortages and cost inflation, which required rapid

qualification of alternative suppliers and price increases.

Andwe faced various logistics challenges due to limited

container availability, congestion at key ports and driver

shortages. We responded by using air freight, booking

shipping far in advance and implementing surcharges.

TheElementis global supply chain responded well, and

theresilience is clear in our performance. However, with

thepath of COVID-19 remaining somewhat uncertain, we

expect these supply chain challenges to continue for the

foreseeable future.

Does the Company invest enough resources

oninnovation?

This year we spent $15m on global innovation and technical

support, which, excluding Chromium (a cash focused business)

represents approximately 2% of Group revenue. Ifattractive

opportunities arise that require more resources, we will, of

course, carefully consider pursuing them. However, our

immediate focus is not on how much we spend, but rather how

we spend it; that is why our innovation culture and focus is so

important. We are focused on solving our customers’ biggest

problems, with clear sustainability credentials and doing so

at speed. With 14% of our revenue today coming from new

products vs 10% in 2017, we are well on our way to delivering

our target of 17% by 2025.

How is sustainability linked to your innovation efforts?

This year, to optimise our innovation efforts, we launched

asustainability scorecard based on defined factors. All new

product launches and innovation pipeline projects must

haveclear sustainability credentials; this ensures we deliver

innovation that benefits our customers and the wider society.

For example, we recently launched Thixatrol® AS 8053,

arheology modifier for high performance adhesives and

sealants. In addition to fantastic performance credentials,

thisproduct has clear sustainability benefits. It is derived from

castor wax, resulting in a product that is over 75% bio based.

It also requires minimal heat activation, saving our customers

energy and, being a 100% active ingredient with no water

content, it reduces transportation emissions.

How will the Company reach its medium term target

ofa17% adjusted operating profit margin?

Broadly, we see two legs to reach our 17% margin target.

First, e see approximately $100m of incremental revenue

opportunities across our growth platforms such as natural

skin care and premium decorative paints. Second, we are

targeting a further $10m of savings for delivery by 2023

driven by the start up of our new plant in India, procurement

excellence and manufacturing process improvements. We are

confident that this focus on growth and efficiency, combined

with continued recovery in certain end markets and targeted

pricing actions, will allow us to deliver our ambition.

What are your capital allocation priorities and when

will dividends return?

Elementis has a strong track record of cash generation and

our immediate focus is to use this capital to fund organic

growth and reduce our financial leverage. The Board also

recognises the value of dividends to shareholders and,

dependent on further balance sheet deleveraging, will

lookto reinstate the dividend in the medium term.

Disciplined capital allocation

Strong cash flow

Invest for growth

Debt reduction

Shareholder returns

Capital investments

– ~6% of sales

– Typical returns 20%+ IRR on

growth & productivity capex

– Medium term ambition

below 1.5x

– Reinstate once further progress

made on reducing financial

leverage

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Our investment case

Reasons to invest

Differentiated premium assets

The fundamentals of our business are strong,

focused on high quality, high margin activities in

Personal Care, Coatings and Talc. These premium

performance additives businesses are centred on

long duration and differentiated resources, including

the only hectorite clay mine in the world in California,

and high quality talc deposits in Finland. Combined

with unique technology and market leading

formulation capabilities these businesses have

enduring competitive advantages.

Read more about our innovation focus

onpages 22 and 23

Growth opportunities supported by structural

growthtrends

Across our premium performance additive businesses, we see over $100m of

revenue growth opportunities supported by structural megatrends. In Personal Care,

we are well positioned to serve the growth of premium cosmetics in Asia and

demand for natural skin care ingredients. In Coatings, our technologies enable the

creation of more environmentally friendly industrial coatings and higher performance

decorative paints. In addition, the need to reduce vehicle emissions and single

use plastic consumption will drive strong demand for our Talc based additives.

Read more about our growth opportunities

on pages 24 and 25

Elementis is a global specialty chemicals business

providing innovative solutions for some of the biggest

challenges facing industries and companies today.

Ourbusiness model is built on differentiated premium

assets, an innovation focus, clear growth opportunities

and strong cash generation.

The world’s largest known source of high quality hectorite

clay in California, with over 50 years estimated resource life

Annual Report and Accounts 2021 Elementis plc

150+

Investor meetings during 2021

Strong cash generation

Strong cash generation is a hallmark of Elementis. Looking

forward, we target operating cash conversion of at least 90%,

andsupported by our Innovation, Growth and Efficiency priorities,

this will facilitate sustained reinvestment for organic growth,

financial deleveraging and, in due course, the reinstatement of

dividend payments to shareholders. Our medium term financial

leverage target is under 1.5x net debt/EBITDA, compared with

2.6x today, and delivery of this target is anticipated to drive

significant shareholder returns.

Read more on page 87

In November, Joe Lupia (SVP Technology) held an innovation

webinarshowcasing our innovation strategy, and recent and future

productlaunches

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Innovation at Elementis

Global reach, local presence

East windsor,

USA

São Paulo,

Brazil

Palmital,

Brazil

Cologne

German

Amster

dam,

Netherlands

Songjiang

China

Hsinchu,

aiwan

Technology centres

~$15m

Annual R&D and technical spend

100

Scientists

Global technology sites

There are three pillars to our innovation strategy.

First,we want to create technologies that align

with our growth platforms and deliver sustainability

benefits to the biggest challenges our customers

face. Second, our innovation culture is about being

customer driven, solutions focused and fast moving.

And finally, we have a clear understanding of what

success looks like – our target is for 17% of our

revenue to come from new products by 2025.

New products as % of sales

Base business rebound

post 2020 COVID-19

demand trough

2017

2018

2019

2020

2021

2025

Complementary capabilities

Rheology

Rheology is the science behind the flow

ofmaterials. For instance, how a paint is

applied to a wall or a cream spreads when

applied to skin.

Surface chemistry

Surface chemistry is the ability to modify

asurface’s properties to change the way

itreacts to external stimuli. For instance,

modifying hectorite clay to work in both

solvent and waterborne systems.

Formulation

Formulation is about how different

additivesand chemistries interact. In

aformulation, every chemical is added,

inmeasured amounts, to interact

andachieve a specific purpose.

12 Annual Report and Accounts 2021 Elementis plc

The employee voice: Research & Development

Kim Burch

Global Technical Applications Director – Personal Care

What do you enjoy most about the working

ininnovation at Elementis?

I’ve worked at Elementis for nearly ten years, helping

todevelop new products for the Personal Care market.

We’ve got a fantastic group of highly qualified scientists

around the world, advanced technologies and, of course,

access to unique raw materials, so we’re in a good position

tohelp solve our customers’ problems. I enjoy the partnerships

we have with our customers and the sheer variety of work.

Inthe morning, I could be testing an anti-ageing skin cream for

the North American market, and in the afternoon developing

ahalal colour cosmetic product for the Indonesian market.

Itreally is a dynamic place to work, with a lot of potential.

Innovation in action

Barrier coatings

Regulation and consumer behaviour are driving demand away

from single use oil based plastics in areas such as food packaging

and coffee cups.

To help solve this problem, we developed Finntalc C15B2,

atalcbased additive that provides effective barrier properties.

Within food packaging, talc prevents gases entering and liquids

escaping. And being a natural material, it is fully compostable

andrecyclable.

With an estimated addressable market of $50m, growing

10%ayear, barrier coatings offer attractive potential to our

talcbusiness.

Bentone Hydroclay

2100

The market need for natural Personal Care ingredients is

wellunderstood – customers prefer natural ingredients to

synthetics and they are cleaner and better for the environment.

This year we launched Bentone Hydroclay

2100 to develop

our presence in the large and growing rheology market for

skin care. Based on our hectorite clay, it delivers multiple

benefits to customers.

It has great touch and feel, and its rheology profile means it

iseasily spreadable. It is cold processable, so it doesn’t require

heat activation, thereby delivering energy and emission savings

to customers. And it is 100% natural, microplastic free and

certified by key eco labelling standards such as COSMOS.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Responding to global supply chain challenges

In 2021, global supply chains were tested to their limit,

hit by problems including the Suez Canal blockage

and associated port congestion, Hurricane Ida and

HGV driver shortages. These events, combined with

the rebound in demand following a heavily COVID-19

impacted 2020, tested the resilience of our global

operations and supply chain.

Demand

The surge in demand across industrial end markets required

fastaction to increase production at several of our most

importantsites. We hired extra workers, increased batch sizes

andextended production runs. We also needed to be flexible,

prioritising orders and providing clear and consistent

communication to our customers.

Raw materials

Surging demand combined with supply curtailments due to events

such as the Texas winter storm, Hurricane Ida and ongoing COVID-19

outbreaks, resulted in raw material shortages and significant cost

inflation during the year. In response, we rapidly qualified alternative

suppliers, increased our strategic global purchasing and, where

necessary, implemented price increases.

Strategic report

Supply chain in action

Record monthly production at Livingston, Scotland

Our manufacturing facility in Livingston, Scotland produces

multiple additives for the Coatings market. In 2021, robust

demand for decorative paint, as consumers undertook

DIYprojects during social and travel restrictions, was

complemented by a sharp recovery in industrial coatings

demand. In response, our Livingston team hired additional

staff, implemented 24-hour production schedules and

swiftly reallocated engineers to critical pinch points, while

alsojuggling COVID-19 related staff shortages. The team’s

prompt actions delivered record monthly production

volumes, 30% above the previous record for some product

categories, while maintaining safe working practices.

Manufacturing flexibility at New Martinsville, US

In New Martinsville, US we manufacture specialty rheology

additives, wetting agents and dispersants for water based

coatings. Molten bulk polyethylene glycol is an important

raw material for our chemical processes. In 2021, several

suppliers experienced production outages, resulting

inmarket shortages. In response, within one month

theNewMartinsville team safely adapted their systems

andoperating procedures to switch from liquid to solid

polyethylene glycol, reducing our bulk transportation

needsand ensuring continuity of supply to customers

intheNorth American coatings market.

14 Annual Report and Accounts 2021 Elementis plc

Logistics

We faced a range of logistical challenges during the year,

including limited container availability, congestion at key

portsanddriver shortages. As a result, transportation

optionsnarrowed, and associated costs increased significantly.

Inresponse, we installed dedicated overland transportation

capacity where possible, used air freight where needed, booked

shipping far in advance and implemented surcharges.

Energy

Surging industrial demand, rebounding consumer activity and

supply constraints resulted in rising energy prices around the

globe. For instance, in 2021 European natural gas prices reached

a record peak at €180/MWh (Dutch TTF) on 21 December, 1877%

above the average price in 2020. While effective hedging policies

limited the immediate business impact, the efforts of our global

process improvement teams to reduce our energy intensity have

also helped greatly.

Dedicated logistics in North America

During the year logistical challenges in North America

included the limited availability of bulk trailers and a shortage

of truck drivers. These issues, combined with strong demand

for our Rheolate® HX rheology additives forpremium

decorative paints, little on site storage at keycustomers

andhigh cleaning requirements for transportation equipment

(to avoid cross contamination), resulted in potential delays

tocustomer deliveries. Toovercome these issues, our supply

chain team, workingwith our logistics provider, established

adedicatedpool of drivers and truck trailers. As a result,

wemaintained customer service and secured additional

volumes for 2022.

Reducing energy needs at Newberry Springs, US

At our Newberry Springs site in California, our team operates

a hectorite beneficiation process whereby hectorite clay

ispassed through a centrifuge process, leaving a purified

wetclay slurry that is then dried. During the year our team

implemented several mechanical improvements, increasing

the solid clay content in the slurry entering the drying

process without sacrificing product quality. As a result,

ourproduction yields increased,with a 10% reduction

intheplant’s natural gasrequirements.

Annual Report and Accounts 2021Elementis plc

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Strategic report

Our market environment

A sustainable future

Demographics Premiumisation Sustainability Transparency

Trend

The UN expects the world’s population to increase by 2 billion

inthe next 30 years, to 9.7 billion people.

Most of this increase will be in the developing world, driving

further urbanisation and investment in infrastructure.

Economic development, an expanding middle class and

growing levels of western style consumerism will generate

demand for products that improve living standards in

thesemarkets.

Trend

Premiumisation is bridging the gap between luxury and mass

market – offering all consumers access to unique or innovative

products that promise more.

Consumers are willing to pay premium prices on value added

products with real benefits.

Premium is not just about price. It is the promise of exceptional

quality and experience, fuelling the growth of unique, value

added products.

As a result, the premium segment is experiencing strong

growth, outpacing total category sales in many markets.

Trend

The most often quoted definition of sustainability comes from

the UN World Commission on Environment and Development:

“sustainable development is development that meets the

needs of the present without compromising the ability of

future generations to meet their own needs.”

Sustainability presumes that resources are finite and should

beused conservatively and wisely, with a view to long term

priorities and consequences in the ways in which resources

areused. Simply put, sustainability is about our children and

ourgrandchildren, and the world we will leave them.

Trend

In an ever more connected world, customers and employees

want more transparency from the organisations that serve and

employ them.

Consumers and stakeholders want to know how goods

andservices are delivered to their door, how items are

manufactured and what happens to their personal data.

A word on Twitter, right or wrong, and the world will

know.Instantly.

Organisations of all kinds must establish and maintain trust,

asthe basis for successful collaboration and innovation.

What this means for our industry

Increasing demand for construction and infrastructure

related solutions

Rising demand for personal care products such as

colourcosmetics and skin creams

Increased demand for longer lasting and more

technologically advanced products

Our opportunities

– New geographic markets for consumer and industrial

products that require premium performance additives

– Opportunities to innovate and serve local market needs

What this means for our industry

Demand for products that make consumers’

lives easier

Demand for products with feel good and

premiumcharacteristics

Demand for natural or naturally derived products

Our opportunities

– Higher demand for additives that deliver premium product

performance characteristics

– Opportunities for natural or naturally derived ingredients

(e.g. hectorite, talc or castor wax based additives) which

represent 53% of our total sales

What this means for our industry

Increased desire for solutions that contribute positively

tothe health and wellbeing of society

Demand for solutions that increase production yields

andcontribute towards the circular economy

Pressure to minimise social and environmental impact

ofproduction throughout supply chains

Our opportunities

– Increase the penetration of our naturally derived

chemistries and materials for pollution control systems

– Demand for our technology solutions that lower our

customers’ environmental footprint

What this means for our industry

Consistent and transparent communication of activities

throughout the value chain

Clear evidence of ethical and social considerations in

decision making

Open and frequent consultation with all stakeholders

Our opportunities

– Help customers make informed purchasing decisions

through clear scientific evidence

– Improved reporting and disclosure of corporate activities

Our response

Capital investment in manufacturing assets in India

toenhance our efficiency and bring our products closer

toour customers in high growth geographies

Investment in new technical service centres in Brazil and

China to enhance our regional technical support and help

to capture new business opportunities

Increased sales and marketing resources in Asia

tosupportgrowth in the region

Our response

Focused innovation targeting technologies that deliver

improved product performance, lower operational costs

and enhanced sustainability claims

The launch of 21 new products in areas such as premium

decorative paints, natural skin care ingredients and

highefficacy anti-perspirant actives

Our response

Introduction of a sustainability scorecard for all new

product launches and innovation pipeline projects

The launch of dry powder additives that reduce

transportation emissions, additives that lower customers’

energy requirements and enable food packaging recycling

Progress towards our 2030 environmental targets

Our response

Further investment in digital capabilities including online

customer ordering, tracking and fulfilment, along with

access to product safety data

Implementation of TCFD and increased sustainability

resources including the hiring of a Global Sustainability Director

Verification against demanding labelling standards such

asISO, COSMOS and Ecolabel to highlight the credentials

ofour products

16 Annual Report and Accounts 2021 Elementis plc

Demographics Premiumisation Sustainability Transparency

Trend

The UN expects the world’s population to increase by 2 billion

inthe next 30 years, to 9.7 billion people.

Most of this increase will be in the developing world, driving

further urbanisation and investment in infrastructure.

Economic development, an expanding middle class and

growing levels of western style consumerism will generate

demand for products that improve living standards in

thesemarkets.

Trend

Premiumisation is bridging the gap between luxury and mass

market – offering all consumers access to unique or innovative

products that promise more.

Consumers are willing to pay premium prices on value added

products with real benefits.

Premium is not just about price. It is the promise of exceptional

quality and experience, fuelling the growth of unique, value

added products.

As a result, the premium segment is experiencing strong

growth, outpacing total category sales in many markets.

Trend

The most often quoted definition of sustainability comes from

the UN World Commission on Environment and Development:

“sustainable development is development that meets the

needs of the present without compromising the ability of

future generations to meet their own needs.”

Sustainability presumes that resources are finite and should

beused conservatively and wisely, with a view to long term

priorities and consequences in the ways in which resources

areused. Simply put, sustainability is about our children and

ourgrandchildren, and the world we will leave them.

Trend

In an ever more connected world, customers and employees

want more transparency from the organisations that serve and

employ them.

Consumers and stakeholders want to know how goods

andservices are delivered to their door, how items are

manufactured and what happens to their personal data.

A word on Twitter, right or wrong, and the world will

know.Instantly.

Organisations of all kinds must establish and maintain trust,

asthe basis for successful collaboration and innovation.

What this means for our industry

Increasing demand for construction and infrastructure

related solutions

Rising demand for personal care products such as

colourcosmetics and skin creams

Increased demand for longer lasting and more

technologically advanced products

Our opportunities

– New geographic markets for consumer and industrial

products that require premium performance additives

– Opportunities to innovate and serve local market needs

What this means for our industry

Demand for products that make consumers’

lives easier

Demand for products with feel good and

premiumcharacteristics

Demand for natural or naturally derived products

Our opportunities

– Higher demand for additives that deliver premium product

performance characteristics

– Opportunities for natural or naturally derived ingredients

(e.g. hectorite, talc or castor wax based additives) which

represent 53% of our total sales

What this means for our industry

Increased desire for solutions that contribute positively

tothe health and wellbeing of society

Demand for solutions that increase production yields

andcontribute towards the circular economy

Pressure to minimise social and environmental impact

ofproduction throughout supply chains

Our opportunities

– Increase the penetration of our naturally derived

chemistries and materials for pollution control systems

– Demand for our technology solutions that lower our

customers’ environmental footprint

What this means for our industry

Consistent and transparent communication of activities

throughout the value chain

Clear evidence of ethical and social considerations in

decision making

Open and frequent consultation with all stakeholders

Our opportunities

– Help customers make informed purchasing decisions

through clear scientific evidence

– Improved reporting and disclosure of corporate activities

Our response

Capital investment in manufacturing assets in India

toenhance our efficiency and bring our products closer

toour customers in high growth geographies

Investment in new technical service centres in Brazil and

China to enhance our regional technical support and help

to capture new business opportunities

Increased sales and marketing resources in Asia

tosupportgrowth in the region

Our response

Focused innovation targeting technologies that deliver

improved product performance, lower operational costs

and enhanced sustainability claims

The launch of 21 new products in areas such as premium

decorative paints, natural skin care ingredients and

highefficacy anti-perspirant actives

Our response

Introduction of a sustainability scorecard for all new

product launches and innovation pipeline projects

The launch of dry powder additives that reduce

transportation emissions, additives that lower customers’

energy requirements and enable food packaging recycling

Progress towards our 2030 environmental targets

Our response

Further investment in digital capabilities including online

customer ordering, tracking and fulfilment, along with

access to product safety data

Implementation of TCFD and increased sustainability

resources including the hiring of a Global Sustainability Director

Verification against demanding labelling standards such

asISO, COSMOS and Ecolabel to highlight the credentials

ofour products

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Creating long term value

Strategic report

Our business model

We have the resources...

People

Our engaged and skilled workforce is focused

oninnovation, customer service and delivering

ourstrategy.

~1,400

skilled employees located around theworld

4,500+

employee training hours delivered in 2021

Relationships

We have close long term relationships with

customers, suppliers and other stakeholders,

centred on trust and collaboration.

joint product development projects with

customersin 2021

146

online technical support seminars delivered to

customers in 2021

Expertise

Our technical experts deliver unique and superior

additives to a wide range of end markets.

100

scientists working across 7 innovation and technical

support centres

$15m

spend on R&D and technical support in 2021

Assets

We combine competitively advantaged positions

inhectorite, talc and chromium, with our

distinctivetechnologies, to create value

addedcustomer solutions.

years of estimated resource life at our hectorite

mine in California; the worlds largest known source

ofhigh quality rheology grade hectorite clay

we are the only domestic producer of chromium

chemicals in North America, supported by a

proprietary delivery system that reduces customer

handling risks

Supply chain

Our global manufacturing footprint allows us

tobeflexible and resilient, and deliver high value

innovation solutions to customers in all geographies

manufacturing sites in 7 countries around theworld

950

employees working in manufacturing roles across

the globe

Capital

A highly cash generative business model and

disciplined capital allocation framework that

enablesus to invest in growth, deliver our

strategy,and repaydebt.

111%

average three year operating cash conversion

$53m

capital expenditure in 2021, of which 51% was

directedto growth and productivity investments

...to create market leading

innovativesolutions...

We collaborate with

our customers

We develop innovative solutions

We manufacture safely,

responsibly and effectively

We deliver to our

customers globally

Underpinned by our

culture and values

Safety – our way of life

We are committed to providing a safe

environment for all

Solutions – creating

value for our customers

We make a difference through

ourexpertise, responsiveness

andfocuson quality

18 Annual Report and Accounts 2021 Elementis plc

...which, combined with our strategy…

Innovation

Growth

Efficiency

…benefits all of our stakeholders

Shareholders

Elementis seeks to generate appreciable returns for shareholders over time

throughsustainedearnings growth and, subject to capital constraints,

progressivedividendpayments.

$245m

dividend payments

since2016

$97m

debt reduction since 2018

See pages 54-59

Employees

Elementis promotes equality and diversity throughout the organisation and has policies

andprocedures that allow our employees to meet their training needs and maximise

theirpotential.

$131m

employee wages and salaries

in2021

63%

employee engagement score

See pages 38-40

Customers

Providing value enhancing products and building relationships with our customers

ensureweare better placed to solve their biggest challenges.

new products launched

in2021

$50m

new business opportunities

captured in 2021

See pages 22-24

Suppliers

We value our supplier relationships and take a long term strategic approach

toensureamutually beneficial and supportive relationship.

600+

raw material suppliers used

in2021

~75%

raw materials are sourced

frommore than one supplier

See page 40

Environment

Through product innovation and operational improvements, we are reducing

theenvironmentalimpact of both our activities and our customers’ products.

25%

reduction in our scope 1

and 2 (market-based) GHG

emissions intensity in 2021

upgrades from ESG ratings

agencies in 2021

See pages 34 - 37

Ambition – passion

forexcellence

We are innovative, courageous

anddriven in everything we do

Respect – we do

therightthings

We care for our colleagues, customers,

communities and environment

Team – the power

ofcollaboration

We work, grow and succeed together

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Strategy at a glance

Clear strategic priorities and progress

Our purpose

To achieve sustainable

progressacross the world

throughinnovative specialty

chemicals products that deliver

cleaner, better and more

sustainable performance.

Our vision

We aim to be a growing

specialtychemicals business

thatcreates sustainable value

forallour stakeholders.

Our values

Safety, Solutions, Ambition, Respect

and Team are core to our high

performance culture and reflected

ineverything that we do.

Our strategy

With strong positions in attractive markets, we see clear growth and margin improvement opportunities and expect to

deliver strong, sustainable returns. The execution of our Innovation, Growth and Efficiency strategy will address our

customers’ most challenging problems whilst driving sustained value creation.

Innovation

We are a global leader in performance-

driven additives that help create

innovative solutions forour customers.

Leveraging our capabilities in rheology,

surface chemistry and formulation,

wehelpour customers create

betterproducts.

Read more on pages 26 and 27

Our sustainable approach

Our products help to make

infrastructure, buildings and

consumerproducts more durable,

thereby extending their lifetimes.

We also strive to make our own

operations more efficient and

reducetheir environmental impact

byincreasing our use of renewable

energy, recycling water and

reducingwaste.

20 Annual Report and Accounts 2021 Elementis plc

Innovation

Overview

– Launched 21 new products

– Opened new Personal Care labs

inChina and Brazil

– New and protected products

14%of sales vs 10% in 2017

– 53% of revenue from natural or

naturally derived products

– Launched new products with

open innovation partners

AQDOTand NXTLEVVEL

Priorities

– Launch of 20 new products

– Increase new and protected

products to 17% of sales by 2025

– Drive strategic joint customer

development projects for each

global key account

– Continue to roll out digital pipeline

management tools throughout

the innovation organisation

Link to KPIs

Please refer to pages 28 – 29

Link to risks

Please refer to pages 64 – 72

Growth

Overview

– Captured $50m of new

businessopportunities

– 37% growth in Coatings

technology platforms

– Personal Care: successful roll

outof new skin care ingredients

(salesup 41%) and Asia growth

(sales up 44%)

– Expansion of Talc in Asia

(salesup24%) and the

Americas(sales up 62%)

– Delivery of $16m of Talc

revenuesynergies partially offset

by weak long life plastics and

paper markets

Priorities

– Investment to support cosmetics

growth in Asia

– Drive further penetration of new

hectorite based skin care

products

– Ramp up of anti-perspirant

actives plant in India

– Drive market share gains for

Coatings and Talc

– Delivery of $20-25m of Talc

revenue synergies by 2023

Link to KPIs

Please refer to pages 28 – 29

Link to risks

Please refer to pages 64 – 72

Efficiency

Overview

– Delivered $10m of cost savings

– Started up new anti-perspirant

actives plant in Q3 2021

– Closed Charleston, West Virginia

plant and transferred capacity

toStLouis site

– New enterprise resource planning

(ERP) tool installed in Asia

– Progress towards 2030

environmental targets and

recruitment of our first Global

Sustainability Director

Priorities

– Ramp up new India anti-perspirant

actives plant

– Delivery of $10m of global supply

chain savings by 2023

– Progress towards $10m of

working capital savings by 2023

– Implement over 60 operational

improvement projects in the

supply chain to drive lower cost to

serve and reduced environmental

impact

Link to KPIs

Please refer to pages 28 – 29

Link to risks

Please refer to pages 64 – 72

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Strategy in action

Case Study – Thixatrol® PM 8058 for protective coatings

The protective coatings market is focused on enhancing the durability and

product lifetime of structures and equipment, such as bridges, ships and

machinery. Given environmental considerations, the coatings industry is

lookingto replace existing technologies with materials that are better for

theenvironment, safer to handle and easier to apply. With the protective

coatings market worth $7bn and growing at approximately 5% per annum,

thereis significant market opportunity.

In response, in 2021, we launched Thixatrol® PM 8058, offering multiple

customer benefits. On performance, it delivers enhanced ‘sag resistance’

– meaning it does not drip down a surface resulting in uneven coverage.

On efficiency, it can be incorporated into a range of high solid systems and

hasamuch lower temperature activation, meaning customers can save time

andenergy, and reduce emissions. And finally, being naturally derived from

castor wax, it is over 75% bio based and with clear sustainability credentials.

22 Annual Report and Accounts 2021 Elementis plc

“ Innovation at the heart of

valuecreation”

We are a global leader in performance driven additives and are

focused on creating solutions for our customers that deliver

product performance improvements, efficiency gains and

enhanced sustainability credentials. While customers have

returned to their laboratories, conditions are far from normalised,

and so we continued to leverage our relationships and digital

capabilities to drive the launch of 21 new products in 2021.

Our innovation focus is clear. We want to create solutions for

thebiggest challenges that our customers face; and, in turn,

theseare reflected in our growth platform focus. In Personal

Care,consumers want natural ingredients that deliver superior

performance to synthetic alternatives. In response, in 2021 we

launched Bentone Hydroclay™ 2100, a hectorite based rheology

modifier that is 100% natural, delivers improved touch and feel,

and simplifies customer processing requirements. Likewise, the

Coatings industry wants additives that deliver enhanced one coat

hide and stain resistance for decorative paints. Our Rheolate HX®

series, which we expanded this year, delivers up to 50% better

hide than competitors, has helped our customers win awards

andis now the industry gold standard.

Innovation is interwoven with sustainability; all our new product

launches and pipeline projects must have clear sustainability

credentials. At present 53% of our revenue (up from 45% last year)

is from natural or naturally derived chemistries – for example,

castor wax based organic thixotropes. In addition, we are

conscious of the need for our products to contribute to the overall

wellbeing of society, whether it is through dry powder additives

that reduce transportation emissions or barrier coatings that

enable 100% recyclable food packaging.

We are also focused on the speed of innovation. The integration of

our R&D and technical support teams, along with fast prototyping

and technology transfers across segments, means we are

increasing our speed of innovation. In 2021, our average time

fromconcept to launch was 1.8 years – 30% faster than in 2016.

And finally, we value the role of open innovation in providing

differentiation and increased speed to market. During the year

wedeveloped our partnerships with AQDOT and NXTLEVVEL

Biochem, rolling out novel odour capture technologies and

biomass based solvents for coatings. In addition, we have

established cooperation arrangements with Evolved by Nature,

working on activated silk technology to replace potentially toxic

chemicals, and Allied Microbiota, to enable advanced microbes

toclean up environmental contamination.

As result of this progress, our revenue from new products was

14% in 2021, up from 10% in 2017, and in line with 2020 as our

base business rebounded from the initial impact of COVID-19.

Our innovation pipeline is well positioned, with 60 projects in the

pipeline, of which approximately 20 are scheduled to launch in the

next 12 months, and this will support reaching our Group adjusted

operating profit margin target of 17%.

Innovation

$150m

Target protective coatings

rheology market for Thixatrol®

PM 8058

75%

Renewable/Bio Based content

of Thixatrol® PM 8058

Annual Report and Accounts 2021Elementis plc

Corporate governance Financial statements Shareholder informationStrategic report

Around 90% of Elementis’ earnings are generated by Personal

Care, Coatings and Talc. The value chains across these markets

are similar, transforming natural resources into high value

additives through distinctive science. Across these businesses

wesee clear medium term structural growth opportunities,

representing in total over $100m of incremental

revenueopportunities.

In Coatings, opportunities exist where our additives solve specific

market needs with clear sustainability credentials, for instance

waterborne industrial additives and premium decorative paints.

Such growth areas represent roughly one third of our Coatings

sales, and in 2021 they grew 37%, driven by $23m of new

business wins. Products such as our castor wax based organic

thixotropes for adhesives and sealants and non-ionic associative

thickeners (NiSATs) for premium decorative paints saw notable

Growth

“Solutions for market needs and trends”

Strategic report

Strategy in action

24 Annual Report and Accounts 2021 Elementis plc

growth and market share gains. Geographic expansion is an

important growth pillar in Coatings, and following recent sales and

marketing hires in South East Asia, we grew 30% compared to the

prior year.

In Personal Care, there are significant high margin growth

opportunities. While Asia represents 40% of the personal care

market, it represents under 20% of our sales, and our medium

term aim is to double our cosmetics sales in the region. In 2021,

we grew sales 44% in Asia versus the prior year, and tohelp drive

future growth we made several targeted investments. We opened

our first Personal Care technical service centre in Asia, located in

Shanghai, and more than doubled our local sales and marketing

team. Our new AP Actives plant in India will create a highly

advantaged global supply chain, help us grow in the region and

drive a material performance improvement in the business.

The plant started up in the third quarter and will ramp up

production over the next 12 months. In skin care, a new

application for our hectorite clay, we aim to deliver $10m of

incremental sales over the medium term. In 2021, we launched

Case Study – skin care

Historically, the focus of our Personal Care business

has been oilbased colour cosmetics, such as

lipsticks, mascaras and foundations. However,

ourkey natural resource, hectorite clay, is perfectly

suited to waterbased applications such as skin

creams and lotions. To develop our presence in

thissector of the $500m skin care rheology market,

we recently launched a range of new products,

including Bentone Hydroclay

2100 and Bentone

Luxe® WN.

These products deliver compelling customer

benefits. They provide great touch and feel, are cold

processable so don’t require heat activation, saving

customers energy and emissions and, being 100%

natural, are microplastic free and certified by key

eco labelling standards.

Initial customer reaction has been strong and we

have good growth momentum. In 2021, we grew

ourskin care sales 41% and with a new business

pipeline of $14m we are well on the way to our

medium term target of $10m incremental sales.

three products building out our product portfolio and helping

deliver 41% skin care revenue growth.

In Talc, we are the second largest global producer, serving high

value industrial applications. Our growth strategy is based on

leveraging our global scope and scale, synergistically expanding

into new geographies and market sectors. In 2021, we grew 24%

in Asia and 62% in the Americas versus the prior year, driven by

$13m of new business wins across long life plastics, technical

ceramics and coatings applications. Despite this success, we

remain materially underweight in these regions, with considerable

runway for long term growth. We are on track for our goal of

$20-25m of revenue synergies by 2023, with $16m realised to

date. Sales of talc to coatings customers rose 8% in 2021,

leveraging Elementis’ global key account network and strong

presence in the coatings market. We have also continued to

develop new products and applications. For example, barrier

coating solutions for recyclable food packaging is showing

encouraging early progress, with 27 production and pilot scale

trials and a $5m new business pipeline.

New skin care product

launches in 2021

$14m

Skin care new business

pipeline

Annual Report and Accounts 2021Elementis plc

Corporate governance Financial statements Shareholder informationStrategic report

Strategic report

Strategy in action

Efficiency

26 Annual Report and Accounts 2021 Elementis plc

Case Study – India AP Actives plant

In Q3 2021 our team in India overcame several

obstacles, including COVID-19 lockdowns and

monsoons, to commence production at our new

manufacturing facility in Mumbai. This $20m

investment is focused on the production of

anti-perspirant actives; the ingredients that help to

reducesweat production and provide odour control.

The site is now undergoing a 12 month production

ramp up and customer qualification period, and

when complete will deliver multiple benefits. Firstly,

itwill create a cost advantaged and resilient global

supply network, contributing significantly to our

$10m of cost savings targeted for 2023. Secondly,

itwill position our business to serve the fast-

growing markets in West Asia. And finally, as

aclosed waterproduction system, it will create

anenvironmentally friendly production site.

~$20m

Capital investment in new India plant

Q3 2021

India plant start-up

“ Improving our cost to serve and

reducing our environmental impact”

We are always seeking to improve our organisation, drive ongoing

efficiency gains and become more resilient. The 2021 demand

rebound unleashed significant global supply chain challenges

resulting in material cost inflation. We do not expect these

pressures to abate in 2022 but, through a mixture of price

actions,agile supply chain management and continued

efficiencyfocus, we are confident of protecting and

improvingmargins moving forward.

In 2021, as part of our medium term efficiency programme,

wedelivered $10m of supply chain savings, offsetting $10m of

temporary cost savings made last year which have, as expected,

returned to the business as the impact of COVID-19 has receded.

A significant driver of our $10m savings was the closure of our

Charleston, West Virginia, production plant and consolidation of

capacity at our St Louis, Missouri site. This improved efficiency

and utilisation levels across our North American organoclay

operations. Another notable milestone this year was the start-up

of our anti-perspirant actives plant in India, which will be a

significant enabler of an additional $10m of savings by 2023.

Following completion of the approximate 12 month production

ramp up and customer qualification period, this will create a cost

advantaged and resilient global supply position.

Sustainability and the reduction of our environmental footprint

areat the forefront of all operations decisions, and this year

wemade considerable progress across our supply chain.

Enhanced temperature controls in our talc operations reduced

ourenergy consumption. Automatic sensors at our Newberry

Spring processing plant increased production yields and

reducedwaste, while switching to water based quaternary amines

(from solvent based) at our Anji site reduced both our costs and

environmental impact. Throughout our operations, our global

process excellence teams have identified over 60 projects

thatare beneficial from both an efficiency and environmental

perspective. Their implementation will drive delivery of both

ourcost saving ambitions and our 2030 sustainability targets.

Another key enabler of our efficiency and simplification drive

isour digital implementation programme. In 2021, our global

standard business management software went live in Asia,

bringing the region in line with Europe and the Americas and

improving the flow of data across the organisation. We also

started the roll out of fully online lead-to-order fulfilment cycles

for customers. The onboarding of customers to digital ordering

systems will continue in 2022 and it is already resulting in an

improved customer experience, enhanced new business success

and more efficient resource management.

Annual Report and Accounts 2021Elementis plc

Corporate governance Financial statements Shareholder informationStrategic report

Adjusted operating cash flow ($m)

77.7

76.0

109.8

154.8

2021

2020

2019

2018

Definition

Adjusted operating cash flow is defined as the

netcash flow from adjusted EBITDA plus changes

inworking capital, provisions and share based

payments, less net capital expenditure.

Performance

Further information can be found on page58.

Remuneration linkage

No direct linkage with remuneration.

Link to Strategy

Adjusted Group profit before tax ($m)

112.5

77.0

52.7

93.5

2021

2020

2019

2018

Definition

Adjusted Group profit before tax is defined as

theGroup profit before tax on total operations

(continuing and discontinued) after adjusting

items,excluding adjusting items relating to tax.

Performance

Further information can be found on pages153-156.

Remuneration linkage

Adjusted Group profit before tax is a key element

ofthe bonus plan for the Executive Directors.

Further information can be found within the

Directors’ Remuneration report on page 119.

Link to Strategy

Contribution margin (%)

2021

2020

2019

2018

Definition

Contribution margin is defined as total revenue

lessall variable costs, divided by total revenue

andexpressed as a percentage.

Performance

Further information can be found on page193.

Remuneration linkage

No direct linkage with remuneration.

Link to Strategy

Adjusted operating profit/adjusted

operating margin ($m)

132.6

106.6

81.6

123.0

2021

2020

2019

2018

Definition

Adjusted operating profit is the profit derived from

the continuing operations of the business after

adjusting items. Adjusted operating margin is the

ratio of adjusted operating profit to total revenue.

Performance

Further information can be found on page194.

Remuneration linkage

No direct linkage with remuneration.

Link to Strategy

Average trade working capital to

salesratio (%)

2021

2020

2019

2018

Definition

The trade working capital to total revenue ratio is

defined as the 12 month average trade working

capital divided by total revenue, expressed as

apercentage. Trade working capital comprises

inventories, trade receivables and trade payables.

It specifically excludes prepayments, capital or

interest related receivables or payables, changes

due to currency movements and items classified

asother receivables and other payables.

Performance

Further information can be found on page194.

Remuneration linkage

Average trade working capital is a key element

ofthebonus plan for the Executive Directors.

Further information can be found within the

Directors’ Remuneration report on page 119.

Link to Strategy

Measuring our progress

Strategic report

Key performance indicators

28 Annual Report and Accounts 2021 Elementis plc

Adjusted return on operating capital

employed (ROCE) (%)

2021

2020

2019

15 2018

Definition

ROCE is defined as operating profit after adjusting

items divided by operating capital employed,

expressed as a percentage. Operating capital

employed comprises fixed assets (excluding

goodwill), working capital and operating provisions.

Operating provisions include self-insurance and

environmental provisions but exclude retirement

benefit obligations.

Performance

Further information can be found on page194.

Remuneration linkage

ROCE is an underpin for the long term

incentiveplan.ROCE including goodwill

was7.4%(2020: 5%).

Link to Strategy

Total recordable incident rate (TRIR)

2021

2020

2019

0.22 2018

0.90

0.68

0.48

Definition

We use the US Occupational Safety and Health

Administration (OSHA) definition for recordable

injuries and illnesses. TRIR is the total number of

recordable incidents multiplied by 200,000 divided

by total hours worked by all employees during

theyear.

Performance

Further information can be found on page32.

Remuneration linkage

Non-financial targets within the Executive

Directors’annual bonus structure typically include

acomponent of individual objectives relating to

safety performance. Refer to page 120.

Link to Strategy

Total Lost time accidents (LTA)

2021

2020

2019

22018

Definition

An LTA is an injury or illness that requires time away

from work not including the day ofincident.*

* We have tightened this indicator. In prior years we reported only LTAs

with three days or greater lost time.

Performance

Further information can be found on page32.

Remuneration linkage

Non-financial targets within the Executive

Directors’annual bonus structure typically include

acomponent of individual objectives relating to

safety performance. Refer to page 120.

Link to Strategy

Environmental incidents

2021

2020

2019

2018

Definition

We record and categorise environmental incidents

into tiers based on the severity or actions taken by

regulatory authorities. Tier 3 incidents are those that

have a significant impact on the environment and

require reporting to an external authority and where

enforcement action is likely. Tier 2 incidents have

aminor impact and require notification but are likely

to result in minimal action by the authorities.

Performance

Further information can be found on page34.

Remuneration linkage

Non-financial targets within the Executive

Directors’annual bonus structure include

acomponent of individual objectives relating

tosafety performance. Refer to page 120.

Link to Strategy

1 There were no Tier 3 or Tier 2 environmental incidents in 2021.

Key to strategic priorities

Non-financial KPIs

Innovation Growth Efficiency

Financial KPIs

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Sustainable business

Strategic report

Sustainable business

At Elementis, we recognise the importance

of creatingvalue for all our stakeholders. Our

contribution to a more sustainable society is also

crucial for the resilience of our business. We are

committed to actively addressing the negative

impacts created by our operations and activities.

Globally, events in 2021 continued to highlight the importance of

progressing the United Nations Sustainable Development Goals

(UN SDGs) to address global challenges, including those related

toinequality, climate change and responsible consumption

andproduction. We continue to support the UN SDGs and are

committed to maintaining responsible business operations

whichunderpin these principles.

We also have opportunities tohelp our customers reduce their

negative impacts through theproducts that we manufacture

andsell to our customers. Many ofour chemical products and

performance additives extendthe lifetime and durability of end-use

products, minimisingmaterial and energy demands (seeside panel).

Long-lasting products

Our Chromium chemical ingredients help

extend durability of materials, forexample

high-performance metal products and

construction wood.

Product efficiency

Our Coatings additives enable high

performance paints to protect using one

layerof paint instead of multiple layers.

Resource efficiency

Our talc additives strengthen the plastics

used to light-weight vehicles, helping to

increase vehicle range per charge or tank.

Talc additives also help lower plastic

content in packaging for liquid products.

Healthy society

Our natural additives ingredients enhance

the function of personal care products and

pharmaceutical applications.

2021 Sustainable business recognition

2021: Gold

2020: Silver

2021: B-

2020: C

2021: Medium

2020: High

2021: Constituent

2020: Constituent

Linking our strategy to the SDGs

Health & Safety,

page32

Product stewardship,

page 33

DE&I, page 38

Water, page 36

Responsible

Mining,page 37

Growth, page 24

Financial performance,

pages 54-59

Employee wages,

page158

Innovation, page 23

Efficiency, page 26

Product benefits,

page 23

GHG, page 34

Energy, page 36

2021 Progress

In 2021 we have made good progress towards our 2030

environmental targets, as described in the following pages.

We implemented the Task-Force for Climate-Related Financial

Disclosure Framework (TCFD, page 42) to better understand

ourclimate risks and opportunities. We strengthened our

commitment to water stewardship, issuing a public statement

outlining our plans. Our leadership team was strengthened by

appointing our first Global Head of Sustainability tasked with

taking forward our sustainable business agenda. We also

launched new products with enhanced sustainability features

(page 13). Our efforts have also resulted in improved third-party

sustainability assessments, including gaining EcoVadis gold (up

from silver in 2020), putting us in the top 5% of EcoVadis company

ratings and helping our diverse customer base understand our

impacts and activities. We also remained a constituent of the

FTSE4Good index.

30 Annual Report and Accounts 2021 Elementis plc

Q&A with Phil Blakeman,

Global Sustainability Director

You joined just a few months ago.

Whatattractedyouto Elementis?

Initially it was the people I met. I found a passionate,

knowledgeable and supportive group of people keen to

contribute to an enhanced sustainability agenda. As I look

deeper into the company, the opportunities to accelerate

progress are becoming clearer and I remain excited about

thecompany’s sustainability focus.

Where are your initial focus areas?

It is important to the Board and management that our

sustainability agenda reflects a broad range of perspectives

and is authentic to Elementis. That helps gain commitment

and helps inspire people to be creative. To that end, I am

leading the materiality assessment process, as this helps

provide the foundation for choices we make and the

rationale for specific actions. Of course, a robust climate

change response is necessary, as we define our path

tocarbon neutrality. Finally, in my role as Chair of the

Environmental Sustainability Council, I help ensure the

Company delivers cross-functional projects and embeds

sustainability ever more strongly into our

businessprocesses.

How do you feel about the future of

sustainabilityinElementis?

I’m excited – there are many initiatives in place in the

company, from new operational projects to reduce our

greenhouse gas emissions, a strong diversity focus, and

thedevelopment of new, more sustainable products.

I’mlooking forward to contributing to these activities

andproviding the approaches to help unlock even

moreofour sustainable business potential.

Focus for 2022

We will conduct a materiality assessment of non-financial topics.

This will ensure we focus resources on topics of importance to

ourstakeholders and where our capabilities can deliver the most

impact. Relating to climate change, in 2022 we will quantify the

greenhouse gas emissions across our value chain (Scope 3

emissions). This will enable us to define additional KPIs and

actions that decrease climate risks and identify opportunities

within our value chains. This is a critical understanding that will

help us define our pathway to carbon neutrality and supports

thedevelopment of a Net Zero transition plan.

Human rights

As part of our ongoing commitment to support the United Nations

Global Compact (UNGC), we update our communication on progress

every August. Our latest UNGC communication detailing the steps

wehave taken relating to human rights, labour, environment and

anti-bribery and corruption is available onourwebsite. Our Board

ofDirectors annually approves our Modern Slavery transparency

statement. This is available on our website and describes the steps

that we have taken toprevent modern slavery and human trafficking

inour business and supplychain.

Reduction in GHG

Scope 1 + Scope 2

(market-based) emissions

-25%

2021 change vs 2020

Reduction in energy

fromfuels

-2%

2021 change vs 2020

Reduction in water

withdrawn

-26%

2021 change vs 2020

Reduction in waste sent

for third party treatment

+13%

2021 change vs 2020

2030 Targets*

25% 10%

10%20%

* All targets are per tonne produced and use a 2019 baseline

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Sustainable business

Health and Safety

Safety is a core value at Elementis and our focus is

on keeping our employees safe, protecting people,

and operating responsibly. We believe no one should

go home injured, hurt or sick from working at any of

our locations.

Accountability for health and safety is held by our Chief Executive

Officer, supported by the SVP Global Supply Chain and

Manufacturing and the Global Director for HSE. Our Board

receivea detailed update on our health and safety performance

ateach meeting and the ELT receive updates monthly as part

ofthe review of overall Group performance. Providing a safe

working environment from which our employees return home

safely is a key priority for the Board and the Group as a whole.

Our Health and Safety (H&S) programme reflects how we turn that

focus into action. Our objective is to maintain a world class H&S

programme that delivers excellence in performance and drives

continuous improvement. A copy of our Health, Safety and

Environmental (HSE) policy is available on our website.

Our TogetherSAFE commitment promotes our safety culture to all

employees. TogetherSAFE means considering how every decision

and action may affect others. It guides our behaviours; it follows

our products into the marketplace; and it protects our facilities,

the environment and nearby communities. TogetherSAFE is

helping us advance our ambition of safety excellence and zero

injuries across every corner of our organisation.

We operate a comprehensive management system that supports

our values and the delivery of TogetherSAFE. We continuously

develop key parts of the management system – this year we have

introduced a safety leadership program for 20 plant managers and

senior leaders, which will complete in 2022. Another focus has been

communication and engagement, with regular safety webinars

covering a range of topics, a monthly newsletter, information on our

dedicated H&S intranet site and video messages from leadership

and employees. At our first safety week in April, we encouraged

employees to engage their families in TogetherSAFE with a

children’s drawing contest which had over 40 entries.

Each manufacturing site has developed safety improvement

action plans. These have helped identify hazard recognition as

agroup-wide focus area for next year. Each manufacturing site

also operates a safety committee where concerns can be raised.

Our corporate HSE team conduct regular audits against to

determine compliance with our policies, completing 12 audits

(48%) of our manufacturing sites despite COVID-19 disruptions.

Employees and contractors are given training to understand their

roles and responsibilities to ensure compliance with our safe work

procedures. Employee training is tailored to the specific job

requirements and consists of both in-person and on-line

training,with each site maintaining a training plan. Each site

alsohas context-specific contractor training, covering hazard

communications, work permit processes, site rules and

incidentreporting.

Our site at Castle Hayne, USA has our largest number of

employees in a single location and provides an on-site nurse

tosupport occupational health. Our other sites ensure local

clinicsupport is available. The Group also retains the services

ofamedical consultant for remote support as required.

Health and Safety performance

Our total recordable injury & illness rate (TRIR) was 0.90,

comparedto 0.68 in 2020. There were 12 employee recordable

injuries (nine in 2020). Most of our employee injuries were

lacerations (33%) and sprains (25%). There were four lost-time

accidents (LTAs), including a fractured finger and wrist strain

(three LTAs in 2020). We had seven contractor recordable injuries

in 2021 (one in 2020). Key improvement opportunities identified

from these incidents are better hazard recognition, greater use

ofthe stop work authority given to all employees, and improved

management ofchange. There were zero fatalities in the Group

in2021 (zero in 2020).

Last year, we started to track process safety events and this year

weestablished metrics based on that tracking. We also defined

corporate standards for process safety and have a plan to

complete process hazard analyses (PHAs) for all our processes

by2025. We had one process safety event in 2021 (three in 2020).

This incident involved damage to a finished package drum, which

caused an oxidising chemical to contact with lubricant on the

packing line rollers and resulted in a small fire. There was no

damage to peopleor equipment. Corrective actions implemented

includeimprovements to the drum handler equipment

andoperating procedures.

Good management of process and equipment changes are key to

minimising safety risk, and this was a key learning from incidents

during 2021. In 2021, we introduced a new digital platform to help

our management of change (MOC) processes. The new tool will

help us conduct such changes in a more controlled way.

Performance

Total lost time accidents (LTA)

2021

2020

2019

-2018

Total recordable incident rate (TRIR)

2021

2020

2019

–2018

0.90

0.48

0.68

Process safety incidents

1 3

2021 2020

32 Annual Report and Accounts 2021 Elementis plc

In 2022, we will continue our TogetherSAFE commitment

andaddress 2021 incident learnings by implementing hazard

recognition plus (HRP) training for all employees, including

implementing HRP into our work planning processes in order

tominimise human error, and with training to reinforce our

stopwork authority.

Product stewardship

Our products are fundamental components of society, and we are

committed to making sure any hazards inherent in our products

areminimised by design wherever possible, and remaining

hazardsare fully understood by our customers. This helps ensure

noharm comes to people or the environment during manufacture,

use and disposal.

We monitor evolving ingredient safety or product safety concerns

and work with customers, industry associations and other

stakeholders to understand if and how they might impact our

products and their use. We have comprehensive product safety

and product stewardship processes in place to ensure that any

hazards relating to our products are fully understood and

communicated to our customers, supporting the highest levels

ofproduct safety and regulatory compliance. Potential new

products are risk assessed by our in-house product stewardship

team at every stage of their development through to launch.

This assessment is incorporated as a key requirement in

ourrecently upgraded R&D project management system.

Product changes post-launch are also reviewed by

productstewardship.

We work actively with our customers to help them manage and

minimise risks. For example, we have developed a unique delivery

system for our chromium compounds that minimises handling

andexposure risks at our customers’ facilities. This system is also

scaled, from rail car tanker size down to small containers, making

it a solution for a wide range of end customers who need safe

access to chromium compounds to make their products.

We provide safety data sheets and labels in multiple local

languages for our customers so they can safely use and dispose

of our products. Our goal is to ensure that anyone handling our

products can do so with full knowledge of potential hazards and

safe handling requirements regardless of country or language.

Safety data sheets for our products are also available on our

website. We align with the Globally Harmonized System of

Classification and Labelling of Chemicals (GHS).

Elementis seeks to avoid animal testing whenever possible.

If weare required by regulation to do so (for example, under EU

REACH requirements) we engage third parties to conduct the

tests in the least impactful way possible. Our animal testing policy

is available on our website.

We obtain various certifications for certain products, and these

are listed on our website.

Together Safe

In 2021, several our sites celebrated extended periods of

safeoperation.

Corpus Christi achieved 18 years without a recordable

employee injury, showing strong employee engagement in

driving continuous improvements in safety culture and taking

responsibility for their own and others safety, even through

various organisational changes in that time period.

Other sites also celebrated significant milestones without a

recordable injury: Amarillo and Katwijk (10 years); Milwaukee

Specialities (9 years); Newberry mine (6 years); Middletown,

Dakota City, and New Martinsville (5 years); Ludwigshafen

andLivingston (4 years); our new Taloja site (one million

safehours).

The dedication and commitment of all our employees and

contractors to looking after both themselves and each other

isa strong reflection of our culture and values in practice.

Staying safe in the ongoing COVID-19 pandemic

We have continued to work hard to ensure our employees

remain safe during 2021 through the different COVID-19

waves. Our global COVID-19 Task force has met weekly,

ensuring consistency of policy and actions in response

tothelocal conditions at our sites. Wherever possible, we

have supported flexible working from home and minimised

unnecessary travel. Our site leadership teams ensure a safe

working environment in line with the local conditions, including

social distancing, mask-wearing and ventilation for those

employees whose role requires them to be on site. Our teams

have worked hard to successfully minimise the health risks

and manage the business disruption.

Safety metric methodology

We use the US Occupational Safety and Health Administration

(OSHA) Regulation definition for a recordable injury:

– a work-related accident or illness that results in one or

more of: death; loss of consciousness; absence of more

than one day; medical treatment beyond first aid;

restricted work or transfer to another job

Total recordable and injury and illness rate (TRIR) is the

number of recordable cases multiplied by 200,000 divided

bytotal hours worked by all employees over a calendar year.

We exclude contractors from the TRIR calculation, separately

tracking the number of contractor recordable injuries. A Lost

Time Accident (LTA) is a work-related injury or illness that

requires time away from work (excluding the day of the

incident). A tier 1 or tier 2 process safety event involved loss

of primary containment with consequence. It is an unplanned

or uncontrolled release of any material from a process. Tier 1

has a higher magnitude of consequence than tier 2, as defined

inthe American Petroleum Institute (API) Recommended

Practice (RP) 754.

Annual Report and Accounts 2021Elementis plc

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Strategic report

Sustainable business

Managing our Environmental Impact

As a result, we have developed multi-year plans for improvement

projects to reduce our energy use, greenhouse gas emissions,

water consumption and waste generated. Progress against this

plan is overseen by our Environmental Sustainability Council

(ESC). For further information on the ESC please refer to page 43.

During 2021, we had zero Tier 2 or Tier 3 environmental incidents

(2020: zero).

Through our purpose of delivering cleaner and

better performance solutions, we strive to minimise

our environmental impact and help our customers

to solve their sustainability challenges. In 2020, we

set ourselves specific targets to help us in this aim,

using 2019 as a baseline year. During 2021, we have

put in place additional projects to help us move

faster towards those targets and ensure a lower

environmental impact across our operations.

Greenhouse Gas Emissions

Mitigating our greenhouse gas (GHG) emissions is a cornerstone

of our approach to acting as a responsible business. While our

products help our customers to address the needs of modern

society, our innovations continue to help lower the impact of

answering those needs. For example, we have developed naturally

derived coatings additives that activate at lower processing

temperatures, thereby lowering the energy requirements of

ourcustomers (page 22).

We continue to improve how we address the impacts of our own

activities. This year, we have extended our approach to climate

change during 2021, and report for the first time against the

Task-Force for Climate-Related Financial Disclosure Framework

(TCFD, see page 42). We also report our climate related risk and

opportunities via CDP, gaining a B- rating for CDP Climate (up from

a C rating in 2020). We will continue to extend our work on climate

impacts, risks, and opportunities through 2022 by further embedding

the TCFD framework, completing our value-chain (Scope 3) emissions

inventory and developing a corporate Net Zero Transition Plan.

Our Scope 1 GHG emissions include emissions from combustion

offuels for energy, heat and transport, emissions from our

chemical processes and refrigerants. Our Scope 2 emissions

include emissions caused by creating the electricity and steam we

purchase. Our 2030 target is to reduce our Scope 1 plus Scope 2

(market-based) emissions by 25% per tonne of product made

from a 2019 baseline.

We have made good progress against this target in 2021.

Our absolute Scope 1+2 (market-based) emissions have dropped

by16% vs 2020. We have increased the number of sites who

purchase renewable electricity during 2021 and this has helped

lower our Scope 2 market-based emissions by 51%. Scope 2

location-based emissions showed an 8% improvement, reflecting

acombination of efficiency gains and grid greening (location

based). Scope 1 emissions increased 9%, as higher natural gas

useand higher process emissions at our largest site (Castle

Hayne, USA) more than offset efficiency gains made elsewhere.

Our GHG intensity reduced 25% vs 2020, a good step towards

our2030 target, through a combination of renewable electricity

purchases and energy efficiency projects. Through 2022, we

planto continue to explore options to extend our purchases of

renewable electricity, to continue delivering efficiency projects,

and to consider the options for greater reduction of Scope 1

emissions. We will also develop our first Scope 3 GHG footprint.

Environmental performance

2021

2020: 0

Number of sites

operating on 100%

renewable electricity

2021

2020

2019

-2018

278,362

329,889

349,889

Scope 1+2 (market) – tonnes CO

eq emissions

2021

2020

2019

-2018

3,544,125

3,225,298

3,514,565

Energy (from fuels) – GJ

2021

2020

2019

-2018

3,076,738

3,707,947

3,767,854

Water withdrawal – m3

2021

2020

2019

-2018

43,274

34,190

29,850

Waste sent to third party treatment – tonnes

Third-party verification

Elementis commissioned Avieco, an experienced and

independent sustainability consultancy, to verify our 2021 Scope

1+2 GHG emissions, energy consumption, water withdrawal and

waste data. Scope 1+2 GHG emissions wereverified to the ISO

14064-3: 2019 Greenhouse gases (GHG) standard using a

reasonable level of verification. Restated 2019 and 2020 values

were also verified. Avieco’s verification opinion statement is

available on our website.

34 Annual Report and Accounts 2021 Elementis plc

Global GHG emissions 2030 Target 2021 2020* 2019*

Scope 1 (tonne CO

eq) – 211,619 193,826 205,314

Scope 2 (tonne CO

eq)

Market – 66,743 136,063 143,974

Location – 93,768 102,232 108,474

Total 1+2 (tonne CO

eq)

Market – 278,362 329,889 349,288

Location – 305,387 296,058 313,788

Production (tonne) – 833,100 742,720 831,418

GHG intensity (Total tonne CO

eq/

tonneproduction)

Market 0.315 0.334 0.444 0.420

Location – 0.367 0.399 0.377

GHG from biomass (tonne CO

eq) – 5,189 5,753 6,325

UK GHG emissions 2021 % of global 2021 2020* 2019*

Scope 1 (tonne CO

eq) 3.7 7,740 5,866 7,735

Scope 2 (tonne CO

eq)

Market 4.1 2,712 2,686 3,026

Location 2.2 2,062 1,986 2,031

Total 1+2 (tonne CO

eq)

Market 3.8 10,452 8,552 10,761

Location 3.2 9,802 7,852 9,766

Production (tonne) 2.4 19,926 16,282 19,233

GHG intensity (Total tonne CO

eq/

tonneproduction)

Market – 0.524 0.525 0.559

Location – 0.491 0.482 0.508

* Restated figures, see methodologies box for more information.

Methodologies

Our GHG emissions are calculated with reference to the

GHGProtocol Corporate Standard (2015 revision). We take

anoperational control approach to defining our GHG and energy

organisational boundary, meaning our 25% equity ownership

ofAlembic Manufacturing Ltd is excluded from our Scope 1+2

footprint. This approach is consistent with our financial

statements. Non-financial data from new facilities are

includedfrom the date we take control and the facility

becomesoperational.

Scope 1+2 emissions are reported in tonnes of CO

equivalent

(CO

eq) and include all gases in the GHG Protocol. We use DEFRA

factors for Scope 1 fuels globally. We use IEA emissions factors

for location-based Scope 2 emissions, except in the UK where

weuse DEFRA factors. Market-based emissions include power

purchases associated with a Renewable Energy Certificate (REC)

or Guarantee of Origin (GO), use residual mix factors from the

Association of Issuing Bodies (AIB) for European sites without an

REC or GO, and use location-based factors for remaining sites.

GHG from biomass data includes energy and chemical process

related emissions and excludes biomass in vehicle fuels.

We measure gross global scope 1 and 2 emissions in tonnes

ofCO

eq per tonne of production output as this is a common

intensity metric for our industry sector. Our disclosures meet the

UK Streamlined Energy and Carbon Reporting (SECR) requirements.

2019 Baseline corrections: During a review in 2021, we

recognised some Scope 1 GHG sources (certain processes and

vehicles) had been overlooked in our 2019 and 2020 figures.

Together, these have a material impact (13%) on our baseline

Scope 1 GHG emissions. We have also implemented corrections

and reconciliations in our Scope 2 GHG, energy, water and waste

2019 and 2020 figures. Values are restated in this report.

We record and categorise environmental incidents into tiers

based on the severity or actions taken by regulatory authorities.

Tier 3 incidents are those that have a significant impact on the

environment and require reporting to an external authority and

where enforcement action is likely. Tier 2 incidents have aminor

impact and require notification but are likely to result in minimal

action by the authorities.

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Sustainable business

Energy

We recognise that responsible usage of energy, whatever the source

of energy, reduces demands on resources and infrastructure and

helps lower our costs. Our 2030 target aims to reduce our energy

use from fuels per tonne of production by 20%. In 2021, 73.1% of our

energy came from direct combustion of fossil fuels (2020: 71.7%).

Our sites at Amsterdam, Netherlands, Sotkamo, Finland and

Vuonos, Finland began new electricity supply agreements in

2021,which have increased the amount of our purchased energy

with arenewable energy certificate (REC) or guarantee of origin

(GO)to50% (0% in2020). We continue to assess opportunities

toincrease our purchase of clean energy.

In 2021, sites continued to improve energy efficiency, for example:

– Newberry Springs, USA implemented several mechanical

improvements to the ore beneficiation process, meaning the slurry

requires less energy to dry and resulting in an estimated reduction

in the plant’s annual natural gas requirements of26,000 GJ.

– Sotkamo, Finland upgraded a boiler to a more efficient one,

saving an estimated 1,600 GJ per year.

– Songjiang, China increased the efficiency of their gas burners,

saving an estimated 400 GJ per year.

– Livingston, UK introduced energy management software

throughout the facility, saving an estimated 884GJper year.

In total in 2021, we spent $298,000 on energy efficiency projects

(2020: $233,000) to save an estimated 35,000 GJ of annual

energy demand (2020: 42,000 GJ).

Our total energy usage was 7.6% higher in 2021 compared to

2020, mostly due to increased gas consumption as activity levels

increased – energy from fuels increased by over 300,000 GJ.

Our energy use from fuels per tonne production is 2% better

than2020 reflecting benefits of our energy efficiency projects.

Global

2030

Target 2021 2020 2019

Total energy (GWh) – 1,356.41 1,260.39 1,377.24

Total energy (GJ) – 4,844,343 4,501,375 4,918,727

Purchased

energy (GJ) – 1,300,218 1,276,079 1,404,161

– of which is

certified

renewable(%) – 50 0 0

Energy directly

from fuels (GJ) – 3,544,125 3,225,298 3,514,565

Production (tonne) – 833,100 742,720 831,418

Energy intensity

(GJ from fuels /

tonne produced) 3.381 4.254 4.343 4.227

2021 %

of global 2021 2020 2019

Total energy (GWh) 3.8 51.35 40.30 50.40

Total energy (GJ) 3.8 183,384 143,926 180,004

Production (tonne) 2.4 19,926 16,282 19,233

Energy intensity – 9.20 8.84 9.36

To drive towards our 2030 target, we have identified potential for

upgrades of our high energy demand gas kilns including an upgrade

to the kiln liners and addition of extra air to increase efficiency. These

projects are part of a global portfolio of identified energy efficiency

projects that are currently estimated to save 1 million GJ of energy

for an investment of $5 million over the next 5 years.

Water

We see water as a precious resource that is not to be wasted

andwe continue to work to mitigate our water risks and impacts.

In 2021, we adopted awater stewardship policy which is available

on ourwebsite. As part of our TCFD work (page 42), wehave

considered climate-driven water risks at our sites. We have also

publicly reported our water performance through CDP for the

firsttime in 2021,achieving a B- rating. We aim to reduce

waterwithdrawal per tonne of production by 10% by2030.

Overall, our water withdrawal is lower by almost 700,000 m

compared to 2019 baseline, meaning we have already met our

2030 target. In 2021, we saw the fruits of our investments in

enhanced water recycling at our mine in Vuonos, Finland and

NewMartinsville, USA. Our new Taloja, India site entered

commissioning phase and is designed to recycle all water

usedinthe manufacturing process, in a similar way to that already

done at our Huguenot, USA site. We have also worked to increase

efficiency of water use across our whole portfolio. For example,

after investigating unexpectedly elevated water withdrawal

amounts, our site in Songjiang, China detected underground

leaksdue to corroded water pipes. Upgraded pipes and

additionalwater meters were installed, helping to prevent

anddetect future leakages.

In 2022 we plan to review our water target and ensure water

management improvement planscontinue. Tighter effluent quality

discharge limits will be introduced in 2022 at some sites which

may result in higher water withdrawal compared to 2021.

2030

Target 2021 2020 2019

Total water

withdrawal (m

) – 3,076,738 3,707,947 3,767,854

Production

(tonnes) – 833,100 742,720 831,418

Water withdrawal

intensity (m

tonne produced) 4.08 3.69 4.99 4.53

36 Annual Report and Accounts 2021 Elementis plc

Waste

We recognise how valuable resources are and we aim to use them

as efficiently as possible. To this end, we are working to reduce

the waste (including hazardous waste) we send for third party

treatment per tonne of production by 10% by2030. For example,

our site in Livingston is working to qualify waste clay materials

asa by-product for use in agriculture. If successful, this could

prevent up to 3,000 tonnes of waste generation. Our site in

Hsinchu has improved process efficiencies to minimise waste

generation by recycling filter waste and solvent, which are

expected to prevent over 10,000 kg of waste generationannually.

2030

Target 2021 2020 2019

Total Waste

(tonnes) – 43,274 34,190 29,850

Production

(tonnes) – 833,100 742,720 831,418

Waste intensity

(tonnes waste /

tonne produced) 0.032 0.052 0.046 0.036

Our waste sent for third party treatment increased substantially

in2021 because of temporary supply chain disruptions to our

sales of a by-product, resulting in us needing to dispose of large

quantities of this material as waste. Our waste per tonne of

production therefore also increased. Without this disruption,

underlying reductions of our other waste streams made good

progress towards our 2030 target.

Some of our sites generate large quantities of mineral wastes

(overburden, tailings, ore beneficiation residues etc) that remain

intailing storage facilities on our sites. There is potential for these

materials to be valorised in the future.

Air quality

We control the emission of dust and gaseous pollutants – VOC’s

(volatile organic compounds), nitrogen oxides and sulfur oxides –

in compliance with our local operating permits, using scrubbers

where necessary. These emissions can be generated from our

mining activities, our high-temperature processes and our

handling of organic chemicals. Our facilities are checked for

compliance by regulatory authorities. In 2021, our Hsinchu site

invested in increased capacity of their air pollution control system,

increasingflexibility in production.

Responsible Mining

We operate mines in Finland and California, USA that give us direct

access to critical and unique mineral resources incorporated into

our products. We engage openly and constructively with local

communities, seek continuous improvements in our practices

andwork to minimise negative impacts of our operations. We work

to protect the environment and nature, reducing or avoiding our

impact on sensitive species, habitats and ecosystems.

We also actively manage environmental monitoring (including

water quality) and remediation activities at legacy locations,

including our facility in Corpus Christi, US and at Eaglescliffe, UK.

Finland

We operate four active open cast mines for high purity talc

minerals. Our talc mines are members of the Finnish Network for

Sustainable Mining, which aims to advance responsible mining

practices and we are committed to the Finnish Towards

Sustainable Mining (TSM) Standard.

We operate an environmental management system and are certified

to ISO14001. We continuously monitor environmental impacts with

our own laboratories or qualified third parties, including the quality of

groundwater and surface water. We also reuse the water the from our

tailings storage facility in our ore processing, minimising our need for

freshwater withdrawal – resulting in over 95% water recycling rate.

As we mine, we pump out accumulating groundwater and rainwater,

treating it before discharge.

As we process the talc ore, we produce nickel concentrate

andmagnesite sand as by-products, which is utilised in on-site

infrastructure or sold externally. We also use rocks in road

construction on site.

The land area actively mined at these sites is 1,792 hectares.

Our land management and remediation plans include consideration

of landscape value when designing landfill areas.

The impact of our mining activities on biodiversity is monitored in

compliance with local operating permits and regulations. There are

no endangered species identified in our Finnish mining areas. We are

currently in the assessment phase for an expansion of our mining

area and are ensuring we minimise impacts on the local ecosystem.

California, USA

We operate one open cast mine in California for our unique

hectorite clay mineral. We can mine 220 hectares of land and have

additional claims (mineral rights) on U.S. federal land surrounding

the current operation. The ore screening system is included in our

ISO9001 quality management system and we are working towards

ISO14001 certification in 2022.

By design and geologic location, no stormwater leaves the site.

Occasionally, rainwater in the active mining areas is pumped to

other parts of the property to evaporate while allowing mining to

continue. Water from an on-site and owned well is used for dust

control to remain in compliance with the reclamation plan and

regional California Air Quality Management District requirements.

All mined material is segregated such that further uses can be

found for it in future (e.g. in agriculture, highway construction or

landfill liners, etc.). To date, we have sold a small amount of rock

asstorm erosion protection andclay for agriculture amendments

and residential pond liners. In 2022, we plan to re-use crushed

wasterock from the mine overburden as a road surface on

sitetoreducethe water amounts needed for dust control

(andimprovemine vehicle tyre wear).

Our mine is within the habitat range of the Mojave Desert tortoise,

which is on the International Union for Conservation of Nature

(IUCN) red list as critically endangered. We have an approved

tortoise barrier surrounding the site to prevent tortoises entering

the site. Should a tortoise be found inside the fence, we work with

a trained biologist to return the animal safely to its natural habitat.

Our biodiversity statement is available on our website.

Annual Report and Accounts 2021Elementis plc

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Strategic report

Sustainable business

Our working culture is driven by our values.

Collaboration and teamwork shape our culture and

help build strong bonds with diverse colleagues around

the world. Together, we work to drive growth for our

company, create a safe environment for each other and

deliver innovation and value to our customers and other

stakeholders. We aim to ensure everyone is valued and

given the chance to fully contribute, to recognise and

appreciate diversity of views and include employees

across the organisation in providing input into initiatives

that advance ourstrategy.

Employee Engagement and Wellbeing

Elementis is committed to employee engagement throughout the

business. Employees are kept informed of the performance and

strategy of the Group, HSE matters and other initiatives through

regular email bulletins and meetings. The Board receive bi-annual

updates on our workforce engagement and we have a Designated

Non-Executive Director for Employee Engagement, who is

supported by our Chief Human Resources Officer.

All employees can participate in an employee engagement survey

once per year. In 2021, response rates were 68% (up from 60%

in2020) and ahead of the 55-60% benchmark range across

allcompanies (based on data from our survey partner Gartner).

The surveys show an increase in positive responses to the survey

questions in our primary Engagement Capital Index (up from 55%

in 2020 to 63% in 2021). Secondary indices such as Manager,

Values and Diversity, Equity & Inclusion (DE&I) also improved.

This correlates with actions we have taken to improve manager

communications, including providing managers with workshops

and toolkits.

We continue to develop our engagement strategy and in 2022

wewill launch a new initiative regarding our Employee Value

Proposition (EVP) andemployer branding.

The Company continues to highlight the importance of mental

health. We support flexible working, provide employee assistance

helplines; and have regular informal check-ins with employees.

We have continued global employee townhalls and other

engagement efforts in a virtual setting. The CEO has informal

sessions such as ‘Coffee with the CEO’ to further connect with

employees. Our health and wellness initiatives include free webinars

for employees on mental and physical wellbeing. As employees

continue to work through the challenges associated with

COVID-19, ongoing focus and support will remain a key priority.

Global 2021 2020 2019

Total 1,413 1,353 1,342

Americas 589 582 609

Europe 446 433 418

Asia 378 338 315

Diversity, Equity and Inclusion

Elementis strives to create a culture where all employees feel

safe,respected, valued and empowered to contribute ideas and

perspectives. We recognise that the diversity of our people and

the inclusive nature of our culture are intrinsic to better business

decisions and fundamental to the success ofourstrategy.

During the year, the Board has received updates on DE&I matters

andhas performed in line with the Board diversity policy and

objectives. We have a Board composition with 43% female

Boardmembers. Further information on the Board can be

foundon pages 76-77.

Our DE&I Leadership Council is co-chaired by the CEO and CHRO

and is represented by senior leaders who have a passion for DE&I.

During 2021, the council has continued to deliver against their

road map with initiatives centred around knowledge and culture,

process and policy, and communications and reporting.

This year, education for DE&I topics has been accelerated.

Unconscious bias and inclusive conversations e-learnings were

delivered. Expert speakers addressed inclusive leadership and

active cultural advocacy. In total 644 hours of DE&I training has

been delivered. Workshops and an accompanying toolkit have

been provided to 60 senior people managers to encourage

ongoing dialogue and communication on DE&I topics, with

thetoolkits available for over 270 managers globally.

Our employee resource groups (ERGs) are becoming more

established and are helping raise awareness of various topics

andperspectives. Our global Women in Leadership forum has

organised external speakers for a range of topics and established

an Asia Women In Leadership group in 2021. In the US, a People

ofColour ERG has been established this year.

The Group is an equal opportunities employer and considers

applications for employment from all backgrounds. We provide

facilities, equipment and training to assist all employees.

Should anemployee become differently abled during their

Our employees

Highlights and progress against targets

2021

2020: 30

2019: 25

2018: 24

% senior female

employees*

2021

2020: 55

Employee engagement

capital index %

* ELT and direct reports, excluding administration

Annual Report and Accounts 2021 Elementis plc

employment, efforts would be made to retain them in their current

role or to explore opportunities for redeployment in the Group.

In 2022, we plan a physical accessibility review of our facilities.

Our strategy to increase gender diversity continues to result in

agreater proportion of females in senior positions, up to 31% in

2021 (from 30% in 2020). We align with the FTSE Women Leaders

definition of senior positions, that is our ELT and direct reports

excluding administrative roles. Across the whole employee

population, gender diversity has remained flat at 24% in 2021.

This compares with 37% women in manufacturing roles

(International Labour Organisation data).

% Female 2021 2020 2019

Senior leaders* 31 30 25

Total 24 24 23

* ELT and direct reports, excluding administrative personnel

Employment

Our HR policies demonstrate how our Values are put into practice.

They underscore our commitment to providing equal opportunities

in employment, striving to ensure that the work environment is free

of harassment and bullying and that everyone is treated with dignity

and respect. Our policies are available to all employees via the

company intranet and local HR. Mandatory training is provided

toemployees.

We conduct a biennial review of our gender pay globally, the

outcome of which is reviewed by the Board, although we are

notrequired to report under the UK gender pay gap regulations.

The next review is due in 2022. We are accredited by the UK Living

Wage Foundation in respect of our pay commitment todirect and

third-party employees at all UK locations.

6.3% of our employees are union members (data excludes

Ludwigshafen, Germany where we have no right to this information).

22.6% are subject to collective bargaining agreements. The total

voluntary attrition rate in 2021 was 5.9% (2020: 7.8%).

Training and Development

We are committed to inspiring and investing in the skills of our

people. In 2021 we launched LinkedIn Learning as the virtual

learning platform for all employees, providing them with access

totrainings covering professional and personal skills. Over 4,500

learning hours were logged onthis platform during this first year

of provision. In addition, allpeople managers have access to

Gartner for People Managers,which provides them with targeted

courses andmaterials on leadership and managerial skills.

Assessment of individual training and development needs is an

important feature of the annual performance process. All our

employees have a mid-year and annual performance review,

where employees and their managers agree on a learning and

development goal, as well as agreeing on current performance

and next year objectives. We recognise the importance of

developing talent internally, as well as attracting talent from

outside the organisation, to provide our employees with the skills

they need to succeed in the future. This year, we strengthened

ourorganisation with 281 new hires, the majority of whom were

inmanufacturing and supply chain.

Communities and volunteering

We offer our employees paid time off to spend volunteering and

encourage them to participate in volunteering activity as teams.

This initiative started in 2021, although many teams around the

world postponed their volunteering activity until 2022 due to

COVID-19 restrictions. Examples of team volunteering that did

proceed include: employees in Cologne, Germany who conducted

alitter-pick in a city park, collecting 16 bags of rubbish; employees

in Songjiang, China who visited a local nursing home, cheering the

residents and helping with paintwork repairs; employees in the US

who spent a day cleaning a New Jersey beach.

Ethics and

compliance

We are committed to conducting business with

integrity around the world and to fair and ethical

behaviour throughout our organisation.

Our Code of Conduct and Ethics is the cornerstone of our ethics and

compliance programme. It helps us communicate our commitment

to responsible business and promotes a culture of complying with

the law and doing business ethically. It provides the framework for:

– making a culture of ethics and compliance apparent and

accessible to all employees and third parties doing business

with Elementis

– providing training and guidance on key compliance areas

– guaranteeing that all concerns are investigated appropriately

– ensuring ethical and compliance matters are considered and

weighted appropriately in all Elementis business decisions

In 2021, we created a cross-functional project to refresh our Code

to make it accessible in a variety of formats and resonant with all

our business segments and stakeholders. We are looking forward

to launching the new Code in early 2022, accompanied by a

variety of awareness-raising initiatives.

Ethics and Compliance Council

In 2021, we set up a new Ethics and Compliance Council (ECC).

The ECC is comprised of the Group General Counsel & Chief

Compliance Officer (Chair), the executive leaders from each

business segment and function and Internal Audit. The ECC meets

quarterly and reports to the CEO after each meeting and to our

Board of Directors twice a year. Its purpose is to uphold and

oversee an ethics and compliance culture at Elementis and to

ensure the Code, and related Elementis policies and standards,

are effectively communicated and implemented. In 2022, we will

focus on expanding our network of Ethics and Compliance

Champions to ensure representation from every site.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Sustainable business

Creating a culture of transparency and non-retaliation

We value open and honest communication and encourage

employees and third parties to speak up about any concern

asitarises, to their manager, HR, other Elementis function (such

asHSE or Finance), or Legal and Compliance. Where an individual

does notfeel able to raise the matter with anyone at Elementis,

itcan be raised confidentially and anonymously (where local law

permits) to areporting service hosted independently of Elementis.

All reports are investigated at the direction of the Group General

Counsel & Chief Compliance Officer. We promptly take all required

steps based on the outcome of the investigation, including

provision of regular updates to the reporter. We are committed

toprotecting any employee who reports a violation in good

faithfrom retaliation, even if the report does not hold up

inaninvestigation.

In 2021, we appointed a new provider for our independent

reporting service, IntegrityCounts. Posters publicising the

different reporting channels that are available 24 hours a

day,7days a week in multiple languages, were issued to each

Elementis site, along with a global email awareness campaign.

We received four reports via the independent reporting service

during 2021 (2020: six), further details of which are set out below:

Report Type Date of Report (2021) Outcome of investigation

Harassment and /

or Discrimination

April No findings of the

issuesalleged

Violence and /

orAbuse

October Substantiated –

employeereceived

behavioural coaching

Harassment and /

or Discrimination

November Substantiated –

contractor agreed to

terminate its employee

Harassment and /

or Discrimination

December Substantiated –

employeedisciplined

Compliance Training

As a result of the ongoing pandemic, during 2021 we

deliveredourcompliance learning programme predominantly

viae-learning(with classroom facilities provided for employees

atmanufacturing facilities) and smaller group videoconferences.

Training is tailored to the role and location of our employees,

based on an understanding of the nature of the ethical and

compliance risks to which each employee may be exposed.

In 2021, employees were offered a range of courses, including

Modern Slavery, Anti-bribery and Data Protection. Over 1,100

hours of learning were completed in the year. The average

completion rate for the eight principal courses was95.5%.

Data Privacy

We remain committed to ensuring the security and confidentiality

of our data. The Data Protection Steering Committee (DPSC)

continues to meet regularly, overseeing the Group’s compliance

with the ever-changing landscape of privacy and data protection

regulation. In 2021, this notably included China’s new laws on data

security and personal information protection.

In 2021, as some of our workforce maintained home or flexible

working, we delivered a series of live online privacy and information

security sessions and introduced guidance on working from home

and safe disposal of confidential waste, to support our existing

policies and procedures. We remain committed to the security of

our network and systems. In 2021, the DPSC introduced a schedule

of simulated phishing campaigns to raise employee awareness of

cyber security threats. The overall simulated compromise rate

remained considerably below the average predicted rate.

We continue to encourage the timely, open, and transparent

reporting of actual and potential incidents concerning personal

data, and have dealt with the following reports during 2021:

Cause of report* Number of reports

Loss or theft of data / hardware 2

Disclosed in error 4

Technical / procedural error 9

Cyber incident 4

Third Party 1

* Elementis did not experience any notifiable personal data breaches in 2021

Supply Chain Transparency

We operate a complex, international supply chain of approximately

5,000 suppliers for our raw material feedstocks and indirect

procurement, and we are committed to driving transparency

throughout these value chains and partnering with suppliers who

share our commitment to supply chain transparency and responsible

business. In 2021, the Compliance, Sustainability and Procurement

teams collaborated on a tender to identify an appropriate externally

hosted solution to bring increased standardisation and efficiency to

our third-party integrity risk-screening processes. We will go live with

this new platform in 2022, which will further enhance our established

zero-tolerance approach to corruption and modern slavery in our

supply chain and position us well for compliance with the anticipated

European Directive on corporate accountability and due diligence.

We support the use of certified sustainable palm oil and

derivatives. Our Livingston, UK site purchases palm oil derivatives

for use in our organoclay and gel products. The site is third-party

certified to the Roundtable on Sustainable Palm Oil (RSPO) Mass

Balance Supply Chain Model.

Our standard payment terms for suppliers are net 60 days from

receipt of goods and services. In the UK, we report our UK

payment performance to the UK Government’s reporting portal

twice a year. In January – June 2021, 94% of invoices were paid

within 60 days, with an average payment time of 25 days. In July

– December 2021, 97% of invoices were paid within 60 days, with

an average payment time of 21 days. These data represent faster

payments to suppliers than in 2020 (average payment times 26

days and 30 days).

Tax Transparency

On an annual basis, we develop and publish our tax transparency

statement. This statement is approved by the Board and is

available on the Company’s website. We aim for a proactive and

transparent relationship with all relevant tax authorities to facilitate

meeting our statutory and legislative obligations.

40 Annual Report and Accounts 2021 Elementis plc

Strategic report

Non-financial information statement

Section 414CA and 414CB of the Companies Act 2006 requires the Company

to provide information to help stakeholders understand our position on non-financial

matters. The table below sets out where you can find thisinformation:

Reporting requirement

Policies and standards which govern our approach Further information

Anti-corruption and

anti-bribery

– Code of Conduct

– Anti-corruption policy

– Anti-trust policy (global competition)

– Purchasing Code of Practice

– Sustainable business – Ethics and

Compliance, pages39-40

– www.elementis.com

Employees

– Health, Safety and Environmental policy

– Code of Conduct

– Life saving rules

– Data protection and privacy policies

– Equality and diversity policies

– Whistleblowing policies

– Sustainable business – Our employees,

pages38-40

– Diversity Policy and initiatives, page 94

– Whistleblowing, page 100

Environmental matters

– Code of Conduct

– Health, Safety and Environmental policy

– Water Stewardship statement and policy

– Biodiversity statement

– Sustainable business – Health and Safety,

pages32-33

– Sustainable business – Our employees,

pages 38-40

– www.elementis.com

Respect for human

rights

– Code of Conduct

– Equality and diversity policies

– Data protection and privacy policies

– Purchasing Code of Practice

– Modern slavery statement

– Sustainable business – Our employees,

pages38-40

– Diversity Policy and initiatives, page 94

– www.elementis.com

Social matters

– Code of Conduct

– Volunteering policy

– Whilst we do not have specific policy

onsocial/community matters, we engage

directly with our communities wherever

weoperate

– Sustainable business – Our employees,

page39

– Stakeholder engagement - Communities

and the environment, page 51

Stakeholders

– Section 172 – Section 172, pages 52-53

Description of the

Business model

– Business Model, pages 18-19

Description of Principal

Risks and impact on

business activity

– Risk management, pages 64-67

– Principal risks and uncertainties, pages

68-72

– Audit Committee report, page 99

Innovation

– Innovation at Elementis, pages 12-13

Non-financial key

performance indicators

– Key Performance Indicators, pages 28-29

– Sustainable business, pages 30-40

– Taskforce for Climate-related Financial

Disclosures, pages 42-47

Reference to our policies, due diligence processes and information on how we are performing in these areas are contained throughout

theStrategic report. Information on our principal risks can be found on pages 68 to 72, information on our non-financial key

performance indicators can be found on page 29 and a description of our business model can be found on pages 18-19. Certain Group

policies and internal standards and guidelines are not published externally.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Taskforce for Climate-related Financial Disclosures (TCFD)

Climate Change Impacts

Recommended disclosures Further information

Governance

– Describe the Board’s oversight of climate related risks andopportunities

– Describe management’s role in assessing and managing climate related risks and opportunities

Strategy

– Describe the climate related risks and opportunities the organisation has identified over the

short, medium and long term

– Describe the impact of climate related risks and opportunities on the organisation’s business

strategyand financial planning

– Describe the resilience of the organisation’s strategy, taking into account difference climate

related scenarios, including a 2°C or lower scenario

Risk management

– Describe the organisation’s processes for identifying and assessing climate related risks

– Describe the organisation’s process for managing climate related risks

– Describe how the organisation’s processes for identifying, assessing and managing climate

related risks are integrated into the organisations overall risk management

Metrics and targets

– Describe the metrics used by the organisation to assess climate related risks and opportunities

in linewith its strategy and risk management process

– Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 GHG emissions, and the relatedrisks.

– Describe the targets used by the organisation to manage climate related risks and opportunities

and performance against targets

We support the recommendations of the TCFD

framework and are aligning our reporting with the

TCFD disclosure recommendations for the first

time this year. This is in line with the FCA’s (Financial

Conduct Authority) confirmation that premium-listed

companies in the UK are required to disclose how

climate change will impact their business. The TCFD

proposed a global framework for disclosing climate

related risks and opportunities that will aid us in

improving our resilience to climate change.

This year, we have conducted, with specialist support, a

gapanalysis on our current level of alignment to the eleven

recommendations of TCFD. This process identified opportunities

to strengthen linkages to climate related risks and opportunities,

and new organisational processes, particularly in the TCFD

Strategy and Metrics & Targets categories.

TCFD recommends that all companies should conduct a climate

scenario analysis (CSA) to assess the potential climate related

risks and opportunities that may impact them. In 2021 we

completed our own CSA and assessed the resilience of our

business to certain climate-related risks.

Our work against the TCFD disclosure recommendations is

summarised below. We plan to continuously improve our use of

TCFD in the coming years, for example by increasing our ability

tofinancially quantify the risks and opportunities in different

climate scenarios.

Listing Rule 9.8.6R statement

Elementis plc has complied with the requirements of LR

9.8.6R by including climate-related financial disclosures

consistent with the TCFD recommendations and

recommended disclosures except for Scope 3 GHG

emissions due to the complexity of our diverse value

chains. We recognise the importance to our business

ofunderstanding Scope 3 emissions and are committed

to assessing our Scope 3 footprint in 2022, with the aim

tobe fully compliant for the year ending 31st December

2022. We plan to identify and quantify the relevant Scope

3 categories for our business with the help of external

specialists and this will help us to prioritise GHG

reductions and climate risk mitigation actions within

ourvalue chains.

42 Annual Report and Accounts 2021 Elementis plc

Strategy

As a speciality additives business, the market segments in which

our businesses operate are highly diverse and our products are

fundamental to a wide range of economic activity within society.

Our strategy of Innovation, Growth, and Efficiency incorporates

climate and sustainability related drivers, for example:

– Our product innovations are helping our customers to deliver

efficiency advantages in energy, durability and material usage

that support a low carbon transition across society (see

examples on page 23).

– We identify growth opportunities in market segments (such as

premium decorative coatings or natural skin care ingredients that

allow the performance and sustainability benefits of our products

to generate value for multiple stakeholders (see page 24-25).

– Our environmental targets (see page 31) and risk

management (see page 64) help us to deliver increased

efficiency, reliability and sustainability, while lowering our

exposure to the operational risks of climate change and

thetransition to a low carbon society.

Board Audit Committee

CEO

ELT

Sustainability Director

Environmental

Sustainability Council

Functional teams/

project managers

Internal

audit

CFO

Risk management function

Board

ESG, principal risks &

uncertainties including

climate related risks and

opportunities

Audit

Oversight of risk management

and internal controls including

climate related risk

Overview of the selected NGFS climate scenarios

Net Zero 2050

Divergent Net

Zero

Current Policies

Summary Orderly transition

across the world

and industry

sectors to meet

Net Zero by 2050

met, but with a

delayed start and

inconsistent

policies that are

focussed more

on transport,

construction,

and consumers

Current Policies

continue with no

significant extra

push to align with

IPCC

Policy ambition 1.5°C 1.5°C 3°C+

Policy reaction

Immediate and

smooth

Immediate but

divergent

Negligible/none

Type of change Orderly Disorderly Hothouse world

Technology Fast change Fast change Slow change

Cost of carbon High Very high Very low

Regional policy

variation

Medium Medium Low

Governance

The governance of climate related risks and opportunities is

integrated into our overall risk management framework. At Board

level, the CEO’s report highlights ESG progress including climate

related risks and opportunities, with further detailed management

updates provided on a bi-annual basis. This year these included,

for example, our strategic approach to TCFD (see also page 52 for

further information on s.172 duties). In 2021, the Audit Committee

was given oversight of our progress to align with TCFDdisclosure

recommendations through management-prepared materials.

Our CEO has ultimate accountability for our strategic response to

climate related risks and opportunities. The Executive Leadership

Team (ELT) members are responsible for effectively managing

climate related risks and opportunities (as part of our wider

riskmanagement process). In 2021 we appointed a Director of

Sustainability, who is responsible for overseeing our Sustainability

strategy and chairs our Environmental Sustainability Council

(ESC). The ESC meets monthly and oversees project managers,

assesses risks and identifies necessary actions on climate related

topics. The ESC provides updates after every meeting tothe CEO

and ELT with written materials.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Taskforce for Climate-related Financial Disclosures (TCFD)

Climate Change Impacts

Nine most material climate-related risks to our operations.

Extreme weather

events

Water scarcity Carbon pricing

Investor pressure Customer demands Consumer trends

Raw material

supplies / prices

Energy prices Access to renewable

electricity

To help us with our medium and long-term climate planning and

inalignment with the recommendations of TCFD, this year we

conducted a climate scenario analysis (CSA). We used climate

scenarios defined by the Network for Greening the Financial

Systems (NGFS). NGFS is internationally recognised for its work

toadvance climate science and contributes to the International

Panel on Climate Change’s (IPCC) work. NGFS has defined six

climate scenarios that are used by central banks to explore possible

economic and financial impacts of climate change. These scenarios

are often taken as the starting point for organisations to build their

own assumptions and cover a range of physical and transitional

risks, each with varying economic, policy and population trends.

We selected three of these scenarios for analysis – Net Zero 2050;

Divergent Net Zero and Current Policies. These are summarised

inthe table page 43.

We then held virtual workshops with functional leaders to

helpassess how these scenarios might impact our business.

Over multiple workshops, we built up a comprehensive picture of

potential climate related risks and opportunities in each scenario,

and the dynamics in short/medium (2025), long (2030) and

extended (2040 and beyond) timeframes. Using the workshop

outputs, we focused our initial long list of 32 potential risks down

to nine risks (two physical risks and seven transition risks) that we

consider most likely to be material to our business.

In terms of the climate related dynamics of the markets we

operate in, we identified opportunities, especially in the Net Zero

2050 and Divergent Net Zero scenarios. In these scenarios,

changing demands of industry customers and end-consumers

were thought likely to increase our opportunities for our innovative

products in all three timeframes. For example, we would likely see

more demand for our natural and naturally derived additives for

personal care products, and for our talc additives used in plastics

for vehicle light-weighting that help increase the distance travelled

for a given amount of electricity or fuel used.

We identified fewer market-based risks. One of these was that

inthe extended (2040 and beyond) timeframe, demand for our

talcadditives used in pollution control catalyst ceramics for

combustion engines would drop in the Net Zero 2050 and

Divergent Net Zero scenarios, as new vehicle fleets become

increasingly electrified. Nevertheless, in the short/medium (2025)

and long (2030) timeframe, this remains an opportunity under

every scenario because pollution control regulations continue

totighten, driving more demand for these products. The business-

as-usual nature of the Current Policies scenario translates simply

as potential lost market opportunity.

Overall, we consider that in the short, medium, and long-term,

themarket opportunities we could access with our portfolio would

more than compensate for the market risks we identified during a

low carbon transition. Thus, the diversity of the market sectors we

serve, and the desirable performance and sustainability features

of our products, provide increased revenue opportunities driven

by climate change and the low carbon transition.

Ensuring we can take advantage of such opportunities and

helpour customers and end-users respond is a key part of

ourstrategy to manage climate related risks and opportunities.

Reflecting this, two of nine risks are related to our ability to

anticipate and deliver upon changing market expectations

(specifically, customer demands and consumer trends risks).

To deliver to the market, we need a climate resilient operation.

The CSA was also helpful to identify the most significant climate

related risks for our operational delivery. These risks include

carbon pricing, investor pressures, supply chain resilience,

energymarkets and extreme weather events.

We held further discussions with functional leaders to assess

thepotential impact of these nine climate related physical and

transition risks. Using our corporate risk assessment framework,

we scored the impact and likelihood of these nine risks over short/

medium (2025), long (2030), and extended (2040 and beyond)

timeframes in each of the three climate scenarios.

44 Annual Report and Accounts 2021 Elementis plc

Detailed review of the top two most significant risks in each NGFS climate scenario

Customer demands Carbon pricing Consumer trends

Raw material supplies/

prices

Extreme weather events

Risk type Transition Transition Transition Transition & Physical Physical

NGFS scenario

in which it is

high risk

Net Zero 2050 Net Zero 2050 &

Divergent Net Zero

Divergent Net Zero Current Policies Current Policies

Why the risk

isimportant

tous*

Our customers

preferentially source

products with lower

climate impacts than

we offer, resulting in

lower revenues.

A high carbon price

causes significant

increase in operating

costs.

Our cost base may

become

uncompetitive.

Consumers change

buying habits to lower

consumption or to

lower climate-impact

products than we

offer, resulting in lower

revenues.

Key raw materials

have lower availability,

damaging our ability

to fulfil orders,

potentially lowering

revenues AND/OR

higher raw material

prices mean our cost

base may become

uncompetitive.

Our sites and / or

delivery routes are

shut down due to

damage, delaying

order fulfilment and

potentially lowering

revenues and

increases our cost

base for repairs /

prevention.

Our

assessment

approach

Review direct

feedback from key

customers and their

own public climate

targets.

Review competitor

public climate targets

against our own.

Carbon prices as

defined in NGFS

scenarios were used

along with our Scope

1 & 2 GHG reduction

plans to calculate

potential impact.

Public information on

consumer trends in

sentiment and

behaviours.

Feedback from our

direct customers.

Key supply chain

exposure to extreme

weather disruption,

including impacts on

bio-derived material

production and

petrochemicals

availability.

Site climate trends

assessed using NGFS

scenario assumptions

for financial impact.

Impact is assumed

higher for our critical

sites with large

volumes and unique

processes.

Strategic

mitigations

Climate and

sustainability benefits

described our product

marketing.

New product

innovation.

Deliver on GHG

reduction plans and

review targets.

Develop Scope 3

footprint.

Continue Scope 1 & 2

emissions reduction.

Continue energy

efficiency

improvements.

Develop Scope 3

footprint.

Continually review

emission reduction

targets.

Product price

adjustments.

Innovate to ensure we

are well positioned for

new market trends.

Ensure sustainable

practices though

thesupply chain.

Maintain our portfolio

diversity.

Qualify multiple

suppliers.

Encourage

sustainable climate

adaptation actions at

key suppliers.

Inventory

management.

Continue to assess

need for investment

inextreme weather

adaptations at

criticalsites.

* The quantification of potential financial impacts was assessed for some risks, however, further work is necessary to ensure this assessment is

appropriate for disclosure purposes.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Climate Change Impacts

Strategic report

Taskforce for Climate-related Financial Disclosures (TCFD)

Risk management

Our climate risk management approach is incorporated at an

enterprise level into our overall risk management framework

(detailed on page 67) and all nine climate-related risks identified

through the CSA analysis (described above) are visible in our

Group risk register. Some of these risks (for example extreme

weather disruption) have long been identified as elements of

ourprincipal risks (see page 68), and we will continue assessing the

climate-related component of such risks to ensure we have

appropriate mitigation and response plans.

The Audit Committee and Board have oversight of our risk

management function and internal controls as noted on pages

99-100. Risk mitigations are monitored by the ELT and delivered

by the ESC-coordinated working teams (such as Scope 1 and 2

reduction) or by functional teams (such as new product innovation

and product marketing).

Metrics & Targets

We have a range of metrics and targets that we use to address

ourclimate related risks and opportunities in line with our strategy

and risk management process. The table on page 47 shows which

of these metrics and targets are relevant mitigations for which of

our climate related risks. The table also shows which risk, target

and metric are most strongly related with our Scope 1, 2 and 3

GHG emissions, and where in this report to find more information

about our actions and progress.

We continue to review our metrics and targets in line with

developing practices and regulatory requirements. We recognise

theimportance of understanding Scope 3 GHG emissions for

ourbusiness and are committed to assessing our Scope 3 GHG

footprint in 2022. This will help us prioritise GHG reduction and

climate risk mitigation actions throughout our value chains.

In the short/medium (2025) timeframe, all nine risks scored lower

than in longer timeframes. All risks were scored to be increasing or

flat through to 2040 and beyond in all scenarios, except for the raw

materials risk which has a score peak in 2030 in the Net Zero 2050

scenario. This reflects our view that under this scenario, disruptions

as supply chains transition in the long term (2030) will be substantially

resolved in the extended timeframe (2040 and beyond).

The two top-scoring risks identified for each climate scenario

were the same for the long (2030) and extended (2040 and

beyond) timeframes in all scenarios. These risks, why they

areimportant to us, how we assessed the risk and our strategy

tomitigate them are described in the table on page 45.

Action plans already exist for our strategic mitigations to the nine

risks, and further detail on our progress can be found throughout

this report.

Overall, our short/medium term (2025) strategy and business

planning includes actions to ensure we take climate related

opportunities and manage risks, including in:

– marketing, to allow early identification of trends and

opportunities

– our innovation pipeline to deliver new products that improve

performance and sustainability

– operational activities, such as energy efficiency projects and

sourcing renewable power

For example, we have identified energy efficiency projects that

require $5M of investment in the next 5 years (with $531,000

spent on energy efficiency projects in 2020 and 2021). Our long

term (2030) and extended timeframe (2040 and beyond) planning

involves assessment of regulatory and market trends. In the

climate-related area, this additionally means developing a clear

definition of and pathways to deliver on our commitment of

becoming carbon neutral.

Therefore, based on this assessment we believe our strategy is

fundamentally resilient to market dynamics in different climate

scenarios (including a 1.5°C Net Zero scenario) over short/

medium, long and extended timeframes, and provides a strong

foundation to capitalise on climate related opportunities and

further increase resilience against climate related risks.

46 Annual Report and Accounts 2021 Elementis plc

Current climate related targets & metrics, the climate risk areas that they help to mitigate and the related

GHG emission scope

Target Customer

Demands

Carbon

Pricing

Consumer

Demands

Raw

material

supply /

prices

Extreme

Weather

events

Water

scarcity

Investor

pressure

Energy

Prices

Access to

renewable

electricity

Emission

Scope

Additional

information

GHG emission

reduction

1,2 Page 35

Energy

(from fuels)

efficiency

1,2 Page 36

Reduced

water use

3 Page 36

Waste

reduction

3 Page 37

Metric

Renewable

electricity

1,2 Page 34

Natural content

of products

1,2 Page 21

New products

launched

3 Page 23

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Stakeholder engagement

Listening and responding to our stakeholders

Key

Innovation Growth Efficiency

We are committed to listening to, engaging with and

reflecting our stakeholders’ needs and priorities in

our business plans and operations. Our engagement

approach is based on trust and transparency, which

reflects our strategy and purpose.

Customers

Why we value them

Our customers rely on us to deliver high quality products with

superior performance, efficiency and sustainability features.

We deliver a range of products to customers around theworld,

and by providing expertise and innovation, we keep our

customers at the forefront of their industries.

How the Board engages

The CEO and the Business Unit leaders are in regular contact

with our customers and regularly update the Board on the

strength and quality of our customer relationships including

innovation projects, challenges and opportunities, trends,

competitive landscape, performance in year and longer

termstrategy.

As a mechanism to increase the voice of the customer in

theBoard environment and deepen knowledge of customer

relationships, customer testimonies (video format) have featured

in Board presentations during the year.

How the business engages

– Customer dialogue and being able to demonstrate

operational resilience have been significant priorities in the

year as a result of a highly dynamic supply chain environment

– We have continued to work in partnership with our customers

to develop innovative products that align with market trends

– We provide technical support services to our customers and

have an established global key account programme which

enables us to focus on deepening our customer relationships

– Sustainability is a key focus for customers and several

largecustomers have engaged with us directly on innovation

and sustainability projects and performance, which has

strengthened the innovation pipeline and led to new

innovation partnerships and collaboration

– We participate in conferences, trade shows and industry

associations, although throughout the pandemic most

engagement was carried out via virtual meeting formats

2021 highlights

– Launched 21 new products

– 60 innovation projects in development

– $50m new business

– $15m spend on R&D

– 2 new R&D labs (Brazil and China)

– 146 online customer technical support seminars

Read more on pages 14-15

Suppliers

48 Annual Report and Accounts 2021 Elementis plc

Why we value them

Our employees are crucial to the success of our business and

many of our decisions have an impact on them. Our employees

want to feel valued and empowered to make a difference. A safe,

ethical and sustainable workplace with rewarding careers and

investment in training and development remain important

hallmarks of employee satisfaction.

How the Board engages

– Organisational culture, strategy, engagement and talent

and succession matters form part of the standing CEO

report to the Board

– A detailed session on people strategy, culture,

employee engagement, talent and succession is led by

the ChiefHROfficer

– Christine Soden (DNED) has engaged with focus groups,

received engagement updates throughout the year and

circulated a note to all employees on how the Board has

listened to and used the feedback as part of the employee

voice in the Boardroom

– Through commercial and function presentations to the

Board throughout the year

– Director induction programme – townhalls, site visits and

Board dinners, although most engagement has been virtual

during theyear

How the business engages

– We continually engage and communicate with our people on

their health, safety and wellbeing, our organisational culture,

promoting diversity and inclusion, and training and development

– We use our annual engagement survey as a mechanism

tomeasure progress, obtain feedback and develop action plans

– Active engagement activities are facilitated through global

andlocal townhall meetings, quarterly business briefings,

Coffee with the CEO, works councils, and business, site and

functional meetings

– We launched our Inside Elementis news and information

platform to keep employees up to date with latestnews,

recognition, diversity and inclusion events and Company

performance

– Performance reviews and appraisals provide feedback on

agreed objectives and careerdevelopment discussions

– Diversity, equity and inclusion – employee resource groups

have been established to facilitate local and regional

diversity and inclusion activities

– A range of online training and support and a confidential

employee assistance and wellbeing programme

2021 highlights

– 74% of sites without a recordable injury in 2021

– 63% response rate of employees (engagementscore)

– 4 global Women in Leadership events

– Over 4,500 hours of employee training

– Over 644 hours of Diversity, equity and inclusion

trainingdelivered

– 3 global townhall meetings and 11 informal ‘Coffee with

theCEO’ sessions

Read more on pages 38-40

Employees

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Stakeholder engagement continued

Key

Innovation Growth Efficiency

Investors

Why we value them

As owners of the Company, it is important to understand their

perspectives on sustainable growth, capital efficiency and how

the Company is run.

How the Board engages

– Chairman and SID governance meetings

– Executive remuneration policy proposals and

implementation

– Annual shareholder meetings

– Corporate brokers interactions with the Board

– Investor relations Board report

– Feedback from investors following results presentations

– Full year and half year results presentations, trading

statements and press releases provide meaningful

information on which investors can make informed

investment decisions

How the business engages

– We engage with our shareholders regularly and consult with

our major shareholders on specific issues to understand their

views. The CEO, CFO and Director of Investor Relations are

the principal contacts for shareholder engagement

– ESG performance, supply chain, innovation, governance

andfinancial related matters have been common themes

ininvestor dialogue during the year which has been shared

withthe Board

– Virtual innovation seminar held for investors helps grow

awareness and understanding of innovation capabilities

2021 highlights

– Over 150 investor meetings

– Attended 5 investor conferences

– Virtual innovation seminar for investors led by SVP

GlobalTechnology

– Virtual presentation for retail shareholders in partnership

withShareSoc

– First hybrid AGM delivered

Read more on page 87

Why we value them

Engagement with governments and local regulatory

authoritieshelps toensure we understand changing

regulatoryrequirements and can maintain a constructive

dialogue to meet these requirements.

How the Board engages

The Board is kept informed of relevant governance, legal,

regulatory and compliance matters, including data privacy.

How the business engages

– Direct engagement with regulatory authorities, including

permit compliance, reporting breaches, annual technical

submissions and regulatory guidance

– Establishing and maintaining key contact relationships

withthe Company’s main regulators

– Active engagement with industry bodies

2021 highlights

– Company submission in response to UK Government

consultation – ‘Restoring trust in audit and corporate governance’

– Dialogue with Financial Reporting Council in response to a

Thematic Review of IAS 37 Provisions, Contingent Liabilities

and Contingent Assets – further information on page 100

– Zero notifiable data breaches

– FTSE Women Leaders Review on Boards submission

Regulatory authorities

50 Annual Report and Accounts 2021 Elementis plc

Communities and the environment

Why we value them

Engagement helps us to understand our impact on the wider

society and the ways in which we can work together tomake

avaluable difference.

How the Board engages

Oversight by the Board of corporate responsibility plans

andreporting, including the review and approval of key

corporate statements.

How the business engages

– Environmental and social reporting on our website,

includingcorporate responsibility, modern slavery,

genderpay, water stewardship and carbon emissions

– Philanthropy and employee-matched funding for

charitypolicy

– Local volunteering activities

– Carbon Disclosure Project (CDP), UN Global Compact

communication on progress and EcoVadis submissions

– Local biodiversity initiatives such as recycling rainwater

forbanana plantations in Brazil

2021 highlights

– Water stewardship policy

– Volunteering and fundraising activities

– Gold rating from EcoVadis and B- rating from CDP

– Responsible Chromium award – only chrome producer in the

world to receive this award

Read more on pages 34-37

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Section 172 statement

Promoting the success of the Company

Our Directors have a duty under Section 172 of the Companies Act

2006 (s.172) to promote the success of the Company for the benefit

of its members. In doing so, they must have regard to the interests

of our employees, the business relationships with our suppliers and

customers, the impact of our operations on the community and

the environment, and the desirability of the Company maintaining

a reputation for high standards of business conduct.

To be able to fulfil their duties when making decisions, it is

essential that our Directors understand what matters to our

stakeholders and, equally, that it is not always possible to provide

positive outcomes for all stakeholders when considering the long

term success of the Company.

Details of our stakeholder groups and how the business and the

Board have engaged with them during the year are set out on

pages48-51.

The Board receives information on stakeholder engagement

matters through regular reports and presentations from senior

management throughout the year. All Board papers for principal

Board decisions include a specific section on s.172 and

stakeholder interests. In addition to s.172 duties, there are also

other factors that are taken into account or may be considered

relevant in the context of decision making, for example, pension

scheme members or engagement with regulatory authorities.

Directors bring additional value by sharing knowledge or insight

gained from previous or current roles which enable a more holistic

approach to the decision making environment.

Christine Soden, our designated Non-Executive Director for

workforce engagement, ensures that the views and concerns

ofthe workforce are brought to the Board and are taken into

account. Further information on our approach to workforce

engagement can be found on pages 85-86.

How the Board fulfils its s.172 duties

S.172 duties Read more Pages

(a) Consequences of decisions

in the long term

Our business model

Our strategic priorities

Principal risks and uncertainties

Viability statement and going concern

TCFD disclosures

Board activities

18-19

20-27

68-72

42-47

(b) Interests of employees Non-financial information statement

Sustainable business – Our employees

Culture and values

38-40

relationships with suppliers,

customers and others

Sustainable business

Operating review

Our strategic priorities

30-40

60-63

20-27

(d) Impact of operations on the

community and the environment

Sustainable business – Managing our environmental impact

TCFD disclosures

34-37

42-47

(e) Maintaining high standards

of business conduct

Sustainable business 30-40

(f) Acting fairly between

members

Shareholder engagement

Voting rights

129

Board training

Each of the Directors is aware of their duties and has received

trainingons.172

Board information

Board papers include specific

reference to s.172 and

stakeholder interests

Board directly and indirectly

engages with stakeholders

Board strategic discussion

Board considers quality of

information and seeks assurance

where necessary

Chair facilitates board discussion

ahead of formal debate

Board decision

Company Secretary records all

Board decisions

Board decisions are cascaded

forimplementation

In the ordinary course of business, site visits and Board dinners

alsoprovide opportunities for direct engagement with employees,

however, this has not been possible as a result of continued

COVID-19 related travel restrictions. In addition, the Directors also

engage directly with our investors (see page 87 for more detail)

andour employees.

52 Annual Report and Accounts 2021 Elementis plc

Key

Employees Customers

Investors

Suppliers

Creditors

Government and regulators

Environment and communities

Matters considered by the Board

The following are some of the decisions made by the Board this year which demonstrate how colleague interests, the need to foster

business relationship with other key stakeholders and other section 172 matters have been taken into account in discussions and

decision-making:

Decision s.172 considerations The Board’s role

Renewable electricity

procurement strategy

(including a framework

for delegation of

authority)

The key stakeholders

identified:

The ability to secure renewable

energy forour key sites is a strategic

focus for the company and is

considered by the Board to be vital

for the long term success of

theCompany.

The Board’s decision-making process was based on a longer term

purpose driven objective to ensure that the business can deliver

sustainable growth through innovative products that offer cleaner,

better and sustainable performance. The reduction of energy

used in the production or manufacture of products (i.e GHG Scope

3 emissions) will enable the Company to reduce supply chain

emissions in the long-term as well as enabling the Company

toachieve its sustainability targets. Sustainability features in

ourproducts and our operations are key topics of dialogue and

engagement with investors, customers and employees. The Board

considered management’s proposal and used insight from

stakeholder dialogue to conclude that there were no negative

impacts for any one group of stakeholders. The agility to contract

in a timely manner, cost and demand for renewable assets remain

important factors for success.

Suspension of

dividends

The key stakeholders

identified:

The Board recognises the value of

dividends to shareholders and made

a difficult decision to continue the

suspension of dividends during 2021.

In 2020 at the height of COVID-19 related uncertainty, the Board

decided to take several steps to provide additional financial

headroom and preserve cash, one of which was the suspension

ofthe dividend and relaxation of banking covenants as announced

in 2020. In 2021, as a result of continued COVID-19 related

macroeconomic uncertainty, the Board contemplated the longer

terms interests of shareholders and creditors in the context of the

Group’s capital allocation priorities and it was deemed appropriate

to focus on continued debt reduction versus a resumption of

dividend. The Board carefully considered the short term negative

impact on our shareholders, including employee shareholders but

determined that these interests would be better served through

prioritising the Group’s capital allocation focus on investments to

drive organic growth, further debt reduction and when appropriate

the resumption of dividends to shareholders.

Supply chain resilience

throughout 2021

The key stakeholders

identified:

The ability to operate resiliently

throughout 2021 continues to be

akey priority for the Board as part

ofthe ongoing long-term success

ofthe Company.

The Board have continued to play a holistic role in oversight of

themany supply chain issues that have dominated the macro

andmicro environments where the Group operates recognising

managements’ role in navigating the dynamic supply chain

environment. The Board considered the interests and expectations

of stakeholders in the regular reports received by management to

address the dynamic supply chain landscape with a particular focus

on cost management, inflationary environment, raw material

availability, operational capability and ability to serve customers

whilst continuing to demonstrate ongoing focus on innovation,

strategic focus and financial profitability. The Board have received

and discussed a range of information including; the balance of

supply chain resilience and risk, employee safety and well-being

and continued backdrop of global and local COVID-19 guidance.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Finance report

Good performance improvement

andleveragereduction

As a result of strong new business

success, targeted pricing actions in

response to accelerating cost inflation

and demand recovery across many of

our end markets, this year we delivered

a much improved level of performance.

In turn, this earnings recovery resulted

in an encouraging reduction in financial

leverage from 3.2x to 2.6x net debt

toEBITDA.

Ralph Hewins

Chief Financial Officer

Group results

In 2021, revenue increased 17% from $751m to $880m due

tostrong new business success, targeted pricing actions and

demand recovery across most of our end markets following a

COVID-19 impacted prior year. Excluding the impact of currency

translation, underlying revenue increased 14%. Revenue in

Personal Care rose 9% on a reported basis and 6% on an

underlying basis*, as demand showed steady recovery due to

thegradual easing of social interaction and travel restrictions.

In Coatings, revenue increased 20% on a reported basis and 17%

on an underlying basis*, driven by strong new business success

and pricing actions in response to accelerating cost inflation.

In Talc, revenue increased 14% on a reported basis and 9% on

anunderlying basis*, as geographic expansion outside of Europe

and delivery of revenue synergies more than offset weakness

inboth long life plastics for automotive applications and paper

markets. Revenue in Chromium increased 16% due to strong

volume growth as demand increased across a range of industrial

end markets.

Reported operating profit increased from a loss of $28m to a

profit of $26m with a strong performance improvement partially

offset by $80m of adjusting items, the largest of which was a

$53m non-cash Talc goodwill impairment (2020: Talc $33.4m

andEnergy $26.9m) due to the continuing impact of COVID-19

onindustrial activity and global supply chains. Adjusted operating

profit increased 28% on an underlying basis* from $82m to

$107mwith the aforementioned higher revenue and associated

earnings more than offsetting cost inflation primarily associated

with global supply chain challenges. The statutory result for the

year was a profit of $3m compared with a loss of $67m in 2020.

54 Annual Report and Accounts 2021 Elementis plc

Adjusting items

In addition to the statutory results, the Group uses alternative performance measures, such as adjusted operating profit and adjusted

dilutedearnings per share, to provide additional useful analysis of the performance of the business. The Board considers these

non-GAAP measures as an alternative way to measure the Group’s performance. Adjusting items in 2021 resulted in a charge of$71.2m

before tax, a decrease of $50.3m against last year. The key categories of adjusting items are summarised below. For moreinformation

onadjusting items and the Group’s policy for adjusting items, please see Note 5 and Note1 to the financialstatements respectively.

Credit/(charge)

Personal

Care

Coatings

Talc

Chromium

Central

costs

Total

Business transformation (0.1) (4.2) – (0.3) – (4.6)

Environmental provisions – – – (8.3) – (8.3)

Impairment of goodwill – – (52.3) – – (52.3)

Amortisation of intangibles arising on acquisitions (8.7) (1.1) (6.0) (0.2) – (16.0)

Sale of Montreal land – – – 1.0 – 1.0

Total charge to operating profit (8.8) (5.3) (58.3) (7.8) – (80.2)

Sale of businesses (1.7) – – – – (1.7)

Mark to market of derivatives – – – – 10.7 10.7

Total (10.5) (5.3) (58.3) (7.8) 10.7 (71.2)

Business transformation

In November 2020, the closure of the Charleston plant was

announced. Costs of $4.2m in 2021 (including $0.4m of

depreciation) associated with preparing thesite for sale are

classified as an adjusting item and the site is planned to be

disposed of in the future. Further charges of $0.4m relate to the

optimisation of the supply chain footprint across our Personal

Care and Chromium businesses.

Environmental provisions

The Group’s environmental provision is calculated on a discounted

cash flow basis, reflecting the time period over which spending is

estimated to take place. The movement in provision relates to a

change in discount rates that has decreased the liability by $1.3m in

the year, and extra remediation work identified in the year which has

resulted in a $9.6m increase to the liability. As these costs relate to

non-operational facilities they are classified as adjusting items.

Impairment of goodwill

In Talc, while the business fundamentals are unchanged, the

continuing impact of COVID-19 on wider industrial activity and

global supply chains, especially affecting the automotive sector,

and the near term forecast profitability of the business has

resulted in a goodwill impairment of $53.1m. This impairment

isreflected as a P&L charge of $52.3m and $0.8m movement in

exchange differences on translation of foreign operations in other

comprehensive income.

Amortisation of intangibles arising on acquisition s

Amortisation of $16.0m (2020: $15.5m) represents the charge in

respect of the Group’s acquired intangible assets. As in previous

years, these are included in adjusting items as they are a non-cash

charge arising from historical investment activities.

Sale of Montreal land

In 2021 the Group disposed of a non-core parcel of land in Montreal,

Canada. The profit on disposal has been treated as an adjusting item.

Sale of businesses

The $1.7m loss on disposal of two non-core dental businesses,

Eisenbacher Dentalwaren ED GmbH and Adentatec GmbH, has

been treated as an adjusting item in 2021.

Mark to market of derivatives

The movements in the mark to market valuation of financial

instruments that are not in hedging relationships are treated as

adjusting items as they are non-cash fair value adjustments that

will not affect the cash flows of the Group.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Revenue

2021

2020

$m Change

Personal Care 174.7 160.8 9%

Coatings 384.3 319.1 20%

Talc 150.4 132.5 14%

Chromium 170.7 146.9 16%

Inter-segment – (8.0) N/A

Revenue 880.1 751.3 17%

Adjusted operating profit

2021 2020

Operating

profit/(loss)

Adjusting

items

Adjusted

operating

profit/(loss)

Operating

profit/(loss)

Adjusting

items

Adjusted

operating

profit/(loss)

Personal Care 27.9 8.8 36.7 20.0 13.6 33.6

Coatings 56.5 5.3 61.8 (4.9) 46.3 41.4

Talc (44.3) 58.3 14.0 (22.4) 39.0 16.6

Chromium 6.3 7.8 14.1 (3.6) 9.2 5.6

Central costs (20.0) – (20.0) (17.3) 1.7 (15.6)

Operating (loss)/profit 26.4 80.2 106.6 (28.2) 109.8 81.6

Δ After adjusting items – see Note 5 to the financial statements

Group performance – revenue

Revenue

2020

Effect of

exchange

rates

Increase

2021

Revenue

2021

Personal Care 160.8 3.5 10.4 174.7

Coatings 319.1 9.3 55.9 384.3

Talc 132.5 6.1 11.8 150.4

Chromium 146.9 – 23.8 170.7

Inter-segment (8.0) – 8.0 –

Revenue 751.3 18.9 109.9 880.1

Group performance – adjusted operating profit

Operating

profit

2020

Effect of

exchange

rates

Increase/

(decrease)

2021

Operating

profit

2021

Personal Care 33.6 1.0 2.1 36.7

Coatings 41.4 0.8 19.6 61.8

Talc 16.6 0.6 (3.2) 14.0

Chromium 5.6 – 8.5 14.1

Central costs (15.6) (0.8) (3.6) (20.0)

Adjusted operating profit 81.6 1.6 23.4 106.6

Δ After adjusting items – see Note 5 to the financial statements

Strategic report

Finance report continued

56 Annual Report and Accounts 2021 Elementis plc

Hedging

Cash flow hedges are used as part of a programme to manage our

exposure to interest rate risk and commodity price risk particularly

associated with USD and EUR interest payments and aluminium

pricing. In 2021, interest rate and commodity price movements

were such that the net impact of these hedge transactions was

aloss of $0.4m (2020: $0.9m) recycled to the income statement.

Central costs

Central costs are those costs that are not identifiable as expenses

ofaparticular business and comprise expenditures of the Board

ofDirectors and corporate head office. In 2021, adjusted central

costs were$20.0m, up $4.4m on theprevious year due to an

increase in variable remuneration and an investment in capability.

COVID-19 assistance

The Group has accessed various Government support schemes

aimed at mitigating the potential impact on individuals’ job losses

resulting from the impact of COVID-19. The most significant

amounts received by the Group include the following:

– $0.4m in relation to Government support under temporary

wage support schemes available in the Netherlands.

The Group does not have any unfulfilled obligations relating

tothese support programmes. This amount has been offset

against employee remuneration costs.

– Agreement of payment plans with tax authorities in China

todefer payments of income taxes and payroll taxes resulting

in $1.1m payment deferrals across the Group.

Other expenses

Other expenses are administration costs incurred and paid by

theGroup’s pension schemes, which relate primarily to former

employees of legacy businesses, and were $2.1m in 2021

compared with $1.6m in the previous year.

Net finance costs

2021

2020

Finance income 0.3 0.3

Finance cost of borrowings (23.3) (22.6)

(23.0) (22.3)

Net pension finance costs (0.3) (0.6)

Discount unwind on provisions (2.6) (2.7)

Fair value movement on derivatives 10.7 (10.2)

Dividend currency hedge cancellation – (1.8)

Interest on lease liabilities (1.6) (1.7)

Net finance costs (16.8) (39.3)

Net finance costs for 2021 were $16.8m, a decrease of $22.5m on

lastyear. Finance costs comprise interest payable on borrowings

calculated using the effective interest rate method, facility

arrangement fees, the unwinding of discounts on the Group’s

environmental provisions, fair value movement on derivatives

andinterest charged on lease liabilities.

The decrease in net finance costs is primarily due to the fair value

movement on derivatives ($20.9m decrease) versus prior year and

the cancellation of the dividend currency hedge in 2020 following

the suspension of the 2019 final ordinary dividend ($1.8m decrease).

Finance cost of borrowings was broadly in line with the previous year.

Both pension finance costs, which are a function of discount

ratesunder IAS 19 and the value of schemes’ deficit or surplus

positions, and the interest on lease liabilities, were broadly

consistent in 2021 compared with 2020.

The discount unwind on provisions relates to the annual time value

ofthe Group’s environmental provisions which are calculated on

adiscounted basis. The unwind of $2.6m in 2021 is in line with the

previous year.

Taxation

Tax charge

2021

Effective

rate

% $m

2020

Effective

rate

Reported tax charge/

(credit) 3.3 (57.0) (1.8) (2.6)

Adjusting items tax credit 11.3 – 16.0 –

Underlying tax charge 14.6 19.0 14.2 26.9

The Group incurred a tax charge of $14.6m (2020: $14.2m) on

adjusted profit before tax, resulting in an effective tax rate of

19.0% (2020: 26.9%). The Group’s effective tax rate in 2021 is

slightly lower than its usual range due to beneficial adjustments

inrespect of prior years and the one-off impact of the UK rate

change on its deferred tax assets.

Tax on adjusting items relates primarily to the reversal of an uncertain

tax provision in the US and the amortisation of intangible assets.

The expectation for the Group’s effective P&L tax rate is around

22-23% until 2023, after which it is anticipated to rise to 25-26%

due to the previously announced increase in UK corporation tax

rates from April 2023. The enacted rate change increases the

Group’s UK deferred tax assets by $1.2m, with the tax credit

reflected in the income statement. Furthermore, the enacted rate

change increases the Group’s UK deferred tax liabilities by $2.5m,

with the tax charge reflected in other comprehensive income.

Following the European Commission’s State Aid investigation

intothe UK Finance Company Exemption (FCE) regime, Elementis

received a charging notice in February 2021 for the maximum

exposure of $19m (excluding interest). Elementis paid the notice

amount to HMRC on 5 March 2021, as required, and has lodged

anappeal. A charging notice for associated interest of $1m was

received on 24 June 2021 and paid on 7 July 2021.

Whilst Elementis has lodged an appeal against the charging

notice,this does not defer the payment of the tax assessed.

As Elementis considers that the appeal will ultimately be

successful, at 31 December 2021 an asset has been recorded

within non-current assets in the accounts on the expectation

thatthe charge will be repaid in due course. The UK Government’s

appeal against the European Commission’s decision was heard

bythe General Court of the European Union during October 2021

with a decision expected during 2022.

Earnings per share

Note 9 to the consolidated financial statements sets out a number

of calculations of earnings per share. To aid comparability of the

underlying performance of the Group, earnings per share reported

under IFRS is adjusted for items classified as adjusting.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Adjusted diluted earnings per share was 10.6 cents

∆

for 2021

compared with 6.5 cents

∆

in the previous year, an increase of63%

due to higher profit and a lower effective tax rate. Basic earnings

pershare before adjusting items was a profit pershare of 0.4

cents

∆

compared with a loss per share of 11.5cents

∆

in2020.

Note 9 to the Group consolidated financial statements provides

disclosure of earnings per share calculations both including and

excluding the effects of adjusting items and the potential dilutive

effects of outstanding and exercisable options.

Distributions to shareholders

Given the market and economic uncertainties, andthe Board’s

desire to provide additional financial headroom andpreserve

cash, no dividend distributions to shareholders weremade during

the year. The Board is also not recommending afinal dividend

for2021. The Board recognises the importance ofdividends

toshareholders and will look to reinstate payments oncefurther

progress is made on reducing financial leverage.

Cash flow

Net cash flow from operating activities decreased by $40.4m

to$66.7m in 2021, due to an increase in cash tax of $23.1m,

themajority of which relates to the ongoing EU state aid case,

andworking capital outflow as a result of increased revenues.

Net cash outflow in relation to investing activities increased by

$25.8m to $65.0m following the successful conclusion of an

historic, pre-acquisition interest deductibility case ($13.2m

outflow) and also due to increased capital expenditure primarily

linked to the new AP Actives plant in India.

Net cash outflow in relation to financing activities reduced by

$39.4m to $25.3m in 2021 due to additional tax cash outflows

related to specific items as set out above limiting surplus cash

topay down central borrowings.

The adjusted cash flow which excludes the effect of adjusting items

from operating cash flow is summarised below. A reconciliation

ofstatutory operating profit to EBITDA is shown inthe alternative

performance measures section on page 193.

2021

2020

EBITDA

158.5 132.8

Change in working capital (31.6) 18.8

Capital expenditure (52.8) (40.0)

Other 1.9 (1.8)

Adjusted operating cash flow 76.0 109.8

Pension payments (0.1) (0.1)

Interest (23.2) (23.4)

Tax (30.9) (8.5)

Adjusting items (20.4) (12.2)

Payment of lease liabilities (6.7) (6.7)

Free cash flow (5.3) 58.9

Issue of shares 0.1 0.1

Dividends paid – –

Acquisitions and disposals 0.3 0.5

Currency fluctuations 12.0 (13.4)

Movement in net debt 7.1 46.1

Net debt at start of year (408.1) (454.2)

Net debt at end of year (401.0) (408.1)

1 EBITDA – earnings before interest, tax, adjusting items, depreciation

andamortisation.

Adjusted operating cash flow decreased by $33.8m to $76.0m

for2021 as an increase of $25.7m in EBITDA was offset by $50.4m

movement in working capital and an increase in net capital

expenditure of $12.8m.

Free cash outflow of $5.3m in 2021 represents a reduction of

$64.2m on the prior year period. Cash tax outflows increased from

$8.5m to $30.9m, primarily due to the $19.5m charging notice

received for the ongoing EU state aid case. A further one-off cash

outflow of $13.2m associated with an historic, pre-acquisition

interest deductibility tax case increased adjusting items cash

outflow from $12.2m in 2020 to $20.4m in 2021.

Net debt decreased from $408.1m in 2020 to $401.0m in2021,

areduction of $7.1m, and net debt to adjusted EBITDA decreased

from 3.2x** in 2020 to 2.6x** in 2021. The decrease inleverage is

due to the improvement in adjusted EBITDA, reflective

oftheGroup’s higher earnings.

Balance sheet

2021

2020

Intangible fixed assets 815.7 892.6

Tangible fixed assets 499.7 516.0

Working capital 164.0 141.4

Net tax liabilities (112.6) (132.2)

Provisions and retirement benefit

obligations (22.5) (79.0)

Financial assets and liabilities (5.2) (30.7)

Lease liabilities (40.2) (44.4)

Unamortised syndicate fees 3.1 4.8

Net debt (401.0) (408.1)

Total equity 901.0 860.4

Group equity increased by $40.6m in 2021 (2020: decrease of

$45.8m). Intangible fixed assets decreased by $76.9m due to an

impairment of $52.3m, $16.6m of amortisation of intangibles and

$8.2m of foreign exchange. Tangible fixed assets decreased by

$16.3m, with gross PPE additions of $51.5m, right-of-use asset

capitalisation of $2.0m more than offset by exchange differences

of $18.7m and depreciation of $51.7m.

Working capital comprises inventories, trade and other receivables

and trade and other payables. Working capital increased by $22.6m

in 2021, a result of higher underlying revenue.

Net tax liabilities of $112.6m decreased as a result of the EU state

aid payment which has been recognised as an asset based on the

expectation that the charge will be repaid in due course of the

broadly in line with the previous year.

Adjusted ROCE (excluding goodwill) increased to 13% from 10% in

2020, due to increased adjusted operating profit (see Alternative

Performance Measures on page 193).

The main dollar exchange rates relevant to the Group are set

outbelow.

Year end

2021

Average Year end

2020

Average

Pounds sterling 0.74 0.73 0.73 0.78

Euro 0.88 0.84 0.82 0.88

Strategic report

Finance report continued

58 Annual Report and Accounts 2021 Elementis plc

Provisions

The Group records a provision in the balance sheet when it has

apresent obligation as a result of past events, which is expected

to result in an outflow of economic benefits in order to settle the

obligation and the amount can be reliably estimated. The Group

calculates provisions on a discounted basis. At the end of 2021,

the Group held provisions of $61.8m (2020: $58.8m) consisting

ofenvironmental provisions of $58.7m (2020: $50.6m), self-

insurance provisions of $0.7m (2020: $1.5m) and restructuring

and other provisions of $2.4m (2020: $6.7m).

Environmental provisions have increased by $8.1m in 2021,

withanet $8.3m taken through adjusting items, $9.6m expense

relates to extra remediation work for additional closure and

decommissioning activities offset by $1.3m relating toa change

inthe discount rate applied to the liabilities. The remaining

movement relates to $2.6m of unwind of discount in the year

offset by $0.4m of currency translation and $3.1m of utilisation.

The self-insurance provision represents the Group’s estimate

ofits liabilityarising from retained liabilities under the Group’s

insurance programme.

Within the restructuring and other provisions categories the

majority of the balance relates to payments to be made for right

offirst refusal on a quarry, payments for which are linked to

thedischarge of residue into another quarry owned by the

samecounterparty.

Pensions and other post retirement benefits

2021

2020

Net (surplus)/liability:

UK (56.6) (7.9)

US 8.3 18.3

Other 9.0 9.8

(39.3) 20.2

UK plan

The largest of the Group’s retirement plans is the UK defined

benefit pension scheme (‘UK Scheme’), which at the end of 2021

had a surplus, under IAS 19, of $56.6m (2020: $7.9m). The UK

Scheme is relatively mature, with approximately two thirds of its

gross liabilities represented by pensions in payment, and is closed

to new members. Return on plan assets of $35.0m (2020: $75.2m)

and liability adjustments of $27.1m (2020: $59.5m) arising due

tohigher discount rates based on real corporate bond yields

increased the surplus. Company contributions of $0.6m (2020: $nil)

reflect the funding agreement reached with the UKtrustees

following the 2020 triennial valuation which concluded in 2021.

US plan

In the US, the Group reports two post retirement plans under IAS

19: a defined benefit pension plan with a deficit value at the end of

2021 of $1.7m (2020: $11.8m), and a post retirement medical plan

with a liability of $6.6m (2020: $6.5m). The US pension plans are

smaller than the UK plan and in 2021 the overall deficit value of

the US plans decreased by $10.0m due to actuarial decreases

inthe liability of $6.3m (2020: $12.8m increase), return on plan

assets of $7.2m (2020: $15.8m) and employer contributions

of$0.5m (2020 $0.5m).

Other plans

Other liabilities at 31 December 2021 amounted to $9.0m (2020:

$9.8m) and relate to pension arrangements for a relatively small

number of employees in Germany, certain UK legacy benefits and

one pension scheme acquired as part of the SummitReheis

transaction in 2017.

Financial assets and liabilities

Financial liabilities at 31 December 2020 include $nil of contingent

consideration in respect of Talc (2020: $13.4m). This balance was

settled in 2021 following the successful conclusion of an historic,

pre-acquisition interest deductibility tax case relating to Talc.

Also included are net derivative financial liabilities of $5.2m

(2020:$15.9m) relating to the valuation of various risk

managementinstruments.

The movements in the mark to market valuation of financial

instruments that are not in hedging relationships are treated as

adjusting items as they are non-cash fair value adjustments that

will not affect the cash flows of the Group.

Events after the balance sheet date

The ongoing EU state aid case is discussed in the taxation section

of this finance report.

There were no other significant events after the balance

sheetdate.

Ralph Hewins

Chief Financial Officer

3 March 2022

Δ After adjusting items – see Note 5

* Adjusted for FX (where constant currency reflects prior year results

translated at current year exchange rates).

** See calculation within the unaudited information on page 194

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Operating review

SALES BY REGION

Asia 16%

Europe 39%

Americas 45%

Personal Care

Partial demand recovery

andimprovingmomentum

Stijn Dejonckheere

SVP Global Personal Care

As social and travel restrictions started

to recede, demand for Personal Care

products improved. While demand

is yet to return to pre-COVID levels,

this improvement, combined with our

continued strategic progress, means

weare well positioned to improve our

financial performance.

Financial performance

Personal Care revenue in 2021 was $175m

compared with $161m in the prior year, a 9%

increase on a reported basis. Excluding currency

impacts, revenue rose by 6% on an underlying

basis*, driven by demand recovery in our two key

end markets, colour cosmetics and anti-perspirant

deodorants. While these markets have started

torecover as COVID-19 related social and travel

restrictions have eased, they remain approximately

3-5% below 2019 levels, thereby providing scope

for further recovery.

Adjusted operating profit was 9% ahead of the prior

year period at $37m, with margins of 21.0% stable

onthe prior year (20.9%). Improved volumes

andproduct mix more than offset double running

costsassociated with the ramp up of the new India

manufacturing plant, people investments in Asia to

drive future growth and increased raw material costs.

Strategy

Our medium term Personal Care growth strategy

isfocused on two areas, Cosmetics and AP

actives.In both segments we have differentiated

technologies and strong competitive positions

withattractive opportunities to grow ahead

ofthemarket.

In Cosmetics, consumers are increasingly looking for

products that contain clean and natural ingredients,

providing a clear structural growth driver for our

hectorite clay based Cosmetics additives. With 8%

average annual sales growth over the last decade,

wehave a strong track record, and looking forward,

further targeted investment will drive our ability to

develop new customers and enter new geographies

and markets.

In Asia, our cosmetics business is underweight, with

the region representing under 20% of our sales

compared with 40% for the broader Personal Care

industry. In January, we opened a new technical

service centre in China, our first facility in the region

dedicated to serving Personal Care customers.

In addition, we have added eight heads in sales,

marketing and R&D, more than doubling our headcount

in the region. These steps, combined with innovative

new products tailored to local market trends and a

market recovery, helped deliver 44% year-on-year

sales growth in Asia during 2021, and will drive our

medium term aim of doubling sales in the region.

Skin care, is a large, resilient and growing part

ofamarket where we have historically had little

participation. This year, to develop our skin care

presence, we launched two exciting new products,

Bentone Hydroclay™ 2100 and Bentone® Luxe XO,

and expanded our marketing activities. Reflecting our

progress, skin care sales rose 41% versus the prior

year and with a new business pipeline of $14m we

are well positioned to deliver our medium term target

of $10m incremental sales.

In AP Actives, population growth and rising

disposable incomes are anticipated to drive strong

growth for anti-perspirants in markets such as

South America and Asia. In the third quarter, we

successfully started up a new $20m manufacturing

plant in India. This facility, which is now undergoing

a12 month ramp up and qualification phase, will

ensure we are well positioned to serve these growth

markets and generate material cost savings.

Innovation is critical to our future success in both

Cosmetics and AP Actives. In 2021, we launched

14new products, our highest level on record, all

ofwhich provide premium product performance

attributes and enhanced sustainability claims.

In addition, we have deepened our partnership with

AQDOT, rolling out the AQFresh™ odour capture and

smart fragrance release solutions, strengthening our

marketing leading portfolio ofactives and ingredients

for anti-perspirant and deodorant applications.

The Personal Care product portfolio and innovation

pipeline is well positioned to deliver organic revenue

growth above GDP growth, with high and stable

margins over the medium term.

* Adjusted for currency impact. See page 56.

$175m

2021 Revenue

(2020: $161m)

$37m

2021 Adjusted

Operating Profit

(2020:$34m)

60 Annual Report and Accounts 2021 Elementis plc

SALES BY REGION

Asia 34%

Europe 31%

Americas 35%

$384m

2021 Revenue

(2020: $319m)

$62m

2021 Adjusted

Operating Profit

(2020:$41m)

Coatings

Strong new business success

andmargin progression

Luc van Ravenstein

SVP Global Coatings and Energy

While demand largely rebounded following

the impact of COVID-19, it is encouraging

to see the delivery of record new business

and strong margin improvement in a

challenging supply chain environment.

Wehave a business and product portfolio

that is well positioned for thefuture.

Financial performance

Coatings revenue in 2021 was $384m compared

with $319m in the prior year, a 20% increase on a

reported basis. Excluding the impact of currency,

revenue rose 17%, driven by new business success,

pricing actions and demand recovery from

COVID-19 lows in 2020. Revenue from the Energy

business, now reported as part of Coatings, rose

21% on the prior year supported by higher oil prices

and increased drilling activity.

Excluding Energy, Coatings sales rose 17% on an

underlying basis* with strong growth in all regions

asdecorative activity remained buoyant and

industrial demand recovered. In EMEA, sales rose

27% on an underlying basis*, with notable strength

in industrial coatings applications, reflective of new

business success, particularly for our Thixatrol®

products which are also used in high performance

adhesives and sealants. In Americas, sales rose

17%* driven by encouraging new business success

for our Rheolate® HX rheology series for premium

decorative paint. In Asia, where over 80% of our

sales come from industrial activity, underlying* sales

rose 9% as strong growth in South East Asia was

partially offset by slowing market activity in China

inthe second half of the year.

Adjusted operating profit rose by 49% from $41m

to$62m, and 46% on an underlying basis*, with

volume growth, improved price/mix and cost savings

from the Charleston plant closure and StLouis

capacity consolidation more than offsetting raw

material cost inflation. As a result, adjusted operating

profit margins rose from 13.0% in 2020 to 16.1%

in2021, a tremendous result in a challenging global

supply chain environment and reflective of a

business well positioned for future success.

Strategy

Today our Coatings business offers a simpler yet

more differentiated product portfolio, alongside a

more efficient operating model. This solid platform

helped us navigate the challenges of 2021 and

execute our growth strategies, resulting in 37%

sales growth across our technology growth

platforms that represent just over one third

ofthetotal business; as detailed below.

In decorative paint, we have a strong value proposition

for the premium segment. Consumers want paints

that are easier to apply, with better stain resistance

and enhanced sustainability credentials.

Our Rheolate® HX series meets all of these

requirements and, with 47% growth in 2021, has

demonstrated encouraging new business success

and market share gains. We are now approximately

half way towards achieving our medium term aim

ofdoubling our share of this $400m market to

approximately 20%. To drive further progress, we

have continued to innovate, and will soon launch

Rheolate® PHX 7025, a powdered associative

thickener which delivers up to 75% reduction in

transportation emissions and expands our total

addressable market to $500m.

In industrial coatings, we have broad and

complementary solutions that enable the transition

from solvent to waterborne technologies, thus

delivering significant environmental benefits without

sacrificing performance. We saw strong customer

demand for our solutions in 2021, with 31% revenue

growth. To support this momentum, we have launched

several new products including Thixatrol® PM 8058 for

protective coatings. This castor wax based additive

is 75% bio based, delivers thicker application and

requires lower temperature activation, thereby

saving customers energy and emissions.

Adhesives and sealants are the third major growth

platform of our Coatings business. This market is

supported by megatrends such as the replacement

of mechanical fasteners with adhesives, and energy

efficiency regulations which require improved heat

retention properties. Our range of additives deliver

enhanced adhesion and durability, up to 30% lower

energy processing costs and genuine sustainability

benefits. Our revenue in this market grew double

digits in 2021, and with a $10m new business

pipeline we look forward to making further progress.

* Adjusted for currency impact. See page 56.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Operating review continued

Christian Kather

SVP Global Talc

This year witnessed a mixed operating

environment with stronger industrial

activity partially offset by weaker than

expected demand for high value long

life plastics. Nonetheless, we have made

good strategic progress, expanding

our presence in Asia and the Americas,

delivering $16m of revenue synergies

and developing new applications such as

barrier coatings for recyclable packaging.

Financial performance

Revenue in 2021 was $150m compared with $133m in

the prior year, a 14% increase on a reported basis.

Excluding the impact of currency movements,

revenue rose by 9%, with new business success

and pricing actions partially offset by weakness

inautomotive and paper end markets.

Sales of industrial talc (representing over 85% of total

Talc revenue) rose 15% on an underlying basis*, driven

by $13m of new business, geographic expansion

and demand recovery in several end markets

following a COVID-19 impacted 2020. Sales to

coatings customers grew 8% on an underlying basis*,

reflective of market share gains as we gained new

customers and entered new geographies, taking our

revenue synergies since acquisition to $16m.

Sales to technical ceramics customers more than

doubled on the prior year due to market share gains,

predominantly in Asia. This momentum more than

offset a weak performance in high value long life

plastics, due to a 6% decline in European automotive

production because of well documented semi-

conductor shortages.

Talc sales to the graphic paper market declined as

expected by over 30% on an underlying basis* driven

by the ongoing shift to non-print media. This market

now represents just under 8% of total Talc revenue.

Adjusted operating profit declined 16% on a

reported basis (19% on an underlying basis*) from

$17m to $14m, with top line growth more than offset

by higher costs in the second half of the year due

toaccelerating logistics and energy cost inflation,

ahead of pricing actions taken in response.

Strategy

Historically the focus of our Talc business has been

serving European paper markets, reflective of the

location of our talc deposits in Finland. Over the last

decade, we have successfully repositioned the

business to serve higher value, growing end markets

around the world. Despite this success there are

further opportunities to increase our presence in the

$1bn global talc market and expand outside Europe,

which accounts for approximately 80% of our

business. Following recent investments in local

salesand technical support, we grew 24% in Asia

and 62% in Americas, driven by $13m of new

business success in long life plastics, technical

ceramics and coatings. With both regions

representing approximately 20% of total sales,

compared with 50% for the overall market, there

ismuch more room for growth.

Leveraging the Group’s global asset base, marketing

and distribution capabilities and technical expertise,

we also aim to deliver $20-25m of revenue synergies

by 2023. At the end of 2021, we had delivered $16m

of our target, and with a significant new business

pipeline we have encouraging momentum.

Notable progress has been made consolidating

distributors, cross selling talc additives to existing

Elementis coatings customers, expanding into

newgeographies and developing new products

such as pre-dispersed Talc.

Expanding our market share in existing markets and

developing new applications is crucial to our future

success. While the slowdown in global automotive

production has impacted demand for long life

plastics, the structural market drivers of vehicle

light-weighting and emissions reductions remain

positive. Our aim is to expand our share in this $500m

market from 7% towards our global averageof 11%.

The business has a strong track record of identifying

and developing new product applications. Talc for

barrier coatings that enable recyclable food

packaging is an exciting new area where we are

making encouraging progress, with 27 production

andpilot scale trials and a $5m new business pipeline.

* Adjusted for currency impact. See page 56.

$150m

2021 Revenue

(2020: $133m)

$14m

2021 Adjusted

Operating Profit

(2020:$17m)

Talc

Good strategic delivery in a

mixedoperating environment

Asia 14%

Europe 79%

Americas 7%

SALES BY REGION

62 Annual Report and Accounts 2021 Elementis plc

Eric Waldmann

SVP Global Chromium

Chromium performance improved on

theprior year, driven by improved demand

from industrial end markets following

theimpact of COVID-19 in 2020. Signs

ofpricing recovery are encouraging and

our focus remains on the delivery of safe

and reliable operations.

Financial performance

Chromium revenue in 2021 was $171m, up 16%

from $147m in the prior year driven by double digit

volume growth. Due to the rebound in industrial

activity, demand for chromium chemicals increased

across a range of end markets including metal

plating, leather tanning and construction

applications. While average unit pricing modestly

decreased in the year, the second half of the year

showed clear signs of recovery. As a result of

demand improvements and constrained supply,

weestimate global chromium industry capacity

utilisation rose from approximately 75% in 2020

to85% in 2021. In turn, this tightness is positively

impacting market prices.

Adjusted operating profit rose by 152%, with

improved volumes and product mix more than

offsetting accelerating raw material costs.

Adjusted operating profit margin rose from

3.8%to8.3%.

Strategy

In Chromium, we have a strong competitive

advantage as the sole producer in North America,

with a differentiated product delivery system that

materially reduces customer product handling risk.

While our business supplies industrial end markets

that are exposed to the economic cycle, in

particular outside North America, it has a track

record of attractive cash returns with scope for

future operational and performance improvement.

Our primary focus is the delivery of safe and

reliableoperations for our employees and

customers. This year we were pleased to be

recognised with the Responsible Chromium

labelawarded by the International Chromium

Development Association. The award reflects our

high standards in areas including safe processes,

safeguarding the environment, fighting corruption,

and demonstrates our commitment to being

aresponsible provider.

Global supply chain challenges including raw

material inflation and logistical bottlenecks tested

our resilience in 2021. We responded well but there

is more we can do to improve our efficiency and

market position. We have identified and will be

working on several projects which target both cost

and efficiency gains over the next several years.

Opportunities for growth also exist. In leather

tanning we gained key new leather tanning accounts

in North America and increased the take up of our

Waynetan Chrome Sulphate product range with new

products that deliver high quality leather hides and

enhanced production yields.

We continue to focus on moving our product

mixtowards high value chrome acid and oxide

applications. Such products are essential to

enhancing the durability and lifecycle of critical

industrial equipment in areas like aerospace, military

equipment, automobiles and trucks, heavy duty

equipment, manufacturing machinery, medical

devices and exciting new applications including

hydrogen fuel cells.

$171m

2021 Revenue

(2020: $147m)

$14m

2021 Adjusted

Operating Profit

(2020:$6m)

Chromium

Demand improvement points

topotential pricing recovery

Asia 20%

Europe 12%

Americas 68%

SALES BY REGION

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Risk management

Elementis faces a number of risks, uncertainties and

opportunities in the ordinary course of its operations.

Theeffective identification, mitigation and ongoing

management of these risks underpins the delivery

ofstrategic objectives. Elementis has an established

risk management framework and system of internal

controls to support decision making throughout the

financial year.

Risk management systems are intended to mitigate and reduce risk

to the lowest extent possible; however, complete elimination of all

risks faced by Elementis is not possible. The risk management

processes can only provide reasonable and not absolute assurance

against material misstatement or loss.

Risk management

Our framework for risk management

The Board has overall responsibility for risk management and sets

the Group’s policies, culture and tone on risk as well as providing

oversight to management. A risk management framework is in

placeto identify, assess, mitigate and monitor the risks faced.

The Company places the highest priority on preventing loss of life,

other harm to people and the environment, legal and regulatory

breaches and damage to reputation or brand and has in place

Group policies, procedures and guidance in various aspects of

business operations and functions in order to help the ELT and

employees manage risk in these areas.

Top down

Oversight,

identification,

assessment and

mitigation of risks

at a Group level

Board

The Board has overall responsibility for risk management and sets the Group’s policies, culture and tone on risk

as well as providing oversight to management

Audit Committee

Supports the Board and has

specific responsibility for

monitoring financial reporting as

well as the internal and external

audit programmes, one of the

primary purposes of which is to

provide assurance on financial,

operational and compliance

controls.

CEO

(supported by the ELT)

The CEO is responsible for

implementing Group policies,

riskmanagement performance,

identifying principal risks and

ensuring resources are allocated

for effective risk management

andmitigation.

ELT individuals and risk

champions

ELT members have responsibility

for managing and monitoring

risksrelevant to their business

orfunction on an ongoing basis

and work with the support of

riskchampions to further

embedrisk management

withinthe organisation.

Bottom up

Identification,

assessment and

mitigation of risks

across operational

and functional

areas

Operational and supporting functions

Data Protection Steering Committee, HSE Council, Manufacturing Council, Ethics and Compliance Council,

Environmental Sustainability Council, Diversity, Equity and Inclusion Council, and Investment Commitment

forum (Capital expenditure & allocation) and Internal Audit.

The Group employs a three lines model to provide a simple and effective way to enhance risk management and control processes and

ensure roles and responsibilities are clear. The Board maintains oversight to ensure risk management and control activities carried out

by the three lines are proportionate to the perceived degree of risk and its own risk appetite across the Group.

First and second line functions provide comfort to management thatcontrols are designed appropriately and are working effectively

tomitigate the principal risks. Examples include the review of the general IT controls framework during the year and business

continuityplans at site level in response to the COVID-19 pandemic.

64 Annual Report and Accounts 2021 Elementis plc

Our principal risks

1. Global economic conditions and competitive

market pressures

2. Business interruption as a result of a major

event or a natural catastrophe

3. Business interruption as a result of supply

chain failure of key raw materials and/or third

party service provision

4. Regulatory compliance and product

stewardship challenges

5. Major regulatory enforcement action, litigation

and/or other claims arising from products and/

or historical and ongoing operations

6. Intellectual property and know-how

7. Portfolio innovation and technology/protection

8. People, talent management and succession

9. IT networks, data security and privacy

10. Health and Safety (new)

First line roles:

Business operations

Our first line of defence, our employees, have

a responsibility to manage day-to-day risk

in their own areas, guided by Group policies,

procedures and control frameworks.

Local management, and ultimately

theELT,ensure that risks are managed,

maintained, reviewed and actioned

according to these frameworks.

Second line roles:

Oversight functions

The second line of defence is provided

bythe management team reviewing and

monitoring current and emerging risks

using a bottom-up and top-down approach.

Third line roles:

Internal Audit

The third line of defence is assurance over

the effectiveness of mitigating controls.

This is provided through internal audits,

inaddition to reports from external

assurance providers, which are reviewed

bymanagement and monitored and

challenged by the Audit Committee

andtheBoard.

Risk heat map (gross impact)

High

Impact

Low Medium

Probability/likelihood

Risk trend indicators: + increasing – decreasing = same

High

= =

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Risk management continued

Risk culture

Every individual at Elementis has a responsibility to manage risk,

irrespective of function, business or role. Risk awareness exists

through decision making processes and is embedded in systems,

policies, procedures, leadership and, behaviours and specific

standards such as the Code of Conduct. All Company employees

are responsible for complying with related Company policies and

guidance, and share responsibility for ensuring that the Company

conducts its business in a safe, lawful and ethical manner.

Risk appetite and tolerance

Risk appetite at Elementis is understood as being the amount

ofriskthat the Board is prepared to accept in return for reward

orinvestment return. There is a degree of variability in determining

riskappetite which may be based on strategic objectives as well

asguidance from management or advisers based on appropriate

understanding and analysis of the nature of the risk. The strategic

appetite for risk is decided on a case-by-case basis at Board

level,for example with respect to any corporate transaction or

significant capital expenditure project, and delegated to the ELT

toimplement as appropriate. The maximum risk that can be

takenbefore the Company experiences financial distress is also

decided at Board level and mitigated, as far as possible, by internal

controls, business continuity plans, insurance, financial

instruments and contracts.

Our risk review processes

Our risk management policy defines our approach to risk

management. The Board maintains an annual forward planner

toensure that appropriate focus is given at scheduled meetings

todiscuss, review and monitor business and operational

performance, strategic priorities, governance, compliance

andriskmatters. This approach enables the Board to engage

directlywith each of the business units and functional

departmental leaders.

Each ELT member is responsible for identifying, assessing and

monitoring their respective business and functional risks as well

asmeasuring the impact and likelihood of the risk to the business.

Each identified risk is categorised as strategic, commercial,

operational, financial or compliance.

On an annual basis, the ELT collectively reviews the enterprise risk

universe and the Board carries out a review of the principal risks

anduncertainties.

During the year, the following risk management activities have

been carried out:

– Renewal of insurance programme

– BU and function risk registers reviewed, updated and

development of effectiveness of controls with clear

accountabilities

– New climate change risk landscape and assessment and

climate scenario analysis undertaken

– Launch of risk champion role to support each business

segment and function

– Property risk survey programme

– Board briefings on climate change reporting frameworks, risks

and implementation

Key areas of focus during the year

During 2021, the Board carried out a robust assessment of the

key risks which we believe could threaten the Group’s business

model, future performance, solvency or liquidity, or the long term

viability of the Company. These risks, if they materialise, could

have a significant impact on the Group’s ability to meet its

strategic objectives over the medium term.

Our risk heat map (page 65) identifies these key risks pre-

mitigation that we consider most impact our business model

(pages 18-19) and the delivery of our strategic objectives (pages

20-27). Movements on the risk heat map reflect changes to the

underlying long term risk environment.

– IT networks, data security and privacy remain an increasingly

significant risk to the business. The COVID-19 pandemic has

expedited the use of new online platforms within the business

and at home. Elementis continues to enhance its security and

controls, and provides regular IT, cyber and GDPR updates to

theBoard.

– Following a review of people, talent management and

succession risk, the impact of the risk was assessed to

havedecreased in risk profile due to the progress made

during the year. For example, the addition of several

significantroles including General Counsel and Chief

Compliance Officer and creation of the Global Director

ofSustainability role demonstrates the strength of the

management team. As noted on page 71, the Company

hasupdated its succession planning processes to include

retention risk and impact analysis.

– The global pandemic was previously reported as a principal

risk and, following assessment, COVID-19 is considered

having a number of interdependencies with several principal

risks. The impact of COVID-19 will now be captured within

ourother principal risks and is believed to be a shorter term

impact, whilst our principal risks profile reflects medium

tolonger term risks. The global COVID-19 taskforce led by

theCHRO will continue to monitor post COVID-19 risks and

opportunities as global economies recover and vaccination

programmes gain traction.

– Health and safety is an important part of our risk management

process. Previously risks associated with health and safety

havebeen incorporated within other principal risks; however,

following assessment it has been agreed that ‘Health and

safety’ will be introduced as a new principal risk.

– The risk rating of Business interruption as a result of supply chain

failure of key materials and/or third party service provision has

increased mainly due to the impact of COVID-19 on global

supply chains. The Group continued with improving its planning

process to ensure inventory and safety stock levels.

There have been no significant changes to the risk profiles for

theremaining principal risks although we continue to monitor and

review as appropriate.

Priorities for 2022 include

– Further enhancement of our mitigation programme including

tracking and monitoring

– Fully integrate TCFD/ESG into our risk management system

– Improve risk programme capabilities to include net

riskreporting

66 Annual Report and Accounts 2021 Elementis plc

Emerging risks

Emerging risks and opportunities are identified and documented

through theexisting riskmanagement framework through a

variety of horizon-scanning methods and through activities,

forexample:

– Monthly performance calls with each business unit

andfunctions including deeper dives on new business

opportunities, supply chain resiliency and

procurementmatters

– Annual and 3 year financial plans and budgets and processes

– Board, ELT and other internal governance forums

– Customer/market insight and industry specific data

– Materiality assessment with regard to ESG

As well as assessing ongoing risks, we continue to consider how

the business could be affected by emerging risks over the longer

term and how strategic, market and customer initiatives might

manage risks and seize any new opportunities. It is often possible

to identify and respond to the potential impacts of emerging risks,

but it is more challenging to predict their financial impact,

likelihood and timeframe. For example, the climate scenario

analysis which was carried out as part of our TCFD statement

onpages 42-47.

Climate change

Our response to the impacts of climate change is core to our long

term success. Our products can contribute to lower energy and

resource use, and we are working to minimise impacts of our own

operations and supply chain.

In 2020, we set challenging targets to minimise our environmental

and climate related impacts. For further information on our

performance and activities in each of these areas, please refer

topages 34-37.

Our risk assessment has concluded that climate change is a

contributing factor to many of our principal risks and longer term

uncertainties. Specific climate risk factors are identified in our

TCFD response. The TCFD framework has enabled us to analyse

the physical and transition risks we face over a longer time

horizon, and to better understand the implications of different

future climate scenarios on our business. Further information

onour approach to TCFD can be found on page 42.

Internal control

The key elements of the Group’s internal control framework

aremonitored throughout the year. The Audit Committee has

conducted a review of the effectiveness of the Group’s risk

management and internal control systems on behalf of the Board.

To support the Board’s annual assessment, a report is prepared

by the Head of Internal Controls on the Group’s principal risks and

internal controls. This describes the risk management systems

and key internal controls, as well asthe work conducted in the

year to improve the risk and control environment, including the

level of assurance undertaken.

The internal control framework is intended to effectively manage

rather than eliminate the risk of failure to achieve business

objectives. It can only provide reasonable, but not absolute,

assurance against the risk of material misstatement or

financialloss.

For further information on internal controls, please refer

topage99.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Principal risks and uncertainties

Global economic conditions and competitive market pressures

Link to strategic objective

1 2 3

Movement in year

Description of risks

The performance of the specific end-user markets we serve is affected by

general economic conditions. Adverse developments that may result in a

downturn in general economic conditions or in the industries in which our

customers operate may include political uncertainty, retaliatory tariffs or

other disputes between trading partners. Sub-optimal global economic

conditions can affect sales, raw material costs, fluctuations in foreign

exchange rates, capacity, utilisation and cash generation, which can impact

our position against banking covenants.

Increased competitive pressure in the marketplace can result in significant

pricing pressure and loss of market share. The impact of non-delivery of

operating plans can lead to market expectations of Group earnings not

being met and slower delivery of reported strategic priorities.

Impact of COVID-19

– Risk impact assessment carried out in respect of financial stress testing/

response and strategy

Controls and mitigating activities

– Financial performance (monthly sales, profit and cash flows and position

against key banking covenants) is closely monitored with full year scenario

planning of our key risks reforecasts updated twice a year and variances

investigated and explained

– Contingency and cost reduction plans can be implemented in the event of

an economic downturn to reduce operating costs, including non-essential

capital expenditure items and discretionary spend

– Currency and commodity hedging action taken as appropriate

– Global key account management programme in place to deepen how we

work and grow with our largest customers as well as monitoring customer

performance and trends to pre-empt end market changes

– Balanced geographic footprint and supply chain and broad differentiated

product offering across different sectors

Developments in year

– Continued focus on cost reductions, capex effectiveness, working capital

and discretionary spend (see page 27 for further information)

– New business opportunities delivered $50m and focus on future

opportunitypipeline

– Balance sheet protections maintained including, bank covenant relaxations

and continued suspension of dividends

– Prices rises implemented to mitigate impact of raw material, logistics

andenergy cost increases

– Refer to business summaries on pages 60-63

Link to KPIs Read more on pages 28-29

Business interruption as a result of a major event or a natural catastrophe

Link to strategic objective

1 2 3

Movement in year

Description of risks

The ability of the Group to manage its operations successfully and achieve

performance in line with its strategy, business plans and budgets depends

on the efficient and uninterrupted operation of planning processes,

operational delivery capabilities and internal control environment.

Production facilities may be subject to planned and unplanned shutdowns,

turnarounds and outages including natural catastrophe, weather, climate

change, disruption associated with transportation, utilities and distributors,

which could result in increased costs in securing alternate facilities,

significant time to increase production or customer qualification.

A major event is categorised as an operational or HSE incident, transport

related, or workplace incident caused by system failure and/or human error

orby fire, storm, flood or pandemic.

Impact of COVID-19

– Management continued to monitor pandemic status on a site by site

basis

Controls and mitigating activities

– Preventative maintenance, critical spares, process and other safety

procedures to mitigate the effects of a major incident

– Property damage and business interruption insurance coverage

– Each site is required to develop a business continuity plan that includes

emergency response and business recovery protocols; annual reviews,

periodic updates, and training; and exercising the plan via periodic drills or

table top exercises. We verify business continuity compliance through the

HSE auditing process.

– Business continuity scenario planning overseen by ELT

– HSE management programme which includes corporate compliance audits

and insurance property surveys

– HSE matters reviewed by ELT on a monthly basis

Developments in year

– Internal audits completed for Anji, Songjiang and Castle Hayne

– Continued focus on operational reliability

– Adverse weather conditions impacted the entire state of Texas, including

our Castle Hayne site, resulting in the unplanned shutdown of the site and

energy utilities

Link to KPIs Read more on pages 28-29

Annual Report and Accounts 2021 Elementis plc

Business interruption as a result of supply chain failure of key raw materials and/or third party

service provision

Link to strategic objective

2 3

Movement in year

Description of risks

The Group is dependent on numerous raw materials from various sources.

In the event of a long term supply disruption or market volatility, it may not

be possible to secure sufficient supplies of raw materials from alternative

sources on a timely basis or in sufficient quantities or qualities or on

commercially reasonable terms. The lead time and effort needed to

establish a relationship with a new supplier could be lengthy and could

result in additional costs, diversion of resources and reduced

productionyields.

Impact of COVID-19

– Port congestion

– Delays associated with shipping, availability of containers and shortages

of truck drivers

Controls and mitigating activities

– Review of single source supply chain and find and qualify alternatives

– Market research to understand and monitor the impact of short term events

– Recalibration of inventory stock levels and lead times on a regular basis

atall sites

– Business continuity scenario planning overseen by ELT

Developments in year

– External reviewing of supplier business continuity planning

– Supply chain contingency planning to mitigate other trade related

riskscontinually assessed and updated to address dynamic

planningenvironment

– Continually leverage strategic supplier relationships to secure required

rawmaterial volume

– Improved planning process ensured appropriate inventory and safety

stocklevels

– Accelerated production qualification programme to ensure ability to

redistribute production volume across our global manufacturing network

– Continued focus on qualification of new sources of supply

Link to KPIs Read more on pages 28-29

Regulatory compliance and product stewardship challenges

Link to strategic objective

1 2 3

Movement in year =

Description of risks

Emerging regulations in global markets can lead to hurdles and additional

costs to deliver on strategic objectives. Non-compliance and suspected

non-compliance could lead to regulatory action. The Group is subject to

extensive and evolving riskin multiple jurisdictions.

Impact of COVID-19

– No impact

Controls and mitigating activities

– Global Product Stewardship team oversees, manages and monitors

regulatory developments in various jurisdictions

– Coordination with R&D team to enable a faster speed-to-market of new

technologies and applications

– Safety Data Sheets, labels, and regulatory information is provided for global

customers specific to the requirements in their jurisdiction

– Multiple languages are used to communicate these requirements

– Active compliance and risk management programmes in place (including

policies, procedures and training)

– Horizon scanning for evolving regulatory landscape in new markets

Developments in year

– UK REACH planning and assessment are underway throughout the

supplychain

– Successful implementation of EURASIA REACH

– Supported the manufacturing optimisation change through

regulatoryactivities

– Adding regulatory expertise to growth regions to support expanding

marketsegments

Link to KPIs Read more on pages 28-29

Key

Innovation

Growth

Efficiency

Movement in year

No change

Increasing

Decreasing

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Principal risks and uncertainties continued

Major regulatory enforcement action, litigation and/or other claims arising fromproducts and/or

historical and ongoing operations

Link to strategic objective

Movement in year

Description of risks

The scale and complexity of the Group’s operations means that the Group

is subject to a wide range of international regulation spanning all aspects

ofits business. This regulatory sphere includes multiple corporate taxation

regimes, national and supra-national anti-corruption, fair competition and

data privacy laws, as well as applicable environmental regulations and

standards relating tothe Group’s past and present operations.

Failure tocomply can lead tocomplex cross border claims, litigation,

damages, fines, penalties andremediation orders. The Group may be

involved in legal proceedings andclaims within the ordinary course of

business including legacy claims frombusinesses that have been acquired

or disposed of by the Group orongoingoperations.

Adverse results in legal proceedings could result in reputational and

financial damages, loss of business, business opportunity and profit,

anddiversion of management time and resources.

Impact of COVID-19

– Although normal travel between the Group’s sites by the Group’s

functional teams continued to be limited due to pandemic travel

restrictions, e-learning functionality was used to deliver a broad

rangeofcompliance training modules to employees

– The Group’s governance forums were able to continue to meet

byvirtualconnection

Controls and mitigating activities

– Cross functional expertise including Legal, Compliance, Finance, HSE

andProduct Stewardship, supported appropriately by external consultants and

advisors, actively monitoring emerging risks and ensuring controls in relation

to known risks are effective

– The Group’s products are routinely and rigorously tested to the higheststandards

– The Group continuously evolves its global compliance programme to ensure high

risk employees receive targeted training and to establish adequate surveillance

for, and responses to, newly identified risks and issues – as monitored by

the internal audit programme

– Insurance programme and risk transfer strategy in place to mitigate potential

financial losses

– The Audit Committee and Board of Directors exercise oversight through

regular reports on all threatened and actual litigation within the Group from

the General Counsel

– Employees are subject to a range of policies and procedures setting out

required behaviours and standards, and consequences for non-compliance

– The Ethics and Compliance Council, chaired by the General Counsel and

Chief Compliance Officer, meets regularly to monitor the Group’s compliance

culture and ensure ethics and compliance considerations are appropriately

weighted in business decisions

– The Data Protection Steering Committee meets regularly to oversee

compliance with applicable data privacy laws

Developments in year

– See page 40 for KPIs on ethics and compliance

– Internal audit programme and activities continued in 2021, see page 99 for

further information

Link to KPIs Read more on pages 28-29

Intellectual property and know-how

Link to strategic objective

Movement in year

Description of risks

Failure to adequately protect and preserve intellectual property and

proprietary know-how in both existing and new markets could harm our

competitive position.

Impact of COVID-19

– No impact

Controls and mitigating activities

– The Group actively manages its trademark portfolio via an internal Trademark

Committee (TMC) comprised of the business segment Marketing Directors

and Legal. The TMC meets regularly to take decisions in relation to the

registration of new trademarks and defensive activity in relation to existing

marks. The TMC is supported by a global network of trademark agents who

represent the Group’s interests in all relevant jurisdictions.

– General Counsel supported by in-house and external legal teams

– The Group’s Science Director works closely with the Legal team andexternal

patent attorneys to ensure emerging inventions areappropriatelyprotected.

– Employees are trained on the importance of appropriate handling and

disclosures of proprietary and confidential information.

– The Legal team reviews every Confidentiality Agreement entered into by the

Group to assess the suitability of the proposed purpose and the duration

ofthe confidentiality obligations. A central record of all Confidentiality

Agreements entered into globally is maintained by the Legal team.

– Contentious IP matters are reported through to the Audit Committee

andBoard of Directors.

Developments in year

– New stage gate system incorporates intellectual property and freedom

tooperate as requirement to launch new product

– Patent and intellectual property disclosures to keep distinction in our

newlaunches

– In house legal expertise for partnership

– Evaluation of new tool (chemtracker) to monitor competitive intellectual

property landscape for each business segment

– Enforcement of proprietary advantage

Link to KPIs Read more on pages 28-29

Annual Report and Accounts 2021 Elementis plc

Portfolio innovation and technology

Link to strategic objective

1 2

Movement in year

Description of risks

The ability of the Group to compete is highly dependent on its ability to

meet the changing needs of customers and keep pace with technological

innovations and sustainability trends.

New or substitute products and technologies developed by competitors

could erode the Group’s ability to compete and lead to declines in sales

and market share.

Impact of COVID-19

– Qualification of alternate raw materials for existing portfolio have

impacted number launches

Controls and mitigating activities

– Global R&D team aims to develop new products and technologies

usedinanevolving market to meet the changing needs of our

sophisticatedcustomers

– Collaborative relationships with customers and industry formulators

ensures our efforts are aligned with latest market trends

– Innovation stage gate process with systematic prioritisation enables

theGroup to deliver high value solutions for the market

– Hectorite and high quality talc minerals are natural resources enabling

theGroup to consistently deliver high performance innovation

Developments in year

– 21 new products launched in 2021 (targeted 20 planned for 2022)

– Innovation from new products was in line with 2020 at 14% in 2021

– New innovation management (smart sheet based) tool has been

implemented to increase speed to market

– Sustainability remains a key driver for Innovation: all new launches will have

sustainability drivers as part of the launch package

– Open innovation with strategic partners remains a priority

Link to KPIs Read more on pages 28-29

People, talent management and succession

Link to strategic objective

1 2 3

Movement in year

Description of risks

The Group operates in highly competitive labour markets and relies upon

the expertise and services of talented individuals and teams to succeed.

Loss of key people or disruption to teams withouttimely action could result

in a disruption to business operations.

Developments in year

– Orderly transition to new General Counsel and Chief Compliance Officer;

Global Marketing Directors for Personal Care and Coatings;

Manufacturing Directors for Chromium and Specialties plus the addition

of a Global Sustainability Director completed through external hiring

– Internal development moves for Senior Leaders in Coatings, HR and

Finance to further build experience and capability

– LinkedIn Learning adopted globally with a local solution sourced for

China to enhance learning opportunities

– Talent and succession process further embedded into the organisation

with cross functional reviews for commercial roles

– Flexible working principles adopted globally to support talent acquisition

and retention

Controls and mitigating activities

– Formal talent, succession management and retention risk programmes in

place with individual development goals reviewed

– Succession to senior management positions formally reviewed by the ELT

twice a year

– Succession to the ELT reviewed with the Board

– Regional HR Directors, Global Talent Manager and Country HR Managers

support the CHRO and ELT to provide focus on talent

– HR systems functionality in place for performance management, goal

setting, career profile and compensation planning with succession

management to be integrated in 2022

– Formal system for job grading and compensation benchmarking in place

supported by external expertise

– Employee engagement survey reviewed on 6 monthly basis with the quality

of managers measured through their impact on Engagement. Action plans

developed by each people manager.

Impact of COVID-19

– Accelerated the roll-out and adoption of e-learning

– Prompted a global approach to flexible working through new principles with

local application

Link to KPIs Read more on pages 28-29

Key

Innovation

Growth

Efficiency

Movement in year

No change

Increasing

Decreasing

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Strategic report

Principal risks and uncertainties continued

IT networks, data security and privacy

Link to strategic objective

Movement in year

Description of risks

The Group is expected to increasingly rely on IT systems for its internal

communications, controls, reporting and relationships with customers

andsuppliers.

A significant disruption could cause delays to key operations and

inabilityto meet customers’ requirements and result in increased

operatingcosts, legal liability and reputational damage. In addition,

continuing developments in data protection legislation globally have

created a range of compliance obligations with increased financial

penalties for non-compliance.

Impact of COVID-19

– Targeted guidance issued on records management when working

remotely

Controls and mitigating activities

– Security controls including policies and procedures, staff awareness

andtraining, risk management and compliance, systems and information

management and protection process

– Regular IT, cyber and data protection updates to the Board

– Business continuity and emergency response plans are in place for

manufacturing sites

– Internal audits are scheduled on a regular basis

Developments in year

– Schedule of phishing simulations introduced to increase awareness

andcontinually assess training needs

– Information governance group established

– Implementation of a privacy and data protection management platform

– Digital data review pilot programme launched

Link to KPIs Read more on pages 28-29

Health and Safety

Link to strategic objective

1 2 3

Movement in year NEW

Description of risks

The nature of business manufacturing activities, which includes the

production, storage and transport of hazardous materials, has a wide-

ranging exposure to health and safety risks, including both occupational

safety and process safety risks. Failure to recognise, evaluate and mitigate

health and safety risks would leave the Group vulnerable to negative

impacts such as employee and contractor injuries, lost production time,

equipment damage, impact to the community, potential regulatory

compliance challenges, and reputational damage.

Impact of COVID-19

– Operational impacts with short term interruptions due to staff shortage;

covered staff gaps with overtime and reprioritising production

schedules

– Keeping informed with local requirements and implementing safety

protocols as necessary

– No work related COVID-19 cases documented

Controls and mitigating activities

– Safety leadership – setting clear expectations for site leaders and

supervisors on their role and responsibility for ensuring employee safety

and providing them with leadership training/tools (Alive & Well at the End of

the Day); HSE site leader certification process required for all site leaders;

establishing safety lagging and leading key performance indicators;

communication and demonstration of top management’s strong

commitment to our Safety value

– Management systems – programmes such as compliance and insurance

audits, root cause analyses, management of change, routine inspections,

risk assessments, training, contractor management and work permits

– Safety culture development – stop work authority focus and training; increasing

employee participation in safety through near miss reporting, hazard recognition

and safety committees; TogetherSAFE awareness sessions with all employees

and development of safety improvement plans focused on employee concerns

– Process safety management – performing process hazard analyses;

ensuring equipment is well maintained and functioning properly (mechanical

integrity) through capital investment; developing corporate guidelines and

performing equipment criticality assessments to determine preventative

maintenance approach

Developments in year

– Development of new management of change web based tool

– Participation in World Day for Safety & Health at Work and establishing

aSafety week

– Dedicated HSE Sharepoint page

– Development of process safety management guidelines for process hazard

analyses and equipment criticality assessments

– Embedding TogetherSAFE, our value for safety, into our work planning

andbusiness processes; launching the first CEO TogetherSAFE award

promoting team safety initiatives

Link to KPIs Read more on pages 28-29

Key

Innovation

Growth

Efficiency

Movement in year

No change

Increasing

Decreasing

72 Annual Report and Accounts 2021 Elementis plc

Strategic report

Viability and going concern statement

Going concern

The Directors are satisfied that it is appropriate for the Group and

the Company to adopt the going concern basis of accounting in

preparing these Group and parent company financial statements,

and that there are no material uncertainties impacting the ability

of the Group and Company to continue to operate over a period

ofat least 12 months from the date of approval of the financial

statements. To support this assessment the Directors produced

three models covering a future period of three years from the

dateofthese accounts demonstrating the position of the Group

regarding its two financial covenants, Net Debt/EBITDA and

InterestCover, at each measurement period for the 12 months

following the date of signing of these accounts and annually

thereafter. These models comprised:

– A base case scenario, aligned to the latest Group annual

operating plan for 2022 as well as the Group’s three-year plan

for 2023 and 2024;

– A severe but plausible downside scenario that assumes that

the global economic environment is severely depressed over

the assessment period; and

– A reverse stress test flexing sales to determine what

circumstance would be required to breach borrowing covenants.

Having agreed covenant relaxations with our lenders in March

andSeptember 2020, the revised provision in our banking

arrangements is for the Net Debt/EBITDA covenant to step down

from 3.75x at present to 3.25x in June 2022. No breaches in the

required covenant tests were reported during the year and under

both the base case, and severe but plausible downside, scenarios

the Group is expected to remain within its financial covenants

throughout the going concern period and the conditions necessary

for the reverse stress scenario to be applicable were deemed

remote. The Directors also considered factors likely to affect its

future performance and development, the Group’s financial

position, current excess liquidity position, high level of cash

conversion and the principal risks and uncertainties facing the

Group, including the Group’s exposure to credit, liquidity and market

risk and the mechanisms for dealing with these risks. The Group’s

net debt position at the 2021 year end was $401.0m. It has access

to a syndicated revolving credit facility of $375m, of which $71.6m

has an expiry date of September 2024 and $303.4m has an expiry

date of September 2025, and long term loan facilities of $200m and

€172m which have an expiry date of September 2023. The Group

had further borrowings available to it of over $350m at the year end.

In conclusion, after reviewing the base case scenario, the severe

but plausible downside scenario and considering the remote

likelihood of the scenario in the reverse stress test occurring as well

as having considered the uncertainty relating to global supply chain

and the mitigating actions available, the Directors have formed the

judgement that, at the time of approving the consolidated financial

statements, there are no material uncertainties that cast doubt on

the Group’s going concern status and that it is appropriate to

prepare the consolidated accounts on the going concern basis.

Business viability assessment

The basis of the assessment includes a detailed review of strategic

and operating plans, underpinned by one- and three-year financial

forecasts including profit and loss and cash flows. Consideration is

therefore given to capital expenditures, investment plans, returns

toshareholders and other financial commitments, as well as

theCompany’s debt bearing capacity, its financial resources,

borrowings and the availability of finance. No review of business

plans and financial forecasts is complete without a robust

assessment of the risks and opportunities in such planning models

and the assumptions used. These reviews include consideration

and discussion of the materials prepared and presented to the

Board by management and its advisers (where appropriate), as

wellas additional information requested by the Board. The Board’s

programme of monitoring major risks is therefore an important

component of the business viability assessment and the financial

impact of the principal risks is modelled over the three-year

period.Business and segment growth scenarios, rate of return

oninvestments, assumptions on global GDP growth rates, relevant

currency rates, commodity prices in business plans and financial

forecasts are all considered, with stress testing on financial models

where appropriate. Finally, a review of litigation and tax reports, legal

and compliance risks throughout the year and at a formal year end

risk review ensures that the viability statement is made with a

reasonable degree of confidence.

Principal risks

For each principal risk that is deemed to be both permanent

andhave a high impact, a severe but plausible scenario has been

considered. In making the business viability statement, the Board

has reviewed and discussed the overall process undertaken by

management and has assessed the outcome of the stress-

testing, carried out using the Group’s three-year financial forecast

as the base case. The three-year financial forecast considers the

Group’s cash flows, interest cover, Net Debt/EBITDA covenant

ratio and other key financial ratios over the period. These metrics

are assessed against the Group Risk Register to determine the

most impactful ones to stress test against, and this is carried

outto evaluate the potential impact of the Group’s principal risks

actually occurring. Based on the results of its review, and as set

out above, the directors have a reasonable expectation that the

Group will be able to continue its operation and meet its liabilities

as they fall due over the three-year period of their assessment.

Business viability statement

In accordance with the UK Corporate Governance Code provision 31,

the Directors have reviewed the Group’s current position and carried

out a robust assessment of the principal risks and uncertainties that

might threaten the business model, future performance, solvency

and liquidity of the Group, including resilience to such threats, and

consider that they have a reasonable expectation that the Group will

be able to continue in operation and meet its liabilities as they fall due

over a period of at least three years. A period of three years was

chosen as being consistent with the Group’s business and financial

planning models, R&D plans, a number of key supply contracts and

external borrowing facilities. In addition, three years is the period

used for mid-term business planning purposes. Regarding

accessibility to financing, whilst the majority of the RCF currently

hasan expiry of Sept 2025, the Term Loan expires in Sept 2023,

within the three year period, and so will require renegotiation or

replacement before this. Elementis has to date had a very supportive

banking syndicate (as indicated by the willingness of the majority

of members to extend the RCF facility during 2021 and to relax

thebanking covenants in March and September 2020) as such the

Directors do not believe there will be any issues in renegotiating a

further Term Loan when necessary. Whilst the Directors have no

reason to believe that the Group will not be viable over a longer

period, a three year period allows the Directors to make the viability

statement with a reasonable degree of confidence whilst providing

shareholders with an appropriate longer term outlook. The Directors‘

viability assessment of the Group’s prospects is based on reviews

ofannual operating and three year business plans, bank covenant

compliance forecasts, including sensitivities, the Group’s strategy

and strategic priorities, principal risks and how these are managed

and mitigated. How these reviews were carried out, the principal

risksand how they are being managed are more fully described and

explained in the Principal Risks and Uncertainties section on pages

68-72, together with relevant assumptions and qualifications.

Strategic report

The Strategic report was approved by the Board of Directors on

3 March 2022 and is signed on its behalf by:

Paul Waterman Ralph Hewins

CEO Chief Financial Officer

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Leading with purpose

Corporate governance

Chairman’s introduction to governance

Ways of working

Notwithstanding the continued public health and travel

challenges,the Board has continued with its regular scheduled

meetings and programme of business, adapting where necessary

toaccommodate for timezone differences and additional meetings

as appropriate. Meetings were held face to face when safe to do

soand in line with public health advice. Looking ahead to 2022,

theBoard calendar is ablend of physical and virtual meetings

designed to maximise the time spent together as a Board as well

ascontinuing to deepen the understanding of the business and

interact with employees.

Promoting the success of the Company

As noted on page 52, the Board have a clear role in promoting the

success of the Company for the benefit of shareholders. As your

Board, we continue to consider all relevant stakeholders inour

decision making processes and you can find further information

onpages 53 and 75.

Engaging our employees

The Board has not been able to physically meet with our

employees during 2021, as our plans to visit sites were not

feasible as a result of ongoing COVID-19 related travel and public

health advice. We look forward to resuming those activities as

soon as it is safe todo so and are planning on carrying out visits

in2022 to our office and technology laboratory in New Jersey,

ourSt Louis site and our mining operations in Finland.

Virtual meetings have enabled the Board to connect with the

business segment and functional leaders during the year and the

CEO, CHRO and other members of the ELT have provided frequent

reports on workforce matters including employee engagement

insight, leadership activities, townhalls, diversity and inclusion

initiatives, health and safety, and ongoing information on the

impact of the pandemic on employees in each of the countries

inwhich we operate. Further information on our approach to

employee engagement can be found on page 38 and the work

ofour Designated Non-Executive Director on pages 85 to 86.

How sustainability drives long term success

The Board has continued to deepen its focus on sustainability

andclimate change during the year and, on page 42, the Board

ispleased to present the Company’s first TCFD disclosure and

issupportive ofthe progress and journey that the Company is

making with sustainability at the heart of the Company’s purpose

and strategy.

Outcomes of the Board evaluation

The external evaluation activity that was conducted in the second

halfof the year confirmed that we continue to operate as an

effective Board and are recognised as being open, transparent,

collaborative and respectful, combined with an appropriate

balance between support and constructive challenge. The levels

of commitment, enthusiasm and responsiveness that each Board

member has demonstrated through this challenging year have

been outstanding. Details of the evaluation activity are included

inthe report on pages 90 to 91.

Remuneration Policy

Our Remuneration Policy is due to be renewed at our Annual

General Meeting (AGM) in 2022. The Remuneration Committee

hascarried out a review of current Remuneration Policy and

consulted with its top shareholders on changes to current

Remuneration Policy. The outcome of the consultation exercise

demonstrated that there isstrong support for the changes which

willbe formally put to shareholders for approval at the AGM.

Further information can befound in the Directors’ Remuneration

reporton pages 101 to 127.

AGM

As ever I am grateful to you, our shareholders, for your

continuedsupport. Our AGM will take place on 26 April 2022.

Further information can be found in the Notice of Meeting

whichisavailable on the Company’s website.

John O’ Higgins

Chairman

Dear Shareholders,

I am pleased to present our Governance

report for the year ended 31 December 2021.

The Board is responsible for ensuring the long

term success of the Company, generating

value for shareholders and contributing to the

communities in which it operates and wider

society. This report sets out our approach to

governance, our key areas of focus during

theyear, our ways of working and how we,

asyour Board, remain effective as stewards

ofyour company.

74 Annual Report and Accounts 2021 Elementis plc

Strategic pillar:

Innovation

The Board’s governance role

The Board reviews information on the innovation

pipeline, business opportunities, product

launches, innovation partnerships and customer

innovation projects which supports the growth

ofthe business.

What we considered in 2021

– Regular innovation reporting from the CEO and

a deeper strategy focused innovation session

with Joe Lupia, SVP Global Technology

showcasing the latest innovation

– Understanding global key accounts, customer

development projects, open innovation

approach, and market drivers and opportunities

– Review of information relating to the impact of

COVID-19 on the innovation pipeline and

ongoing opportunities to maintain innovation

momentum with customers

For more information see pages 12-13 and 23

Strategic pillar:

Growth

The Board’s governance role

The Board reviews information on the market

drivers and assumptions for each business,

including investments to underpin growth and

emerging market opportunities and revenue

generation profile.

What we considered in 2021

– Monitoring delivery of new business

opportunities pipeline and growth of product

portfolio platforms following in-depth business

segment presentations

– Regular information on industry data for the

business segments

– Approved the three year plan and annual

operatingplan

– Monitoring Talc acquisition revenue synergies

For more information see pages 24-25

Strategic pillar:

Efficiency

The Board’s governance role

The Board reviews information on the

organisational capability and resource plans,

capital allocation strategy, investments and

medium term performance objectives.

What we considered in 2021

– Tracking progress of strategic investments for

St Louis (US) and Taloja (India) sites, including

focus on safety, deadlines and budget

– Oversight and approval of capital expenditure

and investment plans throughout the annual

planning and forecasting cycle

– Regular review of information on operational

reliability, capacity, resilience and oversight

ofcost, logistics and raw material challenges in

a year characterised by the effects and impact

of COVID-19

For more information see pages 26-27

How governance supports our strategy

Corporate governance plays a vital role in formulating and

delivering strategy. The Board and Executive Directors, collectively

work towards the strategic priorities to build the long term success

ofthe Company. In doing so, the Board must balance a diverse

range of stakeholders and ensure that the vision, purpose and

culture are aligned.

Innovation, Growth and Efficiency are the strategic priorities

onwhich the long term success of the Company is built.

The Board has an established programme of business which

enables regular discussion on strategic priorities as well as the

risks and opportunities which can affect the delivery of strategy.

In addition, there are feedback mechanisms and external

information which help the Board to ensure the strategy

isdelivered in line with stakeholder expectations.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

The right skills to deliver our strategy

Corporate governance

Board of Directors

John O’Higgins

Chair

Paul Waterman

Chief Executive Officer

Ralph Hewins

Chief Financial Officer

Steve Good

Senior Independent Director

Tenure on Board:

John was appointed a Non-Executive Chair

and Chair of the Nomination Committee

on 1 September 2021. John joined the

Board as a Non-Executive Director on

4 February 2020 and was appointed Senior

Independent Director on 29 April 2020 prior

to his appointment as Chair.

Independent:

Yes**

Committee memberships:

Tenure on Board:

Paul was appointed CEO on

8 February 2016.

Independent:

Committee memberships:

–

Tenure on Board:

Ralph was appointed CFO-Designate

and Executive Director on 12 September

2016 and became the Elementis Group

CFO on 1 November 2016.

Independent:

Committee memberships:

–

Tenure on Board:

Steve was appointed Senior

Independent Director on 1 September

2021. Steve joined the Board as a Non-

Executive Director on 20 October 2014

and became Chair of the Remuneration

Committee on 25 April 2017.

Independent:

Yes**

Committee memberships:

Experience and role:

John served as chief executive of

Spectris plc from January 2006 to

September 2018, leading the business

through a period of significant strategic

transformation and development. Prior

to Spectris plc, John spent 14 years at

Honeywell International in a number

of senior management roles including

chairman of Honeywell Automation India

and president of automation & control for

Asia- Pacific. His early career was spent

at Daimler Benz A.G. as a research and

development engineer.

Previous non-executive director

rolesinclude Exide Technologies,

aUSbased supplier of battery

technology to automotive and

industrialusers (from 2010 to 2015).

John holds a master’s degree in

Mechanical Engineering from Purdue

University (US) and an MBA from INSEAD.

External appointments:

– Trustee of the Wincott Foundation

– Non-executive director of Oxford

Nanopore Technologies plc and a

member of the audit, risk, remuneration

and nomination committees

– Senior independent director of

Johnson Matthey plc and a member

ofthe audit, nomination and

remuneration committees

– Advisor to Envea Global, a market

leader in environmental air and

emissions measurement and majority

owned by The Carlyle Group

Experience and role:

Paul has a proven track record

in developing markets, products

and opportunities for creating

value, business optimisation and

transformation. Paul’s global experience

provides the skill set required to deliver

the Company’s strategy and provide

inspiring leadership.

Prior to joining Elementis, Paul was global

CEO of the BP Lubricants business

in 2013 after having overseenthe BP

Australia/New Zealand downstream

business. In 2010, Paul was country

president of BP Australia. Prior to this

he was CEO of BP’s global aviation,

industrial, marine and energy lubricants

businesses (2009 to 2010) andCEO of

BP Lubricants Americas (2007-2009).

He joined BP after it acquired Burmah-

Castrol in 2000, having joined the latter

in 1994 after roles at Reckitt Benckiser

and Kraft Foods.

Paul holds a BSc degree in Packaging

Engineering from Michigan State

University and an MBA in Finance and

International Business from New York

University, Stern School of Business.

External appointments:

None

Experience and role:

Ralph is an accomplished CFO who has

astrong track record in finance, strategy

development and implementation, and

M&A, which enables him to provide

effective financial leadership to underpin

the delivery of the Company’s strategy.

Ralph had a 30 year career with BP,

where he held a number of significant

leadership positions, including roles

in financial management, sales and

marketing, corporate development,

M&A, strategy and planning. In 2010,

Ralph was CFO of BP Lubricants and

served on the board of Castrol India

Limited from 2010 until 2016.

Ralph holds an MA degree in Modern

History and Economics from the

University of Oxford and an MBA

from INSEAD.

External appointments:

None

Experience and role:

Steve has strong and relevant

international experience in specialty

chemicals businesses, manufacturing

and diverse industrial markets, which

enables him to provide guidance and

challenge to management. Steve’s

involvement with remuneration

committees in other organisations

enables him to provide judgement and

demonstrate sound knowledge of topical

remuneration matters in his capacity as

Remuneration Committee chair.

Steve was chief executive of Low &

Bonar plc between September 2009

andSeptember 2014. Prior to that role,

he was managing director of its technical

textiles division (2006-2009), director of

new business (2005-2006), and managing

director of its plastics division (2004-

2005). Prior to Low & Bonar, he spent ten

years with BTP plc (now part of Clariant)

in a variety of leadership positions

managing international specialty

chemicals businesses. Steve served

asnon-executive director and chairman

of the remuneration committee of Cape

plc (2015-2017), non-executive director

of Anglian WaterServices and member

of the auditcommittee, nomination

committee and remuneration committee

(2015-2018), non-executive director

ofDialight plc (2018-2020) and director

of Low & Bonar Pension Trustee Ltd

(2018-2021).

Steve holds a degree in Economics and

Financial Management from Sheffield

University. He is a chartered accountant.

External appointments:

– Non-executive chairman of Zotefoams

plc (non-executive director from

October 2014 and chairman from

April2016), chairman of the nomination

committee and member ofthe

remuneration committee

– Non-executive chairman of Devro plc

(from June 2019) and chairman of the

nomination committee

** On appointment

Annual Report and Accounts 2021 Elementis plc

Dorothee Deuring

Independent Non-Executive Director

Anne Hyland

Independent Non-Executive Director

Christine Soden

Independent Non-Executive Director

Tenure on Board:

Anne was appointed a Non-Executive

Director on 1 June 2013 and became

Chair of the Audit Committee in

August 2013.

Independent:

Yes**

Committee memberships:

Tenure on Board:

Dorothee was appointed a Non-

Executive Director on 1 March 2017.

Independent:

Yes**

Committee memberships:

Tenure on Board:

Christine was appointed a Non-

Executive Director on 1 November 2020

and is the Designated Non-Executive

Director for workforce engagement.

Independent:

Yes**

Committee memberships:

Experience and role:

Anne brings significant and current

financial, internal controls, audit and

taxexpertise to the Board, which enables

her to be effective in her role as Audit

Committee Chair. Anne’s background

with global companies enables her to

effectively contribute in the context

ofElementis’ existing markets and

newbusiness opportunities.

Anne is currently CFO of Kymab Group

Ltd, a biopharmaceutical company

acquired by Sanofi in April 2021.

Prior to her current executive role, she

was CFO and company secretary of

both BBI Diagnostics Group Ltd and

Vectura Group plc. Previous senior

finance positions held include director

of corporate finance at the then FTSE

100 Celltech Group plc, Medeva plc

and KPMG.

Anne holds a degree in Business Studies

from Trinity College, Dublin and is a

chartered accountant (FCA) and a

corporate tax adviser (CTA-AITI).

External appointments:

– Non-executive director of Clinigen

Group plc (from January 2018) and

chair of the audit committee

– Non-executive director of Mereo

BioPharma Group plc (March 2022)

– CFO of Kymab Group Ltd (a Sanofi

company) (from March 2015)

Experience and role:

Dorothee provides the Board with

valuable insight into the wider European

chemicals and industrial sectors as well

as sector specific acquisition expertise.

Dorothee manages her own corporate

advisory consultancy, serving a number

of European clients in the pharma/

biotech sector. She is active in various

industry bodies. Her previous executive

roles included managing director and

head of Corporate Advisory Group

(Europe) at UBS in Zurich, head of M&A

chemicals and healthcare at a private

investment bank in Germany and as

a senior executive in the corporate

finance department at the Roche Group.

Dorothee served as non-executive

director of the supervisory board of

Bilfinger SE and member of the audit

committee (May 2016 – May 2021).

Dorothee holds a master’s degree in

Chemistry from the Université Louis

Pasteur, Strasbourg and an MBA

from INSEAD.

External appointments:

– Non-executive director of AXPO

Holding AG (from March 2017)

– Non-executive director of Lonza Group

(from April 2020)

– Supervisory board member of

Immofinanz AG (from October 2021)

Experience and role:

Christine brings significant experience

of innovation and the commercialisation

of technology to the Board. Christine is

an experienced CFO with a strong track

record from leading a range of private

and public companies rooted in

innovation with a particular focus

on biotechnology, life sciences and

pharmaceutical products.

Christine was CFO and company

secretary of Acacia Pharma Group

plc, apublic quoted provider of

pharmaceutical products designed

toimprove the outcomes and recovery

for surgical patients (2015-2020).

Prior toAcacia Pharma Group plc,

Christine served as CFO and then

non-executive director of AIM-listed

ElectricalGeodesics, Inc., which

was acquired by Philips NV in 2017.

Other CFOand finance leadership

rolesinclude Optos plc, BTG plc (former

FTSE 250 constituent), Oxagen Limited

and Celltech Chiroscience Group plc,

having started her life-sciences career

asfinancial controller of Medeva plc.

Christine has previously served as chair

of the audit committee at e-therapeutics

plc, an AIM-listed technology based

drug discovery platform (2017-2020)

and at Provalis plc, a quoted healthcare

business (2000-2005). She was also

non-executive director of Futurenova

Limited, a provider of antimicrobial

cases for iPads and iPhones from

2017to 2021.

Christine is a chartered accountant and

holds a degree in Mathematics from the

University of Durham.

External appointments:

– Non-executive director of Fertility

Focus Limited (from 2013)

– Non-executive director of Cell and Gene

Therapy Catapult (from October 2020)

– Non-executive director of Arecor

Therapeutics plc (since May 2021)

Key to committee membership

Audit Committee Nomination Committee

Remuneration Committee

Chairman of the Committee

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Stjin Dejonckheere

SVP Global Personal Care

Corporate governance

Executive Leadership Team

Paul Waterman

Chief Executive Officer

Eric Waldmann

SVP Global Chromium

Dr Christian Kather

SVP Global Talc

Ralph Hewins

Chief Financial Officer

Luc van Ravenstein

SVP Global Coatings and Energy

Steve Ridge

SVP Global Supply Chain &Manufacturing

Full biography can be found on page 76

Tenure:

Joined Elementis in 2012

Experience and role:

Luc is responsible for leading the Global Coatings

business. He has led the business’ Transformation

programme and put in place its new growth strategy.

Luc started his career with Elementis as Global

Business Director, Personal Care and became SVP,

Personal Care in July 2016 and leading the growth

of the Personal Care business and integration of

the SummitReheis acquisition. In February 2018, he

was appointed SVP, Global Coatings. Luc began his

career at Croda where he held various roles in their

coatings business before heading up their European

personal care business.

Luc has an MSc degree in Chemistry and Chemical

Engineering, a Professional Doctorate in Engineering

from Eindhoven University of Technology and

is a graduate of the Program for Leadership

Development from the IESE business school.

Tenure:

Joined Elementis in 2007 and was appointed SVP

Global Personal Care in May 2020

Experience and role:

Stijn is responsible for the leadership of the

Personal Care business, which includes Cosmetics

and AP Actives businesses. He is an accomplished

leader who has demonstrated an ability to build and

lead high performing commercial teams. Stijn spent

many years developing his career at Elementis in

various positions inour Personal Care and Coatings

business, most recently as Director Global Sales

Personal Care.

Prior to Elementis, he also held leading commercial

rolesat Capsugel, now Lonza, and Barentz.

Stijn holds Master’s degrees in Bio-Engineering

from Ghent University and Agro-Management

from Montpellier SupAgro, and is a graduate of

the Executive Development Program from the

Wharton School.

Tenure:

Joined Elementis in 2018

Experience and role:

Christian has led the Talc business since 2011, having

joined Mondo in 2010, which was acquired by the

Company in 2018.

Previously, Christian worked as senior vice president

& general manager at Evonik Degussa Corp., in

Parsippany, NJ. There he was heading the Business

Unit Coatings and Additives and was responsible for

the global pigment dispersion business. Before that,

he held a number of senior executive positions with

the Degussa Group, both in Europe and the US.

Christian has a business education from Harvard

Business School and INSEAD, and a PhD in International

Law from the University of Munster, Germany.

Tenure:

Joined Elementis in 2007 and was appointed SVP

Global Chromium in February 2018

Experience and role:

Eric is responsible for the leadership of our global

Chromium business.

Eric has held a number of roles in the Chromium

business and, prior to his current role, was VP

Financeand Sourcing. Prior to joining Elementis,

Eric’s experience was focused in the areas of finance,

accounting, mergers and acquisitions, and sourcing.

Eric holds a bachelor’s degree in business

administration from Bucknell University, and an MBA

from Villanova University. Eric is a member of the

International Chromium Development Association

(ICDA) Council, which oversees and sets the

strategy forpromoting the value and sustainability

of chromium and represents the chromium

industry worldwide.

Tenure:

Joined Elementis in 2019

Experience and role:

Steve brings to Elementis his solid experience in

overseeing a global manufacturing and supply chain

foot print. With a proven track record of leading

international teams and a passion for safety and

continuous improvement.

Steve is responsible for supply chain, manufacturing,

capital projects, procurement, quality, and health

and safety.

Steve joined Elementis from FMC where he was the

global manufacturing director. Prior to FMC, Steve

was the global EHS and operational excellence

director at Celanese.

Steve has a master’s degree in Chemical Engineering

from Texas A&M University and a bachelor’s

degree in Chemistry and Mathematics from Florida

Southern College.

Full biography can be found on page 76

78 Annual Report and Accounts 2021 Elementis plc

Greg Bellotti

Chief Information Officer

Tenure:

Joined Elementis in 2014 and was appointed CIO in

January 2021

Experience and role:

As Chief Information Officer, Greg is responsible

for global IT strategy, operations, service delivery,

innovation and digital transformation.

Prior to joining Elementis, Greg held IT leadership

roles at Summit Medical Group (now Allscripts)

and Siemens. At Summit, he rebuilt a team and an

infrastructure to support exponential growth across

facility locations. During his tenure at Siemens, Greg

was instrumental in the acquisition of HEAR USA,

the first B2C in Siemens’ portfolio, and led project

management, global service provision and the global

PMO at various times.

Greg graduated from The College of New Jersey

in 1992 with a Bachelor of Science degree in

Law&Justice.

Anna Lawrence

Group General Counsel and Chief

Compliance Officer

Tenure:

Joined Elementis in March 2021

Experience and role:

Anna leads the Group’s Legal function with global

responsibility for all legal matters within the Group

including Litigation, M&A and Intellectual Property

matters. As Chief Compliance Officer, Anna’s remit

includes oversight of the Group’s compliance

programme including the development of our Group

compliance policies and procedures.

Prior to joining Elementis, Anna was director of legal and

compliance at Kingfisher plc (FTSE100) covering supply

chain, procurement and intellectual property. Prior to

Kingfisher she worked for Johnson Matthey. She started

her legal career at Allen & Overy LLP and is an English

qualified corporate and commercial lawyer.

Anna has a degree in Modern Languages from the

University of Oxford, a postgraduate diploma in Law

andLegal Practice from BPP Law School, London and

isan Associate of the Chartered Governance Institute.

Tenure:

Joined Elementis in 2017.

Experience and role:

Chris leads the Group Human Resources and

Communications function and is responsible

for talent, succession, HR operations, reward

programmes and internal communications.

His focus is on embedding the Company’s culture

and values throughout the organisation, developing

internal talent and standardising our global people

processes. Chris is co-Chair of the Elementis

Diversity, Equity andInclusion Council.

Chris has over 20 years’ experience of global human

resources gained in a mix of privately held US and

UK listed plcs, with the first 12 years of his career in

manufacturing and supply chain.

Chris holds an MEng in Mechanical Engineering from

the University of Liverpool.

Chris Shepherd

Chief Human Resources Officer

Laura Higgins

Group Company Secretary

Tenure:

Joined Elementis in 2018

Experience and role:

Laura is the Group’s Company Secretary and is

responsible for providing Board support and advice

on corporate governance, UK listing obligations

and corporate transactions. Laura is also a pension

trustee and a member of the Elementis Diversity,

Equity and Inclusion Council.

Laura has held various senior company secretarial

positions at public quoted companies including Sky,

Britvic, Betfair and Rio Tinto.

Laura holds a postgraduate diploma in Legal

Practice and a BA (Honours) in Law and Legal Studies

with History. She is also a Fellow of the Chartered

Governance Institute.

Joe Lupia

SVP Global Technology

Tenure:

Joined Elementis in 2019

Experience and role:

Joe joined in 2019 and is responsible for the

leadership of the Global R&D and Product

Stewardship functions. His former commercial

experiences enable him to ensure our innovation

pipeline is capable of delivering both technical

and financial success. Joe is responsible for

collaborating with the business leaders to develop

new technologies that enhance our customers’

product performance.

Joe has 30 years’ experience in the chemicals

industry and joined us from BASF, where he had many

different technical and commercial roles over his 24

year tenure.

Joe has a Ph.D. in Organic Chemistry from Seton

Hall University.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

The UK Corporate Governance Code

Corporate governance

UK Corporate Governance Code

The UK Corporate Governance Code 2018 (the ‘Code’) sets

standards of good practice in relation to all areas of corporate

governance the UK. The Code has applied to the Company since

1 January 2019. In this Annual Report we report on how we

applied the main principles of the Code and complied with its

relevant provisions.

The Company was not in compliance with Provision 38 during the

year; however the Executive Directors are currently on a phased

glidepath reduction in pension towards the workforce rate (as

noted in page 103 in the Directors’ Remuneration report and as

noted in the 2020 and 2019 Directors’ Remuneration reports.

Investors were consulted on this matter and remain supportive

ofthe Company’s approach.

Elementis has complied with all other relevant provisions

throughout the year ended 31 December 2021 and from that

dateup to the date of approval of this Annual Report. The Code

iscurrently available www.frc.org.uk

Board leadership and Company purpose

Pages

A. Effective and entrepreneurial Board to promote

the long term sustainable success of the

Company, generating value for shareholders and

contributing to wider society

B. Purpose, values and strategy with alignment

toculture

C. Resources for the Company to meet its objectives

and measure performance. Controls framework

for management and assessment of risks

D. Effective engagement with shareholders

andstakeholders

48-51

E. Consistent workforce policies and practices

tosupport long term sustainable success

104-105

& 38-39

Chairman’s introduction to governance 74

Strategic report 1-73

Section 172 statement 52-53

Activities of the Board 83

Board of Directors 76-77

Culture 84

Shareholder engagement 87

Stakeholder engagement 48-51

Workforce engagement 85-86

Division of responsibilities

Pages

F. Chair leadership of the Board 88

G. Board composition and responsibilities 88

H. Role of NEDs 88

I. Policies, processes, information, time, resources

and the Company secretary

Governance framework 81

Roles and responsibilities 88

Time commitments 89

Conflicts of interest 89 & 93

Composition, succession and evaluation

Pages

J. Board appointments, succession plans for Board

and senior management, and promotion of diversity

K. Skills, experience and knowledge of the Board

andlength of service of the Board as a whole

L. Annual evaluation of the Board as a whole and

individual evaluation to demonstrate each Director

continues to contribute effectively

Board evaluation process 90

Board skills and attributes 95

Diversity policy 94

Nomination Committee report 92-95

Audit, risk and internal controls

Pages

M. Independence and effectiveness of internal and

external audit functions and integrity of financial

and narrative statements

97, 99

N. Fair, balanced and understandable assessment

ofthe Company’s position and prospects

100

O. Risk management and internal control framework

and principal risks the Company is willing to take

toachieve long term strategic objectives

Audit Committee report 96-100

Risk management 64-67

Viability and going concern statement 73

Internal controls and risk management 99

Fair, balanced and understandable 100

Remuneration

Pages

P. Remuneration policies and practices to support

strategy and promote long term sustainable

success, with executive remuneration aligned

toCompany purpose and values

104-105

Q. Policy procedure on executive remuneration,

director and senior management remuneration

106-112

R. Authorising remuneration outcomes 119

Directors’ Remuneration report 101-127

Directors’ Remuneration Policy 102

Directors’ Annual Report on Remuneration 118

80 Annual Report and Accounts 2021 Elementis plc

Governance framework

Corporate governance

Division of responsibilities

Audit Committee

– Overseeing financial reporting

and the Group’s financial systems

– Monitoring internal controls and

risk management

– Maintaining an appropriate

relationship with our internal

andexternal auditors

Diversity, Equality and

Inclusion Council

Ethics and Compliance

Council

HSE Council Sustainability Council

Nomination Committee

– Responsibility for the structure,

size and composition of the

Board, ensuring the Board and

Committees have the correct

balance of skills, knowledge

andexperience

– Ensuring and overseeing

succession planning and

responsibility for the annual

review of Board effectiveness

– Identifying and nominating

suitable candidates for

appointment to the Board

– Promoting diversity

Remuneration Committee

– Setting the Remuneration Policy

and determining the review

structure for the Chairman,

Executive Directors and

Executive Leadership team,

toalign their remuneration

withthe long term interests

ofthe Company

– Approving the bonus plan,

longtermincentive plan targets

andshare awards

For further information,

please see page 96

For further information,

please see page 92

For further information,

pleasesee page 101

Shareholders

Board of Directors

The Board is collectively responsible for ensuring long term sustainability andthe

delivery of long term value and success for our shareholders. It also provides

effective challenge and support to the Executive Leadership team inrelation to

strategy, whilst ensuring the Group maintains an effective risk management and

internal controls systems.

Board Committees

The Board is supported in its activities by Board Committees that have specific

delegated responsibilities, as set out in separate terms of reference which are

available on the website: www.elementis.com

Chief Executive Officer (CEO)

The CEO is responsible for the day-to-day running of the business

andoverseeing its performance, development and strategy.

Executive Leadership team

The Executive Leadership team is led by the CEO and meets quarterly to review

and consider a number of reports. It also meets monthly to review and discuss

each business segment. Relevant matters are reported to the Board by the CEO

or the Chief Financial Officer.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Matters reserved

Group financial report

Risk management and internal controls

Corporate governance

Group strategy

Acquisitions and disposals

Talent and succession

Culture and values

Sustainability

Health and safety

Engagement with key stakeholders

Financial and trading statements

Corporate governance

Board leadership and Company purpose

How the Board operates

The Board held nine scheduled meetings during the year and

additional Board meetings were also held to discuss emerging

matters such as COVID-19 updates, Board succession matters

anddefence activities.

For each Board and Committee meeting, meeting papers are

provided in advance through a secure portal. Board papers

includestanding items such as financial performance and

investorrelations updates and special business such as

strategic,operational or governance matters, which are

preparedby Executive Directors, senior management,

theCompany Secretary and/or external advisers.

The Board regularly invites ELT members to attend Board

meetings and receives presentations and updates from their

relevant business and functional areas.

Other key information such as analyst/investor reports, Company

policies and governance guidelines is available through the

secureportal.

Board allocation of agenda time

Agendas for each Board meeting are prepared by the Company

Secretary as a rolling programme over a 12 month period but

arereviewed regularly and updated where appropriate.

The agenda for each Board meeting is agreed with the

Chairman,CEO and CFO.

Scheduled meetings during the year

Strategy 48%

Performance 30%

Governance 22%

Board meeting attendance

The attendance of the Directors at the Board

meetings in the year ended 31 December 2021:

Andrew Duff*

John O’Higgins

Paul Waterman

Ralph Hewins

Dorothee Deuring

Steve Good

Anne Hyland

Christine Soden

* Andrew Duff stepped down from the Board on

1 September 2021.

Matters reserved for the Board

To ensure there is a clear division of responsibilities between the

Board and the running of the Company business, the Board has a

formal schedule of matters reserved for its decision. This is

reviewed on a periodic basis and is available on our website

www.elementis.com.

Changes to the Board during the year

Andrew Duff stepped down from the Board on 1 September 2021

John O’Higgins was appointed as Chairman on 1 September 2021*

* Further information regarding John’s appointment can be found within the

Nomination Committee report on page 94.

Annual Report and Accounts 2021 Elementis plc

Key activities of the Board in 2021

The Board’s key activities and their link to Section 172 factors are shown below.

The Company’s Section 172 statement can be found on pages 52 and 53.

Section 172 matters

Employees Customers

Investors

Suppliers

Government and regulators

Environment and communities

Link to Section 172

Defence

activity

– On 31 March 2021, an unsolicited approach was made by

InnospecInc(Innospec), a global specialty chemicals group listed

on NASDAQ

– The Defence Committee, supported by the Board, together with

management and advisers, conducted a thorough review to

assess the fundamental value as well as the likely value to be

created by the continued delivery of existing strategy and the

future prospects of the Company

– On 9 April 2021, the Board unanimously rejected the conditional

proposal and on 15 April 2021, Innospec publicly announced the

cessation of active interest in the Company

Link to Section 172

Strategic

updates

– Annual Operating Plan and Innovation

– Litigation and Compliance, and IT and Cyber

– Talc

– Global Supply Chain Management, Procurement, HSE and ESG

– Engagement and Chromium

– Coatings and Energy

– Personal Care and 2022-2024 financial shape

– People related topics including strategy, diversity, equity and

inclusion, people engagement andsuccession

Link to Section 172

Chair

succession

– On 23 March 2021, Andrew Duff announced he intended to step

down from the Board as Chair. The Nomination Committee

retained Korn Ferry to consult on the Chair succession approach

where an internal candidate had expressed interest in the role

ofChair

– A specification for the role of Chair was agreed and a longlist of

potential external candidates were evaluated, resulting in three

external candidates being shortlisted for further discussion.

Having ascertained the candidates’ interest in the role and

following a detailed evaluation of the attributes, experience and

references of the candidates, the Nomination Committee agreed

to recommend the internal candidate for appointment as Chair

Link to Section 172

Board

evaluation

– Manchester Square Partners (MSP) were engaged to conduct the

triennial external evaluation

– Following a review of Board papers, a series of interviews were

held with each Board member, the Company Secretary, the Chief

HR Officer and, the General Counsel and Chief Compliance Officer

– Following a Board observation session, MSP presented their

report. The themes arising from the evaluation were discussed

and a set of actions were agreed

– Further information regarding the evaluation can be found

onpages 90-91

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

How the Board monitors culture

Cultural indicators

Cultural identifier

Promoting

integrity and

accountability Valuing diversity

Culture aligned to

purpose

Culture aligned to

values

Culture aligned to

strategy

Employee

survey insight

Employee

engagement

Employee retention,

promotion and

attrition data

Reports on progress

on diversity, equity

and inclusion

Whistleblowing

reports

Health, safety and

environmental

performance

Internal Audit reports

and findings

Ethics and

compliance

programme

Corporate governance

Board leadership and Company purpose continued

Our purpose, culture and values

Our purpose is to achieve sustainable progress across the world

through innovative specialty chemical products that deliver

cleaner and better performance.

We are collaborative industrial innovators; developing long term

partnerships with our customers, innovating at pace to keep them

atthe forefront of their markets. Combining our access to unique

natural resources with our unmatched rheology and technological

expertise, we responsibly transform raw materials into advantaged

ingredients that provide crucial end product benefits. This enables

our customers to solve their product performance and

sustainabilitychallenges.

The Board is satisfied that the Company’s culture continues to be

aligned with its purpose, values and strategy:

– Company values were established during 2018 following

arefresh and engagement with employee focus groups

– Strategy is discussed regularly and includes the three year

plan and annual operating plan, and is formally agreed as part

ofthe Board’s annual programme

– The Company’s values of Safety, Solutions, Ambition, Respect

and Team underpin the behaviours expected to cultivate an

open and inclusive culture

Maintaining a healthy culture

To ensure that the Company is creating the right environment

forlonger term success, a variety of mechanisms are available

tomeasure Company culture, as shown below.

There are also other mechanisms for measuring culture

whichcanbe directly linked to the Company’s values.

Further information can be found on pages 38-40.

84 Annual Report and Accounts 2021 Elementis plc

Corporate governance

Workforce engagement

In line with the requirements of the Code,

the Board considered the mechanisms for

ensuring that the views and concerns of

the workforce are taken into account and

agreed that a specific Board accountability

for workforce engagement would be

formalised by appointing a Boardmember

to serve as the Designated Non-Executive

Director for workforce engagement

(DNED). Christine Soden currently serves

as the DNED and assumed the role on

appointment as a Board member on

1November 2020.

A role description was established

and the DNED is expected to:

Examples of workforce engagement themes

“I am impressed by the level

of engagement, honesty and

professionalism of our workforce

andIlook forward to further

discussionin 2022”

Read more on page 49

Responsibilities:

– Understand the concerns of the workforce

– Articulate those views and concerns in

Boardmeetings

– Ensure the Board takes appropriate steps

toevaluate the impact of proposals and

developments on the workforce and consider

whatsteps should be taken to mitigate any

adverse impact

– Feedback to the workforce on steps taken to

address concerns or explain why particular

steps have not been taken

– To review and monitor insight driven by the

engagement survey or other qualitative data

(quarterly updates) with the Chief HR Officer

– To actively participate in a programme of

workforce engagement which may include a

variety of engagement mechanisms/channels

such as focus groups and townhalls

– To report on the programme of engagement

activity and workforce concerns

– To feedback any concerns regarding

remuneration directly to the

RemunerationCommittee

– To prepare appropriate responses to address

workforce concerns

– To explain how the Code provisions relating

toworkforce engagement have been met

Workforce themes

Values and culture

COVID-19

response

Communications

Local/global ways

of working

Processes

Remuneration

and benefits

Christine Soden

Designated Non-Executive Director for workforce engagement

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Corporate governance

Workforce engagement continued

Workforce engagement highlights in 2021

Activities Outcomes

– Christine Soden was the keynote speaker for the

Company’s inaugural Women in Leadership forum on

International Women’s Day in March 2021 with global

employees in a virtual Q&A format facilitated by the

Company Secretary

Raising Christine’s profile as the Designated Non-

Executive Director for workforce engagement within

anon-selective work environment

Launch of Women in Leadership forum, as part of the

Company’s diversity, equity and inclusion strategy

– Quarterly data insight gained from the Company’s

engagement survey

Enabling deeper contextual understanding relating to

engagement capital, management, diversity and inclusion

and values indices which are used to measure

employeeengagement trends

– Focus group insights from the US, Finland,

Netherlands, UK, China, India and Germany

withaparticular focus on understanding local

workforce challenges together with actions

toaddress the challenges

Detailed perspective of local challenges and

opportunities faced by employees enabling an

understanding of how global strategy and policies

arecascading through the business

– Panel discussion with local HR managers

withoutsenior management in attendance

Local HR issues were shared in a transparent and

honestenvironment

– Regular workforce engagement reports at Board

meetings and aligned to principal Board decisions

(forexample, the annual operating plan)

Representing employee views and concerns brings depth

to Board discussion and strengthens Directors’

awareness around their duties to consider employee

stakeholders indecision making processes

– Site visits and physical meetings with employees have

not been able to take place during 2021, but it is

expected that Christine Soden will resume this

activity when COVID-19 advisory and travel

restrictions sufficiently ease

Meeting employees at their place of work helps to build

relationships and gain awareness of the local environment

and culture

– Communication feedback loop to employees on what

has been heard in the focus groups, employee

engagement insight and how the Board has taken

these views into account during the year

Employees feel that their views have been heard and that

actions have been taken to address their concerns

– Regional focus groups led by the DNED

– Quarterly engagement data insight

– Emerging engagement survey themes

– Regular DNED reports to the Board

– Global, local or functional townhalls and site visits

– DNED feedback loop communication to all employees

Workforce engagement activities – 2022

86 Annual Report and Accounts 2021 Elementis plc

Corporate governance

Shareholder engagement

Shareholder communications

The Chairman is responsible for effective communication

withshareholders. The CEO and CFO are the Company’s

principalcontacts for investors, analysts, press and other

interestedstakeholders.

There is a dedicated investor relations programme for current and

potential investors, which is managed by the Director of Investor

Relations, who reports to the CFO. Further information regarding

shareholder services can be found on page 196.

Shareholder engagement

Investor meetings

The Board receives an investor relations report at each of its

meetings outlining recent dialogue with investors and feedback

received and updates from our corporate brokers, JP Morgan

andNumis. Analysts‘ reports are also made available to the Board.

The Chair attends the financial results presentations, where he

has the opportunity to meet with those analysts who attend.

All Board members are invited to attend results presentations.

The Chair and Senior Independent Director (SID) are available

toshareholders to discuss governance and strategy concerns

asappropriate. The SID regularly meets with the Company’s

majorinvestors. At these meetings, investors are also given the

opportunity to meet with other members of the Board, for

example, the Chair of the Audit, Nomination or Remuneration

Committee. During the year, our Remuneration Chair consulted

with investors and leading advisory bodies relating to proposed

Shareholders by number of shares

Balance ranges

1-499 0.13%

500-999 0.13%

1,000-4,999 0.77%

5,000-9,999 0.49%

10,000-49,999 0.95%

50,000-99,999 0.78%

100,000-499,999 4.88%

500,000-999,999 4.55%

1,000,000-999,999,999 87.32%

Shareholders by type

Party type

Private individuals 2.35%

Nominee companies 69.34%

Limited and public limited

companies 22.38%

Other corporate bodies 5.70%

Pensions funds, insurance

companies andbanks 0.23%

– Trading statement

– FY20 results

presentation

– Results roadshow

– Chairman Governance

roadshow

– AGM trading statement

– Retail Investor

presentation

– UBS Small and Mid-cap

conference

– H1 21 results

presentation

– Results roadshow

– Berenberg chemicals

conference

– 9 month trading update

– Investor event

– Innovation webinar

Jefferies industrials

conference

– JPM – Best of British

conference

– Berenberg European

conference

Key shareholder activities during the year

changes to the Directors’ Remuneration Policy ahead of

submitting for shareholder approval at the 2022 Annual

GeneralMeeting. In 2021, atotal of over 150 meetings

wereheldwith investors.

Private investors

The Board is keen to hear the views of our private shareholders

andthey are encouraged to use our shareholder mailbox,

company.secretariat@elementis.com. The Company’s website

iskept updated with Company reports and related information.

Enquiries may also be addressed to the Company Secretary

andsent to the registered office.

Annual General Meetings

The Company held a hybrid AGM for the first time on 13 May

2021. As a consequence of public health advice, the meeting

wasconstituted with a minimum quorum in physical attendance.

This format enabled shareholders to attend the meeting in

asafeandsecure remote environment and a telephone line

wasavailable for shareholders to ensure that they could be

heard.The proceedings of the AGM is available on demand.

All resolutions were approved by shareholders on a poll.

Shareholders were able to submit questions ahead of the AGM;

however, no questions were submitted prior to or at the AGM.

The 2022 AGM will be held on 26 April 2022 at 10.00am and

further information can be found in the Notice of Meeting.

Annual Report and Accounts 2021Elementis plc

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Role Name(s) Responsibility

Chair*

John O’Higgins

– Leadership of the Board and responsible for its effectiveness

– Setting the agendas in consultation with the CEO, CFO and Group

CompanySecretary

– Promoting open, honest and constructive debate and challenge during

meetings and guiding the CEO and CFO in delivery of the strategy

– Ensuring the Board conforms with the highest standards of corporate

governance

– Chairs the Nomination Committee and ensures the Board has an appropriate

balance of skill, diversity and experience and effective succession planning

in place, and leads the annual Board effectiveness review

– Effective engagement and communication shareholders and other

stakeholders, and ensuring that their views are understood by the Board

CEO

Paul Waterman

– Day-to-day management of the business

– Execution of strategy and operational performance

– Providing regular updates to the Board on all significant matters relating

tothe Group

– Ensuring the Company has a strong team of high calibre executives, and

putting in place management succession and development plans

CFO

Ralph Hewins

– Supporting the CEO in the delivery of the Company’s strategy and financial

performance

– Leading the Group Finance function and responsible for financial reporting,

investor relations, IT, risk, insurance and tax matters

– Key role in external stakeholder relationship, including investment

community, lenders and pension trustees

Senior

Independent

Director

Steve Good

– Acting as a sounding board to the Chair, providing support and advice where

necessary

– Point of contact for shareholders and other stakeholders to discuss matters

of concern

– Leading the Board’s appraisal of the Chair’s performance with the Non-

Executive Directors

Independent

Non-Executive

Directors

Dorothee Deuring

Steve Good

Anne Hyland

John O’Higgins

Christine Soden

– Providing independent oversight objectivity to the Board’s deliberations

– Using their broad range of experience and expertise to challenge

management and aid decision making

– Serve on various Committees and play a leading role in the effectiveness

ofthose Committees

Designated

Non-Executive

Director for

workforce

engagement

Christine Soden

– Representing the Board when engaging and communicating with employees

and providing communication on any outcomes

Company

Secretary

Laura Higgins

– Supporting the Chair in ensuring the Board operates efficiently and

effectively

– Providing the Board with advice on governance developments

– Facilitating the Directors’ induction programmes and assisting with ongoing

training and development

– Assisting the Chair with the Board effectiveness review process

* Independent on appointment

Roles and responsibilities of the Directors

Corporate governance

Composition, succession and evaluation

88 Annual Report and Accounts 2021 Elementis plc

Time commitment

Following the Board evaluation process, as detailed on page 90,

theBoard has considered the individual Directors’ attendance,

contribution and external appointments, and are satisfied that

each of the Directors is able to allocate sufficient time to the

Group to discharge his or her responsibilities effectively.

Information on Directors’ external appointments can be

foundonpages 76 to 77.

The Directors’ commitments register is maintained by the

Company Secretary and is regularly reviewed by the Nomination

Committee. All Directors are expected to commit sufficient time

tothe Board, and the Company, as is necessary to carry out their

duties as a Director.

Additional appointments

If a Non-Executive Director wishes to take on an additional

external appointment, they are required to seek permission

fromthe Board. The Board will take into consideration the time

commitment required by the Non-Executive Director in their role

as a Board Director, Committee Chair or Committee member

before any permission is given.

Prior to the appointment of Christine Soden, her other

commitments were carefully considered by the Nomination

Committee as part of the appointment process. During the

year,the Board considered and approved additional external

appointments for Christine Soden and Dorothee Deuring.

The Executive Directors do not hold any external appointments.

Board training and independent advice

All Directors have access to the advice and services of the

Company Secretary and may take independent professional

advice, as appropriate, at the expense of the Company.

Directors are given the opportunity throughout the year to

undertake training and attend seminars, as necessary, to keep

their skills and knowledge up to date. In addition, technical

briefings are regularly included in Board and Committee papers.

The Company Secretary supports the Chairman in ensuring

thatthe Board and its Committees operate within the governance

framework and that communication and information flows within

the Board and its Committees and between management and

Non-Executive Directors remain effective.

Independence of the Non-Executive Directors

Each of the Non-Executive Directors is considered independent

incharacter and judgement. The Chairman was considered

independent on appointment and the Board confirms that he

remains effective. The independence of Non-Executive Directors

isreviewed annually by the Nomination Committee.

Further information can be found in the Nomination Committee

report on page 92.

The biographies of the Directors can be found on pages 76 to 77

and details of the membership of each Board Committee can be

found on pages 92, 96 and 101 respectively.

Directors’ insurance and indemnities

The Company maintains Directors’ and Officers’ liability insurance,

inthe event of legal action brought against its Directors.

The Company has also granted indemnities to each of the

Directors. These indemnities are uncapped in amount, in relation

tocertain losses and liabilities which they may incur to third

parties in the course of acting as a Director of the Company.

Neither the indemnity or insurance provides coverage in the event

that a Director is proved to have acted fraudulently or dishonestly.

Conflicts of interest

The Board operates a policy to identify and, when appropriate,

manage actual or potential conflicts of interest that may arise.

Directors are required to seek Board approval for any actual or

potential conflicts of interest. Conflicts of interest are considered

formally by the Board, at each meeting, and are kept under review

throughout the year.

Ralph Hewins is in receipt of a conflict authorisation from the

Company in respect of him acting as a trustee of the Elementis

Group Pension Scheme. Further details can be found in the

Directors’ report on page 128.

Information flows

The Chairman and the Company Secretary ensure that theDirectors

receive clear and timely information on all relevant matters.

Board papers are circulated in a timely manner in advance of the

meetings to ensure that there is adequate time for them to be read

and to facilitate robust and informed discussion. A fully encrypted

electronic Board portal is used to distribute Board and Committee

papers and to provide efficient distribution of business updates

and other resources to the Board.

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Corporate governance

Composition, succession and evaluation continued

External Board evaluation process and framework

Appointment of consultants

The Code requires that an external evaluation is undertaken every

three years. Manchester Square Partners were engaged to carry

out this activity, which took place in the second half of 2021.

MSP conducted the previous external evaluation in 2018 and

itwasagreed that it was appropriate to re-appoint them, taking

intoaccount their knowledge of the Company and change in

composition of the Board over the last three years, including

significant roles of the Chair and SID. Further, it was agreed

thatMSP would bringinsight into the evolution and overall

effectiveness of the Board over time. MSP have no other

connection with the Companyor any of the Directors.

Board evaluation structure

Working with the Chair and the Company Secretary,

MSPused their experience and insight of the Company

toconsiderhow the Board would need to continue evolving to

meet the needs of the Group now and over the coming years.

The individual interviews with the Board, Company Secretary,

CHRO and, General Counsel and Chief Compliance Officer

focused on a set of questions relating to the themes below:

Evaluation timeline and process

The process is divided into four stages:

June – September 2021

The Nomination Committee, with the support of the Board,

discussed the approach and format for the triennial evaluation

activity, which resulted in MSP being appointed toconduct the

external evaluation. The Chair and MSP discussed and agreed

thebrief and timeline.

September – October 2021

MSP carried out a review of Board and Committee papers for

thepreceding 12 months and scheduled individual meetings

withBoard members, the Company Secretary, the CHRO and,

theGeneral Counsel and Chief ComplianceOfficer.

Board and Committee observation was conducted by MSP.

November 2021

The findings of the evaluation were discussed with the Chair

andCompany Secretary and finalised into a report for wider

Boardreview.

December 2021

The report was presented to the Board byMSP. The Board

discussed the findings and agreed on the focus areas for the

forthcoming year.

Structure,

composition,

succession,

diversity

Values & culture,

strategy, role,

challenges, risks,

dynamics and

engagement

Governance

Governance,

execution,

leadership

Key

Board leadership and Company

purpose

Division of responsibilities

Composition, succession,

andevaluation

90 Annual Report and Accounts 2021 Elementis plc

2020 internal Board evaluation

Building on the evaluation activity in 2019, the Board agreed to carry out an internal Board evaluation process, which was led by

the Company Secretary. The outcomes of the Board evaluation activity for 2020 were:

Actions Status in 2021

Reviewing the balance/cadence

ofBoard activities and meetings

to reflect adapted ways of

workingbetween physical

andvirtual meetings

The 2022 Board calendar has been adapted to optimise Board time

spent together. Of the eight scheduled meetings for 2022, five are

planned to be physical meetings and three are planned to be virtual

meetings. Additional meetings are likely tobeheld in a virtual format.

Continued focus on Board

succession, senior management

development, and talent and

succession mapping beneath

Executive Directors

The Nomination Committee and the Board have received talent and

succession and wider organisational people strategy updates. John

O’Higgins succeeded Andrew Duff as Chair and Steve Good was

appointed SID on 1 September 2021. The Board continues to be

active in succession planning matters with Anne Hyland and Steve

Good approaching tenure.

Discuss and agree the external

evaluation approach scheduled

for 2022 and timing

MSP were engaged to carry out the external evaluation activity,

whichtook place in Q3-Q4. Information on the process can be

foundonpage90.

Complete induction programmes

for John O’Higgins and

ChristineSoden

Induction programmes were tailored for both Board members and

largely carried out in a virtual format. Page 93 includes an example

ofatypical Board induction programme.

Continued focus on risk

management and compliance

Risk management systems and processes have developed during

theyear with risk featuring regularly in Board discussion. Compliance

practices, processes and culture have progressed following the

introduction of the new General Counsel and Chief Compliance Officer.

Initiation of site visits and

re-connecting with management

(when safe to do so) and informal

Board events

2021 was another year characterised by public health and travel

restrictions. ELT members have presented their business deep dives

to the Board with key members of their team alongside, which has

enabled the Board to gain more exposure to talent within the

Company. Site visits to the US and Finland are planned for 2022.

2021 externally Board evaluation summary

In line with the Code, MSP, together with a brief from the

Chair,developed a set of questions to ensure that the specific

objectives of the evaluation activity were met and would enable

the Board to agree areas of development and provide further

value to stakeholders.

It was agreed that the Board has evolved considerably since

thelast review and has continued to function well, providing

valuable governance, oversight and challenge since the previous

evaluation, notwithstanding a series of challenges including

navigating the COVID-19 crisis, renegotiating debt covenants,

takeover activity, supply chain challenges and handling NED

andChair succession. The Board is recognised as an open,

transparent, friendly, respectful, collaborative and cohesive

Boardwith strong capability and diversity of experience, expertise

and thinking around the table. There is an appropriate balance

between support and constructive challenge from the NEDs

andgenuine appreciation from the executives for the enthusiasm

and value add of the NEDs.

All Committees are considered to operate effectively with praise

for the chairmanship of all Board Committees, with the support

and guidance of the Company Secretary and other external

advisers as appropriate. All Board members receive full access

topapers and minutes, so all have the ability to be fully informed

about all work done at Committee level.

Areas of focus for 2022

– Board succession – continue to ensure the Board is

composed of the most appropriate balance of skills,

knowledge, experience and diversity and to ensure the

orderlysuccession of Anne Hyland and Steve Good over

thenextone to two years

– Strategy – continue to develop discussion of strategy

(incorporating ESG topics) with focus on portfolio and long

term ambition

– Risk management – agree on risk topics for focused Board

discussion during the year

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Corporate governance

Nomination Committee report

Board meeting attendance

The attendance of the Directors at the Board meetings in the year

ended 31 December 2021:

Andrew Duff (Chair)*

◊

1/1

Dorothee Deuring 6/6

Steve Good 6/6

Anne Hyland 6/6

John O’Higgins (Chair)* 2/2

Christine Soden 6/6

* Four meetings were held regarding the succession of the Chair role.

It was not appropriate for Andrew Duff, as current Chair, and John

O’Higgins, as the internal candidate, to be in attendance at those

meetings.

◊

Andrew Duff stepped down from the Board on 1 September 2021.

The Committee’s terms of reference are available on the

Company’s website at www.elementis.com.

Highlights

Areas of focus

– Appointment of new Chair and SID

– Ongoing Board succession planning

– Oversight of Group’s diversity policy

– External Board evaluation

– Review of terms of reference

Role of the Committee

The Committee is responsible for the structure, size

andcomposition of the Board, ensuring that the Board

andCommittees have the most appropriate balance of

skills,knowledge and experience. This Committee ensures

andoversees succession planning and has responsibility

fortheannual evaluation of the Board.

Key responsibilities

– Regularly reviewing the structure, size, diversity and

composition of the Board

– Ensuring that the Company has the right leadership, balance

ofskills and experience to deliver the Company’s strategy

andenable the Board to effectively fulfil its obligations

– Succession planning for the Board and ELT

– Leading on the annual performance evaluation of the Board

and its Committees

– Identifying and nominating, for approval by the Board,

candidates to fill Board vacancies as and when they arise

– Managing potential Directors’ conflicts of interests

Programme of business

– Annual review of Directors’ independence and conflicts

inaccordance with the Committee’s terms of reference

– Engagement with external search consultants to assist

withthe Chair succession approach

– External Board evaluation

– Reviewing structure, size, diversity and composition

oftheBoard

– Succession planning for the Board and oversight of senior

management succession plans

– Non-Executive Directors meeting without the Executive

Directors present

– Approval of Nomination Committee report

John O‘Higgins

Chair, Nomination Committee

Dear Shareholders,

As Chair of the Nomination Committee

(the‘Committee‘), I am pleased to present

the Nomination Committee report covering

the work of the Committee during 2021.

Thisreport should be read in conjunction

with the separate section on compliance

under the UK Corporate Governance Code

on page 80.

Composition, success and evaluation

92 Annual Report and Accounts 2021 Elementis plc

Board effectiveness processes

Annually the Chair is responsible for conducting an appraisal with

each Non-Executive Director in respect of their skills, experience,

contribution and time commitment to the Company.

TheCommittee also oversees the effectiveness process and

agreed that an externally facilitated review was appropriate during

the year. Further information regarding this year’s effectiveness

review can be found on page 90.

Directors’ conflicts

The Committee has oversight of Directors’ potential conflicts of

interest and during the year, in accordance with policy, considered

and approved additional external directorships for Dorothee

Deuring and Anne Hyland.

Board composition and skills

A matrix is maintained which serves as a record of directors’

experience, attributes and expertise. The Committee reviews

thismatrix annually to ensure that the Board has an appropriate

composition and range of skills, experience and diversity to

prevent any dominance, either individually or collectively over

theBoard’s decision making processes. Highlights from this

matrix are noted on page 95.

Re-appointment of Directors

All Directors are subject to re-election at the next Annual General

Meeting, as required by the Code. Following the evaluation activity

and taking into account a review of director independence,

conflicts and ongoing time commitments, the Committee

concluded that each of the Directors continues to make an

effective contribution tothe Board and, with the exception of

Anne Hyland, all Directors will stand for re-election at the AGM.

During the year there was no requirement for the re-appointment

ofa Director for second or third term. The Committee regularly

reviews the schedule of non-executive tenure and the next formal

review will take place in 2022. Recommendations for annual

re-appointment are supported by considerations regarding the

Directors’ independence, experience andcontribution which they

bring to the Board and its Committees. These matters will be

subsequently confirmed following the Boardevaluation process

during 2022 and a review of conflicts andindependence. In line

with best practice, the continuing Board roles remain subject

toannual re-election by shareholders.

Board induction programme

Induction – General topics

– The role of a Director

– Board and Committees

– Board Meetings

– Rules and regulations and

guidance

– Board procedures

– Current issues

– Nature of the Company,

its business and its

markets

– The Company’s main

relationships

Induction – Board Committees (as appropriate)

– Role and remit of the

Committee

– Link between the

Committee’s policy and

the Company’s strategic

objectives

– The annual meeting

schedule for the

Committee

– The main business

conducted by the

Committee

– The legal requirements

relevant to the

Committee’s operations

– Market practice and

current trends relevant to

the Committee

– Current issues

– Views of investors on

matters considered by the

Committee and potential

areas of focus

– Any technical training on

key matters

Induction – External advisers

Meetings with:

– External auditors

– Internal audit function

– Remuneration consultants

– Brokers

– Lawyers

Induction – Senior management meetings

Meetings with:

– CEO

– CFO

– SVP Global Coatings and

Energy

– SVP Global Personal Care

– SVP Global Chromium

– SVP Global Talc

– Chief HR Officer

– Chief Information Officer

– SVP Global Supply Chain

& Manufacturing

– Group General Counsel

and Chief Compliance

Officer

– Group Company

Secretary

– Group Head of Tax

– Group Financial Controller

– Director of Investor

Relations

Induction – Site visits

– Induction – Site visits

– SciPark – New Jersey, US

(US head office)

– Amsterdam, Netherlands

(Talc)

– Castle Hayne – North

Carolina, US (Chromium)

– Others as agreed during

the course of the year

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Corporate governance

Nomination Committee report

Board induction

The Chair, with the support of the Company Secretary,

isresponsible for preparing and co-ordinating an appropriate

induction programme, which is to be tailored to the needs

ofeachnewly appointed Non-Executive Director.

Newly appointed Directors are provided with a thorough briefing

ontheir fiduciary duties and continuing obligations from the

Company Secretary, and legal advisers if required.

A typicalinduction programme can be found on page 93.

Succession planning

Following the announcement of the Chair’s intention to retire

fromthe Board, the Committee discussed the approach for

thisparticular role and appointed Korn Ferry, external search

consultants, to assist with the process, which included the

sensitivity of managing an internal candidate, John O’Higgins.

As Andrew Duff and John O’Higgins were not able to participate

inany of the Committee discussion regarding the Chair

succession process, Steve Good, with the support of the

Committee, led the Chair succession process.

With input from the Executive Directors, the Committee prepared

arole specification and a recruitment brief, which was shared and

discussed with Korn Ferry. A longlist comprising candidates with

regard for the benefits ofdiversity, including gender and ethnicity,

was prepared by Korn Ferry and considered by the Committee.

Having discussed the merits of each of the candidates, the

Committee agreed a shortlist, including John O’Higgins, for

further discussion.

Having carried out further due diligence including time

commitments and potential conflicts, and with the support

oftheBoard, the Committee concluded that John O’Higgins

beappointed as Chair.

As a consequence of this appointment, the role of Senior

Independent Director had become vacant and, following

Committee discussion, there was unanimous support for

SteveGood to fill the role in addition to his role as Chair of the

Remuneration Committee. These role changes were announced

on 29 July 2021 and became effective on 1 September 2021.

In the period from announcement to 1 September 2021,

AndrewDuff and John O’Higgins agreed a transition and handover

process. For the induction as Chair, the Company facilitated

atailored approach building on the induction programme that

John O’Higgins received on joining the Company.

Diversity policy

The Board has adopted a diversity policy, which is available on the

Company’s website. The Board acknowledges the importance of

diversity initsbroadest sense in the boardroom as a key element

of Board effectiveness. The Board is fully supportive of the

recommendations ofthe Parker Review and the Hampton-

Alexander Review which are discussed in the context of succession

planning. Diversity includes perspective, experience (including

working internationally), background (including nationality),

cognitive and personal strengths and other personal attributes,

aswell as diversity ofgender, social background and ethnicity.

Progress on our diversity objectives

– Our external advisers are selected on their commitment and

ability to deliver diverse longlists in the recruitment processes

– The composition of the Board is reviewed on an annual basis

– The gender balance of the Board exceeds our target of 33%

(currently 43%)

– Oversight of gender and ethnic diversity profile across

theGroup including promotion of talent into management roles

– Oversight of senior management succession plans

– Assessment of skills, expertise, backgrounds and experiences

are considered prior to Directors joining the Board and on an

ongoing basis using a diversity matrix

– Continue to monitor regulatory developments and best

practice in respect of diversity

– The policy is reviewed on an annual basis

Priorities for the year ahead

– Succession planning for new Non-Executive Directors

ahead of expiry of tenure for Anne Hyland and Steve Good

in 2023

– Review Board and senior management succession plans

– Review Board diversity policy and objectives

– Review of 2021 external evaluation outcomes and planning

for 2022 internal evaluation

94 Annual Report and Accounts 2021 Elementis plc

Diversity overview

Composition of the Board

Length of tenureOverall gender diversity summary

Gender of the Board

Gender, Company-wide Nationality of the Board

Gender of ELT

Gender balance of ELT and direct reports

Average age of Board as at 31 December 2021

4 3

210

3201,018

Senior management (XLT)

Board

Senior managers (s.414 CA 2006

definition)

All employees

ELT

Male Female

American

British

Austrian

Irish

Less than 3 years

4 to 6 years

3 to 6 years

Executive Directors

Independent Non‑Executive Directors

Chair

Female

Male

Female

Male

320

1018

Female

Male

Female

Male

Board expertise and experience matrix

John

O‘Higgins

Paul

Waterman

Ralph

Hewins

Dorothee

Deuring

Steve

Good

Anne

Hyland

Christine

Soden

Manufacturing/industrial processing

Specialty chemicals

Strategy/business development

International business & markets

Innovation/product development

Sales/marketing/customer

Accounting/tax/treasury/risk management

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Attendance at Audit Committee meetings

Anne Hyland (Chair) 4/4

Dorothee Deuring 4/4

John O’Higgins* 3/4

Christine Soden 4/4

* John O’Higgins stepped down from the Audit Committee on

appointment as Chair of the Board, 1 September 2021.

Highlights

Areas of focus

– Recommended approval of the 2020 Annual

Report and Accounts and 2021 Half Year Statements

totheBoard

– Approval of audit plans (external and internal) for 2021

– Review of going concern and viability statement

– Assessment of impact of COVID-19 on the key

balances and estimates

– Presentation of adjusting items

– Goodwill and indefinite life intangible assets

impairment review

– Group tax exposures and tax positions

All members of the Committee are independent Non-Executive

Directors. Members’ biographies can be found on pages 76 to77.

The Chair of the Board, CEO, CFO and Group Financial Controller,

alongside representatives from the external auditors, Deloitte,

andinternal auditors, PwC, have a standing invitation to attend

Committee meetings. All Board members have access to

Committee papers.

As required by the Code, the Board is satisfied that Anne Hyland has

the relevant financial experience to chair this Committee and the

Committee as a whole has the financial and commercial competence

to meet its responsibility in an independent and robust matter.

Role of the Committee

To assist the Board by establishing, reviewing and monitoring the

Group’s financial reporting, internal controls framework and risk

management, internal audit programmes and changes in

regulatory requirements.

Composition of the Committee

In accordance with the Code, the Board has confirmed that

allmembers of the Committee are independent Non-Executive

Directors and have been appointed to the Committee based

ontheir individual financial and commercial experience.

The Board is satisfied that Anne Hyland, as Chair of the Committee,

has recent and relevant financial experience to chair this Committee

through her current executive role as CFO at Kymab Group and as

chair of the audit committee at Clinigen plc (AIM listed) as well as

previous experience as CFO at FTSE-listed Vectura plc. Anne is a

chartered accountant (FCA) and a corporate tax adviser (CTA-AITI).

The Committee, as a whole, has financial and commercial

competence relevant to the sector in which the Group operates.

Further information on the skills, expertise and experience of

Committee members can be found on page 95.

Anne Hyland

Chair, Audit Committee

Dear Shareholders,

As Chair of the Audit Committee (the

‘Committee’), I am pleased to present the

AuditCommittee report covering the work

of theCommittee during 2021. This report

should be read in conjunction with the separate

section on compliance under theUK Corporate

Governance Code on page80.

Audit, risk and internal controls

Corporate governance

Audit Committee report

96 Annual Report and Accounts 2021 Elementis plc

Key responsibilities

– Monitoring the integrity of the Group’s financial statements,

financial reporting and related statements

– Ensuring the appropriateness of accounting policies, any

changes to these, and any significant estimates and

judgementsmade

– Reviewing the effectiveness of internal controls,

complianceandrisk management systems

(includingwhistleblowing arrangements)

– Overseeing all aspects of the relationship with the internal and

external auditors; approving the policy on non-audit services;

making recommendations to the Board for their dismissal or

changes; and supervising any tender process

The Committee’s terms of reference, which are reviewed and

approved annually, are available on the Company’s website.

Activities during the year

The Committee’s focus in 2021 has been on:

– Meetings with both the internal and external auditors to review

their key findings

– Reviewing the internal control systems and considering the

output of internal audit reviews and management’s action plans

– Reviewing the integrity, consistency and key accounting

judgements made by management in both the Company’s

fulland half year results

– Advising the Board on whether the Annual Report and

Accounts preparation process is fair, balanced and

understandable, and provides the information necessary to

shareholders to assess the Group’s position and performance,

business model and strategy

– Reviewing the going concern and viability statements, and the

supporting assumptions and assessments in the Company’s

half year report and Annual Report and Accounts

– Ensuring compliance with applicable accounting standards,

monitoring developments in accounting regulations which

affect the Group and reviewing the appropriateness of

accounting policies and practices currently in place

– Reviewing the effectiveness of the internal and external auditors,

their independence and objectivity and terms and scope of

engagement, and recommending their re-appointment

– Overseeing matters relating to tax, including the impact of tax

rates on the financial statements, the position on EU state aid

and approval of the Company’s tax strategy

– Litigation and compliance reports for both the full and half year

– Considering the material legal risks impacting the Company

and the associated provisioning for both the full and half year

– Receiving updates on the Code of Business Conduct and

Ethics, and the associated training and whistleblowing policies

– Technical updates on the Annual Report and Accounts key

developments, 2021 year end report environment, corporate

governance matters and future developments

– Reviewing the Group’s risk management activities undertaken

by each business area, and at Group level to identify and

assess the Group’s principal risks

– Monitoring and assessing the Group’s insurance arrangements

– Selection and appointment of new lead auditor

– FRC correspondence and oversight of the Company’s

response to the BEIS ‘Restoring trust in audit and corporate

governance’ consultation

– Preparation, and reviewing progress, for TCFD disclosure

requirements

– Identifying, assessing and mitigating climate related risks

Committee effectiveness

The Committee’s performance andeffectiveness were reviewed

inthe year as part of the Board’s effectiveness review conducted

by Manchester Square Partners. Further details can be found

onpages 90-91.

External auditors

Deloitte have served as external auditors for six years. The Committee

engages with Deloitte on a regular basis to ensure this area of

oversight is appropriately maintained. The Committee periodically

meets privately with the lead audit partner and senior members

ofthe audit team to discuss their work and findings.

Audit of the 2021 Annual Report

At the end of 2021, Deloitte presented their audit plan for the

yearahead, which the Committee considered and then approved.

Deloitte highlighted the key areas of risk, which were primarily

identified as areas of judgement and complexity and were

consistent with those areas identified by the Committee.

As part of the audit process, Deloitte prepared a detailed report

oftheir audit findings, which was reviewed and discussed by

theCommittee. A similar process is undertaken for the half

yearresults.

Audit effectiveness

To support the Committee in evaluating the effectiveness of the

external auditors, a questionnaire based evaluation is circulated

tointernal stakeholders who have had the most interaction with

the external auditors during the audit process. The data is collated

into a score card which is used to assess the strengths and

weaknesses of the external auditors.

Management and the external auditors then address any areas

ofweakness in their regular review meetings, and the lead audit

partner from Deloitte updates the Committee on how areas of

weakness are being addressed.

The Committee also monitors audit effectiveness by reviewing

theAudit Quality Inspection reports published by the FRC.

The Committee will formally assess Deloitte’s performance in

relation to the 2021 audit following its completion. It is intended

that a resolution to re-appoint Deloitte as the external auditor will

be proposed at the 2022 AGM.

Audit independence

The Committee considers the external auditors’ objectivity

andindependence at least twice a year. It receives reports from

Deloitte on its internal quality controls and independence rules

and considers carefully the extent of the non-audit services

provided by Deloitte.

The Committee is of the view that Deloitte was objective and

independent throughout the 2021 audit process, notwithstanding

the level of non-audit services provided.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Corporate governance

Audit Committee report continued

Auditor rotation, tendering and competition

and Markets Authority order – statement

ofcompliance

The Committee carried out an audit tender process in 2015,

resulting in the appointment of Deloitte as external auditors in

April2016. Deloitte’s re-appointment in 2021 was approved by

shareholders atthe Company’s AGM in May 2021. Under the

Companies Act 2006, the lead audit partner must be mandatorily

replaced after five years to ensure auditor independence.

The external auditors, as a whole, can only be appointed for

amaximum term of ten years before a competitive tender is

required tobe undertaken.

Key judgements How the Committee has addressed these matters

Going concern

Given the continuing significant uncertainties resulting from the impact of COVID-19 on the economic

environment in which the Group operates, and the material uncertainty around going concern reported

at the half year, the Committee has placed a particular focus on the appropriateness of adopting the

going concern basis in preparing the consolidated financial statements for the 12 months ended

31 December 2021. To support the Committee’s assessment, management produced three models

over a future period of three years from the date of these accounts – a base case, a downside case

andareverse stress case with cashflows for each demonstrating the position of the Company

regarding its two financial covenants – net debt/EBITDA and interest cover at each measurement

period for the 12 months following the date of signing of these accounts. Having agreed covenant

relaxations with our lenders in March and September 2021, the revised provision in our banking

arrangements is for the net debt/EBITDA covenant to step down from 3.75x at present to 3.25x

inJune2022. Under both the base and downside cases, the Group is expected to remain within its

financial covenants throughout the going concern period and the conditions necessary for the reverse

stress case to be applicable were deemed sufficiently remote. As such, the Committee concluded

itwas appropriate for the Group to adopt the going concern basis for these accounts.

Impairment testing

ofgoodwill in

relation tothe

TalcCGU

Critical accounting estimates arise in determining the value in use for the goodwill balances

tested,which require assessments of the duration over which reliable business plans can be made,

achievability of these plans (and therefore future cash flows), growth rates beyond the period covered

by the business plans and appropriateness of the discount rates applied to future cash flows. A report

from management was discussed setting out the basis for the assumptions and confirmation that the

cash flows used were derived from the 2022 three year plan (which in their role as members of the

Board, Committee members had previously reviewed and approved). The Committee has reviewed the

robustness of the impairment model, challenged the appropriateness of the key assumptions used to

calculate value in use including forecast sales volumes, selling prices, growth rates used to extrapolate

beyond the forecast period and the discount rates applied to the resulting cash flows. The Committee

also considered the continuing market challenges being faced by the business, especially in the

automotive sector and increasing distribution and supply chain costs, and the continuing risk these

present to achievement of the business plans. After considering these items, and also the impairment

of $33.4m made to goodwill relating to the Talc cash generating unit (CGU) in 2020, theCommittee

concluded a further impairment of $53.1m was necessary at 31 December 2021.

Revenue

recognition

The main area of judgement continues to be in relation to recognition of revenue from shipments

bysea. The Committee satisfied itself that the Group had appropriately recognised revenues in

accordance with their contractual obligations during the period, paying particular attention to period

end cut-off.

The year ended 31 December 2021 was the fifth year for the lead

audit partner Christopher Powell. In preparation for the orderly

transition of lead audit partner, two experienced candidates were

interviewed by management, a process which was overseen by the

Chair of the Committee. The transition of lead audit partner was

accelerated as a result of Christopher Powell not being available to

complete his fifth year and Lee Welham succeeded Christopher

Powell as the new lead audit partner, effective from January 2022.

The Committee confirms that the Company is compliant with the

provisions of The Statutory Audit Services for Large Companies

market investigation (mandatory use of Competitive Tender

processes and Audit Committee Responsibilities) Order 2014,

forthe year ended 31 December 2021.

98 Annual Report and Accounts 2021 Elementis plc

External audit tendering timeline

– 2016: Deloitte were appointed as external auditors

– 2021: Mandatory appointment of new audit partner

– 2025: Full competitive tender to be undertaken

– 2026: Re-appointment, or appointment of new, external auditor

Non-audit services

The Group has an agreed policy with regard to the provision

ofaudit and non-audit services by the external auditor, which

hasoperated throughout 2021 and is available on the

Company’swebsite.

Under the policy, the CFO may approve individual engagements

where the fee is up to 15% of the Group’s audit fee for the year,

provided that the non-audit fees in the year do not exceed 50%

ofthat Group audit fee. Decisions above these thresholds must

bereferred to the Committee for determination.

2020 2021

Audit fees ($m) 2.2* 2.2

Assurance related services ($m) 0.1 0.2

Non-audit fees ($m) 0.1 -

Ratio of non-audit fees to audit fees (%) 4.5% 0%

Total fees ($m) 2.4 2.4

* Includes $0.3m of extra fees relating to the 2019 Group audit

Internal controls and risk, and risk management

The Committee’s role is to review the effectiveness of the internal

control, compliance and risk management systems which it carries

out in support of the Board’s formal review of significant risks and

material controls, as summarised in the Risk management report

on pages 64-67.

PwC provide an outsourced internal audit function. The Committee

considers that the value of internal audit is enhanced by having

athird party perform this function, to support the independent

challenge ofmanagement and give greater access to expertise

andresources than an internal function couldprovide.

The internal audit plan is based on a review of the Group’s key

riskswhich are considered high risk or have not been subject

toarecent audit.

The 2021 internal audit plan was discussed and agreed between

management and PwC ahead of it being considered and

subsequently approved by the Committee. Management review

theschedule with PwC on a quarterly basis and adapt the

schedule during the year to incorporate any new or increased

riskswhich materialise.

The outcomes of these reports are provided to the Committee,

alongside any management actions.

Following an evaluation of the services provided by PwC in

respect of the internal audit, the Committee confirms that both

the process for determining the internal audit programme, and

theprogramme itself, are appropriate and effective.

Management have committed to fully addressing control findings

raised by our auditors at the prior period end through their audit

response plan. The Committee was consulted on the initial plan and

has received regular updates from management on implementation

progress throughout the year. The Group has invested in capability

across both Finance and IT, putting in place new controller roles

inregions as well as improving modelling capability and enhancing

information technology general controls. It is recognised that

further improvements are required to address the remaining control

findings in relation to the goodwill impairment models and issues

relating to user access and segregation of duties within specific

ITsystems and the Committee will continue to oversee actions

taken to remediate the remaining control observations. Set out

below is a summary of the key features of the Group’s internal

controls and risk management system.

Control environment

The Group has policies and procedures that set out the

responsibilities of business and site management, including

authority levels, reporting disciplines and responsibility for

riskmanagement and internal controls. In addition, annual

compliance statements oninternal controls are certified

byeachoperating segment.

Risk identification and review

A formal risk review process exists at Board and ELT levels for

theidentification, evaluation, mitigation and ongoing monitoring

of risks, including emerging risks. Further details can be found

onpages 68-72.

Internal audit programme

An internal audit programme is proposed by PwC in consultation

withthe CFO and approved by the Committee each year, setting

outa programme of audits over the course of the next 12 months.

The programme covers the monitoring of the effectiveness

ofinternal controls and the design of processes to test the

effectiveness of controls. As well as conducting audits of operating

facilities, sales offices and tolling sites on a two to three year

rotational basis, the internal audit programme includes reviews

ofGroup functions and processes.

During 2021, the following audits were undertaken (with two other

audits being deferred until 2022 due to the impact of COVID-19):

– IT general controls review

– Tax governance review

– Financial close and reporting review

– Cyber security IdAM review

– Castle Hayne site

– Asia – Shanghai/Anji sites

Internal auditor effectiveness

To support the Committee in evaluating the effectiveness of the

internal auditor programme, a questionnaire based evaluation is

completed by employees who had had the most interaction with

PwC during the year. A scorecard is reviewed by the Committee

toassess the strengths and weaknesses of the internal auditors.

The effectiveness of the internal audit function was confirmed and

agreed by the Committee.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

Corporate governance

Audit Committee report continued

Controls assurance

The controls assurance framework at Elementis is as follows:

– Board leadership supported by an open and transparent

culture of ‘no surprises’, good governance and compliance.

This means knowing and understanding the businesses, and

quality interactions between the Board and the Executive

Leadership team (including a regular programme of

presentations and reports tothe Board, as well as operational

site visits)

– Internal and external audit programmes, regular litigation and

compliance reviews with the Group General Counsel and Chief

Compliance Officer

– A programme of compliance audits, and regulatory

inspections, environmental reviews and property surveys by

external specialists

– Code of Business Conduct and Ethics, on which all employees

are given training and are required to self-certify compliance

with, supplemented by an online compliance training

programme, an anti-bribery and corruption policy, which

contractors are also required to sign up to, whistleblowing

arrangements and an anti-retaliation policy

Whistleblowing

The Group’s whistleblowing facility is accessible on a 24/7

basis,365 days of the year and provides arrangements for an

independent service provider to receive, in confidence, reports of

breaches of any legal or Company policy or standards, including

those related to accounting, auditing, risk, internal control and

related matters.

Details of how to access this service are referenced in the Code of

Conduct; posters are available at each site and via the compliance

training portal. The Committee has oversight of reports of this

nature. During 2021, there were 4 reports, all of which were duly

investigated and closed during the year.

BEIS consultation - Restoring trust in audit

andcorporate governance

During 2021, with the support and oversight of the Committee

andthe Board, the Company submitted a comprehensive

response to the BEIS consultation. The consultation set out a

number of proposals relating to how companies should report

ontheir governance and finances, how reports should be audited,

how the audit and the audit market should change and oversight

by a new regulator. It is acknowledged that the outcome of the

consultation is yet to be published at the date of the approval

ofthe 2021 Annual Report and Accounts. As part of the internal

audit plan for 2022, the Committee will have oversight of

associated readiness activity, implementation timelines and

willallocate appropriate resources to continue the development

ofour framework of controls in line with guidance.

FRC Thematic Review of IAS 37 Provisions,

Contingent Liabilities and Contingent Assets

The FRC engaged with the Company during the year to advise that

the Company’s Annual Report and Accounts to 31 December 2020

would be included in the FRC’s sample for the thematic review of

companies’ disclosures relating to provisions, contingent liabilities

and contingent assets under IAS 37. The FRC sought further

information about the Company’s self-insurance provision.

It wasconcluded that the Company had provided satisfactory

explanations. The FRC will publish the associated report on

25 March 2022. For further information, please refer to pages

147and 182 notes in the financial statements.

Fair, balanced and understandable

The Committee adopted a similar approach as in previous

yearstoensure that the Annual Report is fair, balanced and

understandable. The process was as follows:

– An internal Annual Report team (ART) was set up to manage

the process. The ART consisted of members drawn from

Group Finance, Company Secretariat, and Investor Relations

teams. The ART was responsible for regularly reviewing work

and ensuring balanced reporting with appropriate links

between key messages and sections of the Annual Report

– The Committee Chair held meetings with the audit partner,

and the Committee held meetings with the external auditor

without management being present

– An audit clearance meeting was held with the Committee

Chair, CFO and members of the Finance team alongside the

audit partner and audit team members

– The Committee received updates from management on the

Annual Report progress and audit throughout the process as

well as from the Company’s brokers and other advisers

– The Committee, Chair and Executive Directors reviewed the

Annual Report in its final stages

Following this process, the Committee and then the Board were

able to confirm that the Annual Report, taken as a whole, is fair,

balanced and understandable, and provides the necessary

information for shareholders to assess the Group’s position,

performance, business model and strategy.

Anne Hyland

Chair, Audit Committee

100 Annual Report and Accounts 2021 Elementis plc

Directors’ Remuneration report

Corporate governance

Directors’ Remuneration report

The Directors’ Remuneration Report is set out

in the following parts:

1. This Annual Statement from the Chair of

the Remuneration Committee summarising

how our Remuneration Policy has been implemented

andthekey decisions taken by the Committee

2. At a Glance section providing an overview of how we

implemented the Remuneration Policy during the year

under review

3. The Directors’ Remuneration Policy for which shareholder

approval isbeing sought in a binding vote at the AGM to be

held on26 April2022

4. The Annual Report on Remuneration which provides full

detail on how we paid Directors during 2021 and how we

propose to implement the Policy in 2022

The Directors’ Remuneration Policy and the Directors’ Remuneration

Report (excluding the Directors’ Remuneration Policy) will be

presented to shareholders for approval atthe AGM on 26 April

2022and I hope you will vote in support of the resolutions.

Dear Shareholders,

As Chair of the Remuneration Committee

(the ‘Committee’), I am pleased to present

the Directors’ Remuneration Report for the

year ended31December2021. This report

should be read in conjunction with the separate

section on compliance under the UK Corporate

Governance Code on page 80.

Index page

Annual Statement of the Chair of the

Remuneration Committee 101

Remuneration at a glance 104

Directors’ Remuneration Policy

Policy report 108

Policy table 108-112

Share ownership guidelines 112

Recruitment policy 115

Service contracts 116

Payment for loss of office 116

Treatment of incentive plans 116

Non-Executive Directors – terms of appointment 117

Shareholder engagement 117

Annual Report on Remuneration

Remuneration payable to Directors for 2021 118

Annual bonus for performance in 2021 119-120

Directors’ share based awards 121

Directors’ scheme interests 122

Directors’ share interests 123

Payments to past directors for loss of office 124

Total shareholder return 124

CEO to all employee pay ratio 124

Relative importance of spend on pay 125

Percentage change in remuneration of the Directors 125

Statement of shareholder voting 126

Other information about the Committee’s membership

and operation 126

Terms of reference 126

Activities during the year 127

Steve Good

Chair, Remuneration Committee

Attendance at Remuneration

Committeemeetings

Steve Good (Chair) 4/4

Dorothee Deuring* 3/4

John O’Higgins 4/4

Christine Soden 4/4

* Dorothee Deuring was unable to attend the July 2021 meeting as a result of a

rescheduling conflict

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

101

Corporate governance

Directors’ Remuneration report continued

Remuneration Policy

As a global specialty chemicals company, Elementis offers

performance-driven additives that help create innovative

formulations for consumer and industrial applications. We have

market leading positions in high performance ingredients in the

Personal Care, Coatings and Talc markets and are the leading

manufacturer of Chromium in North America. We have a global

footprint, with the majority of our manufacturing sites based

intheUS and a talented leadership team located across the

US,theUK, and the EU. Our strategy is to deliver long term

sustainable shareholder value through innovation-led growth and

theexecution of efficiency savings. We continue to deliver solid

progress against this strategy, improving both our margin and

cash conversion, enabling the Company to reduce its leverage.

With regard to our Remuneration Policy, it has been purposefully

designed to support our strategy detailed above. Our overall

policy is set with reference to UK benchmarks, with flexibility

retained to pay above UK norms where executives are recruited

from overseas. Our pay model is UK-centric and includes base

salary, pension and benefits, annual bonus, and a performance

share plan (the same policy cascades below Executive Director

level but includes restricted stock as well as performance shares

inrecognition of local market practice in the geographic locations

in which we operate).

Remuneration is weighted towards long term variable pay which

supports the long term nature of the investment decisions we

make.Our performance metrics are fully aligned with strategy

assetout above.

At the 2021 AGM we received shareholder approval to extend the

life of our 2018 Directors’ Remuneration Policy for a further year.

This followed the Remuneration Committee’s decision in 2019 to

defer our triennial policy review process as a result of the short

term uncertainty created by COVID-19. We have now undertaken

a full policy review and will be proposing our refined policy to

shareholders at our 2022 AGM.

In summary, the review concluded that our current policy is

working effectively and is generally aligned with institutional

investors’ ‘best practice’ expectations. As a result, we are not

proposing material changes to the current arrangements. The

changes we are proposing are minor amendments updating the

policy to mirror current market and best practice developments.

The main changes are as follows:

– Long term incentives: The proposed policy for the threshold

levelof vesting has been set such that no more than 25%

ofafuture award may vest for achieving the threshold

performance target. Whilst this level of vesting is not

anticipated being applied to financial targets set for future

awards (e.g. EPS and cash conversion targets where 0%

vestsat the threshold performance target), it is anticipated

that25% of any portion of an award set against relative

totalshareholder return targets would vest at the threshold

performance target, mirroring standard market practice.

Thiswould apply to long-term incentives awards granted

from2022 onwards.

– Share ownership guidelines: From 2022, executives will

beexpected to hold shares equal to the value of the lower

oftheactual shareholding at cessation of employment and

the currentguideline (200% of salary).

Investors were consulted on this approach and were supportive.

Itis also noted that the 2021 Remuneration Policy was updated

toreflect the phased reduction to incumbent Executive Director

pension levels to align with the typical rate of pension provision

provided to the wider UK workforce (with alignment achieved from

1 December 2022) and the alignment of the pension policy for

new Executive Directors with that in force for new joiners to the

UK workforce. This update is also incorporated into the 2022

Remuneration Policy.

Remuneration in 2021

As detailed in the Strategic report, 2021 was a year of strong

performance and progress against our Innovation, Growth and

Efficiency strategy. We delivered double digit revenue growth

andan adjusted operating profit of $107m, which was above

ourinternal planning and ahead of external market expectations

for the full financial year. Our performance reflected a combination

of agile supply chain management, self-help actions and recovery

in demand inanumber of our key businesses. We also launched

over 20 new products, won more than $35m of new business

anddelivered $10m of in year cost savings. Further information

onin year performance can be found on page 120.

Annual bonus

As a result of the above, following the Committee undertaking aformal

assessment of performance against the targets, bonuseswere

payable at 93% of maximum fortheExecutive Directors.

Further details of the targets set for 2021 and the actual

performance achieved are disclosed on page 120.

Long term incentive plan (LTIP)

The 2021 LTIP awards were granted on 6 April 2021 based on

normal award levels of 200% of salary for the Chief Executive

and175% of salary for the Chief Financial Officer.

The metrics were equally weighted on EPS, TSR and cash

conversion. The vesting of the award is also subject to a return

oncapital employed underpin which requires the Committee to

consider whether the return generated is in line with the Board’s

expectations and, if not, to reduce the vesting to a more appropriate

level. The Committee also retains discretion to reduce the number

of shares on vesting should it be considered appropriate,

including in the event of a perceived windfall gain.

Full details of the targets and the awards are set out on page 121.

Tothe extent these awards vest at the end of the three year

performance period, shares will be required to be held for

afurther two years.

The 2019 LTIP Awards that were subject to EPS growth

andTSRperformance targets measured over the three years

to31 December 2021 will not vest due to the required levels

ofthreshold performance not being achieved. Further details

areincludedonpage 105.

The Committee believes that the overall incentive outturns

andapproach to target setting for 2021 (as detailed above)

wereappropriate based on the Company’s performance

overthewholeperformance period and demonstrates that the

Committee has, and willcontinue to, set performance targets

which it considers tobemeaningful and appropriately stretching.

As a result, theCommittee is comfortable that its general

approach toremuneration and theoverall policy framework

areworking asintended.

102 Annual Report and Accounts 2021 Elementis plc

With regard to use of Committee discretion during the year, in

March 2021, the Committee considered the performance targets

relating to 2020 performance and agreed with the Executive

Directors’ recommendation that no bonuses be payable in 2021

for 2020 performance, despite robust performance in year.

Remuneration in 2022

The application of the proposed policy for 2022 is largely in line

with 2021 as summarised below:

Salary review: In line with the workforce in the UK and US, the

Executive Directors’ base salary increases will be 3% for 2022.

Pension reductions: In line with the previously communicated

glidepath detailed in the 2019 Directors’ Remuneration report,

pension contributions for incumbent Executive Directors will

continue to be reduced from 22.5% of salary to 21% of salary

on1 December 2022, which will bring incumbent Directors in

linewith the typical funding cost of pension benefits for UK

employees as determined in 2019. Since there has been no

material change to the funding cost, the Executive Directors’

glidepath will result in their pension benefit (as a percentage

ofsalary) being aligned with the typical pension provided to

themajority of the UK workforce.

2022 annual bonus: There will be no change to the quantum of

theExecutive Director bonus opportunity and as such the CEO

willhave the opportunity to earn up to 150% of salary and the

CFO up to 125% of salary.

As for 2021, the bonus will be based 70% against a challenging

range of financial targets (50% on adjusted Group profit before tax

and 20% on average trade working capital to sales ratio (AWC) on

total operations), with the remaining 30% based on non-financial

strategic objectives which are specific and measurable objectives

that are related to the Company’s strategic priorities. Within the

non-financial targets we are making a change for 2022 in that we

are raising the profile on sustainability to reflect our Group-wide

focus. Accordingly, half of the non-financial targets will relate

tosustainability including targets relating to Health & safety,

Diversity, equity and inclusion and environmental. The balance

ofthe non-financial targets will continue to relate to our strategic

priorities of Innovation, Growth, and Efficiency.

Summary details of our approach to target setting are detailed

onpage 107 and full details of the financial target ranges and

ourperformance against them will be disclosed on a retrospective

basis in next year’s report. The Committee has discretion to

modify the overall amount of bonus payable to ensure it is

appropriate. 50% of any bonus earned is deferred in shares

fortwo years.

2022 LTIP Awards: Awards are expected to be granted at 200%

ofsalary for the Chief Executive and 175% of salary for the Chief

Financial Officer.

The primary performance targets will be as per the 2021 awards

with 33% based on EPS, 33% based on cash conversion and 33%

based on TSR performance conditions.

– The EPS targets will be set based on the level of EPS achieved

in 2024 with vesting to take place from 13.5 cents to 17.5 cents

for threshold to maximum vesting, which runs from 0% to 100%

on a straight line basis. The Committee considers the EPS

target to be appropriately stretching in light of the progress

made with our Company’s strategy after having had regard to

current internal planning and external broker forecasts for our

future performance in light of current market conditions.

– The cash conversion targets will again be set based on

arange of 85% to 95% which aligns with the Company’s

publicly stated medium term target. Threshold to maximum

vesting runs from 0% to 100% on a straight line basis.

– TSR will continue to be assessed against the constituents

ofthe FTSE All Share index (excluding investment trusts).

Threshold vesting starting at 25% for median performance

(increased from 3.85% under the 2022 Policy in line with

standard market practice), increasing on a graduated basis

with100% vesting for achieving stretch targets, which for

TSRwill require at least upper quartile performance.

The 2022 LTIP awards will also be subject to a return on capital

employed underpin. This will require the Committee to consider

thevesting result determined based on the application of the EPS,

TSR and operating cash conversion performance conditions in

light of the return on capital employed achieved during the three

year period ending 31 December 2024 relative to the Board’s

internal targets and planning over the period. If the Committee

does not consider the vesting result appropriate in light of the

return on capital employed achieved, the underpin enables

vesting to be reduced to a more appropriate level. The general

discretion the Committee retains will also require the Committee

to consider on vesting if it believes there to have been a windfall

gain and, ifso,reduce the vesting level to a level considered

reflective ofunderlying financial performance.

Context of Directors’ pay within the Company

Christine Soden is the Designated Non-Executive Director (DNED)

for workforce engagement. During the year we held employee

focus groups in the US, China, Finland and Germany to gather

employee feedback on a range of topics including pay and benefits.

This followed an analysis of our employee engagement survey

results and resulted in a communication and education programme

started in 2021 and running throughout 2022. Wecontinue to

monitor employee engagement relative to compensation through

our employee survey. This feedback wasconsidered by theBoard,

which resulted in actions to ensure elements of compensation

and benefits are well understood at a local level.

The Group is not required to provide disclosure of the CEO

toall-employee pay ratio given the Group has less than 250

employees in the UK. However, given the external focus on pay

ratios, the Committee has included full pay ratio disclosure on page

124 and is comfortable that the ratio is in line with the Company’s

pay policies and in line with current FTSE market practice.

The Group is also not required to report under the gender pay

gapregulations. Despite this, the Group reviews gender pay on a

biennial basis. The last gender pay review was completed towards

the end of 2020 and a further review will take place towards the

endof 2022. CEO pay ratio and gender pay are taken into account

when there is a full review of the Executive Director and wider

Remuneration Policy.

Concluding remarks

The Committee believes that the Policy and our approach to

implementation in both 2021 and 2022 are in the best interests

ofthe Company and we hope that you will support the actions the

Committee has taken by voting in favour at the 2022 AGM. If you

have any concerns, please feel free to contact me via the Group

Company Secretary at company.secretariat@elementis.com.

Steve Good

Chair, Remuneration Committee

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

103

Corporate governance

Directors’ Remuneration report continued

Implementation of Remuneration Policy for 2021

The section below summarises how the Policy was implemented in the financial year ended 31 December 2021. Further details are

provided on pages 114 to 123.

Key Policy features Performance assessment How we implemented in 2021

Salary

– Increases normally guided by the general increase

forthe local workforce and/or broader workforce

asawhole

Not applicable

Paul Waterman Ralph Hewins

2021 salary £679,463* £369,482

* Equivalent to $936,096

In line with the average increases awarded to

theUS and UK salaried workforce, the salaries

ofthe CEO and CFO were increased by 2%. These

changes were effective from 1 January2021.

Our measures

Annual bonus

Adjusted Group profit before tax:

50% weighting

Adjusted average trade working capital

tosalesratio (AWC):

20% weighting

Non-financial objectives (aligned

withstrategicimplementation,

safetyandenvironment andpeople:)

15% weighting – Sustainability targets

15% weighting – Strategic targets

2021 LTIP

Earnings per share (EPS):

33% weighting

Relative Total Shareholder Return (TSR):

33% weighting

Cash conversion:

33% weighting

ROCE underpin

How our measures link to strategy

Strategic priorities

Performance metrics Innovation Growth Efficiency

Bonus Financial: (70%)

Adjusted Group profit before tax ✓ ✓ ✓

Average trade working capital to sales ratio ✓ ✓

Non-financial: (30%)

Sustainability targets ✓ ✓ ✓

Innovation, Growth and Efficiency ✓ ✓ ✓

LTIP EPS (33%) ✓ ✓ ✓

Relative TSR versus FTSE All Share (33%) ✓ ✓ ✓

Cash conversion (33%) ✓

Return on operating capital employed (underpin) ✓ ✓ ✓

At a glance

104 Annual Report and Accounts 2021 Elementis plc

Key Policy features Performance assessment How we implemented in 2021

Pension/benefits/all-employee share schemes

– Pension: In line with the phased pension contribution

detailed in the 2021 Remuneration Policy, the CEO

and CFO pension contribution reduced in year

from24% to 22.5% of salary, effective from

1 December 2021.

– Benefits: Directors receive market competitive

benefits and may participate in all-employee

shareschemes

Not applicable

Paul Waterman Ralph Hewins

Pension £164,686* £88,214

* Equivalent to $226,888

Implementation in line with the Policy.

Executive Directors’ pensions have been and will

be reduced in phases to be in aligned with the

pension provision of the median employee:

– From 1 January 2020: 25%

– From 1 December 2020: 24%

– From 1 December 2021: 22.5%

– From 1 December 2022: 21%

Annual bonus

– Performance related scheme which

delivers value for achievement against

annual targets

– Committee may adjust outturn where

formulaic assessment is inconsistent

with Company’s overall performance

– 50% of bonus earned deferred into

shares for two years

– Recovery and withholding

provisionsapply

Paul Waterman Ralph Hewins

Opportunity 150% of salary 125% of salary

PBT $77m vs target of $63.5m

Payout

(50%ofbonus) 100% of PBT maximum

AWC 20% vs target of 23.8%

Payout

(20%ofbonus) 100% of AWC maximum

Non-financial See page 120

Payout

(30%ofbonus)

77% of

Non-financial

maximum

77% of

Non-financial

maximum

Total

93% of

maximum

93% of

maximum

Further information can be found on pages 119-120.

As detailed in the Annual

Statement on page 101, 2021

wasayear of strong performance

and progress against our

Innovation, Growth and Efficiency

strategy. We delivered double digit

revenue growth and an adjusted

operating profit of $107m which

was above our internal planning

and ahead of external market

expectations for the full financial

year. Our performance reflected

acombination of agile supply chain

management, self-help actions and

recovery in demand inanumber of

our key businesses.

Long term incentive plan

– Performance measures based on

financial and/or relative TSR metrics

andmeasured over three years

– Committee may adjust outturn where

formulaic assessment is inconsistent

with Company’s overall performance

– Holding period applies for two years

following vesting

– Recovery and withholding

provisionsapply

2019 Award

Average EPS

growth

TSR vs FTSE All

Weighting 50% 50%

Threshold target 3% p.a. Median

Maximum target 10% p.a. Upper quartile

Actual -13% p.a. 17th percentile

Vesting 0%/50% 0%/50%

Further information can be found on pages 121-122 .

Since the performance targets

were not met in relation to the

2019 LTIP award, no vesting will

take place.

Share ownership guidelines

– Build up and maintain a shareholding

equal to 200% of salary

Paul Waterman Ralph Hewins

Guideline 200% of salary 200% of salary

Level

On track

154%ofsalary

On track

66%ofsalary

¹ For the purposes of the guideline, an estimate has been

made in relation to the after tax number of shares in

relation to vested/unexercised share awards.

Both the CEO and CFO increased

their holdings during the year.

Further information can be found

on page 123.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

105

Corporate governance

Directors’ Remuneration report continued

Implementation of Remuneration Policy for 2022

As a UK Listed business, our primary reference points for both quantum and remuneration structure for our Executive Directors are UK

benchmarks. However, as noted in our policy, we retain flexibility as to where we position individuals against UK benchmarks to take into

account the locations in which they work and also the relevant market for talent. With our CEO being a US Citizen, based in the US,

splitting his time between the UK and US, his remuneration quantum is set to be aligned with UK market practice both in terms of

structure and quantum. However, recognizing that remuneration quantum is above UK levels in US businesses of a similar size and

complexity, his total remuneration package is positioned towards upper quartile versus UK FTSE 250 benchmarks. For completeness,

this market positioning is considered appropriate on the basis that versus US companies of a comparable size and complexity his

remuneration quantum falls between lower quartile and median.

The section below summarises how the Committee intends to implement the Policy for the forthcoming financial year ending

31 December2022.

Key Policy features 2022 implementation

Salary

– Level based on the scope and responsibilities of the role

– Increases normally guided by the general increase for the

local workforce and/or broader workforce as a whole

– The Committee reviewed salaries and decided to award Paul

Waterman and Ralph Hewins each a salary increase as shown

inthe table below, which is consistent with the average

increase in year for the respective US and UK salaried

workforce.

Paul Waterman Ralph Hewins

Salary as at 1 January 21 $936,096 £369,482

Salary as at 1 January 22 $964,179 £380,566

2022 Increase (+3%) (+3%)

Pension/benefits/all-employee share schemes

– Pension: CEO participates in US specific arrangements

andreceives a salary supplement and the CFO receives

asalarysupplement

– Any new Director appointment will have pension set at 8%

ofsalary in line with that offered to new joiners across the

wider workforce

– Benefits: Directors receive market competitive benefits and

mayparticipate in all-employee share schemes

– Implementation in line with the Policy

– Pension rates for incumbent Directors are on a glidepath to be

aligned with the typical individual pension funding rates

prevalent at the time of the Directors’ appointment (see pages

123-124 for further detail)

Annual bonus

– Policy maximum of 150% of salary for CEO and 125% of

salary for CFO

– Performance related scheme which delivers value for

achievement against annual targets

– Committee may adjust outturn where formulaic assessment

isinconsistent with Company’s overall performance

– 50% of bonus earned deferred into shares for two years

– Recovery and withholding provisions apply

Link to KPIs

– Adjusted Group PBT

– AWC

– Individual objectives linked to sustainability and

strategicpriorities

Paul Waterman Ralph Hewins

Opportunity 150% of salary 125% of salary

Performance metrics:

– Adjusted Group PBT: 50%

– Average trade working capital to sales ratio: 20%

– Non-financial strategic priorities: 30% of which 15% based

onappropriately structured sustainability priorities with the

remaining 15% set on innovation, growth andefficiency

targets. The targets are fully aligned with the Company’s

current strategy and have been set to be challenging in the

context of the Company’s performance expectations for the

year ahead

– The Committee considers that the bonus targets are

commercially sensitive and therefore plans to disclose

themonly on a retrospective basis in next year’s Directors’

Remuneration report

– The range of targets around budgeted performance levels

toapply in 2022 has been calibrated to take into account

thecurrent external environment and internal planning

106 Annual Report and Accounts 2021 Elementis plc

Key Policy features 2022 implementation

Long term incentive plan

– Policy maximum is 250% of salary

– Awards vest to the extent performance conditions

areachieved

– Performance measures based on financial and/or relative TSR

metrics and measured over three years with a ROCE underpin

– Committee may adjust outturn where formulaic assessment is

inconsistent with Company’s overall performance and/or there

is a perceived windfall gain

– Holding period applies for two years following vesting

– Recovery and withholding provisions apply

– ROCE underpin introduced for the 2019 awards continues

toapply

Link to KPIs

– EPS

– Relative TSR

– Cash conversion

– The choice of targets relates to measuring the Company’s

success in delivering profitable growth and sustainable

shareholder returns

Paul Waterman Ralph Hewins

LTIP Award 200% of salary 175% of salary

Performance metrics:

Weighting

Threshold

target

Threshold

vesting

Maximum

target

FY 2024 EPS 33.3%

13.5 cents

per share 0%

17.5 cents

per share

Cash conversion 33.3% 85% 0% 95%

Relative TSR vs

FTSE all-share

index 33.3% Median 25%

Upper

quartile

– The range of EPS targets is considered to be appropriately

demanding noting (i) that vesting takes place from 0% (as

opposed to the market norm of 25%), and (ii) in line with

institutional investor expectations such that the range

straddlesconsensus growth expectations

– Cash conversion is the three year average operating

cashconversion

Chair and NED fees

– To attract individuals with the relevant skills, knowledge and

experience that the Board considers necessary in order to

maintain an optimal mix that ensures the effectiveness of the

Board as a whole in carrying out its duties and responsibilities

– With the exception of the Chair’s fee given his appointment in

2021, in line with treatment for the UK workforce, fees will

increase by 3% for the upcoming year

2022 2021

2022

Increase

Basic fees

Chairman £198,957 £198,957 (+0%)

Non-Executive Director £53,863 £52,294 (+3%)

Additional fees

Senior Independent Director £9,360 £9,087 (+3%)

Chair of Audit or

Remuneration Committee £9,360 £9,087 (+3%)

Workforce engagement NED £4,680 £4,544 (+3%)

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Strategic report Corporate governance Financial statements Shareholder information

107

Corporate governance

Directors’ Remuneration report continued

Remuneration Policy report

The Company’s existing Remuneration Policy was approved by

shareholders at the Company’s 2021 AGM and took effect from the

date of that meeting. This policy was a rollover of the 2018 Policy with

the Committee considering that a full Policy review should be delayed

until 2021 to allow the business to focus on the challenges arising due

to the COVID-19 pandemic. The Committee has undertaken a full

review of the Policy during 2021 and an updated Policy is therefore

presented to shareholders for approval at the 2022 AGM on 26 April

2022, and if approved this will be the effective date of the Policy.

The Committee determines the Remuneration Policy taking into

account all relevant factors. The Committee receive input from

management and external advisers with respect to the design of the

Policy and consider the context of the relevant stakeholders when

considering their input. The Committee determines the Policy

applicable to the Executive Directors and the Chairman, with the

Policy for Non-Executive Directors agreed by the Board, excluding

the Non-Executive Directors. This also applies when with respect to

the implementation of the Policy so that no individuals are involved in

decisions as to their own remuneration. The Committee concluded

that the Policy continues to support the long term strategy of the

company and as such only minor changes were required.

– Long term incentives: The policy for the threshold level of vesting

has been set such that no more than 25% of a future award may

vest for achieving the threshold performance target. Whilst this

level of vesting is not anticipated being applied to financial targets

set for future awards (e.g. EPS and cash conversion targets where

0% vests at the threshold performance target), it is anticipated

that 25% of any portion of an award set against relative total

shareholder return targets would vest at the threshold

performance target, mirroring standard market practice.

– Share ownership guidelines: From 2022, executives will be

expected to hold shares equal to the value of the lower of the

actual shareholding at cessation of employment and the

current guideline (200% of salary). The post cessation guideline

only applies to shares vesting under incentive plansfrom 2022.

Further summary details of this change are included in the

Remuneration Committee Chair’s Introductory Statement in

thisreport.

The Policy is aligned with the six factors listed in Provision 40 of

the UK Corporate Governance Code:

– Clarity – the Policy is set out as transparently as possible and the

workforce engagement Director retains oversight of employee

communication and education. We proactively consult our

shareholders on any proposed changes to remuneration policy.

– Simplicity – the Remuneration Policy is structured as simply

as possible; however, a degree of complexity is required to

align pay and performance. Performance metrics are chosen

to focus on the key operational, financial and strategic

performance objectives of the business.

– Risk – the Remuneration Policy has been shaped to

discourage inappropriate risk taking, including long term

performance measurement, deferral and shareholding

guidelines which extend into post-employment. The

Committee retains discretion to override formulaic outcomes.

– Predictability – elements of the Policy are subject to caps and

dilution limits. Examples of how remuneration varies

depending on performance is set out in the scenario charts.

– Proportionality – there is a sensible balance between fixed

pay and variable pay, and incentive pay is weighted to

sustainable long term performance.

– Alignment to culture – the Policy is weighted towards

performance related pay which supports a performance-

based culture and the non-financial targets encourage

innovation and optimisation which are also central to the

Elementis culture and is aligned to Company values.

Policy table

The information in the table below sets out the Remuneration Policy for Directors.

Basic salary

Purpose and link to

Company’s strategy

Targeted at a level to attract and retain world class executives who are essential to drive the business

forward and deliver the Company’s strategic goals.

How it operates

inpractice

Annual salary increases that are broadly in line with the local workforce (in percentage of salary terms),

subject to Committee approval.

Increases beyond the average of those granted to the local workforce (in percentage of salary terms) may

be awarded in certain circumstances, such as where there is a material change in responsibility or

experience of the individual, to recognise exceptional performance over a sustained period or a significant

increase in the complexity, size or value of the Company.

Where new joiners or recent promotions have been placed on a below market rate of pay initially, aseries

of increases above those granted to the local workforce (in percentage of salary terms) may begiven over

the following few years subject to individual performance and development inthe role.

Salaries are normally reviewed in December and any changes are effective from 1 January inthefollowing year.

Maximum potential

value

There is no prescribed maximum for salary increases. The Committee will be guided by the general increase

for the local workforce and/or broader workforce as a whole, as well as the circumstances listed above.

108 Annual Report and Accounts 2021 Elementis plc

Benefits

Purpose and link to

Company’s strategy

To aid retention and to remain competitive in the marketplace. Healthcare benefits in order tominimise

business disruption.

Executive Directors may also participate along with other employees in the Group’s HMRC approved SAYE

or other equivalent savings based share schemes to share in the success oftheGroup.

How it operates

inpractice

Life assurance and private medical health insurance are provided.

Provision of either a company car (for business and personal purposes) or a car allowance.

Payments in connection with an international assignment and payments in connection with a relocation,

which would typically be paid for a transitionary period only, tailored to the location ofeach executive. The

benefits may include provision of tax advice where, at the Company’s request, the international location (or

balance of time spent in different locations) is changed.

Participation in all-employee/savings based share option schemes as above.

In addition, benefits in the US, where it is standard, include cover for dental costs, accidental death and

disablement, long term disability and club membership.

Maximum potential

value

SAYE/savings based schemes are subject to individual limits. These are $2,000 per month in the US and up

to the HMRC prescribed limit (£500 per month) in the UK.

Other benefits: the Committee will determine the level of benefit as it considers appropriate, taking into

consideration local market practice.

Pension

Purpose and link to

Company’s strategy

To aid retention and remain competitive in the marketplace.

To provide appropriate retirement benefits commensurate with local market practice, seniority ofthe role

and tenure with the Company.

How it operates

inpractice

Executive Directors are eligible to participate in a Company sponsored pension scheme, a statutory

pension arrangement, receive cash in lieu of a Company pension or a combination ofthese.

Maximum potential

value

For incumbent Executive Directors, pensions will continue to be reduced in phases to be aligned with the

pension provision of the median employee:

– From 1 January 2020: 25%

– From 1 December 2020: 24%

– From 1 December 2021: 22.5%

– From 1 December 2022: 21%

Any new Director appointment will have pension set to be aligned with the average of the appropriate

wider workforce rate (currently 8% of salary).

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Corporate governance

Directors’ Remuneration report continued

Annual bonus scheme

Purpose and link to

Company’s strategy

To incentivise the senior management team to exceed the annual operating plan approved by the

Board at the start of each financial year.

To ensure that a significant proportion of an executive’s total remuneration is based on corporate/

business financial performance that is linked to the Company’s annual operating plan.

Through the part deferral of bonuses into deferred shares this enables incentive pay to help

executives build and maintain meaningful shareholdings and thereby provides a long term focus.

How it operates

inpractice

An annual bonus is based on over performance against selected performance measures which

arelinked to the Company’s key performance indicators, or the achievement of strategic and/or

operational objectives.

Bonus payments are paid following the approval of full year results. Payments are based on salaries

at the time of payment.

Bonus deferral element: 50% of any cash bonus payable is normally awarded in shares and deferred

fortwo years. Dividends accrue on deferred shares (which are normally structured as nil cost options

orconditional share awards) that vest during the vesting period. Deferred shares are forfeitable for

gross misconduct (dismissal for cause).

The Committee may seek recovery and/or withholding of bonuses paid that are later found to

havebeen based on performance that was mis-stated or incorrectly calculated, or where the

amountofany bonus may have been reduced or withheld due to reasons of gross misconduct.

Recovery andwithholding provisions will apply for a period of three years following payment of any

bonus. Detailed provisions are incorporated into the rules of the various schemes which govern

theterms ofa bonus payment and/or the making of any deferred share or conditional award.

Maximum potential value

CEO: 150% of basic salary.

CFO: 125% of basic salary.

A higher annual bonus limit of 200% of basic salary may apply for new recruits.

Framework used to

assessperformance

Performance measures will be mainly financial measures. The Committee reserves the right toselect

other non-financial targets (including the basis of their measurement) as appropriate considering

the Company’s strategic objectives for the year ahead.

The financial element of the bonus may include (but is not limited to) the Company’s key performance

indicators which include:

Profit before tax or other measures of profitability.

Group average trade working capital to sales ratio expressed as a percentage (‘AWC’) or other cash

flow indicators.

For any profit related metric, targets will be set at threshold, plan and stretch levels and the amount

payable for threshold performance is 0% for financial targets rising on a graduated basis through

to100%, becoming payable at the stretch performance level. With regard to non-financial targets,

itis not always practicable to set targets on a sliding scale and so targets may be set based on the

achievement of specific milestones and/or on a graduated scale.

The Committee will consider the bonus outcome each year based on the Company’s performance

against the measures set at the start of the year. If it considers the quantum to be inconsistent with the

Company’s overall performance during the year it can override the result of the performance test.For

the avoidance of doubt, this can be to zero and bonuses may not exceed the maximum levels detailed

above. Any use of such discretion would be detailed in the Annual Report on Remuneration.

The Committee keeps performance metrics under review on an annual basis to ensure they

continue to remain appropriate and has the discretion to introduce new metrics or remove existing

ones and amend their relative weightings. As a result, the performance metrics and weightings may

vary in line with the Company’s evolving strategy during the life of the Policy. The profit related

element of annual bonus shall not be less than 50% of the overall bonus opportunity.

110 Annual Report and Accounts 2021 Elementis plc

Long term incentives

Purpose and link to

Company’s strategy

The LTIP is the sole long term incentive mechanism for Executive Directors and is intended to

alignthe interests of the executives and shareholders in growing the value of the Group over the

long term.

When granting awards under the LTIP the Committee generally takes into consideration the need

tomotivate and retain the Executive Directors and other participants.

How it operates

inpractice

Awards are normally structured as either nil cost options or conditional share awards which are

eligible to be granted annually. Options may be exercisable three years from, and within ten years

of,thedate of award. Share awards normally vest on the third anniversary of the date of award.

A post vesting holding period of two years will normally apply to annual awards.

Recovery and withholding provisions similar to those described in respect of annual bonus

payments but relating to the vesting of LTIP awards will apply to awards.

Dividends may accrue on shares that vest during the vesting period (and during the post vesting

holding period where awards are structured as nil cost options) and may be paid in cash or shares.

Maximum potential value

The maximum award limit is set at 250% of basic salary.

Current practice is as follows:

– CEO: 200% of basic salary

– CFO: 175% of basic salary

Framework used to

assessperformance

Awards are subject to achievement of financial (e.g. EPS and operating cash conversion) and/or

relative TSR performance conditions, measured over a minimum of three financial years beginning

with the financial year in which the award is made. The Committee also retains flexibility to introduce

strategic targets as a performance measure for a minority of an award.

The threshold vesting level may be up to 25% of maximum, increasing to 100% vesting on a

graduated basis for achieving stretch targets.

For the TSR portion of the 2022 Awards, the threshold vesting for achieving median will be 25%

ofmaximum. For the EPS and operating cash conversion performance conditions applying to the

2022 Awards, the threshold vesting level will start from 0%.

In relation to strategic targets, the structure of the target will vary based on the nature of the target

set (i.e. it will not always be practicable to set strategic targets using a graduated scale and so

vesting may take place in full if specific criteria are met in full).

The metrics and their weighting and targets within the LTIP will be reviewed each year.

The Committee will consider the LTIP vesting outcomes for awards based on applying the

performance conditions and, if it considers the level of vesting to be inconsistent with the

Company’s overall performance during the performance period (including its underlying financial

performance), itcan override the result of the performance test. For the avoidance of doubt, this

canbe to zero. Any use of such discretion would be detailed in the Annual Report on Remuneration.

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111

Corporate governance

Directors’ Remuneration report continued

Share ownership guidelines

Purpose and link to

Company’s strategy

To align an executive’s interests with those of shareholders and to encourage executives

toparticipate and share in the long term success of the Group.

How it operates

inpractice

Executive Directors are expected to build up a shareholding in the Company that is equal in value

to200% of their basic annual salaries. The guideline will also apply for two years post cessation

ofemployment such that Executive Directors are expected to hold shares equal to the value of the

lower ofthe actual shareholding at cessation of employment and the current guideline (200% of

salary). The post cessation guideline only applies to shares vesting under incentive plans from 2022.

Shares vesting from share awards, or transferred pursuant to an exercise of any option, granted

under any share incentive or employee share saving scheme may not be sold (other than to meet

atax liability) until the above shareholding level has been met. In exceptional circumstances the

Committee may allow the Director to sell some, or all, shares received from a share incentive scheme

even if the individual has not met the share ownership guidelines, provided they are satisfied that

shareholder interests are adequately aligned.

The Committee monitors compliance with these guidelines and can make changes to them from

time to time.

Non-Executive Chairman and Directors’ fees

Purpose and link to

Company’s strategy

To attract individuals with the relevant skills, knowledge and experience that the Board considers

necessary in order to maintain an optimal mix that ensures the effectiveness of the Board as a whole

in carrying out its duties and responsibilities.

How it operates in

practice

Non-Executive Directors’ fees are determined by the Chairman and the Executive Directors, having

regard to fees paid to Non-Executive Directors in other UK quoted companies and the time

commitment and responsibilities of the role.

In the case of the Chairman, the fee level is determined by the Committee. As well as taking into

consideration the above factors, the Committee sets the fee at an appropriate level necessary to

attract a role holder qualified to effectively lead the board of a company of a similar size and prestige

as Elementis.

Fees are payable in cash and Non-Executive Directors are not eligible to participate in any pension,

bonus or share incentive schemes.

All Non-Executive Directors are reimbursed for travel and related business expenses reasonably

incurred in performing their duties so that they are fully recompensed on a pre-tax basis for

undertaking Company business.

No individual is allowed to vote on his/her own remuneration.

Maximum potential value

Fees will be reviewed annually with changes taking effect from 1 January in the following year.

It is the Company’s policy (other than where there is a step change in the time commitment required

of the Non-Executive Directors) that fees paid to the Chairman and other Non-ExecutiveDirectors

are increased annually in line with the average increase awardedtotheUKsalaried workforce.

112 Annual Report and Accounts 2021 Elementis plc

Link between Policy, strategy and structure

The Remuneration Policy is principally designed to attract,

motivate and retain the Executive Directors and other members

ofthe Executive Leadership team (senior management team) to

execute the Company’s corporate and business strategies in

order to deliver the annual operating plan and sustainable year on

year profitable growth, as well as to generate and preserve value

for shareholders over the longer term, without encouraging

excessive levels of risk taking. The principles and values that

underpin the remuneration strategy are applied on a consistent

basis for all Group employees.

The remuneration structure for Executive Directors is made up

oftwo elements: fixed remuneration (consisting of basic salary,

benefits including, for example, non-contributory health insurance

and life assurance, and pension provision), and variable remuneration

(annual bonus scheme and long term share incentives).

It is Company policy to reward all employees fairly, responsibly

and by reference to local market practices, by providing an

appropriate balance between fixed and variable remuneration.

Choice of performance measures and

approach totargetsetting

The performance metrics that are used for annual bonus, and

longterm incentive plans are drawn from a suite of Company

KPIsmonitored by the Board that are closely linked to the

financialKPIs on pages 28-29.

In the annual bonus scheme, the financial measures currently

used are adjusted Group profit before tax and average working

capital (AWC). Adjusted Group profit before tax is a clear measure

of the Company’s trading performance and AWC encourages the

most efficient use of working capital and ishow earnings are

converted into cash. These metrics are aligned with the

Company’s objectives and strategy.

In addition, non-financial criteria also form part of the targets set

inthebonus scheme and these are based on Company specific

sustainability objectives (e.g. Health and Safety, Diversity, equity

andinclusion and environment) and/or strategic business objectives

(e.g. relating to innovation, growth and efficiency targets).

With regard to long term performance targets, EPS is currently

used since it is aligned with the Company’s strategy of delivering

profitable growth and creating long term shareholder returns.

Cash conversion is also used to encourage efficient working

practices. Use of relative TSR also further aligns shareholders

andexecutives.

Targets for financial metrics are set relative to internal planning

expectations after having regard to general economic conditions,

external market data, current and past performance of the

business and any organic or acquisitive growth plans.

Where appropriate, targets are set based on sliding scales.

Onlymodest rewards are available for delivering performance

atthreshold levels or above, with maximum rewardsrequiring

outperformance of our challenging plans approved at the start

ofeach year.

The Committee keeps the choice of metrics and targets under

review for both the annual and long term incentive plans each year

to ensure they are appropriate in light of the Company’s current

circumstances. The Committee retains discretion to revisethe

choice of metric and weightings within the incentives asdetailed

above. Should the Committee make material changes tothe

application of the Remuneration Policy from year to year the

Committee would give consideration to an appropriate form

ofdialogue with the Company’s major shareholders.

Differences in executive remuneration policy

compared toother employees

The Committee is informed of pay structures across the wider

Groupwhen setting the remuneration policy for Executive

Directors. The Committee considers the general basic salary

increase for the broader Group and, in particular the employees

based in the US, UK and Europe, when determining salary

increases for the Executive Directors.

The same principles and values behind the design of remuneration

for the Executive Directors apply to other members of the

Executive Leadership team and employees throughout the rest of

the Group, with modifications to reflect local market practice and

the level of seniority and ability to influence Group performance.

Overall, the remuneration policy for Executive Directors is more

heavily weighted towards variable pay than for other employees.

This ensures that there is a clear link between the value created

for shareholders andthe remuneration received by the Executive

Directors, given it isthe Executive Directors who are considered to

have the greatest potential to influence shareholder value creation.

The level of variable pay varies by level of employee within the

Group and is informed by the specific responsibilities of each role

and local market practice as appropriate.

In 2018, the Board introduced the ability to grant restricted shares

intothe new LTIP. The majority of the senior executive population

atElementis is based in the US where it is common market

practice togrant restricted shares. It is considered that the ability

togrant restricted shares in tandem with performance related

share awardsenables the Company to compete for the best

talent. Where restrictedshares are used, the award levels are

generally lowerthan if performance shares were granted, since

restricted share awards are more valuable to a recipient given

there is no performance requirement attached to the vesting

ofthe award. Restricted shares will not be granted to

ExecutiveDirectors.

How the views of employees are taken

intoaccount

The Board has established a Designated Non-Executive Director

for workforce engagement (DNED) as a direct response to the UK

Corporate Governance Code enabling the workforce voice in

Board matters. The role of the workforce engagement Director is

to review and monitor employee insight informed by engagement

activities and employee engagement surveys. During the year,

global reward principles were communicated with additional detail

on determination of pay, irrespective of position. The DNED will

engage with the workforce on these principles in 2022 and seek

feedback. Also, in 2022, the DNED will be fully involved in a full

global gender pay review. For more information, see pages 85-86

on engaging with the workforce.

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113

Corporate governance

Directors’ Remuneration report continued

Committee discretion with regard

toincentiveplans

The Committee will operate the annual bonus plan, deferred

sharebonus plan, LTIP and all employee plans according to their

respective rules and in accordance with the Financial Conduct

Authority’s Listing Rules (‘Listing Rules’) and HMRC rules where

relevant. The Committee retains discretion, consistent with

market practice, ina number of regards to the operation and

administration of these plans. These include the following (plan

limits and performance targets restricted to the descriptions

detailed inthepreceding policytable):

– Who participates in the plans

– The timing of grant of award and/or payment

– The size of an award and/or payment

– The determination of vesting

– Dealing with a change of control (e.g. the timing of testing

performance targets) or restructuring

– Determination of a good/bad leaver for incentive plan

purposesbased on the rules of each plan and the appropriate

treatment chosen

– Adjustments required in certain circumstances (e.g. rights

issues, corporate restructuring and special dividends)

– The annual review of performance conditions, including

metricsand weightings, for the annual bonus plan and LTIP

The Committee also retains the ability to adjust the targets and/

orset different measures and alter weightings for the annual

bonusplan and to adjust targets for the LTIP if events occur

(e.g.material divestment of a Group business) which cause it

todetermine that the conditions are no longer appropriate and

theamendment is required so that the conditions achieve their

originalpurpose and are not materially less difficult to satisfy. The

Committee has discretion to override incentive pay outcomes in

the event that payouts are not considered reflective ofoverall

Company performance having applied the performance

conditions for the annual bonus and LTIP.

CEO and CFO rewards scenario analysis

The bar charts below illustrate the potential pay opportunities

forExecutive Directors under three different scenarios for 2022.

The CEO’s remuneration has been converted into pounds sterling

using the average exchange rate for 2021 ($1.3777:£1.00).

– Fixed: comprises fixed pay being the value of salary, benefits

and pension (based on 2021 Company contributions)

– On target: the amount receivable assumes performance

inwhich 50% of annual bonus is payable and 50% of LTIP

awards vest.

– Maximum: the maximum amount receivable should all stretch

targets be met and vesting under both the annual bonus

scheme andLTIP is 100%.

– Maximum with share price growth: in addition, we have

provided an illustration of the maximum outcome assuming

50% shareprice appreciation for the purpose of the

LTIPvalue.

The LTIPs also relate to awards to be made in 2022 rather than any

awards vesting in 2022.

44%

28%

32%

41%

24%

31%

24%

51%

25%

£’00

3,00

2,00

1,00

Fixed On target

Maximum Maximum

(With share

price growth)

£984

£2,209

£3,434

£4,134

000

5,0

Fixed Annual bonus LTIP LTIP value with 50%

share price growth

100%

£’00

1,50

2,00

1,00

100% 46%

30%

31%

41%

23%

29%

25%

51%

24%

Fixed On target

Maximum Maximum

(With share

price growth)

£493

£1,064

£1,634

£1,967

Fixed Annual bonus LTIP LTIP value with 50%

share price growth

114 Annual Report and Accounts 2021 Elementis plc

Recruitment policy

For Executive Director recruitment and/or promotion situations, the Committee will follow the policy outlined below:

Element Policy

Basic salary

Basic salary levels will be set in accordance with the Company’s Remuneration Policy, taking into

account the experience and calibre of the individual (e.g. typically around market rates prevalent

incompanies of comparable size and complexity) or salary levels may be set below this level (e.g.

ifthe individual was promoted to the Board). Where it is appropriate to offer a below market rate

ofpay initially, a series of increases to the desired salary positioning may be given over the following

few years subject to individual performance and development in the role.

Benefits

New Directors may be entitled to benefits such as life assurance, private medical health insurance,

coverfor dental costs, accidental death and disablement, long term disability and provision of

either acompany car (for business and personal purposes) or a car allowance, club membership or

any otherappropriate benefit as the Committee reasonably determines.

Where necessary, the Committee may approve the payment of reasonable relocation expenses

tofacilitate recruitment for a maximum period of 12 months.

Pension

Any new Executive Directors will have their pension level set to be aligned with the appropriate

wider workforce rate (currently 8% of salary).

Annual bonus

The annual bonus would operate as outlined for current Executive Directors but, where necessary

toaid recruitment, the maximum bonus opportunity is 200% of basic salary for the life of this

policy.Bonus will be pro-rated for the proportion of the year served. Depending on the timing and

responsibilities of the appointment, it may be necessary to set different performance measures

andtargets initially.

Long term incentives

Awards under the LTIP will be granted in line with the policy outlined for the current Executive

Directors on an annual basis but, where necessary to aid recruitment, the maximum award is 250%

ofbasic salary for the life of this policy.

An award may be made shortly after an appointment (subject to the Company not being in a

prohibited period). For an internal hire, existing awards would continue over their original vesting

period and remain subject to their terms as at the date of grant. In addition, if the grant of awards

forthat individual precedes his or her appointment as a Board Director for that financial year, the

Committee’s policy would include flexibility to top up awards for that year (subject to the overall

individual salary limit) basedon the executive’s new salary.

Buyout awards

In the case of an external hire, if it is necessary to buy out incentive pay or benefit arrangements

(which would be forfeited on leaving the previous employer), this would be provided for, taking into

account the form (cash or shares), timing and expected value (i.e. likelihood of meeting any existing

performance criteria) of the remuneration being forfeited.

Replacement share awards may be granted using the Company’s LTIP (up to the individual limit)

oroutside of the LTIP if necessary and as permitted under the Listing Rules.

Interim appointments

Where a Director is appointed on an interim basis (e.g. to cover a role until a permanent successor

isappointed), the Company may pay additional remuneration to an individual in line with the policy

forthe role.

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115

Corporate governance

Directors’ Remuneration report continued

Outside board appointments

The Company’s policy is to support executives should they wish

totake on an external board appointment, provided that there

isnoconflict of interest and the role does not interfere with the

executive’s commitment or duties. If an executive does take on

anexternal appointment, they may retain any fees paid and will

berestricted generally to only one such external appointment.

Service contracts

Executive Directors’ service contracts contain a termination

notice period not exceeding 12 months.

Name Date of contract* Notice period

Paul Waterman, CEO 6 November 2015 12 months

Ralph Hewins, CFO 27 June 2016 12 months

* The date of the service contract is not the same as the date of

appointment, which for Paul Waterman was 8 February 2016 and Ralph

Hewins 12 September 2016.

Copies of the Executive Directors’ service contracts are available

for inspection at the Company’s registered office during normal

business hours and will be available for inspection at the AGM.

Policy on payment for loss of office

Termination payments

The maximum amount payable under both the CEO’s and CFO’s

contract is basic salary, benefits and pension for 12 months while

each serves his notice period. For the Executive Directors, the

terms covering termination were agreed at the date their

contracts were made and both are required to mitigate their

lossin the event of loss of office by making efforts to secure

anew position.

The Company may pay compensation in lieu of the notice period

ofbasic salary only, to be paid in monthly instalments (pro-rated

forthe actual notice period). This would apply if the Company

terminates his/her contract for any reason other than for cause,

orif he/she serves notice to terminate his/her contract in

12 months’time.

Payments in lieu of notice to both the CEO and CFO may be

reduced or ceased if either secures a new position. In both cases,

the payments will only be ceased if the salary in a new position is

equal to or more than the salary on termination; if not, the monthly

payments will be reduced by the gross salary earned by the CEO

orCFO in his/her new position each month.

The above summary only addresses contractual rights to

payments in lieu of notice, or during the relevant Director’s notice

period, and may not reflect any settlement or compromise sums

which are separately agreed at the point of termination.

Treatment of incentive plans

Annual bonus plan

If an Executive Director resigns and serves his/her notice period,

the Committee retains discretion to make a pro-rata payment

based on performance. The same applies in certain circumstances

such as if the individual’s employment is terminated on the grounds

of ill health or disability. No bonus is payable for termination

forcause.

In line with the Company’s policy, rules of the annual bonus

scheme incorporate a requirement to defer half of the amount of

bonus vesting for two years in the form of share awards under the

deferred share bonus plan. In certain ‘good leaver’ circumstances

(e.g. ill health, death), the Committee, acting fairly and reasonably,

maywaive deferral.

Deferred share bonus plan

If an Executive Director’s employment is terminated before a

deferred share award vests (after two years), then the awards

would vest in full on the date of leaving unless termination is for

cause, inwhich case the awards would lapse.

LTIP

As with the annual bonus plan, the Company’s current

(andproposed) LTIP also includes a number of discretions

inconnection with an Executive Director leaving employment.

Other than in certain defined ‘good leaver’ circumstances,

awardslapse on cessation of employment. Where an individual

ceases employment for one of the defined ‘good leaver’ events

(i.e. ill health, disability, redundancy within the meaning of UK

legislation or its overseas equivalent, transfer out of the Group/

sale of business or retirement with employer’s consent and, in

thecase of the new LTIP, any other reason at the discretion of

theCommittee), the award will remain eligible to vest on its normal

vesting date (unless the Committee uses its discretion to vest

theaward on the date of cessation of employment), in all cases

subject to a pro-rata reduction to reflect the portion of the vesting

period that has elapsed (unless the Committee determines

otherwise) and the application of the performance condition.

Inthe event of a death of an Executive Director, the default is

forthe award to vest at the date of death unless the Committee

determines otherwise, in which case it will vest at the normal

vesting date with pro-rating and performance conditions applied

asdescribed in other ‘good leaver’ circumstances.

Similar provisions apply in the event of a change of control,

withperformance measured up to the date of the relevant event,

anda pro-rata reduction applying unless the Committee

determines otherwise.

It is the Committee’s policy to exercise these discretions in a way

that would be in the best interests of the Company and depending

on the individual circumstances of each case.

116 Annual Report and Accounts 2021 Elementis plc

Payments agreed prior to the effective date of this policy

Any agreements entered in good faith prior to the commencement of the 2022 Remuneration Policy will remain eligible to operate on

their original terms.

Non-Executive Directors’ terms of appointment

Non-Executive Directors are appointed for a three year term, subject to annual re-election by shareholders. For Non-Executive Directors

whohave served for nine years or more, they may be appointed for a further year at a time. Each letter of appointment currently provides

thatthe Director’s appointment can be terminated by the Company on six months’ notice on any grounds without claim for compensation.

Following the 2018 AGM, the letters of appointment of the Non-Executive Directors were amended to 30 days’ notice by either party,

whichis the application of the new Remuneration Policy where a limit of up to three months is permitted. All other terms will remain the

same. The Chairman’s letter of appointment will remain with a six months’ notice period.

Non-Executive Directors are not eligible to participate in any pension, bonus or share incentive schemes. No individual is allowed to vote

on his/her own remuneration.

The table below provides further details of the letters of appointment that the Non-Executive Directors held with the Company

during2021.

Name Date of appointment

Date of last

re-appointment Date of expiry

Non-Executive Directors

A Duff

01 April 2014 1 April 2020 1 April 2023

D Deuring 1 March 2017 1 March 2020 1 March 2023

S Good 20 October 2014 20 October 2020 20 October 2023

A Hyland 1 June 2013 1 June 2019 1 June 2022

J O’Higgins 4 February 2020 n/a 4 February 2023

C Soden 1 November 2020 n/a 1 November 2023

1 Andrew Duff retired from the Board on 1 September 2021.

Copies of all letters of appointment of Non-Executive Directors are available on the Company’s website.

Shareholder engagement

The views of shareholders are important to the Committee. Regular dialogue and engagement with the Company’s shareholders is

undertaken. For example, the Committee wrote to its major shareholders and the leading advisory bodies in 2021 with the proposed

changes to the Policy and its operation going forward. In particular, the Committee has introduced a post cessation of employment

share ownership guideline in response to shareholder views which will apply from 2022.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

117

Corporate governance

Directors’ Remuneration report continued

Annual Report on Remuneration (‘Report’)

This Report details how the Company’s policies and practices on Directors’ remuneration were applied in respect of the financial year

ended 31 December 2021 and how they will be applied in the 2022 financial year.

Remuneration payable to Directors for 2021 (audited)

Although the Company reports its results in US dollars, the remainder of this report on remuneration is presented in pounds sterling

because the majority of the Directors are UK based and paid in pounds sterling.

A breakdown of the Directors’ remuneration for the year ended 31 December 2021 is set out in the table below.

Fixed Performance related

£’000 Year

Salary/

fees Benefits

Pension

Total

fixed Bonus LTIP Other

Total

variable Total

Executive Directors

Paul Waterman1, CEO 2021 679 89 165 932 976 – 37 1,013 1,946

2020 716 76 178 970 0 – 37 0 1,007

Ralph Hewins, CFO 2021 369 27 88 484 442 – – 442 926

2020 362 26 90 478 0 – – 0 478

Non-Executive Directors

John O’Higgins

, Chairman 2021 107 – – 107 – – – – 107

2020 46 – – 46 – – – – 46

Andrew Duff

, Former Chairman 2021 133 – – 133 – – – – 133

2020 195 – – 195 – – – – 195

Dorothee Deuring 2021 52 – – 52 – – – – 52

2020 51 – – 51 – – – – 51

Steve Good

2021 64 – – 64 – – – – 64

2020 60 – – 60 – – – – 60

Anne Hyland 2021 61 – – 61 – – – – 61

2020 60 – – 60 – – – – 60

Christine Soden

2021 57 – – 57 – – – – 57

2020 9 – – 9 – – – – 9

Former Directors

Sandra Boss

2021 – – – – – – – – –

2020 19 – – 19 – – – – 19

Nick Salmon

2021 – – – – – – – – –

2020 20 – – 20 – – – – 20

Total 2021 1,522 116 253 1,890 1,418 – 37 1,455 3,346

Total 2020 1,538 102 268 1,908 0 – 37 0 1,945

1 Paul Waterman is based in the US and paid in US dollars. He received an annual salary of $936k (2020: $918k). His pension comprises a salary

supplement and employer contributions to defined contribution retirement schemes. The foreign exchange rate applied is the 2021 average rate of

$1.3777:£1.00 (2020: $1.2820:£1.00).

2 Taxable benefits for Paul Waterman consist of a car allowance (£16,949), private health care (£19,271), dental, life assurance, accidental death and

disablement cover and long term disability insurance (£25,112), and tax advice (£21,775). The tax advice benefit allows appropriate tax filings to be made

in both the UK and US as a result of company business travel requirements during 2020/21 which exceeded the normal business expectations agreed on

appointment and gave rise to the need for dual filings. Taxable benefits for Ralph Hewins consist of a car allowance (£18,000), private health care and life

assurance.

3 As required by remuneration reporting regulations, the valuation of Paul Waterman’s US Savings Related Share Option Scheme (SRSOS) award is based

on the face value of shares at grant (September 2020). There are no performance measures for the SRSOS.

4 John O’Higgins was appointed Chairman on 1 September 2021, having been appointed Non-Executive Director on 4 February 2020 and Senior

Independent Director on 29 April 2020.

5 Andrew Duff stepped down as Chairman on 1 September 2021.

6 Steve Good was appointed Senior Independent Director upon John O’Higgins’ appointment as Chairman.

7 Christine Soden was appointed a Non-Executive Director on 1 November 2020 and is the Designated Non-Executive Director for workforce

engagement.

8 Sandra Boss stepped down from the Board on 29 April 2020.

9 Nick Salmon stepped down from the Board on 29 April 2020.

118

Annual Report and Accounts 2021 Elementis plc

Determination of annual bonus outcome for performance in 2021 (audited)

This section shows the performance targets set in respect of the 2021 annual bonus scheme and the level of performance achieved.

As detailed in the Chair’s Introductory Statement, 2021 was a year of strong performance and progress against our Innovation, Growth

and Efficiency strategy. We delivered double digit revenue growth and an adjusted operating profit of $107m, which was above our

internal planning and ahead of external market expectations for the full financial year. Full details of the bonus assessment of the

Executive Directors’ non-financial bonus elements can be found on page 120. Accordingly, and in line with the Policy, 50% of the bonus

payable will be deferred over shares which will be released to the Director after two years which are forfeitable for gross misconduct.

FY 2021 bonus plan targets

Percentage of

maximum bonus

earned

Percentage of

salaryearned

Full year bonus

Relative

weighting of

performance

conditions Threshold Plan Stretch

Actual

result

Percent of

maximum

Paul

Waterman

CEO

Ralph

Hewins

CFO

Paul

Waterman

CEO

Ralph

Hewins

CFO

Maximum as % salary 100% 100% 150% 125%

PBT ($m) 50% 57.2 63.5 69.9 77.0 100% 50% 50% 75% 62%

AWC (%) 20% 25.8 23.8 21.8 20.0 100% 20% 20% 30% 25%

Non-financial 30%

See disclosure below

and on page 120 23% 77% 23% 23% 35% 29%

Total full year 100% 93% 93% 140% 116%

Post discretion 0% 0% 0% 0%

In relation to the targets, 0% is payable at the threshold performance levels, 50% at plan and 100% at the maximum performance level.

Set out on page 120 are the challenging 2021 individual strategic objectives and actual performance against the objectives. The

objectives were categorised into two categories – (1) Strategic Implementation and People (20% weighting) and (2) Safety and

Environment (10% weighting).

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

119

Corporate governance

Directors’ Remuneration report continued

2021 bonus assessment for CEO and CFO

Measure Performance indicators Achievements

Summary

scoring

Safety, compliance, and risk

management

ASSESSMENT

Targets partially achieved

– further investment made in

Safety culture through

TogetherSAFE programme

– Reportable Injuries: target 7

or less, threshold 9 and

stretch 5.

– LTA’s: target =2, threshold =

3, stretch = 1

– Process Safety Tier 1 and

Tier 2 Events: target =2,

threshold = 3, stretch = 1

– Reportable Injuries = 12

– LTA‘s = 4

– Tier 1/2 events = 1

3/10

Strategic Implementation

Actions to deliver ‘Innovation’

Strategic Priority

ASSESSMENT

All targets achieved

orexceeded

– Pipeline of new products in

place to be launched in

2022/2023 to ensure

innovation revenue

contribution on track for 17%

of total by 2025

– 21 new product launches delivered in 2021 with at

least 20 identified for 2022. Innovation funnel for

2023 is strong with products moving through stage

gate process

– Innovation revenue at 14% up from 10% in 2017

with plans to further increase in 2022

– Open innovation with AQDOT and NXTLEVVEL

product launches

15/15

Actions to deliver ‘Growth’

Strategic Priority

ASSESSMENT

All targets achieved

orexceeded

– Underpin future revenue

growth through continuing to

maintain a healthy NBO

pipeline leading to >$25m

NBO delivery in 2022 and

>$25m in 2023

– $50m of new business achieved in 2021 with a

strong pipeline identified for 2022/23. Revenue

growth 17% in Coatings, 15% in Industrial Talc and

>40% in skin care and Asia personal care

Actions to deliver ‘Efficiency’

Strategic Priority

ASSESSMENT

All targets achieved

orexceeded

– Ensure actions in place to

underpin delivery of 2023

targets of $10m cost savings

and $10m working capital

reduction

– Actions are in place to underpin and delivery of

2023 targets via efficiency savings including India

AP Plant; continuous improvement programs in

Minerals, Specialties and Chromium; procurement

efficiency and a review of back-office effectiveness

– Working Capital reduction actions including

improved demand planning accuracy to manage

inventory levels; aligned 2022 plan focused on

process improvement, lead time assessment,

supplier financing and strategic procurement

Actions to deliver additional

Sustainability Strategic

Priority

ASSESSMENT

All targets achieved

orexceeded

– Identify the projects

(investment, impact, timing)

to be implemented within the

next 5 years to accelerate

progress towards the 2030

goals

– Roadmap in place including >60 improvement

projects already demonstrating accelerated

progress towards our Water, Energy and GHG

targets

– Actions taken in the year include manufacturing and

supply chain projects identified to underpin and

exceed our targets; Task-Force for Climate-Related

Financial Disclosure Framework implemented;

appointed Global Head of Sustainability; launched

new products with enhanced sustainability features

– Resulted in improved 3rd party sustainability

assessments gaining Ecovadis gold, MSCI to A, CDP

to B-, Sustainalytics to Medium risk and Responsible

Chromium awards

People

Actions to deliver People

Strategic Priority

ASSESSMENT

All targets achieved

orexceeded

– Build organisational capability

through actions that drive

employee engagement and

create a diverse, equitable

and inclusive organisation

– Through both enterprise wide and local action plans

increased employee engagement score from 55%

to 63% over the year

– Continued to increase gender diversity of Senior

Leadership up to 31% female (FTSE Women

Leaders definition) from 30.5% in 2020

– Evolved DE&I Council and key activities as part of

three year plan

5/5

Key to summary scoring

Achieved in full or predominantly achieved Partially achieved Not achieved

120 Annual Report and Accounts 2021 Elementis plc

Directors’ share based awards

Determination of 2019 LTIP awards (audited)

Under the 2019 Award, achieving the threshold EPS growth target (3% p.a.) would result in 0% of the EPS portion vesting and achieving

the threshold TSR target (median rank versus the FTSE All Share Constituents excluding Investment Trusts) would result in 3.85% of the

TSR portion vesting. Since the threshold performance targets were not met, these awards will not vest.

Annual LTIP awards granted in the year (audited)

On 6 April 2021, LTIP awards were granted in line with the Remuneration Policy. The CEO was granted an award over shares to the value

of 200% of salary and 175% of salary for the CFO. The Committee retains the discretion to reduce the number of shares on vesting

should it be considered appropriate, including in the event of a perceived windfall gain.

Details of the main terms of the 2021 LTIP awards are summarised in the table below. The awards are subject to EPS, TSR and operating

cash conversion performance conditions (equally weighted), each measured over the three years to 31 December 2023 as shown in the

table below.

Award holder

Type of

award Grant date

Number of

awards

Face value

of award at

grant

(£’000s)

Percentage that would vest

atthreshold performance

The end date

of the

performance

period

A summary of performance

targets and measures

Paul Waterman

Nil cost

(restricted

stock unit) 06.04.2021 1,079,362 1,355

0% of the award subject

to the EPS condition

and

3.85% of the award subject

tothe TSR condition

and

0% of the award subject to

operating cash conversion

31.12.2023

FY23 EPS of between

10cents and 13 cents

and

TSR performance of between

median to upper quartile

and

Three year operating cash

conversion between 85%

and95%Ralph Hewins

Nil cost

option 06.04.2021 515,214 647

1 The share price used to determine the number of awards granted was £1.2550, based on the share price on the day prior to grant.

2 Details of deferred bonus and savings based share schemes are shown in the table overleaf.

3 The vesting of the award is also subject to a return on capital employed underpin which requires the Company to consider whether the return generated

is in line with the Board’s expectations and if not, to reduce the vesting to a more appropriate level. The Committee also retains discretion to reduce the

number of shares on vesting should it be considered appropriate, including in the event of a perceived windfall gain.

Sourcing shares for our share plans

Employee share plans comply with the Investment Association’s guidelines on dilution, which provide that overall issuance of shares

under all plans should not exceed an amount equivalent to 10% of the Company’s issued share capital over any ten year period, with a

further limitation of 5% in any ten year period on discretionary plans. Based on the number of awards that remain outstanding as at the

year end, the Company’s headroom for all plans is 3.96% and for discretionary plans is 3.36% of issued share capital.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

121

Corporate governance

Directors’ Remuneration report continued

Directors’ scheme interests (audited)

The interests of the persons who were Directors during the year in the issued shares of the Company were:

Scheme interests

Interest

type Grant date

Option

price

(p) 01.01.21

(A)

Granted

during

2021

Exercised

during

2021

Lapsed

during

2021 31.12.21

Vested but

unexercised

options

Executive Directors

Paul Waterman LTIP

(A)

30.04.2018 – 483,127 – – 483,127 – –

DSBP

(B)

06.03.2019 – 110,378 – 110,378 – – –

LTIP

(A)

01.04.2019 – 849,282 – – – 849,282 –

DSBP

(B)

05.03.2020 – 188,130 – – – 188,130 –

LTIP

(A)

07.04.2020 – 2,037,577 – – – 2,037,577 –

SRSOS

(E)

15.09.2020 63.11 59,188 – – – 59,188 –

LTIP

(A)

06.04.2021 – – 1,079,362 – – 1,079,362 –

Total scheme interests 3,727,682 1,078,362 110,378 483,127 4,213,539 Nil

Ralph Hewins

DSBP

(B)

07.03.2017 – 7,140 – – – 7,140 7,140

(D)

07.03.2017 – 17,458 – – – 17,458 17,458

(C)

07.03.2017 – 92,262 – – – 92,262 92,262

DSBP

(B)

05.03.2018 – 73,123 – – – 73,123 73,123

LTIP

(A)

30.04.2018 – 229,983 – – 229,983 – –

SAYE

(F)

27.11.2018 163.91 10,981 – – – 10,981 –

DSBP

(B)

06.03.2019 – 48,865 – – – 48,865 48,865

LTIP

(A)

01.04.2019 – 381,469 – – – 381,469 –

DSBP

(B)

05.03.2020 – 76,266 – – – 76,266 –

LTIP

(A)

07.04.2020 – 862,469 – – – 862,469 –

LTIP

(A)

06.04.2021 – – 515,214 – – 515,214 –

Total scheme interests 1,800,016 515,214 – 229,983 2,085,247 238,848

Notes

(A) LTIP awards are subject to performance conditions. The same relative TSR performance conditions apply in respect of all awards. The EPS target for the

2018 award requires annual growth of 3% to 10%, with the 2019 and 2020 awards requiring annual growth of 3% to 12%. The EPS target for the 2021

award is based on FY23 EPS of between 10 cents and 13 cents. The operating cash conversion performance conditions for the 2020 and 2021 awards

is based on three year targets between 85% and 95%. These awards ordinarily vest on the third anniversary of the grant date. Full detail of the vesting

conditions areset out on page 121.

(B) Conditional share award under the Deferred Share Bonus Plan (DSBP). Structured as restricted stock units for Paul Waterman and nil cost options for

Ralph Hewins. The 2019 DBSP vested on 6 March 2021. Paul Waterman’s tax liability crystallised on vesting and in line with share ownership guidelines,

49,759 shares were sold to cover liabilities arising from the exercise. 60,619 shares were retained by Paul Waterman. For DSBP awards granted in March

2020, the share price at date of grant was 98.95 pence. The face value of awards at grant were £186,154.63 and £75,466 for Paul Waterman and Ralph

Hewins respectively. Both Executive Directors recommended and the Committee agreed that no bonus be payable in 2021, therefore no DSBP awards

were granted in 2021.

(C) Replacement Awards structured as nil cost options made under standalone arrangements that borrow terms from the LTIP as amended. In line with the

remuneration forfeited on leaving his former employer, the 2017 Award did not have performance conditions, but shares were required to be held for

twoyears.

(D) Replacement Awards structured as nil cost options made under standalone arrangements that borrow terms from the DSBP as amended.

(E) Grant under the Elementis plc US Savings Related Share Option Scheme 2018. The options are exercisable from 15 September 2022 with an option

price of 63.11 pence per share. The options are made pursuant to a two year savings contract and the exercise price is based on the share price at close

of business on 15 September 2020, being the date of the grant.

(F) Options held under the UK SAYE scheme. This is a savings based share option scheme that is not subject to performance conditions. Vesting occurred

on 1 January 2022 and 10,981 shares remain unexercised at the date of this report. Further details on this scheme is shown in Note 26 to the

consolidated financial statements on page 179.

122

Annual Report and Accounts 2021 Elementis plc

Directors’ share interests (audited)

The interests of the Directors (including any connected persons) during the year (and from the year end to 3 March 2022) in the issued

shares of the Company were:

01.01.21

Acquired

during

2021

Disposed

during

2021 31.12.21

Shareholding

level met as at

31.12.21

Executive Directors

Paul Waterman 713,843 80,619 – 794,462 No

Ralph Hewins 59,193 – – 59,193 No

Non-Executive Directors

Andrew Duff

113,500 20,000 – 20,000 n/a

Dorothee Deuring 26,250 – – 26,250 n/a

Steve Good 62,500 – – 62,500 n/a

Anne Hyland 22,153 – – 22,153 n/a

John O’Higgins – 125,600 – 125,600 n/a

Christine Soden – 20,000 – 20,000 n/a

1 As per the Policy, Executive Directors are expected to build up a shareholding that is equal in value to 200% of their basic annual salaries. Share awards

vesting over time will contribute to meeting the shareholder requirement.

2 Andrew Duff retired from the Board on 1 September 2021.

The market price of ordinary shares at 31 December 2021 was 131 pence (2020: 115 pence) and the range during 2021 was 108 pence

to 161 pence (2020: 18 pence to 185 pence).

As at 31 December 2021, the trustee of the Company’s Employee Share Ownership Trust (ESOT) held 446,534 shares (2020: 621,236).

As Executive Directors, Paul Waterman and Ralph Hewins, as potential beneficiaries under the ESOT, are deemed to have an interest in

any shares that become held in the ESOT.

As at 3 March 2022, no person who was then a Director had any interest in any derivative or other financial instrument relating to the

Company’s shares and, so far as the Company is aware, none of their connected persons had such an interest. There was no other

change, so far as the Company is aware, in the relevant interests of other Directors or their connected persons.

Other than their service contracts, letters of appointment and letters of indemnity with the Company, none of the Directors had an

interest in any contract of significance in relation to the business of the Company or its subsidiaries at any time during the financial year.

Retirement benefits

The table on page 124 shows the breakdown of the retirement benefits of the Executive Directors, comprising employer contributions to

defined contribution plans and salary supplements paid in cash.

Paul Waterman received a salary supplement and participated in US contractual retirement schemes. Further detail can be found in the

Policy. The amount shown in the table below represents employer matching contributions and both this and the salary supplement are

included in the Directors’ emoluments table shown on page 118.

Ralph Hewins received a salary supplement in lieu of any other retirement benefit. The amount received is shown in the table below and

in the Directors’ emoluments table.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

123

Corporate governance

Directors’ Remuneration report continued

Directors’ retirement benefits (audited)

Defined contribution plans Salary supplement

2021

£’000

2020

£’000

2021

£’000

2020

£’000

Paul Waterman 38 36 126 143

Ralph Hewins n/a n/a 88 90

Note: The pensions received were in line with the glidepath set out in the 2020 Directors’ Remuneration report and for Paul Waterman included contributions

to his US pension arrangements (which included a tax qualified 401k plan and a non-qualified plan with contributions to these structures varying year to year

but in all cases capped in line with the commitments included in the 2019 Directors’ Remuneration report).

Payments to past directors or payments for loss of office (audited)

There were no payments in the financial year.

Total shareholder return performance and change in CEO’s pay

The graph below illustrates the Company’s total shareholder return for the ten years ended 31 December 2021, relative to the FTSE 250

Index, along with a table illustrating the change in CEO pay over the corresponding period. The table also details the payouts for the

annual bonus scheme and LTIP.

As the Company’s shares are denominated and listed in pence, the graph below looks at the total return to 31 December 2021 of £100

invested in Elementis on 31 December 2011 compared with that of the total return of £100 invested in the FTSE 250 Index. This index

was selected for the purpose of providing a relative comparison of performance because the Company is a member of it.

TSR evolution since 2010 (rebased to 100) Elementis plc FTSE 250 index (excl. Investment Trusts)

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20212020

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

CEO pay (total remuneration – £’000s) 3,560 2,252 1,573 763 1,553

2,539 1,229 1,114 1,007 1,946

Annual bonus payout (% of maximum) 81% 56% 50% 0% 27.5% 93.0% 35.0% 17.3% 0% 93%

LTIP vesting (%ofmaximum) 100% 100% 65% 0% 91.2%

91.4%

0% 0% 0% 0%

1 Includes remuneration for Paul Waterman and David Dutro for the period in which each was CEO during 2016.

2 Relates to Paul Waterman’s buy-out awards which vested in March 2017.

3 Relates to Paul Waterman’s buy-out awards vesting in March 2018.

CEO to all-employee pay ratio

Whilst Elementis is not required to publish a CEO to all-employee pay ratio given it has less than 250 UK employees, voluntary disclosure

of the pay ratio is included below. In line with the relevant legislation, the analysis has been completed using Option A (i.e. actual total

remuneration earned has been used as the basis for comparison).

Whilst this is only based upon 79 UK employees, there is a mix of factory based employees (c. 80%) and corporate Head Office

employees. Option A was used as it was deemed the most accurate and prevalent amongst recent FTSE 250 disclosures. The ratio is

greater than that measured internally for 2020 due to higher than target bonus pay-outs for the majority of UK employees in 2021 and

the much higher ratio of variable pay within the CEO’s overall compensation. The ratio is consistent with the pay, reward and progression

policies for the Company’s UK employees takenasa whole.

124 Annual Report and Accounts 2021 Elementis plc

CEO pay ratio 2019 2020 2021

Method A A A

CEO single figure £1,114 £1,007 £1,946

Upper quartile 15 14 23

Median 21 19 34

Lower quartile 25 23 42

The salary and total pay for the individuals identified at the Lower quartile, Median and Upper quartile positions in 2021 are set out below:

2021 Salary Total pay

Upper quartile individual £64,108 £85,190

Median individual £44,322 £58,025*

Lower quartile individual £43,305 £46,206

* difference between total pay and salary due to individual receiving highest bonus level due to exceptional performance

Relative importance of spend on pay

The table below shows the total remuneration paid across the Group together with the total dividends paid in respect of 2021 and the

preceding financial year.

£m 2021 2020 Change

Remuneration paid to all employees

108.5 97.7 11.1%

Total dividends paid in the year 0 0 0%

1 See Note 8 to the consolidated financial statements. The amounts for 2021 and 2020 have been converted from dollars into pounds sterling using the

average USD/GBP exchange rates for those years.

Percentage change in the remuneration of the Directors (unaudited)

The table below shows the change from 2019 to 2020 and from 2020 to 2021 in the Directors’ pay and the corresponding change of

these elements across all employees within the Group.

Average percentage change 2019-20 Average percentage change 2020-21

Salary Taxable benefits Annual bonus Salary Taxable benefits Annual bonus

CEO

1,2,3

2.0% 8.5% 0% 2% 26% 100%

CFO

1,2

2.2% 2.8% 0% 2% 4% 100%

John O’Higgins

n/a – – 131% – –

Andrew Duff

2.2% – – -31% – –

Dorothee Deuring 2.2% – – 2% – –

Steve Good5 2.2% – – 7% – –

Anne Hyland 2.2% – – 2% – –

Christine Soden6 n/a – – 512% – –

Employees -9.4% – – 11.1% – –

Former Directors

Sandra Boss

2.8% – – – – –

Nick Salmon

2.2% – – – – –

1 All percentages are based on converting relevant local currencies into pounds sterling using the average rates for the respective year.

2 The Executive Directors recommended and the Committee agreed that no bonuses should be payable in relation to 2020 performance.

3 The 2019-20 year on year change in the CEO’s benefits are driven by increased private medical insurance subscription as a result of a change in

coverage, while changes in employee salary, benefits and bonus are driven by changes to the employee population and movements in exchange rates.

4 Andrew Duff stepped down as Chairman on 1 September 2021, with John O’Higgins assuming the role.

5 Steve Good assumed the role of SID on 1 September 2021

6 Christine Soden joined the Board as non-executive Director and DNED on 1 November 2020

7 Sandra Boss was appointed as Designated Non-Executive Director for workforce engagement in October 2019 and retired from the Board in April 2020.

8 Nick Salmon retired from the Board in April 2020.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

125

Statement of shareholder voting

The resolution to approve the 2020 Directors’ Remuneration Policy and the 2020 Directors’ Remuneration report were passed by a poll

atthe Company’s 2021 AGM held on 13 May 2021. Set out in the table below are the votes cast by proxy in respect of these resolutions.

Votes for % for Votes against % against Votes withheld

2020 Directors’ Remuneration report (2021 AGM) 367,357,732 93.67 24,817,630 6.33 61,002,164

2020 Directors’ Remuneration Policy (2021 AGM) 315,271,323 80.55 76,149,855 19.45

61,756,348

1 A key concern was that post-cessation share ownership requirements had not been included in the 2020 Policy which following the full review in 2021

have been included in the proposed 2021 policy.

Votes withheld are not included in the final figures as they are not recognised as a vote in law.

Other information about the Committee’s membership and operation

Committee composition

The Chairman and members of the Committee are shown on pages 76 to 77, together with their biographical information. Four meetings

were held during 2021 and the attendance of Committee members is shown on page 101.

The Chairman, CEO and other Non-Executive Directors who are not members of the Committee have a standing invite to attend and the

CFO and CHRO also attend meetings by invitation, as appropriate. The Executive Directors are not present when their own remuneration

arrangements are discussed or, if they are, they do not participate in the decision making process.

Terms of reference

A full description of the Committee’s terms of reference is available on the Company’s website at www.elementis.com.

Activities during the year

The Committee ensures that the Policy promotes sustained performance of the Company and is aligned with shareholder interests

withincentive pay based on growing profits and delivering above average total shareholder return. In line with the business operations

asa global specialty chemicals company, our Policy is designed with a bias towards long term performance. In line with this strategy,

theperformance metrics are selected to focus on profitable growth and delivering above average total shareholder returns.

The Committee considers the Directors’ remuneration in the context of remuneration practices across the Group, considering pay ratios

(including the CEO pay ratio and gender pay gap), internal relativities, and external benchmarking. The Committee is of the opinion that

the Policy is currently operating as intended, and provides a strong link between Company performance and outturns.

During the Policy review in 2021, the Committee considered the clarity, simplicity, risk alignment, predictability of outcomes,

proportionality and alignment with culture. These are also considered when implementing the Policy. For example, salary increases

areconsidered in the context of the increases provided to the wider employee population, the measures used in the incentive schemes

are directly linked to the KPIs used within the business, and both the annual bonus and LTIP have clearly defined performance targets.

Shareholders were consulted during the Policy review in 2021, with their views taken into account in agreeing the changes recommended.

Corporate governance

Directors’ Remuneration report continued

126 Annual Report and Accounts 2021 Elementis plc

Committee meeting dates Agenda items

February 2021 – 2018 LTIP performance outcomes

– 2020 Executive Director bonus awards

– 2021 LTIP targets/performance conditions

– ELT salary review and bonus payments

– CEO pay ratio calculations

– Approval of final draft of Directors’ Remuneration report

– Remuneration Policy review timetable

April 2021 – 2021 LTIP grant

July 2021 – Market update and Remuneration Policy review discussion proposals

– Employee share schemes

October 2021 – Remuneration Policy proposal approval

– Shareholder consultation process

December 2021 – Chairman’s fee review

– 2022 salary reviews for Paul Waterman and Ralph Hewins

– Update on FY 2021 performance against annual bonus targets

– Application of Remuneration Policy in 2022

– Committee Terms of Reference

Outside of the above meeting dates, the Committee considered and confirmed operational matters in appropriate forums

(e.g. the Executive Directors’ annual bonus targets, and granting of the 2021 LTIP awards).

Evaluation, training and development

On an annual basis, the Committee’s effectiveness is reviewed as part of the evaluation of the Board. Following the evaluation last

year,there were no major issues to report. During 2021, Committee members were updated on the latest developments on executive

remuneration and all members received briefings from the Group Company Secretary and the Committee’s remuneration advisers

throughout the year, to keep them updated on topical matters and developments relating to executive remuneration.

Remuneration advisers

Korn Ferry were appointed external advisers to the Committee with effect from April 2017 following a selection process undertaken by

the Committee. The Committee is satisfied that there was noover reliance on Korn Ferry and that advice received was independent and

objective. Korn Ferry are a member of the Remuneration Consultants Group and voluntarily operate under the Code of Conduct. Fees

paid to Korn Ferry for remuneration advisory services in 2021 were £65,360 (excluding VAT) and were charged on a time and materials

basis. In addition to the remuneration advisory services provided by Korn Ferry, another team provided assistance in respect of Board

succession and provided leadership assessment assistance. There are no other connections with the Company that may impact the

independence of the remuneration advice received given the nature of the other services provided and the internal protocols at

KornFerry.

Auditable sections of the Directors’ Remuneration report

The sections of the Annual Report on Remuneration that are required to be audited by law are as follows: Remuneration payable to

Directors for 2021 and Retirement benefits; and tables headed Annual LTIP awards granted in the year, Directors’ scheme interests,

Directors’ share interests and Directors’ retirement benefits.

Steve Good

Chairman, Remuneration Committee

3 March 2022

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Strategic report Corporate governance Financial statements Shareholder information

127

Corporate governance

Directors’ report

The Directors present the Annual Report and Accounts together

withthe audited consolidated financial statements of the

Company, and the Group, for the year ended 31 December 2021.

The Directors’ Report comprises of pages 128 to 130

ofthisreport, together with the information required to be

disclosedreferred to below which are incorporated by reference,

inaccordance with the Companies Act 2006 and the Listing

Rule9.8.4R of the Financial Conduct Authority. The Company,

inaccordance with Section 414(C)(11) of the Companies Act

2006, has chosen to set out certain information required to be

included in the Directors’ Report in the Strategic Report. The

Governance Report, set out onpages 74 to 131 and the

Consolidated Financial Statements. The destinations for such

information arealso shown in the tablebelow:

Directors

Directors and their interests

The biographical details of the Directors of the Company who

heldoffice during the year, and up to the date of the signing

ofthefinancial statements, are set out on pages 76 and 77.

During the period, Andrew Duff stepped down from his role

asChairman on 1 September 2021.

Appointment and replacement of Directors

The Articles of Association (the “Articles”) give the Directors

power to appoint and replace Directors. Under the terms of

reference of theNomination Committee, appointments are

recommended by the Nomination Committee for approval by

theBoard. In line with the UK Corporate Governance Code, the

Articles also require Directors to retire and submit themselves

forelection at the first annual general meeting (“AGM”) following

appointment and to retire at each subsequent AGM and to submit

themselves for re-election at the following AGM. The service

contracts of the Executive Directors and letters of appointment

ofthe Non-Executive Directors are available for inspection at

theCompany’s registered office.

Directors’ powers

The business of the Company is managed by the Board who may

exercise all the powers of the Company, subject to the Company’s

Articles, the Companies Act 2006 and any special resolution of

the Company. The Articles may only be amended by special

resolution of the Company at a general meeting of its

shareholders.

Directors’ conflicts of interest

Ralph Hewins is in receipt of a conflict authorisation from the

Company in respect of him acting as a trustee of the Elementis

Group Pension Scheme.

The conflict authorisation enables Ralph Hewins to continue

toactas a trustee notwithstanding that this role could give rise

toa situation in which there is a conflict of interest. The Board

considers that it is appropriate for the trustees of the UK pension

scheme tobenefit from the financial expertise of the CFO and that

his contribution at trustees’ meetings demonstrates the Boards

commitment to supporting the UK pension scheme. The Board’s

conflict authorisation is subject to annual review and, under the

terms of the conflict authorisation, reciprocal provisions have

beenput in place with a view of safeguarding information that

isconfidential to the Group, as well as to the trustees. Were a

conflict of interest to arise, Ralph Hewins is required to excuse

himself from reading the relevant papers and absent himself

fromparticipating in relevant discussions. Procedures are in

placeto ensure compliance with the Companies Act 2006.

Theseprocedures havebeen complied with during the year.

Details of any new conflicts or potential conflicts matters are

submitted to the Boardfor consideration and, where appropriate,

are approved.

Authorised conflicts and potential conflict matters are reviewed

onan annual basis.

Carbon emissions, energy consumption

andenergyefficiency

Pages 34-36

Corporate Governance Framework Page 81

Directors’ share interests

and remuneration

Pages 118, 123

Directors’ training and development Page 89

Employee diversity, equality and inclusion Page 38

Employee engagement Page 85

Environmental matters Page 34

Financial instruments & financial

risk management

Page 64

Innovation, Growth & Efficiency strategy Page 20

Long term incentive schemes Page 102

Membership of Board Pages 76-77

Modern Slavery Statement Page 31

Non-financial information Page 41

Principal risks Pages 68-72

Results and Dividend Pages 54-59

Section 172 Statement Pages 52-53

Stakeholder engagement Page 48

Statement of Directors’ Responsibilities Page 131

Sustainability Pages 30-40

Viability and Going Concern Statement Pages 73

128 Annual Report and Accounts 2021 Elementis plc

Directors’ insurance and indemnities

In addition to the indemnity granted by the Company to Directors

inrespect of the liabilities incurred as a result of their office, a

Directors’ and Officers’ liability insurance policy is maintained

throughout the year. Neither the indemnity nor the insurance

provides cover in the event that a Director has proven to have

acted dishonestly or fraudulently. Similar arrangements also

existfor Directors appointed to Group subsidiary entities.

Directors’ share interests

The Directors’ interests in the ordinary share and options of the

Company can be found within the Directors’ Remuneration report

onpages 122 and 123.

Share Capital

As at 31 December 2021, the Company’s authorised and issued

share capital was 581,858,452 ordinary shares, with a nominal

value of 5 pence each. Each issued share carries a voting right of

one vote per share. All of the Company’s issued shares are fully

paid up and rank equally in all respects. The rights attached to the

shares, in addition to thoseconferred on their holders by law, are

set out inthe Company’sArticles.

From time to time the ESOT holds shares in the Company for the

purposes of various share incentive plans and the rights attaching

tothem are exercised by independent trustees, who may take

intoaccount any recommendation by the Company. As at

31 December 2021, the ESOT held 446,534 shares in the

Company (2020: 621,236). A dividend waiver is in place in

respectof all shares that may become held by the Trust.

Further details of the authorised and issued share capital during

the financial year are provided in note 17 to the accounts on

page163.

Rights and obligations attaching to shares

The rights and obligations attaching to the shares are set out in

the Articles. The Articles may only be changed by a special

resolution passed by the shareholders.

Voting rights

Shareholders are entitled to attend and vote at any general

meetingof the Company and a poll will be held on every resolution.

Every member present in person or by proxy has, upon a poll,

onevote for every share held. In the case of joint holders ofa share,

the vote of the senior who tenders a vote, whether in person or by

proxy, shall be accepted to the exclusion of the votes of the other

joint holders and, for this purpose, seniority shall be determined

by the order in which the names stand in the Register of Members

in respect of the joint holding.

Dividends

The Directors are not recommending the payment of a final

dividend this year.

Authority to purchase own shares

The Board has the power conferred on it by shareholders to

purchase its own shares and is seeking renewal of that power at the

forthcoming AGM within the limits set out in the Notice of Meeting.

Employee share plans

The Company operates a number of employee share plans, detailsof

which are set out in note 26 to the consolidated financial statements

and on page 122 of the Directors’ remuneration report. All of the

Company’s employee share plans contain provisions relating to

change of control. On a change of control, options and awards

granted to employees may vest and become exercisable, subject to

the satisfaction of any applicable performance conditions at the time.

Substantial shareholders

In accordance with the Disclosure Guidance and Transparency

Rules (DTR), as at 31 December 2021 and 3 March 2022, the

following interests in voting rights over the issued share capital

ofthe Company had been notified.

Ordinary

Percentage

of issued

share capital

Ameriprise Financial, Inc. and its

group 61,954,711 10.47

APG Asset Management N.V 57,840,964 9.96

SFM UK Management LLP 33,337,634 5.74

Franklin Mutual Advisers LLP 29,170,775 5.01

Aberdeen Asset Managers Limited 23,056,448 4.97

Schroders plc 22,517,387 4.91

AXA Investment Managers S.A. 23,515,878 4.05

BlackRock, Inc. Below 5% Below 5%

FMR LLC Below 5% Below 5%

Employees

Employment policies and equal opportunities

Elementis policies seek to create a workplace that has an

openatmosphere of trust, honesty and respect. Harassment or

discrimination of any kind based on race, colour, religion, gender,

age, national origin, citizenship, mental or physical disabilities,

sexual orientation, veteran status, or any other similarly protected

status is not tolerated. This principle applies to all aspects of

employment, including recruitment and selection, training and

development, promotion and retirement. Employees are free to join

atrade union and participate in collective bargaining arrangements.

It is also a Group policy for employees who have a disability to

reasonably accommodate them, where practicable, and to provide

training, career development and promotion, as appropriate. It

isGroup policy not to discriminate on the basis of any unlawful

criteria and its practices include prohibition on the use of child

orforced labour.

Elementis supports the wider fundamental human rights of its

employees worldwide, as well as those of our customers and

suppliers, and further details set out in the Sustainable business

section on pages 38-40.

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

129

Corporate governance

Directors’ report continued

Employee communications and involvement

The Company is committed to employee involvement throughout

the business. Employees are kept informed of the performance

andstrategy of the Group via email. Telephone conference calls

areheld by the CEO to employees worldwide and these serve as

aninformal forum for employees to ask topical questions about

theGroup. Further information can be found on pages 85 and 86.

Research and development activities

Innovation is a core strategic priority. Our innovation expertise

andcapability is focused on delivering products that address

ourcustomers’ needs.

As at 31 December 2021, 100 employees were engaged in global

research and development activities. For further information on our

approach to innovation, please refer to pages 12 and 23.

During the year ended 31 December 2021, costs relating to

research and development activities were $7.5m (2020: $7.2m).

Additional information

Going concern and viability statement

The Directors consider that the Group and the Company have

adequate resources to remain in operation for the foreseeable

future and have therefore continued to adopt the going concern

basis in preparing the financial statements. The code requires the

Directors to assess and report on the prospects of the Group over

a longer period. This longer term viability statement is set out on

page 73.

Audit Information

Each Director of the Company on 3 March 2022, the date this

Directors’ Report was approved, confirms that so far as they

areaware, there is no relevant audit information of which the

Company’sauditor, Deloitte LLP, is unaware and that they have

takenall the steps that they ought to have taken as a Director to

make themselves aware of any relevant audit information and to

establish that the Company’s auditor is aware of that information.

Auditors

Following recommendation by the Audit Committee, resolutions

tore-appoint Deloitte LLP as auditors and to authorise the

AuditCommittee to fix their remuneration will be proposed

attheforthcoming AGM. The remuneration of the auditors for

theyearended 31 December 2021 is fully disclosed in note 7

totheFinancial Statements on page 158.

Annual General Meeting

The 2022 AGM will be held at 10.00am on Tuesday 26 April 2022

atthe offices of Herbert Smith Freehills LLP, Exchange House,

Primrose Street, London, EC2A 2EG. Details of the resolutions

tobeproposed at the AGM are set out in the Notice of Meeting

which has been sent to shareholders and is available on the

Elementis corporate website: www.elementis.com

Amendments to the Company’s Articles of Association

Any amendments to the Articles of Association of the Company

may be made in accordance with the provisions of the Companies

Act 2006 by way of special resolution.

Significant agreements – change of control

There are few significant agreements which the Company is party

to that take effect, alter or terminate in the event of change of control

of the Company. The Company is a guarantor under the Group’s

$200m and €172m long term loans, and $375m revolving credit

facility and, in the event of a change of control, any lender among the

facility syndicate, of which there are 13 with commitments ranging

from $24m to $92m, may withdraw from the facility and thatlender’s

participation in any loans drawn down are required tobe repaid.

The rules of the Company’s various share incentive schemes

setout the consequences of a change of control of the Company

on the rights of the participants under those schemes. Under the

rules of therespective schemes, participants would generally be

able to exercise their options on a change of control, provided that

the relevant performance conditions have been satisfied and,

where relevant, options are not exchanged for new options

granted by anacquiring company.

The Company is required to disclose any significant agreements that

take effect, alter or terminate on a change of control of the Company

following a takeover bid. In the event of a takeover or other change

of control (usually excluding an internal reorganisation), outstanding

awards under the Group’s incentive plans vest and become

exercisable (including Deferred Bonus Share Plan (DSBP) cash

awards and Long Term Incentive Awards (LTIP) awards), to the

extentany performance conditions (if applicable) have been met,

and subject to time pro-rating (if applicable) unless determined

otherwise by the Board in its discretion, in accordance with the

rules of the plans. In certain circumstances, the Board may decide

(with the agreement of the acquiring company) that awards will

instead becancelled in exchange for equivalent awards over

shares in the acquiring company.

Political donations

The Group made no political donations during the year (2020: nil).

Branches

As a global Group, Elementis’ interests and activities are held or

operated through subsidiaries, branches, joint arrangements or

associates which are established in, and subject to the laws and

regulations of, many different jurisdictions.

Other information

Information about the Group’s financial risk management and

exposure to financial market risks are set out in Note 23 to the

financial statements on pages 170-173.

Events after the balance sheet date

There were no significant events after the balance sheet date.

On behalf of the Board:

Laura Higgins

Company Secretary

3 March 2022

130 Annual Report and Accounts 2021 Elementis plc

Directors’ responsibilities

Corporate governance

Directors’ responsibilities

The Directors are responsible for preparing the Annual Report

andthe financial statements in accordance with applicable United

Kingdom law and regulations. Detailed below are statements

made by the Directors in relation to their responsibilities and

disclosure ofinformation to the auditor:

Statement of Directors’ responsibilities in

respect of the Annual Report and financial

statements

Company law requires the Directors to prepare such financial

statements for each financial year. Under the law, the Directors are

required to prepare the Group financial statements in accordance

with International Financial Reporting Standards (IFRSs) as adopted

by the European Union and Articles 4 of the IAS Regulation and

have also chosen to prepare the parent Company financial

statements inaccordance with Financial Reporting Standard

101Reduced Disclosure Framework.

Under company law, the Directors must not approve the financial

statements unless they are satisfied that they give a true and fair

view of the state of affairs of the Company and of the profit or loss

of the Company for that period.

In preparing the parent Company financial statements, the

directors are required to:

– select suitable accounting policies and then apply them

consistently;

– make judgements and accounting estimates that are

reasonable and prudent;

– state whether applicable UK Accounting Standards have been

followed, subject to any material departures disclosed and

explained in the financial statements; and

– prepare the financial statements on the going concern basis

unless it is appropriate to presume that the Company will

continue in business.

In preparing the Group financial statements, International

Accounting Standard 1 requires that Directors:

– properly select and apply accounting policies;

– present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and

understandable information;

– provide additional disclosures when compliance with the

specific requirements in IFRSs are insufficient to enable users

to understand the impact of particular transactions, other

events and conditions on the entity’s financial position and

financial performance; and

– make an assessment of the Company’s ability to continue as

agoing concern

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Company’s

transactions and disclose with reasonable accuracy at any time

thefinancial position of the company and enable them to ensure

that the financial statements comply with the Companies Act

2006. The Directors are also responsible for safeguarding the

assets ofthe Company and hence for taking reasonable steps

forthe prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also

responsible for preparing a Strategic Report, Directors’ Report,

Directors’ Remuneration Report and Corporate Governance

Statement which complies with that law and regulations.

The Directors are responsible for the maintenance and integrity

ofthe corporate and financial information included on the

Company’s website. Legislation in the UK governing and

preparingand dissemination of financial statements may

differfrom legislation inother jurisdictions.

Directors’ responsibility statement

Each of the Directors, who are appointed at the date of approval

ofthis report, confirm that to the best of their knowledge:

– the financial statements, which have been prepare in

accordance with the relevant financial reporting framework,

givea true and fair view of the assets, liabilities, financial

position and profit or loss of the Company and the

undertakings included in the consolidation taken as a whole;

– the strategic report includes a fair review of the development

and performance of the business and the position of the

Company and the undertakings included in the consolidation

taken as a whole, together with a description of the principal

risks and uncertainties that they face; and

– the Annual Report and financial statements, taken as

awholeare fair, balanced and understandable and provide

theinformation necessary for shareholders to assess the

Company’s position and performance, business model

andstrategy.

This responsibility statement was approved by the Board of

Directors on 3 March 2022 and is signed on its behalf by:

Paul Waterman Ralph Hewins

CEO CFO

Annual Report and Accounts 2021Elementis plc

Strategic report Corporate governance Financial statements Shareholder information

131

Report on the audit of the financial statements

Financial statements

Independent auditor’s report to the members of Elementis plc

1. Opinion

In our opinion:

– the financial statements of Elementis plc (the ‘parent company’)

and its subsidiaries (the ‘group’) give a true and fair view of

thestate of the group’s and of the parent company’s affairs

asat 31 December 2021 and of the group’s profit for the year

then ended;

– the group financial statements have been properly prepared

inaccordance with United Kingdom adopted international

accounting standards and International Financial Reporting

Standards (IFRSs) as issued by the International Accounting

Standards Board (IASB);

– the parent company financial statements have been properly

prepared in accordance with United Kingdom Generally

Accepted Accounting Practice, including Financial Reporting

Standard 101 “Reduced Disclosure Framework”; and

– the financial statements have been prepared in accordance

with the requirements of the Companies Act 2006.

We have audited the financial statements which comprise:

– the consolidated income statement;

– the consolidated statement of comprehensive income;

– the consolidated and parent company balance sheets;

– the consolidated and parent company statements of changes

in equity;

– the consolidated cash flow statement;

– the consolidated financial statement related notes 1 to 33; and

– the parent company statutory accounts related notes 1 to 11.

The financial reporting framework that has been applied in the

preparation of the group financial statements is applicable law and

United Kingdom adopted international accounting standards and

IFRSs as issued by the IASB. The financial reporting framework that

has been applied in the preparation of the parent company financial

statements is applicable law and United Kingdom Accounting

Standards, including FRS 101 “Reduced Disclosure Framework”

(United Kingdom Generally Accepted Accounting Practice).

2. Basis for opinion

We conducted our audit in accordance with International Standards

on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities

under those standards are further described in the auditor’s

responsibilities for the audit of the financial statements section

ofourreport.

We are independent of the group and the parent company in

accordance with the ethical requirements that are relevant to our

audit of the financial statements in the UK, including the Financial

Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to

listed public interest entities, and we have fulfilled our other

ethicalresponsibilities in accordance with these requirements.

The non-audit services provided to the group and parent

company for the year are disclosed in note 7 to the financial

statements. We confirm that we have not provided any non-audit

services prohibited by the FRC’s Ethical Standard to the group or

the parentcompany.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

3. Summary of our audit approach

Key audit matters The key audit matters that we identified in the current year were:

– Impairment of goodwill and intangible assets in relation to the Talc cash generating unit; and

– Revenue recognition in relation to cut off.

Materiality The materiality that we used for the group financial statements was $2.8 million (2020: $3.0 million)

whichwas determined on the basis of 5% of adjusted forecast profit before tax; this excludes business

transformation costs, environmental provisions movements, M&A and disposal costs, impairment of

goodwill, mark to market of derivatives and currency hedge due to dividend cancellation (“adjusted PBT”)

(2020: 0.4% of revenue). This is equivalent to 0.2% of 2021 revenue.

Scoping We have performed full scope audits or audit of specified account balances of seven components which

contribute 96% of the group’s revenue and 98% of the group’s profit before tax.

Significant changes

in our approach

We have amended the basis on which we have determined materiality in the current period in order to

reflect the recovery of the group’s results following the volatility in the prior year as a result of COVID-19.

In FY20 our materiality level was based on revenue as a benchmark, in the current year we have returned

tousing adjusted profit before tax.

In the current year audit, we considered the risk associated with the environmental provision to have

reduced. This is because we have not identified any significant changes or new elements included in

theprovision and management’s process for calculating the provision has improved, therefore it is not

included as a key audit matter.

132 Annual Report and Accounts 2021 Elementis plc

4. Conclusions relating to going concern

In auditing the financial statements, we have concluded that

thedirectors’ use of the going concern basis of accounting

inthepreparation of the financial statements is appropriate.

Our evaluation of the directors’ assessment of the group’s and

parent company’s ability to continue to adopt the going concern

basis of accounting included:

– evaluating the group’s financing facilities including the nature

of facilities, repayment terms and covenants including the

re-tightening of the net debt to EBITDA ratio covenant for the

2022 measurement periods onwards. Further information is

set out on page 63 of the annual report;

– recalculating and assessing of the amount of forecast

headroom on the loan covenants;

– evaluating the reverse stress test prepared by management

and performing a sensitivity analysis to consider specific

scenarios, including a reduction in revenue and associated

profits; and

– assessing the cash flow model used to prepare the going

concern forecast, testing of clerical accuracy of the model

andour assessment of the historical accuracy of forecasts

prepared by management.

Based on the work we have performed, we have not identified

anymaterial uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the

group’s and parent company’s ability to continue as a going

concern for a period of at least twelve months from when the

financial statements were authorised for issue.

In relation to the reporting on how the group has applied the

UKCorporate Governance Code, we have nothing material to

addor draw attention to in relation to the directors’ statement in

the financial statements about whether the directors considered

itappropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with

respect to going concern are described in the relevant sections

ofthis report.

5. Key audit matters

Key audit matters are those matters that, in our professional

judgement, were of most significance in our audit of the financial

statements of the current period and include the most significant

assessed risks of material misstatement (whether or not due to

fraud) that we identified. These matters included those which had

the greatest effect on: the overall audit strategy, the allocation

ofresources in the audit; and directing the efforts of the

engagement team.

These matters were addressed in the context of our audit

ofthefinancial statements as a whole, and in forming our

opinionthereon, and we do not provide a separate opinion

onthese matters.

5.1. Impairment of Goodwill and intangible assets in relation to the Talc CGU

Key audit matter

description

The financial performance of the Talc CGU has been below that forecast by management in 2020.

Talc business performance in 2021 and the future forecast have been impacted by the slowdown in

theautomotive industry, and by increasing distribution and supply chain costs. Management recognised

an impairment charge of $53.1m in relation to the goodwill of the Talc CGU as at 31 December 2021.

As described in note 1 to the financial statements, the annual impairment review involves judgement in

relation to forecasting future cash flows. At the planning stage of our audit, we identified the Talc CGU as

being sensitive to variations in future forecast cash flows and we identified the forecast revenue growth

inthe short-term and growth in the levels of contribution margins as key assumptions which could be

manipulated due to fraud.

Management has highlighted impairment of goodwill as a key source of estimation uncertainty in

note1and provided disclosure on the sensitivity of the Talc CGU to reasonably possible changes in key

assumptions in note 10. This significant judgement area is also referred to within the Audit Committee

report on page 98.

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How the scope of our

audit responded to the

key audit matter

Our procedures included:

– Gaining an understanding of the Group and Talc management’s process for developing the short-term

cash flow assumptions and the relevant controls mitigating the risks identified in the impairment process;

– Performing sensitivity analysis to identify the key assumptions that have a significant effect on the model;

– Challenging the period over which the model has been prepared both for the 5 year forecast period and

70 year long term growth period;

– Meeting with Talc management to understand and challenge the revenue growth forecasts and the

reasons for the changes to the forecasts in the current year;

– Challenging the key assumptions underpinning management’s forecast revenue and contribution margin

growth, including by reference to past actual performance and available third party evidence;

– Considering available market data to assess and challenge the forecast sales volume increases and

longer term growth rates;

– Considering the impact of different scenarios should the forecast levels of revenue growth not

beachieved, including assessment of what costs have been modelled that are directly linked to the

revenue growth;

– Considering and assessing the impact of contradictory evidence in relation to the expected

performance of the CGU;

– Assessing the historical accuracy of forecasts by comparing the current period actual trading

performance against the FY21 planned expectations;

– Involving our internal valuation specialists to challenge the discount rate applied; this was done by

obtaining the underlying data used in the calculation and benchmarking it against market data and

comparable organisations, and by evaluating the underlying process used to determine the risk adjusted

cash flow projections;

– Checking the integrity of the impairment models through testing of the mathematical accuracy,

checking the application of the input assumptions and testing its compliance with IAS 36; and

– Assessing the appropriateness of the reasonable possible change and sensitivity disclosures included

by management in note 10 to the financial statements, challenging management’s choice regarding the

assumptions to be sensitised, and re-performing the underpinning calculations.

Key observations We are satisfied that management’s conclusion that an impairment charge of $53.1m is appropriate.

We consider the disclosure in the judgements and estimates section of note 1 provided concerning the

impairment of assets in the Talc CGU together with the reasonable possible change sensitivity provided

innote 10 to be appropriate.

We identified a control deficiency which we have separately reported to the Audit Committee on the

precision of the management review controls.

5.2. Revenue recognition in relation to cut off

Key audit matter

description

At the year end, manual adjustments are made by management for goods which have been despatched

butwhere, under the terms of sale, the control of the goods has yet to pass to the customer; this is done

because the Group’s systems record revenue on despatch. Management determines the point at which

theperformance obligation has been fulfilled based on different shipping terms and estimates the delivery

times to the point at which control passes to the customer. The Group trades globally and a change in the

number ofdays estimated for shipments to transfer to the customer can have a material impact on the cut

off adjustment. Additionally there is a greater risk that management has not considered delays caused by

difficulties in securing shipments due to supply chain constraints in their assumptions around the delivery

times. This could potentially result in revenue being recorded in the incorrect period.

Given the level of management judgement involved, we have also identified this key audit matter as a

potential fraud risk.

The accounting policy is described in note 1 where this is also included as a critical accounting judgement.

These significant judgement areas are also referred to within the Audit Committee report on page 98.

134 Annual Report and Accounts 2021 Elementis plc

How the scope of our

audit responded to the

key audit matter

Our procedures included:

– Obtaining an understanding of the relevant controls over the revenue cutoff;

– Reviewing and assessing the commercial arrangements, to determine the correct point of revenue

recognition for different shipping arrangements and agreements with customers;

– Selecting a sample of international shipments made pre-year end for time periods varying by destination

port and therefore transit time for shipments and agreeing these to invoice, shipment and order details

and goods receipt notes;

– Assessing whether the current economic environment impacted by COVID-19 and logistics constraints

have a specific impact on cut off;

– Engaging our data analytics team to assess the accuracy and formulae of management’s cut off calculations;

– Challenging management’s assumptions used in their cut off calculation for reasonableness and

consistency and substantively testing of international shipments both pre and post year-end; and

– Testing a sample of post year end credit notes raised to determine if revenue was inappropriately

recognised in 2021.

Key observations We are satisfied that management have completed appropriate cut off adjustments at the year end to take into

account those sales where control has not transferred.

6. Our application of materiality

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions

of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work

and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements Parent Company financial statements

Materiality $2.8 million (2020: $3.0 million) $1.4 million (2020: $1.2 million)

Basis for determining

materiality

Materiality was set on the basis of 5% of

forecastadjusted profit before tax (“adjusted

PBT”) (2020: 0.4% of revenue). This is equivalent

to0.2%of 2021 revenue.

A factor of 3% of net assets was used capped

toanappropriate component materiality of 50%

(2020: 40%) of Group materiality.

Rationale for the

benchmark applied

We have considered the users of the financial

statements when selecting the appropriate

benchmark. Earnings based metrics tend to be

ofmore interest to the analyst and investor-based

communities. Adjusted profit before tax is a

suitable measurement for profit orientated entities.

We have amended the basis on which we have

determined materiality in the current period in

orderto reflect the recovery of the Group’s results

following the volatility in the prior year earnings

ofthe Group as a result of COVID-19. In FY20

ourmateriality level was based on revenue as a

benchmark; in the current year we have returned

tousing adjusted profit before tax.

We have used net assets in determining

materiality as we believe this is an appropriate

basis for materiality as it reflects the nature of

theparent company as a holding company and

itscontribution to the Group performance.

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6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected

misstatements exceed the materiality for the financial statements as a whole.

Group financial statements Parent Company financial statements

Performance

materiality

60% (2020: 60%) of group materiality 60% (2020: 60%) of parent company materiality

Basis and rationale

fordetermining

performance

materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,

uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole.

In determining performance materiality, we considered our past experience of the group and our risk

assessment, including our assessment of the group’s overall control environment. A number of control

deficiencies were identified for the years ended 31 December 2020 and 2021, which were reported to the

Audit Committee.

In determining performance materiality for the current year, we therefore considered the value and number

ofcorrected and uncorrected misstatements in the previous year, as well as the likelihood of these recurring

in the current year. Further discussion regarding the control environment is included in section 7.2.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of $140,000 (2020: $150,000), as

well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee

on disclosure matters that we identified when assessing the overall presentation of the financial statements.

7. An overview of the scope of our audit

7.1. Identification and scoping of components

There are eight components for the 2021 year end audit (2020:

eight), of which the first five below are significant to the Group:

– the Talc operation in Netherlands and Finland;

– the Chromium operations in the US;

– the Chromium operations in the UK;

– the Specialty products operations in the US;

– the Specialty products operations in the UK;

– the Specialty products operations in Taiwan;

– the Specialty products operations in China; and

– the Specialty products operations in Germany.

Seven of these locations were subject to full scope audits or

audits of specified accounts balances and Speciality products

operations in Germany was subject to review procedures.

Our audit work on the eight components was executed at levels of

performance materiality applicable to each individual entity which

were lower than Group materiality and ranged from $1.2 million to

$0.8 million (2020: $1.1 million to $0.9 million).

The in-scope locations represent the principal business units

within the Group’s operating divisions and account for 96%

(2020: 93%) of the Group’s revenue and 98% (2020: 89%) of

theGroup’s profit/(loss) before tax.

At the parent entity level we also tested the consolidation process

and carried out analytical procedures to confirm our conclusion

that there were no significant risks of material misstatement of the

aggregated financial information of the remaining components not

subject to audit or audit of specified account balances. The parent

company is located in the UK and is audited directly by the Group

audit team.

7.2. Our consideration of the control environment

Our audit for the prior period identified a number of control

deficiencies. The nature of these deficiencies primarily related to

theprecision of controls around inventory management within the

Chromium division; the recognition of deferred and current taxation;

the preparation of the goodwill impairment models used and the

precision of the management review controls of those models; and

user access and segregation of duties within the ITsystems.

During the current year audit, we noted that actions have been

initiated and in some cases fully implemented by management to

address the deficiencies previously identified. However a number

of deficiencies remain as at the year end, in particular the precision

of the management review controls of the goodwill impairment

models and a number of issues relating to user access and

segregation of duties within the IT systems. As such, we

extendedthe scope of our substantive procedures in response

tothe identified deficiencies and did not place reliance controls.

As described in the Internal controls and risk management

section of pages 99-100, the Audit Committee will continue to

oversee the actions taken to remediate the control observations.

7.3. Our consideration of climate-related risks

Climate change and the transition to a low carbon economy

(“climate change”) were considered in our audit where they have

the potential to directly or indirectly impact key judgements and

estimates within the financial statements. The Group continues to

develop its assessment of the potential impacts of climate change,

as explained in the Chief Executive Officer’s review within the

strategic report on page 6. Climate risks have the potential to

materially impact the key judgements and estimates within the

financial statements. Our audit considered those risks that could

be material to the key judgements and estimates in the assessment

of the carrying value of non-current assets and environmental

provisions. The key judgements and estimates included in the

financial statements incorporate actions and strategies, to the

extent they have been approved and can be reliably estimated

inaccordance with the Group’s accounting policies. We also

considered whether information included in the climate related

disclosures in the Annual Report were consistent with our

understanding of the business and the financial statements.

136 Annual Report and Accounts 2021 Elementis plc

7.4. Working with other auditors

The Group audit was conducted exclusively by a global network of

Deloitte member firms under the direction and supervision of the UK

Group audit team, with exception of Speciality UK and Chromium UK

operations where the Group audit team performed the audit without

the involvement of a component team. Component auditors were

assigned to perform audit procedures in line with the scoping of the

respective components within their jurisdiction. For the Group audit,

the component auditors focused on components classified for full

scope and specified audit procedures. Further work was performed

at a Group level over the consolidation and components not in scope.

Dedicated members of the Group audit team were assigned to each

component to facilitate an effective and consistent approach to

component oversight.

The planned programme which we designed as part of our

involvement in the component auditor’s work was delivered over

the course of the Group audit. The extent of our involvement

which commenced from the planning phase included:

– Setting the scope of the component auditor and assessment

ofthe component auditor’s independence.

– Designing the audit procedures for all significant risks to be

addressed by the component auditors and issuing Group

audit instructions detailing the nature and form of the

reporting required by the Group engagement team.

In response to the COVID-19 pandemic, which limited our ability

tomake component visits, more frequent calls were held between

the Group and component teams and our procedures included,

where appropriate, providing direction on enquiries made by the

component auditors through online and telephone conversations,

areview of each component auditor’s engagement file by a

seniormember of the Group audit team and Group team virtual

attendance at local component audit close meetings. Given the

pandemic, the majority of our audit was performed under a remote

working environment, with the only component visits performed at

US and Netherland sites. Throughout this time, we increased the

frequency of our meetings with the component teams and with

management to ensure progress. We were able to perform our

procedures without needing to make substantial changes to

ourplanned approach.

8. Other information

The other information comprises the information included in

theannual report, other than the financial statements and our

auditor’s report thereon. The directors are responsible for the

other information contained within the annual report.

Our opinion on the financial statements does not cover the

otherinformation and, except to the extent otherwise explicitly

stated in our report, we do not express any form of assurance

conclusion thereon.

Our responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent with

the financial statements or our knowledge obtained in the course of

the audit, or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material

misstatements, we are required to determine whether this gives rise

to a material misstatement in the financial statements themselves.

If, based on the work we have performed, we conclude that there

is a material misstatement of this other information, we are

required to report that fact.

We have nothing to report in this regard.

9. Responsibilities of directors

As explained more fully in the directors’ responsibilities statement,

the directors are responsible for the preparation of the financial

statements and for being satisfied that they give a true and fair

view, and for such internal control as the directors determine is

necessary to enable the preparation of financial statements that

are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible

for assessing the group’s and the parent company’s ability to

continue as a going concern, disclosing as applicable, matters

related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the group

or the parent company or to cease operations, or have no realistic

alternative but to do so.

10. Auditor’s responsibilities for the audit of

the financial statements

Our objectives are to obtain reasonable assurance about whetherthe

financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report

thatincludes our opinion. Reasonable assurance is a high level

ofassurance, but is not a guarantee that an audit conducted in

accordance with ISAs (UK) will always detect a material misstatement

when it exists. Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they could

reasonably be expected to influence the economic decisions of

users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of

thefinancial statements is located on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms

partof our auditor’s report.

11. Extent to which the audit was considered

capable of detecting irregularities,

including fraud

Irregularities, including fraud, are instances of non-compliance with laws

and regulations. We design procedures in line with our responsibilities,

outlined above, to detect material misstatements in respect of

irregularities, including fraud. The extent to which our procedures are

capable of detecting irregularities, including fraud is detailed below.

11.1. Identifying and assessing potential risks related

toirregularities

In identifying and assessing risks of material misstatement in

respect of irregularities, including fraud and non-compliance with

laws and regulations, we considered the following:

– the nature of the industry and sector, control environment and

business performance including the design of the group’s

remuneration policies, key drivers for directors’ remuneration,

bonus levels and performance targets;

– results of our enquiries of management internal audit and the

audit committee about their own identification and

assessment of the risks of irregularities;

– any matters we identified having obtained and reviewed the Group’s

documentation of their policies and procedures relating to:

– identifying, evaluating and complying with laws and

regulations and whether they were aware of any instances

of non-compliance;

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– detecting and responding to the risks of fraud and

whether they have knowledge of any actual, suspected

oralleged fraud;

– the internal controls established to mitigate risks of fraud

or non-compliance with laws and regulations;

– the matters discussed among the audit engagement team

including significant component audit teams and relevant

internal specialists, including tax, pensions, IT, financial

instruments, valuation, environmental and IT specialists

regarding how and where fraud might occur in the financial

statements and any potential indicators of fraud.

As a result of these procedures, we considered the opportunities

and incentives that may exist within the organisation for fraud and

identified the greatest potential for fraud in the following areas:

impairment of goodwill and intangibles for the Talc cash generating

unit and revenue cut off. In common with all audits under ISAs (UK),

we are also required to perform specific procedures to respond

tothe risk of management override.

We also obtained an understanding of the legal and regulatory

framework that the Group operates in, focusing on provisions of those

laws and regulations that had a direct effect on the determination of

material amounts and disclosures in the financial statements. The key

laws and regulations we considered in this context included the UK

Companies Act, pensions legislation, and tax legislation.

In addition, we considered provisions of other laws and regulations that

do not have a direct effect on the financial statements but compliance

with which may be fundamental to the group’s ability to operate or to

avoid a material penalty which included environmental regulations.

11.2. Audit response to risks identified

As a result of performing the above, we identified impairment of

goodwill and intangibles for the Talc cash generating unit and revenue

recognition cut off as key audit matters related to the potential risk

offraud or non-compliance with laws and regulations. The key audit

matters section of our report explains the matters in more detail and

also describes the specific procedures we performed in response

tothose key audit matters.

In addition to the above, our procedures to respond to risks

identified included the following:

– reviewing the financial statement disclosures and testing

tosupporting documentation to assess compliance with

provisions of relevant laws and regulations described as

havinga direct effect on the financial statements;

– enquiring of management, the audit committee and in-house legal

counsel concerning actual and potential litigation and claims;

– performing analytical procedures to identify any unusual or

unexpected relationships that may indicate risks of material

misstatement due to fraud;

– reading minutes of meetings of those charged with governance,

reviewing internal audit reports and reviewing correspondence

with HMRC and environmental regulators; and

– in addressing the risk of fraud through management override of

controls, testing the appropriateness of journal entries and other

adjustments; assessing whether the judgements made in making

accounting estimates are indicative of a potential bias; and

evaluating the business rationale of any significant transactions

that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations

and potential fraud risks to all engagement team members

including internal specialists and significant component audit

teams, and remained alert to any indications of fraud or non-

compliance with laws and regulations throughout the audit.

Report on other legal and

regulatory requirements

12. Opinions on other matters prescribed

bytheCompanies Act 2006

In our opinion the part of the directors’ remuneration report to

beaudited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of

theaudit:

– the information given in the strategic report and the directors’

report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

– the strategic report and the directors’ report have been

prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and

the parent company and their environment obtained in the course

of the audit, we have not identified any material misstatements in

the strategic report or the directors’ report.

13. Corporate Governance Statement

The Listing Rules require us to review the directors’ statement

inrelation to going concern, longer-term viability and that part

ofthe Corporate Governance Statement relating to the Group’s

compliance with the provisions of the UK Corporate Governance

Code specified for our review.

Based on the work undertaken as part of our audit, we have

concluded that each of the following elements of the Corporate

Governance Statement is materially consistent with the financial

statements and our knowledge obtained during the audit:

– the directors’ statement with regards to the appropriateness

of adopting the going concern basis of accounting and any

material uncertainties identified set out on page 73;

– the directors’ explanation as to its assessment of the Group’s

prospects, the period this assessment covers and why the

period is appropriate set out on page 73;

– the directors’ statement on fair, balanced and understandable

set out on page 131;

– the board’s confirmation that it has carried out a robust

assessment of the emerging and principal risks set out on

pages 66-67;

– the section of the annual report that describes the review

ofeffectiveness of risk management and internal control

systems set out on page 67; and

– the section describing the work of the audit committee set out

on pages 97-98.

138 Annual Report and Accounts 2021 Elementis plc

14. Matters on which we are required to report

by exception

14.1. Adequacy of explanations received and

accountingrecords

Under the Companies Act 2006 we are required to report to you if,

in our opinion:

– we have not received all the information and explanations we

require for our audit; or

– adequate accounting records have not been kept by the

parent company, or returns adequate for our audit have not

been received from branches not visited by us; or

– the parent company financial statements are not in agreement

with the accounting records and returns.

We have nothing to report in respect of these matters.

14.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if

inour opinion certain disclosures of directors’ remuneration have

not been made or the part of the directors’ remuneration report

tobe audited is not in agreement with the accounting records

andreturns.

We have nothing to report in respect of these matters.

15. Other matters which we are required

toaddress

15.1. Auditor tenure

Following the recommendation of the audit committee, we were

appointed by the Board on 27 April 2016 to audit the financial

statements for the year ending 31 December 2016 and

subsequent financial periods. The period of total uninterrupted

engagement including previous renewals and reappointments of

the firm is six years, covering the years ending 31 December 2016

to 31 December 2021.

15.2. Consistency of the audit report with the additional

report to the audit committee

Our audit opinion is consistent with the additional report to the

audit committee we are required to provide in accordance with

ISAs (UK).

16. Use of our report

This report is made solely to the company’s members, as a body,

in accordance with Chapter 3 of Part 16 of the Companies Act

2006. Our audit work has been undertaken so that we might state

to the company’s members those matters we are required to state

to them in an auditor’s report and for no other purpose. To the

fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the company and the

company’s members as a body, for our audit work, for this report,

or for the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure

Guidance and Transparency Rule (DTR) 4.1.14R, these financial

statements form part of the European Single Electronic Format

(ESEF) prepared Annual Financial Report filed on the National

Storage Mechanism of the UK FCA in accordance with the ESEF

Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report

provides no assurance over whether the annual financial report

has been prepared using the single electronic format specified in

the ESEF RTS.

Lee Welham FCA (Senior Statutory Auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

Cambridge, United Kingdom

3 March 2022

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Financial statements

Consolidated income statement

For the year ended 31 December 2021

Note

2021

2020

Revenue 2 880.1 751.3

Cost of sales (545.2) (494.0)

Gross profit 334.9 257.3

Distribution costs (151.9) (112.6)

Administrative expenses (156.6) (172.9)

Operating profit/(loss) 2 26.4 (28.2)

(Loss)/profit on disposal 32 (1.7) 0.3

Other expenses

25 (2.1) (1.6)

Finance income 3 11.0 0.3

Finance costs 4 (27.8) (39.6)

Profit/(loss) before income tax 5.8 (68.8)

Tax 6 (3.3) 1.8

Profit/(loss) for the year 2.5 (67.0)

Attributable to:

Equity holders of the parent 2.5 (67.0)

Earnings per share

Basic earnings/(loss) (cents) 9 0.4 (11.5)

Diluted earnings/(loss) (cents) 9 0.4 (11.3)

1 Other expenses comprise administration expenses for the Group’s pension schemes.

Consolidated statement of comprehensive income

For the year ended 31 December 2021

2021

2020

Profit/(loss) for the year 2.5 (67.0)

Other comprehensive income:

Items that will not be reclassified subsequently to profit and loss:

Remeasurements of retirement benefit obligations 63.5 (0.3)

Deferred tax associated with retirement benefit obligations (14.6) (0.3)

Items that may be reclassified subsequently to profit and loss:

Exchange differences on translation of foreign operations (29.1) 25.0

Effective portion of change in fair value of net investment hedge 10.7 (3.6)

Tax associated with change in fair value of net investment hedge 1.8 –

Tax associated with changes in cashflow hedges (0.4) –

Recycling of deferred foreign exchange gains) on disposal (0.4) (0.2)

Effective portion of changes in fair value of cash flow hedges (0.1) (1.4)

Fair value of cash flow hedges transferred to income statement 2.7 0.9

Exchange differences on translation of share options reserves – (2.7)

Other comprehensive income/(loss) 34.1 17.4

Total comprehensive income/(loss) for the year 36.6 (49.6)

Attributable to:

Equity holders of the parent 36.6 (49.6)

Total comprehensive income/(loss) for the year 36.6 (49.6)

140 Annual Report and Accounts 2021 Elementis plc

Financial statements

Consolidated balance sheet

As at 31 December 2021

Note

2021

31 December

2020

31 December

Non-current assets

Goodwill and other intangible assets 10 815.7 892.6

Property, plant and equipment 11 499.7 516.0

Tax recoverable 30 19.7 –

ACT recoverable 16 – 0.6

Deferred tax assets 16 28.0 26.3

Net retirement benefit surplus 25 56.6 7.9

Total non-current assets 1,419.7 1,443.4

Current assets

Inventories 12 186.1 164.3

Trade and other receivables 13 138.9 108.3

Derivative financial instruments 21 0.2 1.4

Current tax assets 7.1 7.2

Cash and cash equivalents 20 84.6 111.0

Total current assets 416.9 392.2

Total assets 1,836.6 1,835.6

Current liabilities

Bank overdrafts and loans 19 – (3.7)

Trade and other payables 14 (161.0) (132.6)

Financial liabilities 21 (1.4) (17.3)

Current tax liabilities (17.4) (23.2)

Lease liabilities 24 (6.4) (7.2)

Provisions 15 (8.7) (9.6)

Total current liabilities (194.9) (193.6)

Non-current liabilities

Loans and borrowings 21 (482.5) (510.6)

Retirement benefit obligations 25 (17.3) (28.1)

Deferred tax liabilities 16 (150.0) (143.1)

Lease liabilities 24 (33.8) (37.2)

Provisions 15 (53.1) (49.2)

Financial liabilities 21 (4.0) (13.4)

Total non-current liabilities (740.7) (781.6)

Total liabilities (935.6) (975.2)

Net assets 901.0 860.4

Equity

Share capital 17 52.2 52.1

Share premium 240.8 237.7

Other reserves 18 90.7 108.6

Retained earnings 517.3 462.0

Total equity attributable to equity holders of the parent 901.0 860.4

Total equity 901.0 860.4

The financial statements on pages 140 to 184 were approved by the Board on 3 March 2022 and signed on its behalf by:

Paul Waterman Ralph Hewins

CEO CFO

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Strategic report Corporate governance Financial statements Shareholder information

Share capital

premium

Translation

reserve

Hedging

reserve

Other

reserves

Retained

earnings

Total equity

Balance at 1 January 2020 52.1 237.7 (69.0) (8.4) 168.5 525.3 906.2

Comprehensive income

Loss for the year – – – – – (67.0) (67.0)

Other comprehensive income:

Exchange differences – – 21.4 – (2.7) – 18.7

Recycling of deferred foreign exchange losses

on disposal – – (0.2) – – – (0.2)

Fair value of cash flow hedges transferred to the

income statement – – – 0.9 – – 0.9

Effective portion of changes in fair value of cash

flow hedges – – – (1.4) – – (1.4)

Remeasurements of retirement benefit

obligations – – (1.1) – – 0.8 (0.3)

Deferred tax adjustment on pension scheme

deficit – – – – – (0.3) (0.3)

Transfer – – – – (2.9) 2.9 –

Total other comprehensive income/(loss) – – 20.1 (0.5) (5.6) 3.4 17.4

Total comprehensive income/(loss) – – 20.1 (0.5) (5.6) (63.6) (49.6)

Transactions with owners:

Issue of shares by the Company – – – – – 0.2 0.2

Share based payments – – – – 3.5 – 3.5

Deferred tax on share based payments

recognised within equity – – – – – 0.1 0.1

Total transactions with owners – – – – 3.5 0.3 3.8

Balance at 31 December 2020 52.1 237.7 (48.9) (8.9) 166.4 462.0 860.4

Balance at 1 January 2021 52.1 237.7 (48.9) (8.9) 166.4 462.0 860.4

Comprehensive income

Profit for the year – – – – – 2.5 2.5

Other comprehensive income:

Exchange differences – – (18.4) – – – (18.4)

Recycling of deferred foreign exchange gains on

disposal – – (0.4) – – – (0.4)

Fair value of cash flow hedges transferred to the

income statement – – – 2.7 – – 2.7

Effective portion of changes in fair value of cash

flow hedges – – – (0.1) – – (0.1)

Tax associated with changes in cashflow hedges (0.4) (0.4)

Tax associated with change in fair value of net

investment hedge – – – – – 1.8 1.8

Remeasurements of retirement benefit

obligations – – – – – 63.5 63.5

Deferred tax adjustment on pension scheme

deficit – – – – – (14.6) (14.6)

Transfer – – – – (1.4) 1.4 –

Total other comprehensive income/(loss) – – (18.8) 2.6 (1.4) 51.7 34.1

Total comprehensive income/(loss) – – (18.8) 2.6 (1.4) 54.2 36.6

Transactions with owners:

Issue of shares by the Company 0.1 3.1 – – (3.1) – 0.1

Deferred tax on share based payments

recognised within equity – – – – – 1.1 1.1

Share based payments – – – – 5.1 – 5.1

Fair value of cash flow hedges transferred to net

assets – – – (2.3) – – (2.3)

Total transactions with owners 0.1 3.1 – (2.3) 2.0 1.1 4.0

Balance at 31 December 2021 52.2 240.8 (67.7) (8.6) 167.0 517.3 901.0

Financial statements

Consolidated statement of changes in equity

For the year ended 31 December 2021

142 Annual Report and Accounts 2021 Elementis plc

Consolidated cash flow statement

For the year ended 31 December 2021

Note

2021

2020

Operating activities:

Profit/(loss) for the year 2.5 (67.0)

Adjustments for:

Other expenses 2.1 1.6

Finance income 3 (11.0) (0.3)

Finance costs 4 27.8 39.6

Tax charge 6 3.3 (1.8)

Depreciation and amortisation 7 68.3 66.7

Impairment loss on property, plant and equipment 11 – 11.7

(Decrease)/increase in provisions and financial liabilities 0.8 3.7

Pension payments net of current service cost 25 (0.1) 1.1

Share based payments expense 26 5.1 3.5

Impairment of goodwill 52.3 60.3

Loss/(profit) on disposal of business 32 1.7 (0.3)

Operating cash flow before movement in working capital 152.8 118.8

(Increase)/decrease in inventories (24.2) 7.8

(Increase)/decrease in trade and other receivables (33.8) 13.3

(Increase)/decrease in trade and other payables 26.3 (0.6)

Cash generated by operations 121.1 139.3

Income taxes paid (30.9) (8.5)

Interest paid 4 (23.5) (23.7)

Net cash flow from operating activities 66.7 107.1

Investing activities:

Interest received 3 0.3 0.3

Disposal of property, plant and equipment 0.7 1.8

Purchase of property, plant and equipment (52.7) (41.5)

Purchase of business 33 (0.2) –

Disposal of business 32 0.5 0.5

Acquisition of intangible assets (0.4) (0.3)

Contingent consideration paid 21 (13.2) –

Net cash flow from investing activities (65.0) (39.2)

Financing activities:

Issue of shares by the Company and the ESOT net of issue costs 0.1 0.1

Outflow of cancelled dividend hedge – (1.8)

Net movement on existing debt (18.7) (56.3)

Payment of lease liabilities (6.7) (6.7)

Net cash used in financing activities (25.3) (64.7)

Net (decrease)/increase in cash and cash equivalents (23.6) 3.2

Cash and cash equivalents at 1 January 111.0 103.9

Foreign exchange on cash and cash equivalents (2.8) 3.9

Cash and cash equivalents at 31 December 20 84.6 111.0

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Strategic report Corporate governance Financial statements Shareholder information

Financial statements

Notes to the consolidated financial statements

For the year ended 31 December 2021

1. Accounting policies

Elementis plc is a public company limited by shares incorporated

and domiciled in England and is the parent company of the Group.

The address of its registered office is Caroline House, 55-57 High

Holborn, London WC1V 6DX. The Group financial statements have

been prepared and approved by the Directors in accordance with

International Financial Reporting Standards as adopted by the UK

(‘adopted IFRS’). The Company has elected to prepare its parent

company financial statements in accordance with FRS 101.

These are presented on pages 175 to 182.

Basis of preparation

The financial statements have been prepared in accordance

withinternational accounting standards in conformity with the

requirements of the Companies Act 2006 and International

Financial Reporting Standards as issued by the IASB.

The financial statements have been prepared on the historical

cost basis except that derivative financial instruments are stated

at their fair value. The preparation of financial statements requires

the application of estimates andjudgements that affect the

reported amounts of assets andliabilities, revenues and costs

andrelated disclosures at the balance sheet date.

The financial statements have been prepared on a going concern

basis. The rationale for adopting this basis is discussed in the

Directors’ report on page 116.

Reporting currency

As a consequence of the majority of the Group’s sales and

earnings originating in US dollars or US dollar linked currencies,

the Group has chosen the US dollar as its presentational currency.

This aligns the Group’s external reporting with the profile of the

Group, as well as with internal management reporting.

The functional currency of the parent is pounds sterling.

Critical accounting judgements and key sources of

estimation uncertainty

When applying the Group’s accounting policies, management

must make a number of key judgements on the application of

applicable accounting standards and estimates and assumptions

concerning the carrying amounts of assets and liabilities that are

not readily apparent from other sources. These estimates and

judgements are based on factors considered to be relevant,

including historical experience, which may differ significantly from

the actual outcome. The key assumptions concerning the future

and other key sources of estimation uncertainty that have a

significant risk of causing a material adjustment to the amounts

recognised in the financial statements within the next year are

discussed below. The development of the estimates and

disclosures related to each of these matters has been

discussedby the Audit Committee.

Critical accounting judgements

The following is the sole critical judgement, (as opposed to those

involving estimations which are dealt with separately below), that

the Directors have made in the process of applying the Group’s

accounting policies that has significant effect on the amounts

recognised in the financial statements. Where relevant and

practicable, sensitivity analyses are disclosed in the relevant

notes to demonstrate the impact of changes in estimates or

assumptions used.

Revenue recognition

Judgement is exercised over how to determine the timing

ofrevenue recognition for orders where the agreed terms are

deliveryto the destination point. The Group has compiled shipping

estimates based on the destination country which are used to

inform the timing of revenue recognition. In compiling these

estimates management have used past experience and carrier

standard shipping estimates to inform their decision making.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key

sources of estimation uncertainty at the reporting period that may

have a significant risk of causing a material misstatement to the

carrying amounts of assets and liabilities within the next financial

year, are discussed below.

a. Environmental provisions

Provisions for environmental restoration are recognised where: the

Group has a present legal or constructive obligation as a result of past

events; it is probable that an outflow of resources will be required

tosettle the obligation; and the amount can be estimated reliably.

Environmental provisions are measured at the present value of

theexpenditures expected to be required to settle the obligation

using apre-tax discount rate that reflects current market

assessments ofthe time value of money and the risks specific

totheobligation. Due to the long time horizons over which costs

areanticipated, small changes in recurring annual cash outflows can

have a significant cumulative impact on the total provision required.

At 31 December 2021 the carrying value of environmental provisions

was $58.7m. Further details of these provisions and a sensitivity

assessment aregiven in Note 15.

b. Valuation of a defined benefit pension obligation

The key estimates made in relation to defined benefit pensions

relate to the discount rate used to determine the present value

offuture benefit, the rate of inflation applied to plan assets,

mortality rates and rates of salary growth. At 31 December 2021

the UK scheme, the largest of the Group’s retirement plans, had a

surplus of $56.6m whilst the US and other schemes were in a net

deficit position of $17.3m in aggregate. Further details of

pensions and a sensitivity analysis are given inNote 25.

c. Impairment testing of goodwill in Talc cash generating unit

(“CGU”)

Each year the Group carries out impairment tests of goodwill

which require estimates to be made of the value in use of the

cashgenerating units to which it is allocated. These value in use

calculations are dependent on estimates of future cash flows,

long-term growth rates and appropriate discount rates to be

applied to future cash flows.

144 Annual Report and Accounts 2021 Elementis plc

During the year ended 31 December 2021, a full impairment

review was performed and an impairment charge of $53.1 million

was recorded in respect of the goodwill held in the Talc CGU.

At 31 December 2021, goodwill and other intangible assets in the

Talc CGU had a carrying value of $130.3 million, and no further

impairment charge was required. Should the business experience

further unforeseen deterioration of results or were there to be an

increase in the pre-tax discount rate a future impairment may be

required for these assets. Further details and sensitivity

disclosures are included in Note 10.

Basis of consolidation

The consolidated financial statements include the financial

statements of the Company and its subsidiaries for the year.

Subsidiaries are all entities (including structured entities) over which

the Group has control. The Group controls an entity when theGroup

is exposed to, or has rights to, variable returns from itsinvolvement

with the entity and has the ability to affect those returns through

its power over the entity. Subsidiaries are fully consolidated from

the date on which control is transferred to the Group. They are

deconsolidated from the date on which that control ceases.

The Group applies the acquisition method to account for business

combinations. The consideration transferred for the acquisition

ofasubsidiary is the fair value of the assets transferred, the

liabilities incurred to the former owners of the acquiree, and the

equity interests issued by the Group. The consideration transferred

includes the fair value of any asset or liability resulting from a

contingent consideration arrangement. Identifiable assets acquired

and liabilities and contingent liabilities assumed in a business

combination are measured initially at their fair value at the

acquisition date. The Group recognises any non-controlling interest

inthe acquiree on an acquisition-by-acquisition basis, either at

fairvalue or at the non-controlling interest’s proportionate share

ofthe recognised amounts of the acquiree’s identifiable net assets.

Acquisition costs are accounted for as an expense in the

periodincurred.

Intragroup balances and any unrealised gains and losses or income

and expenses arising from intragroup transactions, are eliminated in

preparing the consolidated financial statements. Unrealised losses

are eliminated in the same way as unrealised gains, but only to the

extent that there is no evidence of impairment.

A full list of the Group’s subsidiaries is shown in Note 6 of the

parent company financial statements.

Changes in accounting policies

The accounting policies adopted are consistent with those of the

previous financial year.

Foreign currency

a. Foreign currency transactions

Transactions in foreign currencies are translated at the

foreignexchange rate ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies

at the balance sheet date are translated at the foreign exchange

rate ruling at that date. Foreign exchange differences arising on

translation are recognised in the income statement. Non-monetary

assets and liabilities denominated in foreign currencies that are

stated at fair value aretranslated at exchange rates ruling at the

dates the fair value wasdetermined.

b. Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill

and fair value adjustments arising on consolidation, are translated

at exchange rates ruling at the balance sheet date. The revenues and

expenses of foreign operations are translated at the average rates of

exchange ruling for the relevant period. Exchange differences arising

since 1 January 2004 on translation are taken to the translation

reserve. They are recognised in the income statement upon disposal

of the foreign operation. The Group may hedge a portion of the

translation of its overseas net assets through US dollar and euro

borrowings. From 1 January 2005, the Group has elected to apply net

investment hedge accounting for these transactions where possible.

Where hedging is applied, the effective portion of the gain or loss

on an instrument used to hedge a net investment is recognised in

equity. Any ineffective portion of the hedge is recognised in the

income statement.

Property, plant and equipment

Items of property, plant and equipment are stated at cost less

accumulated depreciation and impairment losses. Freehold land is

not depreciated. Leasehold property is depreciated over the period

of the lease. Freehold buildings, plant and machinery, fixtures, fittings

and equipment are depreciated over their estimated useful lives on a

straight line basis. Depreciation methods, useful lives and residual

values are assessed at the reporting date. No depreciation is charged

on assets under construction until the asset is available for use.

Depreciation is charged on a straight-line basis over the estimated

useful economic lives of the assets as follows:

Buildings 10 – 50 years

Plant and machinery 2 – 20 years

Fixtures, fittings and

equipment

2 – 20 years

Right of use assets Shorter of the useful economic life

ofthe asset and the lease term

The cost of replacing part of an item of property, plant and

equipment is recognised in the carrying amount of the item if it is

probable that the future economic benefits embodied within it will

flow to the Group and its cost can be measured reliably. The costs

of the day-to-day servicing of property, plant and equipment are

recognised in the income statement as incurred.

Management regularly considers whether there are any indications

of impairment to carrying values of property, plant and equipment.

Impairment reviews are based on risk adjusted discounted

cashflow projections. Significant judgement is applied to the

assumptions underlying these projections which include estimated

discount rates, growth rates, future selling prices and direct costs.

Changes to these assumptions could have a material impact on

the financial position of the Group and on the result for the year.

Intangible assets

a. Goodwill

Goodwill arises on the acquisition of subsidiaries, and it represents

the excess of the consideration transferred, the amount of any

non-controlling interest in the acquiree and the acquisition-date

fair value of any previous equity interest in the acquiree over the

fair value of the identifiable net assets acquired. If the total of

consideration transferred, non-controlling interest recognised and

previously held interest measured at fair value is less than the fair

value of the net assets of the subsidiary acquired, in the case of

abargain purchase, the difference is recognised directly in the

income statement.

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145

Strategic report Corporate governance Financial statements Shareholder information

1. Accounting policies continued

b. Research and development

Expenditure on pure research is recognised in the income

statement as an expense as incurred. Under IAS 38, expenditure

on development where research findings are applied to a plan

ordesign for the production of new or substantially improved

products and processes is capitalised if the product or process will

give rise to future economic benefits and where the cost of the

capitalised asset can be measured reliably. Expenditure capitalised

is stated as the cost of materials, direct labour and an appropriate

proportion of overheads less accumulated amortisation. The length

of development lifecycles, broad nature of much of the research

undertaken and uncertainty until a late stage as to ultimate

commercial viability of a potential product can mean that the

measurement criteria of IAS 38 regarding the probability of future

economic benefits and the reliability of allocating costs may not

be met, in which case expenditure is expensed as incurred.

c. Customer relationships and other intangible assets

Customer relationships and other intangible assets are stated

atcost or when arising in a business combination, estimated fair

value, less accumulated amortisation.

Intangible assets continued

d. Amortisation

Amortisation is charged to the income statement on a straight

linebasis over the estimated useful lives of intangible assets

through the administrative expenses line item, unless such lives

areindefinite. Goodwill is systematically tested for impairment

eachyear. Other intangible assets, comprising customer lists,

customer relationships, manufacturing processes and procedures,

trademarks, non-compete clauses and patents are amortised

overtheir estimated useful lives which range from 5 to 24 years.

Impairment of non-current non-financial assets

The carrying amount of non-current assets other than deferred

taxis compared to the asset’s recoverable amount at each balance

sheet date where there is an indication of impairment. For goodwill,

assets that have an indefinite useful life and intangible assets that

are not yet available for use, the recoverable amount is estimated

ateach balance sheet date.

Each year the Group carries out impairment tests of its goodwill

andother indefinite life intangible assets which requires an

estimate to be made of the value in use of its cash generating

units(CGUs). These value in use calculations are dependent on

estimates of future cash flows and long term growth rates of the

CGUs. Further details of these estimates are given in Note 10.

An impairment loss is recognised whenever the carrying

amountofan asset or its CGU exceeds its recoverable amount.

Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of CGUs are allocated

firstto reduce the carrying amount of any goodwill allocated to

CGUs and then to reduce the carrying amount of the other assets in

the unit on a pro-rata basis. A CGU is the smallest identifiable group

ofassets that generates cash inflows that are largely independent

ofthe cash inflows from other assets or groups of assets.

The recoverable amount is the greater of their fair value less costs to

sell and value in use. In assessing value in use, the estimated future

cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time

value of money and the risks specific to the asset(s). For an asset that

does not generate largely independent cash inflows, the recoverable

amount is determined for the CGU to which the asset belongs.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

Impairment of financial assets – expected credit losses

The Group applies the IFRS 9 simplified approach to measuring

expected credit losses which uses a lifetime expected loss

allowance for all trade receivables.

To measure the expected credit losses, trade receivables have

been grouped based on shared credit risk characteristics and

thedays past due. The expected loss rates are based on payment

profiles and the corresponding historical credit losses experienced.

The historical loss rates are adjusted to reflect current and forward

looking information in relation to macroeconomic factors that could

affect the ability of customers to settle receivables.

The Group usually considers a financial asset in default when

contractual payments are 120 days past due. In certain cases,

theGroup may also consider a financial asset to be in default

when internal or external information indicates that the Group

isunlikely to receive the outstanding contractual amounts in full

before takinginto account any credit enhancements held by the

Group. A financial asset is written off when there is no reasonable

expectation of recovering the contractual cash flows.

Inventories

Inventories are stated at the lower of cost and net realisable value.

Net realisable value is the estimated selling price, less estimated

costs of completion and selling expenses. Cost, which is based

onaweighted average, includes expenditure incurred in acquiring

stock and bringing it to its existing location and condition. In the

case of manufactured inventories and work in progress, cost

includes an appropriate share of overheads attributable to

manufacture, based on normal operating capacity.

Trade and other receivables

Trade receivables and other receivables are due for payment within

one year and are thus classified as current. They are non-interest

bearing and are stated at their nominal amount which is the original

invoiced amount, less allowance for expected future credit losses.

Estimates of future expected credit losses are informed by

historical experience and management’s expectations of future

economic factors, further information on expected credit loss

impairment is given in the impairment of financial assets

accounting policy. Individual trade receivables are written off

whenmanagement deem them to be nolonger collectable.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call

deposits with an original maturity of three months or less.

Bank overdrafts that are repayable on demand and form an

integral part of the Group’s cash management are included as

acomponent of cash and cash equivalents for the purpose of the

statement of cash flows.

Leases

A lease liability is recognised when the Group obtains control

ofthe right-of-use asset that is the subject of the lease. The lease

liability is subsequently measured using the effective interest

method, with interest charged to finance costs. Right-of-use

assets are generally depreciated over the shorter of the asset’s

useful life and the lease term on a straight-line basis. If the group

is reasonably certain to exercise a purchase option, the right-of-

use asset is depreciated over the underlying asset’s useful life.

146 Annual Report and Accounts 2021 Elementis plc

At inception, the Group evaluates whether it is reasonably certain

that any option to extend a lease term will be exercised or likewise

whether any option to terminate the lease will be exercised.

The Group continues to evaluate the likelihood of exercising

suchoptions throughout the initial lease term. When the Group is

committed to extending or terminating the lease, having considered

the alternative options available and, where appropriate, lessor

consent to the extension or termination has been obtained, the

Group will consider the option to be reasonably certain to be

exercised. When an option is reasonably certain to be exercised,

the right-of-use asset and lease liabilities recognised are adjusted

to reflect the extended or curtailed lease term.

Leases, which at inception have a term of less than 12 months or

relate to low-value assets, are not recognised on balance sheet.

Payments made under such leases are recognised as an expense

inthe income statement on a straight-line basis over the period

ofthelease.

Borrowings

Borrowings are initially measured at cost (which is equal to the fair

value at inception), and are subsequently measured at amortised

cost using the effective interest rate method. Any difference

between the proceeds, net of transaction costs and the settlement

or redemption of borrowings is recognised over the terms of the

borrowings using the effective interest rate method.

Trade and other payables

Trade payables are non-interest bearing borrowings and are

initially measured at fair value and subsequently carried at

amortised cost.

Provisions

A provision is recognised in the balance sheet when the Group has a

present legal or constructive obligation as a result of a past event, and

it is probable that an outflow of economic benefits will be required to

settle the obligation. If the effect is material, provisions are determined

by discounting the expected future cash flows at a pre-tax rate that

reflects current market assessments of the time value of money

and, where appropriate, the risks specific to the liability.

A provision for restructuring is recognised when the Group

hasapproved a detailed and formal restructuring plan, and the

restructuring has either commenced or has been announced

publicly. In accordance with the Group’s environmental policy

andapplicable legal requirements, a provision for site restoration

in respect of contaminated land is recognised when the land is

contaminated. Provisions for environmental issues are judgemental

by their nature, particularly when considering the size and timing

of remediation spending, and more difficult to estimate when they

relate to sites no longer directly controlled by the Group.

Self-insurance provisions relate to personal injury and other

claims from former employees or third parties and represent

theaggregate ofoutstanding claims plus a projection of losses

incurred but not yet reported which together make up the full

liability recognised as a provision. Insurance recoveries are

recognised as a separate reimbursement asset.

Pension and other post retirement benefits

In respect of the Group’s defined benefit schemes, the Group’s

net obligation in respect of defined benefit pension plans is

calculated by estimating the amount of future benefit that

employees have earned in return for their service in the current

and prior periods, that benefit is discounted to determine its

present value, and the fairvalue of any plan assets is deducted.

The liability discount rate isthe yield at the balance sheet date on

AA credit rated bonds thathave maturity dates approximating to

the terms of the Group’s obligations. Pension and post retirement

liabilities are calculated byqualified actuaries using the projected

unit credit method. Following the introduction of the revised IAS

19 Employee Benefits standard, the net interest on the defined

benefit liability consists ofthe interest cost on the defined benefit

obligation and the interest income on plan assets, both calculated

by reference to thediscount rate used to measure the defined

benefit obligation atthe start of the period.

The Group recognises actuarial gains and losses in the period

inwhich they occur through the statement of comprehensive

income. The Group also operates a small number of defined

contribution schemes and the contributions payable during the

year are recognised as incurred. Due to the size of the Group’s

pension scheme assets and liabilities, relatively small changes

inthe assumptions can have a significant impact on the expense

recorded in the income statement and on the pension liability

recorded in the balance sheet.

Share capital

Incremental costs directly attributable to the issue of ordinary

sharesand share options are recognised as a deduction from

equity. When share capital recognised as equity is repurchased,

theamount of the consideration paid, including directly

attributablecosts, is recognised as a deduction from equity.

Shares repurchased by the Company are classified as treasury

shares and are presented as adeduction from total equity.

Derivative financial instruments

The Group uses derivative financial instruments, such as forward

currency contracts, interest rate swaps and commodity swap

contracts, to hedge its foreign currency risks, interest rate risks

andcommodity price risks, respectively. The Group does not

holdor issue derivative financial instruments for speculative

trading purposes. However, derivatives that do not qualify for

hedge accounting are accounted for as trading instruments.

Due to the requirement to assess the effectiveness of hedging

instruments, changes in market conditions can result in the

recognition of unrealised gainsor losses on hedging instruments

inthe income statement.

Derivative financial instruments are recognised initially at fair

value and are shown within derivatives if they are in an asset

position or within financial liabilities if they are in a liability position.

The gain orloss on remeasurement to fair value is recognised

immediately intheincome statement. However, where derivatives

qualify for hedge accounting, recognition of any resultant gain

orloss depends on the nature of the item being hedged.

Derivative financial instruments continued

a. Cash flow hedges

Where a derivative financial instrument is designated as a hedge

ofthe variability in cash flows of a recognised asset or liability,

orahighly probable forecast transaction, the effective part of any

gain or loss on the derivative financial instrument is recognised

directly inthe hedging reserve. Any ineffective portion of the

hedgeis recognised immediately in the income statement.

Annual Report and Accounts 2021Elementis plc

147

Strategic report Corporate governance Financial statements Shareholder information

1. Accounting policies continued

Amounts previously recognised in other comprehensive income

andaccumulated in equity are reclassified to profit and loss in the

periods when the hedged item is recognised in profit or loss, in

the same line of the income statement as the recognised hedged

item. However, when the forecast transaction that is hedged

results inthe recognition of a non-financial asset the gains or

losses previously accumulated in equity are transferred from

equity andincluded in the initial measurement of the cost of

thenon-financial asset.

IBOR reform

The Group has adopted ‘Amendments to IFRS 9, IAS 39 and IFRS7:

Interest rate benchmark reform – Phase 1’, applying the amendments

retrospectively to hedging relationships that existed atthe start of

the prior year or that have been designated thereafter. The interest

rates on which the cash flows of the Group’s USD interest rate swap

derivative financial instruments are based are currently linked to USD

3 month LIBOR, which is expected to cease as a benchmark at the

end of June 2023. The Group’s EUR interest rate swap derivative

financial instruments reference EURIBOR which is not expected to

cease publication. By adopting these amendments, the impact for

the Group is that it does not need to assume any impacts from

LIBOR reform in assessing whether its existing instruments

continue to meet the hedging criteria.

The Group will continue to apply these amendments until the

uncertainty arising from interest rate benchmark reform is no

longer present with respect to the timing and amount of the interest

rate benchmark cash flows. This temporary relief is expected to

cease, on a hedge-by-hedge basis, when the designated hedge

relationship is amended and application ofPhase 2 reliefs begins.

Further information is given in Note 22.

b. Fair value hedges

Where a derivative financial instrument is designated as a hedge of

the variability in a fair value of a recognised asset or liability or an

unrecognised firm commitment, all changes in the fair value of the

derivative are recognised immediately in the income statement.

The carrying value of the hedged item is adjusted by the change

infair value that is attributable to the risk being hedged (even if

itis normally carried at amortised cost) and any gains or losses

onremeasurement are recognised immediately in the income

statement (even if those gains would normally be recognised

directly in reserves).

c. Hedges of a net investment in a foreign operation

The Group designates the foreign exchange gain or loss on

aproportion of the Group’s Euro and US dollar denominated

borrowings as a hedge of the Group’s net investment in foreign

operations. As such the foreign exchange gain or loss on those

borrowings is recognised in other comprehensive income and

accumulated in equity until such time as the operations are

disposed of at which point the corresponding amounts are

recycled to profit or loss.

Termination benefits

Termination benefits are recognised as an expense when the Group

is demonstrably committed, without realistic possibility of withdrawal,

to a formal detailed plan to terminate employment before the normal

retirement date. Termination benefits for voluntary redundancies

are recognised if the Group has made an offer encouraging

voluntary redundancy, it is probable that the offer will be accepted,

and the number of acceptances can be estimated reliably.

Revenue

Revenue is recognised upon transfer of promised goods to

customers (the performance obligation) in an amount that reflects

the consideration the Company expects to receive in exchange

forthose goods. This may occur, depending on the individual

customer relationship, when the product has been transferred to

afreight carrier, when the customer has received the product or,

forconsignment stock held at customers’ premises, when usage

reports for the relevant period have been compiled.

All revenue is from contracts with customers and pertains to the

sale of specialty chemicals products, selling prices are agreed in

advance and hence are directly observable.

The Group’s payment terms offered to customers are within a

certainnumber of days of receipt of invoice and standard contracts

do not include a significant financing component. The Group does

not expect to have any contracts where the period between the

transfer of the promised goods to the customer and payment by

the customer exceeds one year. As a consequence, the Group does

not adjust any of the transaction prices for the time value of money.

Provisions for returns, trade discounts and rebates are recognised as

a reduction in revenue at the later of when revenue is recognised for

the transfer of the related goods and the entity pays or promises to

pay the consideration. The promise to pay rebates is contractually

agreed in advance and thus the point of transferring the goods to

the customer is deemed to be the later of the two circumstances.

Rebates and discounts are estimated using historical data and

experiences with the customers. Returns from customers

arenegligible.

Operating profit

Operating profit includes net profits realised on the sale of tangible

fixed assets, current and long term assets and liabilities but

excludes gains and losses on the disposal of businesses.

Other expenses

Other expenses are administration costs incurred and paid by

theGroup’s pension schemes, which relate primarily to former

employees of legacy businesses.

Finance income and finance costs

Finance income comprises interest income on funds invested and

changes in the fair value of financial instruments at fair value taken

to the income statement. Interest income is recognised as it

accrues, using the effective interest method.

Finance costs comprise interest expense on borrowings, lease

liabilities, unwinding of the discount on provisions, dividends on

preference shares classified as debt, foreign currency gains/losses

and changes in the value of financial instruments at fair value taken

to the income statement. All borrowing costs are recognised in

the income statement using the effective interest method.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

148 Annual Report and Accounts 2021 Elementis plc

Taxation

Income tax on the profit or loss for the year comprises current and

deferred tax. Income tax is recognised in the income statement

except to the extent that it relates to items recognised directly

inequity or in other comprehensive income. Current tax is the

expected tax payable on the taxable income for the year, using tax

rates enacted or substantively enacted at the balance sheet date,

and any adjustment to tax payable in respect of previous years.

A deferred tax asset is recognised only to the extent that it is

probable that future taxable profits will be available against which

the asset can be utilised. Deferred tax is provided on temporary

differences between the carrying amounts of assets and liabilities

for financial reporting purposes and the amounts used for taxation

purposes. The following temporary differences are not provided

for: the initial recognition of goodwill; the initial recognition of

assets or liabilities that affect neither accounting nor taxable profit

other than in a business combination; and differences relating to

investments in subsidiaries to the extent that they will probably

not reverse in the foreseeable future. The amount of deferred

taxprovided is based on the expected manner of realisation or

settlement of the carrying amount of assets and liabilities, using

tax rates enacted or substantively enacted at the balance sheet

date. Deferred tax assets are reduced to the extent that it is no

longer probable that the related tax benefit will be realised.

The Group is required to estimate the income tax in each of the

jurisdictions in which it operates. This requires an estimation of

current tax liability together with an assessment of the temporary

differences which arise as a consequence of different accounting

and tax treatments. The Group operates in a number of countries

in the world and is subject to many tax jurisdictions and rules. As a

consequence the Group is subject to tax audits, which by their nature

are often complex and can require several years to conclude.

Management’s judgement is required to determine the total provision

for income tax. Amounts are accrued based on management’s

interpretation of country specific tax law and likelihood of settlement.

However, the actual tax liabilities could differ from the position and

in such events an adjustment would be required in the subsequent

period which could have a material impact. Tax benefits are not

recognised unless it is probable that the tax positions are sustainable.

Once considered to be probable, management reviews each material

tax benefit to assess whether a provision should be taken against

full recognition of the benefit on the basis of potential settlement

through negotiation. This evaluation requires judgements to be

made including the forecast of future taxable income.

Share based payments

The fair value of equity settled share options, cash settled shadow

options and LTIP awards granted to employees is recognised as

an expense with a corresponding increase in equity. The fair value is

measured at grant date and spread over the period during which the

employees become unconditionally entitled to the options/awards.

The fair value of the options/ awards granted is measured using a

binomial model, taking into account the terms and conditions upon

which the options/ awards were granted. The amount recognised

as an employee expense is adjusted to reflect the actual number

of share options/awards that vest except where forfeiture is only

due to share prices not achieving the threshold for vesting.

Own shares held by Employee Share Ownership Trust

(ESOT)

Transactions of the Group sponsored ESOT are included in

theconsolidated financial statements. In particular, the ESOT’s

purchases of shares in the Company are charged directly

toequity.

Government grants

Government grants are recognised at fair value when there is

reasonable assurance that the conditions associated with the

grants have been complied with and the grants will be received.

Grants compensating for expenses incurred are recognised as

adeduction of the related expenses in the consolidated income

statement on a systematic basis in the same periods in which the

expenses are incurred.

Alternative performance measures

In the analysis of the Group’s operating results, earnings per

shareand cash flows, information is presented to provide readers

with additional performance indicators that are prepared on a

non-statutory basis. This presentation is regularly reviewed by

management to identify items that are unusual and other items

relevant to an understanding of the Group’s performance and

longterm trends with reference to their materiality and nature.

This additional information is not uniformly defined by all

companies and may not be comparable withsimilarly titled

measures and disclosures by other organisations. The non-

statutory disclosures should not be viewed in isolation or as an

alternative to the equivalent statutory measure. Information for

separate presentation is considered as follows:

– Material costs or reversals arising from a significant restructuring

of the Group’s operations are presented separately

– Disposal of entities or investments in associates or joint ventures

or impairment of related assets are presented separately

– Other matters arising due to the Group’s acquisition,

suchasadjustments to contingent consideration, payment

ofretention bonuses, acquisition costs and fair value

adjustments for acquired assets made in accordance

withIFRS 13 are separately disclosed in aggregate

– If a change in an accounting estimate for provisions, including

environmental provisions, results in a material gain or loss,

that is presented separately

– Other items the Directors may deem to be unusual as a result

of their size and/or nature.

Annual Report and Accounts 2021Elementis plc

149

Strategic report Corporate governance Financial statements Shareholder information

1. Accounting policies continued

Adoption of new and revised standards

In the current year, the Group has applied a number of

amendments to IFRSs issued by the International Accounting

Standards Board (IASB) that are mandatorily effective for

accounting periods that began on or after 1 January 2021.

Their adoption has not had any material impact on the disclosures

oron the amounts reported in these financial statements:

International Accounting Standards (IAS/

IFRSs) and Interpretations (IFRICs):

UK/EU

Endorsement

status Effective date

Covid-19-Related Rent Concessions

– Amendment to IFRS 16 Endorsed

1 June

2020/1 April

2021

Amendments to IFRS 9, IAS 39, IFRS 7,

IFRS 4 and IFRS 16: Interest Rate

Benchmark Reform — Phase 2 Endorsed

1 January

2021

New and revised IFRSs in issue but not yet effective

At the date of authorisation of these financial statements, the

Group has not applied the following new and revised international

accounting standards (IAS/IFRSs) and interpretations (IFRICs) that

have been issued but are not effective for periods starting on

1 January 2021 but will be effective for later periods:

International Accounting Standards (IAS/

IFRSs) and Interpretations (IFRICs) not yet

endorsed for use in the EU or UK:

UK/EU

Endorsement

status

Effective for

annual

reporting

periods

beginning on

or after

Amendments to IFRS 3: Reference to

the Conceptual Framework

Not yet

endorsed

1 January

2022

Amendments to IAS 16: Property, Plant

and Equipment—Proceeds before

Intended Use

Not yet

endorsed

1 January

2022

Amendments to IAS 37: Onerous

Contracts – Cost of Fulfilling a Contract

Not yet

endorsed

1 January

2022

Annual Improvements to IFRS

Standards 2018-2020 Cycle:

Amendments to IFRS 1 First-time

Adoption of International Financial

Reporting Standards, IFRS 9 Financial

Instruments, IFRS 16 Leases, and IAS

41 Agriculture

Not yet

endorsed

1 January

2022

IFRS 17 Insurance Contracts

Not yet

endorsed

1 January

2023

Amendments to IAS 1 and IFRS

Practice Statement 2: Disclosure of

Accounting Policies

Not yet

endorsed

1 January

2023

Amendments to IAS 8: Definition of

Accounting Estimates

Not yet

endorsed

1 January

2023

Amendments to IAS 12: Deferred Tax

related to Assets and Liabilities arising

from a Single Transaction

Not yet

endorsed

1 January

2023

Amendments to IAS 1: Classification of

Liabilities as Current or Non-current

Not yet

endorsed

1 January

2024

IFRS 10 and IAS 28 (amendments):

Saleor Contribution of Assets

betweenan Investor and its Associate

or Joint Venture

Not yet

endorsed tbc

2. Operating segments

Business segments

The Group has determined its operating segments on the basis

ofthose used for management, internal reporting purposes and

theallocation of strategic resources. The key measure used for

review of the performance of the operating segments is adjusted

operating profit. In accordance with the provisions of IFRS 8, the

Group’s chief operating decision maker is the Board of Directors.

The four reportable segments, Personal Care, Coatings, Talc,

andChromium each have distinct product groupings and separate

management structures. Segment results, assets and liabilities

include items directly attributable to a segment and those

thatmay be reasonably allocated from corporate activities.

Presentation of the segmental results is on a basis consistent

withthose used for reporting Group results. The principal

activities of the reportable segments are as follows:

Personal Care

Production of rheological modifiers and compounded products,

including active ingredients for AP deodorants, for supply to

personal care manufacturers.

Coatings

Production of rheological modifiers and additives for decorative

and industrial coatings. The previously reported Energy segment

has been included within Coatings from 1 January 2021.

Talc

Production and supply of talc for use in plastics, coatings,

technical ceramics and the paper sectors.

Chromium

Production of chromium chemicals.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

150 Annual Report and Accounts 2021 Elementis plc

Segmental analysis for the year ended 31 December 2021

2021

Personal

Care

Coatings

Talc

Chromium

Segment

totals

Central

costs

Total

Revenue 174.7 384.3 150.4 170.7 880.1 – 880.1

Internal revenue – – – – – – –

Revenue from external customers 174.7 384.3 150.4 170.7 880.1 – 880.1

Adjusted operating profit 36.7 61.8 14.0 14.1 126.6 (20.0) 106.6

Adjusting items (8.8) (5.3) (58.3) (7.8) (80.2) – (80.2)

Profit/(loss) before interest 27.9 56.5 (44.3) 6.3 46.4 (20.0) 26.4

Loss on disposal (1.7) – – – (1.7) – (1.7)

Other expenses – – – – – (2.1) (2.1)

Finance income – – – – – 11.0 11.0

Finance expense – – – – – (27.8) (27.8)

Taxation – after adjusting items – – – – – (14.6) (14.6)

Taxation – on adjusting items – – – – – 11.3 11.3

Profit/(loss) for the year 26.2 56.5 (44.3) 6.3 44.7 (42.2) 2.5

2021

Personal

Care and

Coatings

Talc

Chromium

Segment

totals

Central

costs

Total

Fixed assets 659.1 310.5 78.8 1,048.4 267.0 1,315.4

Inventories 109.0 23.0 54.2 186.2 (0.1) 186.1

Trade and other receivables 90.0 23.2 20.2 133.4 5.5 138.9

Other tax recoverable – – – – 19.7 19.7

Derivatives – – – – 0.2 0.2

Tax assets – – – – 35.1 35.1

Net retirement benefit surplus – – – – 56.6 56.6

Cash and cash equivalents – – – – 84.6 84.6

Segment assets 858.1 356.7 153.2 1,368.0 468.6 1,836.6

Trade and other payables (86.2) (21.6) (31.0) (138.8) (22.2) (161.0)

Operating provisions (1.0) (4.4) (21.6) (27.0) (34.8) (61.8)

Lease liabilities (27.9) (11.0) (0.5) (39.4) (0.8) (40.2)

Bank overdrafts and loans – – – – (482.5) (482.5)

Current tax liabilities – – – – (17.4) (17.4)

Retirement benefit obligations – – – – (17.3) (17.3)

Deferred tax liabilities – – – – (150.0) (150.0)

Financial liabilities – – – – (5.4) (5.4)

Segment liabilities (115.1) (37.0) (53.1) (205.2) (730.4) (935.6)

Net assets 743.0 319.7 100.1 1,162.8 (261.8) 901.0

Capital additions 28.9 14.3 8.7 51.9 4.4 56.3

Depreciation and amortisation (28.3) (27.4) (10.1) (65.8) (2.5) (68.3)

1 Due to the shared nature of the production facilities for the Personal Care and Coatings segments a split of assets and liabilities by segment is not

available and the cost to determine such a split would be prohibitive therefore assets and liabilities are shown in aggregate for these segments.

Analysis by geography

2021

North

America

United

Kingdom

Rest of

Europe

Rest of the

World

Total

Revenue from external customers 288.7 24.7 289.8 276.9 880.1

Fixed assets 750.9 155.2 335.0 74.3 1,315.4

Capital additions 28.6 1.5 16.3 9.9 56.3

Depreciation and amortisation (33.3) (1.6) (30.3) (3.1) (68.3)

Revenue is based on the location of the customer. The Group’s largest customer accounts for 6.1% of revenue ($53.4m).

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151

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2. Operating segments continued

Segmental analysis for the year ended 31 December 2020

2020

Personal Care

Coatings

(restated)*

Talc

Chromium

Segment totals

Central costs

Total

Revenue 160.8 319.1 132.5 146.9 759.3 – 759.3

Internal revenue – – – (8.0) (8.0) – (8.0)

Revenue from external customers 160.8 319.1 132.5 138.9 751.3 – 751.3

Adjusted operating profit 33.6 41.4 16.6 5.6 97.2 (15.6) 81.6

Adjusting items (13.6) (46.3) (39.0) (9.2) (108.1) (1.7) (109.8)

Profit/(loss) before interest 20.0 (4.9) (22.4) (3.6) (10.9) (17.3) (28.2)

Loss on disposal 0.3 – – – 0.3 – 0.3

Other expenses – – – – – (1.6) (1.6)

Finance income – – – – – 0.3 0.3

Finance expense – – – – – (39.6) (39.6)

Taxation – after adjusting items – – – – – (14.2) (14.2)

Taxation – on adjusting items – – – – – 16.0 16.0

Profit/(loss) for the year 20.3 (4.9) (22.4) (3.6) (10.6) (56.4) (67.0)

*Restated for the amalgamation of the Energy business into the Coatings segment

2020

Personal

Care, and

Coatings

Talc

Chromium

Segment

totals

Central costs

Total

Fixed assets 659.7 347.6 79.8 1,087.1 321.5 1,408.6

Inventories 89.5 20.2 54.6 164.3 – 164.3

Trade and other receivables 62.5 21.6 16.7 100.8 7.5 108.3

ACT recoverable – – – – 0.6 0.6

Derivatives – – – – 1.4 1.4

Tax assets – – – – 33.5 33.5

Net retirement benefit surplus – – – – 7.9 7.9

Cash and cash equivalents – – – – 111.0 111.0

Segment assets 811.7 389.4 151.1 1,352.2 483.4 1,835.6

Trade and other payables (67.7) (20.7) (28.0) (116.4) (16.2) (132.6)

Operating provisions (2.7) (4.2) (21.1) (28.0) (30.8) (58.8)

Lease liabilities (28.9) (13.8) (0.7) (43.4) (1.0) (44.4)

Bank overdrafts and loans – – – – (514.3) (514.3)

Current tax liabilities – – – – (23.2) (23.2)

Retirement benefit obligations – – – – (28.1) (28.1)

Deferred tax liabilities – – – – (143.1) (143.1)

Financial liabilities – – – – (30.7) (30.7)

Segment liabilities (99.3) (38.7) (49.8) (187.8) (787.4) (975.2)

Net assets 712.4 350.7 101.3 1,164.4 (304.0) 860.4

Capital additions 18.4 13.8 7.2 39.4 3.8 43.2

Depreciation and amortisation (29.4) (25.4) (10.2) (65.0) (1.7) (66.7)

1 Due to the shared nature of the production facilities for the Personal Care and Coatings segments a split of assets and liabilities by segment is not

available and the cost to determine such a split would be prohibitive therefore assets and liabilities are shown in aggregate for these segments.

Analysis by geography

2020

North

America

United

Kingdom

Rest of

Europe

Rest of the

World

Total

Revenue from external customers 240.8 24.4 235.4 250.7 751.3

Fixed assets 756.8 210.4 373.7 67.7 1,408.6

Capital additions 19.2 1.2 13.7 9.1 43.2

Depreciation and amortisation (33.7) (1.4) (28.6) (3.0) (66.7)

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

152 Annual Report and Accounts 2021 Elementis plc

Revenue is based on the location of the customer. The Group’s largest customer accounts for 7.9% of revenue ($60.0m).

3. Finance income

2021

2020

Interest on bank deposits 0.3 0.3

Fair value movement on derivatives 10.7 –

11.0 0.3

4. Finance costs

2021

2020

Interest on bank loans 23.3 22.6

Pension and other post retirement liabilities 0.3 0.6

Unwind of discount on provisions 2.6 2.7

Fair value movement on derivatives – 10.2

Dividend currency hedge cancellation – 1.8

Interest on lease liabilities 1.6 1.7

27.8 39.6

5. Adjusting items

2021

2020

Restructuring – 0.9

Business transformation 4.6 22.7

Environmental provisions

Increase in provisions due to additional remediation work identified 9.6 5.6

(Decrease)/increase in provisions due to change in discount rate (1.3) 1.1

M&A and disposal costs – 3.7

Impairment of goodwill 52.3 60.3

Sale of Montreal land (1.0) –

Amortisation of intangibles arising on acquisition 16.0 15.5

80.2 109.8

Sale of Business 1.7 (0.3)

Mark to market of derivative financial instruments (10.7) 10.2

Currency hedge due to dividend cancellation – 1.8

Tax credit in relation to adjusting items (11.3) (16.0)

59.9 105.5

A number of items have been recorded under ‘adjusting items’ by virtue of their size and/or one time nature, in line with our accounting

policy in Note 1, in order to provide additional useful analysis of the Group’s results. The Group considers the adjusted results to be an

important measure used to monitor how the businesses are performing as they achieve consistency and comparability between reporting

periods. The net impact of these items on the Groupprofit before tax for the year is a debit of $71.2m (2020: $121.5m). The items fall into a

number of categories, as summarised below:

Restructuring – In 2020, restructuring costs relate predominantly to the organisational efficiency programme commenced in late 2019,

which eliminated duplicate roles, reduced management layers and increased spans of control in order to realise cost savings and

efficiencies across the Group.

Business transformation –In November 2020, the closure of the Charleston plant was announced. Costs of $4.2m in 2021 (including

$0.4m of depreciation) associated withthe closure of the site are classified as an adjusting item and the site is planned to be disposed

ofinthe future. Further charges of $0.4m relates to the optimisation of the supply chain footprint across our Personal Care and

Chromiumbusinesses.

Environmental provisions – The Group’s environmental provision is calculated on a discounted cash flow basis, reflecting the time

period over which spending is estimated to take place. The movement in provision relates to a change in discount rates that has

decreased the liability by $1.3m in the year, extra remediation work identified in the year which has resulted in a $9.6m increase to

theliability. As these costs relate to non-operational facilities they are classified as adjusting items.

M&A and disposal costs – Charges of $3.7m in 2020 represent costs relating to the disposal of small, non-core businesses in the

Personal Care business segment and advisory fees incurred in response to an unsolicited takeover approach received in the previous

year.

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153

Strategic report Corporate governance Financial statements Shareholder information

5. Adjusting items continued

Impairment of goodwill – In Talc, while the business fundamentals are unchanged, the continuing impact of COVID-19 on wider

industrial activity and global supply chains, especially affecting the automotive sector, and the near term forecast profitability of the

business has resulted in a goodwill impairment of $53.1m. This impairment is reflected as a P&L charge of $52.3m and $0.8m movement

in exchange differences on translation of foreign operations in other comprehensive income.

Sale of Montreal land – In 2021 the Group disposed of a non-core parcel of land in Montreal, Canada. The profit on disposal has been

treated as an adjusting item.

Amortisation of intangibles arising on acquisition – Amortisation of $16.0m (2020: $15.5m) represents the charge in respect of the

Group’s acquired intangible assets. As in previous years, these are included in adjusting items as they are a non-cash charge arising from

historical investment activities.

Sale of Business– The $1.7m loss on disposal of two non-core dental businesses, Eisenbacher Dentalwaren ED GmbH and Adentatec

GmbH, has been treated as an adjusting item in 2021.

Mark to market of derivatives – The movements in the mark to market valuation of financial instruments that are not in hedging

relationships are treated as adjusting items as they are non-cash fair value adjustments that will not affect the cash flows of the Group.

Currency hedge due to dividend cancellation – The charge of $1.8m in 2020 relates to the cancellation of currency hedges following

thesuspension of the 2019 final ordinary dividend that provided additional financial headroom in response to COVID-19.

Tax on adjusting items – this is the net impact of tax relating to the adjusting items listed above.

To support comparability with the financial statements as presented in 2021, the reconciliation to the adjusted consolidated income

statement is shown below.

2021

Profit and

loss

2021

Adjusting

items

2021

Profit and

loss after

adjusting

items

Revenue 880.1 – 880.1

Cost of sales (545.2) – (545.2)

Gross profit 334.9 – 334.9

Distribution costs (151.9) – (151.9)

Administrative expenses (156.6) 80.2 (76.4)

Operating profit 26.4 80.2 106.6

(Loss)/profit on disposal (1.7) 1.7 –

Other expenses (2.1) – (2.1)

Finance income 11.0 (10.7) 0.3

Finance costs (27.8) – (27.8)

(Loss)/profit before income tax 5.8 71.2 77.0

Tax (3.3) (11.3) (14.6)

(Loss)/profit for the year 2.5 59.9 62.4

Attributable to:

Equity holders of the parent 2.5 59.9 62.4

Earnings per share

Basic (loss)/earnings (cents) 0.4 10.3 10.7

Diluted (loss)/earnings (cents) 0.4 10.2 10.6

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

154 Annual Report and Accounts 2021 Elementis plc

2020

Profit and

loss

2020

Adjusting

items

2020

Profit and

loss after

adjusting

items

Revenue 751.3 – 751.3

Cost of sales (494.0) – (494.0)

Gross profit 257.3 – 257.3

Distribution costs (112.6) – (112.6)

Administrative expenses (172.9) 109.8 (63.1)

Operating (loss)/profit (28.2) 109.8 81.6

Profit/(loss) on disposal 0.3 (0.3) –

Other expenses (1.6) – (1.6)

Finance income 0.3 – 0.3

Finance costs (39.6) 12.0 (27.6)

(Loss)/profit before income tax (68.8) 121.5 52.7

Tax 1.8 (16.0) (14.2)

(Loss)/profit for the year (67.0) 105.5 38.5

Attributable to:

Equity holders of the parent (67.0) 105.5 38.5

Earnings per share

Basic (loss)/earnings (cents) (11.5) 18.1 6.6

Diluted (loss)/earnings (cents) (11.3) 17.8 6.5

To support comparability with the financial statements as presented in 2021, a reconciliation from reported profit/(loss) before interest

to adjusted profit before income tax by segment is shown below for each year.

2021

Personal

Care

Coatings

Talc

Chromium

Segment

totals

Central

costs

Total

Reported operating

profit/(loss) 27.9 56.5 (44.3) 6.3 46.4 (20.0) 26.4

Adjusting Items

Business transformation 0.1 4.2 – 0.3 4.6 – 4.6

Increase in environmental provisions due

toadditional remediation work identified – – – 9.6 9.6 – 9.6

Increase in environmental provisions due

tochange in discount rate – – – (1.3) (1.3) – (1.3)

Impairment of goodwill – – 52.3 – 52.3 – 52.3

Sale of Montreal Land – – – (1.0) (1.0) – (1.0)

Amortisation of intangibles arising on

acquisition 8.7 1.1 6.0 0.2 16.0 – 16.0

Adjusted operating profit/(loss) 36.7 61.8 14.0 14.1 126.6 (20.0) 106.6

Other expenses – – – – – (2.1) (2.1)

Finance income – – – – – 0.3 0.3

Finance costs – – – – – (27.9) (27.9)

Adjusted profit/(loss) before income tax 36.7 61.8 14.0 14.1 126.6 (49.7) 76.9

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5. Adjusting items continued

2020

Personal Care

Coatings

(restated*)

Talc

Chromium

Segment totals

Central costs

Total

Reported operating

profit/(loss) 20.0 (4.9) (22.4) (3.6) (10.9) (17.3) (28.2)

Adjusting Items

Restructuring – 0.9 – – 0.9 – 0.9

Business transformation 3.0 17.4 – 2.3 22.7 – 22.7

Increase in environmental

provisions due to additional

remediation work identified – – – 5.6 5.6 – 5.6

Increase in environmental

provisions due to change in

discount rate – – – 1.1 1.1 – 1.1

M&A and disposal costs 2.0 – – – 2.0 1.7 3.7

Impairment of goodwill – 26.9 33.4 – 60.3 – 60.3

Amortisation of intangibles arising

on acquisition 8.6 1.1 5.6 0.2 15.5 – 15.5

Adjusted operating profit/(loss) 33.6 41.4 16.6 5.6 97.2 (15.6) 81.6

Other expenses – – – – – (1.6) (1.6)

Finance income – – – – – 0.3 0.3

Finance costs – – – – – (27.6) (27.6)

Adjusted profit/(loss) before

income tax 33.6 41.4 16.6 5.6 97.2 (44.5) 52.7

* Restated for the amalgamation of the Energy business into the Coatings segment.

6. Income tax expense

2021

2020

Current tax on continuing operations:

UK corporation tax 12.2 6.5

Overseas corporation tax on continuing operations 5.8 8.6

Adjustments in respect of prior years:

United Kingdom (1.0) 0.1

Overseas (7.2) (8.3)

Total current tax 9.8 6.9

Deferred tax:

United Kingdom (2.8) (1.0)

Overseas (3.2) (11.1)

Adjustment in respect of prior years:

United Kingdom – –

Overseas (0.5) 3.4

Total deferred tax (6.5) (8.7)

Income tax (credit)/expense for the year 3.3 (1.8)

Comprising:

Income tax (credit)/expense for the year 3.3 (1.8)

Adjusting items*

Overseas taxation on adjusting items (12.2) (12.4)

UK taxation on adjusting items 0.9 (3.6)

Taxation on adjusting items (11.3) (16.0)

Income tax expense for the year after adjusting items 14.6 14.2

* See Note 5 for details of adjusting items.

The tax charge on profits represents an effective rate of 56.9% (2020: 2.6%) and an effective tax rate after adjusting items of 19.0%

(2020: 26.9%).

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

156 Annual Report and Accounts 2021 Elementis plc

The tax impact of the adjusting items outlined within note 5 and within the Consolidated income statement relates to the following:

2021

Gross

2021

Tax impact

2020

Gross

2020

Tax impact

Restructuring – – 0.9 –

Business transformation 4.6 1.0 22.7 6.3

Environmental provisions 8.3 1.6 6.7 1.0

M&A and disposal costs 1.7 – 3.7 –

Impairment of goodwill 52.3 – 60.3 5.6

Mark to market of derivative financial instruments (10.7) (2.0) 10.2 1.9

Sale of Montreal land (1.0) – – –

Amortisation of intangibles arising on acquisition 16.0 3.5 15.5 1.2

Currency hedge due to dividend cancellation – – 1.8 –

– – (0.3) –

Reversal of uncertain tax provision – 7.2 – –

Tax (credit)/charge and effective tax rate for the year 71.2 11.3 121.5 16.0

The Group is international and has operations across a range of jurisdictions. Accordingly, tax charges of the Group in future periods will

beaffected by the profitability of operations in different jurisdictions and changes to tax rates and regulations in the jurisdictions within

whichtheGroup has operations. The Group ‘s effective tax rate in 2021 is slightly lower than its usual range due to beneficial

adjustments in respect of prior years and the one-off impact of the UK rate change on its deferred tax assets. The medium-term

expectation for the Group’s adjusted effective tax rate is around 22-23% until 2023, after which it is anticipated to rise to 25-26% due to

the previously announced increase in UK corporation tax rates from April 2023.

On 20 December 2021 the OECD published its Global Anti-Base Erosion Model Rules (Pillar Two). The report provides a model for a

coordinated system of taxation that imposes a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined

ona jurisdictional basis, is below the minimum tax rate of 15%. Each OECD member nation has begun consultations on the

implementation of these model rules into local legislation, with the expectation that they will be enshrined into law in 2023. The Group is

currently considering the impact of the announcements on its tax position.

The total charge for the year can be reconciled to the accounting profit as follows:

2021

2020

Profit/(loss) before tax 5.8 (68.8)

Tax at 19.00% (2020: 19.00%) 1.1 19.0 (13.1) 19.0

Difference in overseas effective tax rates 1.5 25.9 4.0 (5.8)

Income not taxable and impact of tax efficient financing (0.9) (15.5) (4.7) 6.8

Expenses not deductible for tax purposes 12.0 206.9 11.5 (16.7)

Adjustments in respect of prior years (8.7) (150.0) (4.8) 7.0

Tax rate changes (1.2) (20.7) 1.3 (1.9)

Movement in unrecognised deferred tax (0.5) (8.7) 4.0 (5.8)

Total charge/(credit) and effective tax rate for the year 3.3 56.9 (1.8) 2.6

The majority of the prior year adjustment relates to the reversal of an uncertain tax provision previously held in respect of the US.

The statute of limitations for the relevant period expired on 15 October 2021 and hence the filed tax returns are treated as final.

The Group’s estimate of the additional tax which may be due has been revised to $nil.

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7. Profit for the year

Profit for the year has been arrived at after charging/(crediting):

2021

2020

Employee costs (see Note 8) 149.5 125.3

Net foreign exchange gains 1.0 0.6

Research and development costs 7.5 7.2

Depreciation of property, plant and equipment 51.7 50.6

Amortisation of intangible assets 16.6 16.1

Total depreciation and amortisation expense 68.3 66.7

Loss/(profit) on disposal 1.7 (0.3)

Profit on disposal of property, plant and equipment 0.2 (0.7)

Write off of inventory 2.5 2.8

Cost of inventories recognised as expense 375.6 325.9

Fees payable to the Company’s auditor and its associates:

Audit of company* 1.4 1.1

Audit of subsidiaries 1.1 1.1

Audit related services – interim review 0.2 0.1

Other advisory fees – 0.1

* The $1.4m of audit of company Includes $0.3m of extra fees relating to the 2020 group audit

Government grants and other COVID-19 assistance

The Group has accessed various government support schemes aimed at mitigating the potential impact on individuals’ job losses

resulting from the impact of COVID-19. The most significant amounts received by the Group include the following:

– $0.4m in relation to government support under temporary wage support schemes available in the Netherlands. The Group

doesnothave any unfulfilled obligations relating to these support programmes. This amount has been offset against employee

remunerationcosts.

– Agreement of payment plans with tax authorities in China to defer payments of income taxes and payroll taxes resulting in $1.1m

payment deferrals across the Group.

8. Employees

2021

2020

Employee costs:

Wages and salaries 130.9 111.6

Social security costs 9.9 8.8

Pension costs 8.7 4.9

149.5 125.3

Number Number

Average number of FTE employees*:

Specialty Products 939 917

Talc 252 253

Chromium 191 195

Central 17 17

Total 1,399 1,382

* Full time equivalent including contractors.

The aggregate amount of Directors’ remuneration (salary, bonus and benefits) is shown in the Remuneration Report on page 105;

– The aggregate amount of gains made by Directors on exercise of share options was $0.1m (2020: $0.1m).

– The remuneration of the highest paid Director was $2.6m (2020: $1.2m).

– Payments have been made to a defined contribution pension scheme on behalf of 1 Director (2020: 1 Director). For the highest paid

Director, pension contributions of $0.2m (2020: $0.2m) were made.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

158 Annual Report and Accounts 2021 Elementis plc

9. Earnings per share

The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the parent is based on the following:

2021

2020

Earnings:

Earnings/(loss) for the purpose of basic earnings per share 2.5 (67.0)

Adjusting items net of tax 59.9 105.5

Adjusted earnings 62.4 38.5

2021

2020

Number of shares:

Weighted average number of shares for the purposes of basic earnings per share 581.0 580.1

Effect of dilutive share options 7.8 13.6

Weighted average number of shares for the purposes of diluted earnings per share 588.8 593.7

2021

cents

2020

cents

Earnings per share:

Basic earnings/(loss) 0.4 (11.5)

Diluted earnings/(loss) 0.4 (11.3)

Basic after adjusting items 10.7 6.6

Diluted after adjusting items 10.6 6.5

10. Goodwill and other intangible assets

Goodwill

Brand

Customer

lists

Other

intangible

assets

Total

Cost:

At 1 January 2020 725.7 25.9 165.8 103.2 1,020.6

Exchange differences 2.6 0.8 4.7 2.5 10.6

Additions – – – 0.4 0.4

Disposals – – – – –

At 31 December 2020 728.3 26.7 170.5 106.1 1,031.6

Exchange differences (2.2) 0.2 (4.1) (2.0) (8.1)

Additions – – – 0.4 0.4

Acquisition 0.5 – – 0.1 0.6

Disposals (1.0) – – – (1.0)

At 31 December 2021 725.6 26.9 166.4 104.6 1,023.5

Amortisation and impairment:

At 1 January 2020 – 2.3 20.8 39.4 62.5

Charge for the year – 0.9 9.3 5.9 16.1

Impairment 60.3 – – – 60.3

Disposals – – – – –

At 31 December 2020 60.3 3.2 30.1 45.3 138.9

Charge for the year – – 9.5 7.1 16.6

Impairment 52.3 – – – 52.3

Disposals – – – – –

At 31 December 2021 112.6 3.2 39.6 52.4 207.8

Carrying amount:

At 31 December 2021 613.0 23.7 126.8 52.2 815.7

At 31 December 2020 668.0 23.5 140.4 60.8 892.7

At 1 January 2020 725.7 23.6 145.0 63.8 958.1

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The net book value of customer lists includes $94.9m (2020: $102.5m) in relation to the acquisition of SummitReheis which have

remaining lives of between 2 and 19 years (2020: between 3 and 20 years) and $32.1m (2020: $38.0m) in relation to the acquisition of

Mondo which have remaining lives of 12 years (2020: 13 years).

The brand intangibles represent the value ascribed to the trading name and reputation of the Deuchem, Fancor, Watercryl, Hi-Mar and

SummitReheis acquisitions. The Group, with the exception of SummitReheis, considers these to have significant and ongoing value to

the business that will be maintained and it is therefore considered appropriate to assign these assets an indefinite useful life. The brand

relating to SummitReheis is being amortised over a period of three years. The carrying amount of brand intangibles with an indefinite

useful life as at 31 December 2021 is $23.7m (2020: $23.5m). Brand intangibles are tested annually for impairment using similar

assumptions to the goodwill testing. The remaining intangible assets comprise the value ascribed to customer lists, patents and

non-compete clauses, which are being amortised over periods of five to twenty-four years.

Goodwill impairment testing

Goodwill is allocated to the Group’s cash-generating units (“CGUs”) as follows:

2021

2020

Personal Care 290.7 289.4

Coatings

* 192.0 193.5

Talc 130.3 185.1

Chromium – –

At 31 December 613.0 668.0

* 2020 Coatings CGU goodwill restated to include Energy which has been reported as part of the Coatings segment from 1 January 2021.

The Group tests annually for impairment at 31 October, or more frequently, if there are events or circumstances that indicate that the

carrying amount may not be recoverable.

10. Goodwill and other intangible assets continued

Basis of the recoverable amount

The recoverable amounts of the Group’s CGUs are determined from value in use (“VIU”) calculations which use cash flow projections

based on financial budgets approved by the directors covering a three to five year period.

Management’s judgement in estimating the cash flows of a CGU

The key assumptions for the value in use calculations are expected changes to sales volumes, selling prices and direct costs during the

forecast period, growth rates used to extrapolate beyond the forecast period and the discount rates applied to the resulting cash flows.

Changes in sales volumes, selling prices and direct costs are based on past practices and expectations of future changes in the market.

For the Talc CGU a five year forecasting model is used to reflect the longer operating and business planning cycle of the industries which

this business serves. A three year forecasting model is used for all other CGUs.

Growth rates

Cash flows for periods beyond the forecast period are extrapolated based on estimated growth rates. The rates do not exceed the

average long term growth rate for the relevant products or markets.

Discount rates

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the

risks specific to the CGUs.

Personal Care

The recoverable amount of the CGU was calculated using forecast cash flows based on budgets and plans for 2022 to 2024, a pre-tax discount

rate of 10.8% (2020: 10.5%) and a long-term growth rate of 5.0% based on the long term historical growth rate seen in this CGU. The recoverable

amount exceeded the carrying value of the CGU by $126.7m. A reasonably possible reduction in the long term growth rate of4.1%, a reduction

in revenues of 5.1% in each year of the three year forecast period (applied to average forecast revenues of $185.2m per annum inthe three

year period) or an increase in the pre-tax discount rate of 1.6%, applied in isolation, would result in the headroom reducing to nil.

Coatings

The recoverable amount of the CGU was calculated using forecast cash flows based on budgets and plans for 2022 to 2024, a pre-tax

discount rate of 11.2% (2020: 10.5%) and a long-term growth rate of 3.0%.

Talc

At 31 December 2021 we considered the continuing impact of COVID-19 on wider industrial activity and global supply chains, especially

affecting the automotive sector, which has impacted current year performance and the near term forecast profitability of the Talc

business to be an indicator of impairment of goodwill for the Talc CGU. As a result, an impairment test was performed which resulted in

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

160 Annual Report and Accounts 2021 Elementis plc

recognition of an impairment of $53.1m to the goodwill of the Talc CGU as at 31 December 2021 based on a recoverable amount of

$440.7m. Due to the currency of the entity in which the goodwill is held, this impairment is reflected as a P&L charge of $52.3m and

$0.8m movement in exchange differences on translation of foreign operations in other comprehensive income.

In reaching the impairment charge the forecast period included revenue growth of between 5% and 8%. A pre-tax discount rate of 10.0%

was applied. The outcome of the impairment review was most sensitive to changes to forecast revenues and discount rate. A 0.5%

increase in the pre-tax discount rate would have increased the impairment charge by $29.2m and a 3% decrease in forecast revenues in

each year of the five year forecast period would have increased the impairment charge by $43.6m.

Chromium

The recoverable amount of the CGU was calculated using forecast cash flows based on budgets and plans for 2022 to 2024, a pre-tax

discount rate of 11.3% (2020: 10.5%) and a long-term growth rate of 3.0%.

11. Property, plant and equipment

Right-of-use assets

Land and

buildings

Plant and

machinery

Fixtures

fittings and

equipment

Under

construction

Land and

buildings

Plant and

machinery

Fixtures

fittings and

equipment

Total

Cost:

At 1 January 2020 125.3 614.5 45.7 18.3 51.4 5.6 2.5 863.3

Additions 0.2 13.0 – 28.3 0.9 – 0.5 42.9

Exchange differences 4.0 28.8 1.0 0.4 1.1 0.4 0.1 35.8

Disposals (1.0) (3.1) (0.6) (0.3) (0.1) (0.2) – (5.3)

Reclassifications 0.1 17.0 1.1 (18.2) – – – –

At 31 December 2020 128.6 670.2 47.2 28.5 53.3 5.8 3.1 936.7

Additions – 13.9 – 38.6 1.4 0.5 0.1 54.5

Exchange differences (2.0) (23.6) (0.4) (0.5) (1.0) (0.3) (0.1) (27.9)

Disposals (0.4) (1.2) (2.6) – – – (0.2) (4.4)

Acquisitions through business

combinations – 0.1 0.2 – – – – 0.3

Reclassifications 0.9 21.2 (0.6) (21.5) – – – –

At 31 December 2021 127.1 680.6 43.8 45.1 53.7 6.0 2.9 959.2

Accumulated depreciation and

impairment losses:

At 1 January 2020 57.9 240.4 33.1 – 16.1 1.1 1.1 349.7

Charge for the year 2.7 40.4 2.3 – 3.4 1.1 0.7 50.6

Exchange differences 1.9 8.4 1.0 – 0.3 0.1 0.1 11.8

Disposals (0.1) (2.1) (0.5) – – (0.3) (0.1) (3.1)

Impairment losses 2.8 8.9 – – – – – 11.7

Reclassifications – (0.3) 0.3 – – – – –

At 31 December 2020 65.2 295.7 36.2 – 19.8 2.0 1.8 420.7

Charge for the year 2.4 43.9 0.4 – 3.6 0.9 0.5 51.7

Exchange differences (1.0) (7.1) (0.6) – (0.3) (0.1) (0.1) (9.2)

Disposals – (1.1) (2.5) – – – (0.1) (3.7)

Impairment losses – – – – – – – –

Reclassifications (0.2) (1.1) 1.3 – – – – –

At 31 December 2021 66.4 330.3 34.8 – 23.1 2.8 2.1 459.5

Net book value:

At 31 December 2021 60.7 350.3 9.0 45.1 30.6 3.2 0.8 499.7

At 31 December 2020 63.4 374.5 11.0 28.5 33.5 3.8 1.3 516.0

At 1 January 2020 67.4 374.1 12.6 18.3 35.3 4.5 1.4 513.6

Group capital expenditure contracted but not provided for in these financial statements amounted to $nil (2020: $nil).

12. Inventories

2021

2020

Raw materials and consumables 62.5 52.5

Work in progress 17.4 15.2

Finished goods and goods purchased for resale 106.2 96.6

186.1 164.3

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Inventories are disclosed net of provisions for obsolescence of $7.3m (2020: $6.8m).

13. Trade and other receivables

2021

2020

Trade receivables 110.6 86.4

Other receivables 20.4 12.5

Prepayments 7.9 9.4

138.9 108.3

During the previous year the group entered into an accounts receivable purchase programme, at 31st December the net balance

outstanding in relation to this programme was $12.9m (2020: $13.7m).

14. Trade and other payables

2021

2020

Trade payables 77.8 71.4

Other payables 22.7 13.7

Accruals 60.5 47.5

161.0 132.6

During the previous year the group entered into a supplier financing arrangement, the net balance outstanding on these arrangements

totalled $6.1m (2020: $4.9m) at the end of the period.

15. Provisions

Environmental

Self

insurance

Restructuring

Other

Total

At 1 January 2021 50.6 1.5 5.3 1.4 58.8

Increase in provisions 9.0 0.8 0.1 – 9.9

Unused amounts reversed – – (0.3) – (0.3)

Unwinding of discount 2.6 – – 0.1 2.7

Utilised during the year (3.1) (1.6) (3.6) (0.5) (8.8)

Currency translation differences (0.4) – (0.1) – (0.5)

At 31 December 2021 58.7 0.7 1.4 1.0 61.8

Due within 1 year 6.9 0.4 0.9 0.5 8.7

Due after 1 year 51.8 0.3 0.5 0.5 53.1

Environmental provisions relate to manufacturing and distribution sites including certain sites no longer owned by the Group.

These provisions have been derived using a discounted cash flow methodology and reflect the extent to which it is probable that

expenditure will be incurred over the next 25 years. The level of environmental provision is based on management’s best estimate of

themost likely outcome for each individual exposure. Environmental provisions are discounted using discount rates which reflect market

assessments and the risks specific to the liabilities. The discount rates used were 1.9% in the US, 1.1% in the UK and 2.0% in Canada.

Included within environmental provisions are amounts in respect of all anticipated costs related to the closure and remediation of the

Chromium UK site at Eaglescliffe.

The following table shows the timeframes in which undiscounted costs in relation to the environmental provisions are expected to be

incurred:

1-10

years

11-20

years

20-25

years

Total

Environmental provisions 33.3 20.2 9.6 63.1

Environmental provisions have decreased by $1.3m due to increases in the discount rates used to discount the provisions and increased

by $10.3m due to extra remediation work identified during the year. $8.3m of the $9.0m increase in provisions is included within adjusting

items (see Note 5) with $0.7m included as an addition to property, plant and equipment (see Note 11).

If the cost estimates on which the provisions at 31 December 2021 are based were to change by 10%, which is reasonably possible, the

provision recognised would need to increase by approximately $5.9m. Whilst a range of outcomes is possible, the Directors believe that

the reasonably possible range for the environmental provision is from $56.1m to $64.6m.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

162 Annual Report and Accounts 2021 Elementis plc

Self-insurance provisions relate to personal injury and other claims from former employees or third parties and represent the aggregate

ofoutstanding claims plus a projection of losses incurred but not yet reported which together make up the full liability recognised as a

provision. Insurance recoveries are recognised as a separate reimbursement asset. The self-insurance provisions are expected to be

utilised within five years.

Restructuring provisions relate to costs of adjusting head count, training, relocation and other costs of restructuring where a need to

dosohas been identified by management. Other provisions represent payments made for right of first refusal on a quarry, payments for

which are linked to the discharge of residue into another quarry owned by the same counterparty. These provisions are expected to be

utilised within three years.

16. Deferred tax and ACT recoverable

Retirement

benefit plans

Accelerated

tax

depreciation

Amortisation

of US

goodwill

Other

intangible

assets

Other

temporary

differences

Unrelieved

tax losses

Total

At 1 January 2020 2.3 (32.0) (58.5) (59.7) 20.5 5.4 (122.0)

Reallocation – (15.0) (10.7) 25.7 – – –

Credit/(charge) to the income statement 0.9 6.2 5.6 (1.8) (7.2) 5.0 8.7

(Charge)/credit to other comprehensive income (0.7) – – – 0.4 – (0.3)

Credit to retained earnings – – – – 0.1 – 0.1

Currency translation differences (0.1) (3.3) – 0.4 (0.5) 0.2 (3.3)

At 1 January 2021 2.4 (44.1) (63.6) (35.4) 13.3 10.6 (116.8)

Credit/(charge) to the income statement 0.3 (1.9) 0.2 2.4 7.4 (1.9) 6.5

(Charge)/credit to other comprehensive income (14.5) – – – (0.4) – (14.9)

Credit to retained earnings – – – – 1.0 – 1.0

Currency translation differences (0.6) 3.2 – 1.6 (1.2) (0.8) 2.2

At 31 December 2021 (12.4) (42.8) (63.4) (31.4) 20.1 7.9 (122.0)

Deferred tax assets – – – – 20.1 7.9 28.0

Deferred tax liabilities (12.4) (42.8) (63.4) (31.4) – – (150.0)

Deferred tax assets have been recognised to the extent that it is considered more likely than not that there will be taxable profits from

which the future reversal of the underlying timing differences can be deducted. Where this is not the case, deferred tax assets have not

been recognised.

Deferred tax liabilities are reduced for any deferred tax assets which exist within a jurisdiction where consolidated tax returns are filed

and where tax assets and liabilities may be netted.

An asset of $42.0m was recognised in 2014 relating to UK advance corporation tax (‘ACT) credits which had previously been

unrecognised because of uncertainty over future UK taxable profits. Movements in the ACT recoverable balance are shown below:

2021

2020

At 1 January 0.6 4.8

Utilisation (0.6) (4.0)

Currency translation differences – (0.2)

At 31 December – 0.6

There are no material losses where deferred tax assets have not been recognised.

At the balance sheet date the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which

deferred tax liabilities have not been recognised was $37.8m (2020: $19.9m). No liability has been recognised in respect of these differences

because the Group is in a position to control the timing of the reversal of the temporary differences and the Group considers that it is

probable that such differences will not reverse in the foreseeable future. As at the balance sheet date the Group had an unrecognised

deferred tax asset of$4.2m (gross $20m) in relation to restricted US interest deductions and an unrecognised deferred tax asset of

$7.3m (gross $22.1m) in respect of German net operating losses.

17. Share capital

2021

2020

At 1 January 52.1 52.1

Issue of shares 0.1 –

At 31 December 52.2 52.1

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18. Other reserves

Capital

redemption

reserve

Translation

reserve

Hedging

reserve

options

reserve

Total

Balance at 1 January 2020 158.8 (69.0) (8.4) 9.7 91.1

Share based payments – – – 3.5 3.5

Exchange differences – 20.1 – (2.7) 17.4

Fair value of cash flow hedges transferred to the income statement – – 0.9 – 0.9

Effective portion of changes in fair value of cash flow hedges – – (1.4) – (1.4)

Transfer – – – (2.9) (2.9)

At 1 January 2021 158.8 (48.9) (8.9) 7.6 108.6

Issue of shares – – – (3.1) (3.1)

Share based payments – – – 5.1 5.1

Exchange differences – (18.8) – – (18.8)

Fair value of cash flow hedges transferred to the income statement – – 2.7 – 2.7

Effective portion of changes in fair value of cash flow hedges – – (0.1) – (0.1)

Fair value of cash flow hedges transferred to net assets – – (2.3) – (2.3)

Transfer – – – (1.4) (1.4)

Balance at 31 December 2021 158.8 (67.7) (8.6) 8.2 90.7

The Company can redeem shares by repaying the market value to the shareholder, whereupon the shares are cancelled. Redemption must

be from distributable profits. The capital redemption reserve represents the nominal value of the shares redeemed.

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign

operations as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments

related to hedged transactions that have not yet occurred.

The share options reserve comprises amounts accumulated in equity in respect of share options and awards granted to employees.

19. Borrowings

2021

2020

Bank loans 485.6 519.1

Unamortised syndicate loan fees (3.1) (4.8)

Carrying value of borrowings at 31 December 482.5 514.3

The borrowings are repayable as follows:

Within one year – 3.7

Within two to four years 485.6 515.4

In the fifth year – –

485.6 519.1

The weighted average interest rates paid were as follows:

2021

2020

Bank loans 2.9 3.2

Group borrowings were denominated as follows:

Dollar

Taiwan

Dollar Euro

Total

Bank loans

31 December 2021 290.0 – 195.6 485.6

31 December 2020 306.6 2.1 210.4 519.1

Of the US dollar borrowings, $nil was unsecured (2020: $nil), bearing interest at the relevant interbank rates plus a margin. The US dollar

borrowings consist of those secured by time deposits and in 2020 the Taiwan dollar borrowings were secured by charges over various

land and buildings in Taiwan.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

164 Annual Report and Accounts 2021 Elementis plc

20. Cash and cash equivalents

Cash and cash equivalents for the purpose of the consolidated cash flow statement comprise the following:

2021

2020

Cash at bank and on hand 84.6 111.0

21. Financial instruments

At 31 December 2021: Held at fair value Held at amortised cost

Through

profit and

loss

Derivatives

used for

hedging

Loans and

receivables

Liabilities

Total book

value

Total fair

value

Current:

Trade and other receivables (see note 13) – – 150.7 – 150.7 150.7

Derivative financial instruments (see note 22) – 0.2 – – 0.2 0.2

Cash and cash equivalents (see note 20) – – 84.6 – 84.6 84.6

Financial assets – 0.2 235.3 – 235.5 235.5

Current:

Bank overdrafts and loans (see note 19) – – – – – –

Trade and other payables (see note 14) – – – (161.0) (161.0) (161.0)

Derivative financial instruments (see note 22)* – (1.4) – – (1.4) (1.4)

Lease liabilities (see note 24) – – – (6.4) (6.4) (6.4)

Non-current:

Loans and borrowings** (see note 19) – – – (482.5) (482.5) (485.6)

Lease liabilities (see note 24) – – – (33.8) (33.8) (33.8)

Derivative financial instruments (see note 22)* (4.0) – – – (4.0) (4.0)

Financial liabilities (4.0) (1.4) – (683.7) (689.1) (692.2)

Total (4.0) (1.2) 235.3 (683.7) (453.6) (456.7)

At 31 December 2020: Held at fair value Held at amortised cost

Through

profit and

loss

Derivatives

used for

hedging

Loans and

receivables

Liabilities

Total book

value

Total fair

value

Current:

Trade and other receivables (see note 13) – – 98.9 – 98.9 98.9

Derivative financial instruments (see note 22) – 1.4 – – 1.4 1.4

Cash and cash equivalents (see note 20) – – 111.0 – 111.0 111.0

Financial assets – 1.4 209.9 – 211.3 211.3

Current:

Bank overdrafts and loans (see note 19) – – – (3.7) (3.7) (3.7)

Trade and other payables (see note 14) – – – (132.6) (132.6) (132.6)

Derivative financial instruments (see note 22)* (14.7) (2.6) – – (17.3) (17.3)

Lease liabilities (see note 24) – – – (7.2) (7.2) (7.2)

Non-current:

Loans and borrowings** (see note 19) – – – (510.6) (510.6) (515.4)

Lease liabilities (see note 24) – – – (37.2) (37.2) (37.2)

Contingent consideration*** – – – (13.4) (13.4) (13.4)

Financial liabilities (14.7) (2.6) – (704.7) (722.0) (726.8)

Total (14.7) (1.2) 209.9 (704.7) (510.7) (515.5)

* Derivatives in a liability position at 31 December 2021 and 31 December 2020 are shown within current or non current financial liabilities in the

Consolidated balance sheet.

** Loans and borrowings are shown net of facility fees of $3.1m (2020: $4.8m).

*** Contingent consideration payable of $nil (2020: $13.4m) is shown in the non-current financial liabilities line in the Consolidated balance sheet.

The balance in 2020 was payable to the previous owners of Mondo were Elementis to be successful in an historic, pre-acquisition interest deductability

case relating to Mondo. In 2021 the case was found in favour of Elementis and so the payment to the previous owners of Mondo was made.

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21. Financial instruments continued

Fair values measurement and hierarchy

Basis for determining fair values

The Group measures fair values in respect of financial instruments in accordance with IFRS 13, using the following fair value hierarchy

that reflects the significance of the inputs used in making the measurements:

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly or indirectly.

Level 3: Valuation techniques using significant unobservable inputs. This category includes contingent consideration.

The following summarises the significant methods and assumptions used in estimating the fair values of financial instruments:

The Group assesses that the fair values of cash and cash equivalents, trade and other receivables, trade and other payables, and the

current portion of floating rate bank and other borrowings, approximate to book values due to the short maturity periods of these

financial instruments. For trade and other receivables, allowances are made within their book value for credit risk. The fair values of lease

liabilities approximate to their book values due to the measurement of lease liabilities at the Group’s incremental borrowing rate, which

has not changed significantly since the inception of the lease liabilities presented. Leases are also negotiated at market rates with

independent, unrelated third parties and are subject to periodic rental reviews.

Derivatives (level 2)

Fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual

maturity of the contract using a risk free interest rate (based on government bonds).

Non-derivative non-current financial liabilities (level 2)

Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at

the reporting date.

Contingent consideration payable (level 3)

Fair value has been estimated by calculating the present value of the future expected cash flows. Expected cash inflows are estimated

based on the terms of the sale and purchase contract, the entity’s knowledge of the business and how the current economic

environment is likely to impact it.

Changes in fair value of financial liabilities classified as level 3 in the hierarchy are as follows:

2021

2020

Contingent consideration at fair value through profit or loss:

At 1 January 13.4 13.0

Foreign exchange losses/(gains) (0.1) 0.4

Cash paid (13.3) –

At 31 December – 13.4

Interest rates used for determining fair value

The interest rates used to discount estimated cash flows, where applicable, are based on yield curves observable at the balance sheet

date and contractual interest rates. The rates used were as follows:

2021

2020

Borrowings 2.4–2.7 2.9–3.3

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

166 Annual Report and Accounts 2021 Elementis plc

The following table shows amounts recognised in profit or loss in relation to financial assets and liabilities within the scope of IFRS 9:

2021

2020

Recognised in profit or loss

Revenue – fair value of cash flow hedges transferred from equity to the income statement (0.3) –

Interest income on bank deposits held at amortised cost 0.3 0.3

Fair value movement on derivatives 10.7 –

Financial income 11.0 0.3

Interest on bank loans (23.3) (22.6)

Fair value of cash flow hedges transferred from equity to the income statement (2.4) (0.9)

Fair value movement on derivatives – (10.2)

Interest on lease liabilities (1.6) (1.7)

Financial costs (27.3) (35.4)

The following table shows amounts recognised directly in equity in relation to financial assets and liabilities within the scope of IFRS 9:

2021

2020

Recognised directly in equity

Effective portion of changes in fair value of cash flow hedge (gain / (loss)) (0.1) (1.4)

Fair value of cash flow hedges transferred to income statement 2.7 0.9

Fair value of cash flow hedges transferred to net assets (2.3) –

Effective portion of change in fair value of net investment hedge 10.7 (3.6)

Foreign currency translation differences for foreign operations (29.1) 25.0

Recognised in:

Hedging reserve 0.3 (0.5)

Translation reserve (18.4) 21.4

22. Derivative financial instruments and hedging activities

Contract or underlying

principal amount Fair Value

At 31 December 2021: Assets Liabilities

Assets

Liabilities

Current:

Interest rate swaps – cash flow hedges –

€120m /

$100m – (0.9)

Nickel swaps – cash flow hedges – 504 MT – (0.5)

Aluminium swaps – cash flow hedges 2,040 MT 1,620 MT 0.2 –

Total 0.2 (1.4)

Non current:

Cross currency swaps –

$110m /

€100m – (4.0)

Total – (4.0)

Contract or underlying

principal amount Fair Value

At 31 December 2020: Assets Liabilities

Assets

Liabilities

Current:

Interest rate swaps – cash flow hedges –

€120m /

$100m – (2.6)

Commodity forward contracts – cash flow hedges

2,040 MT – 1.4 –

Cross currency swaps –

$110m /

€100m – (14.7)

Total 1.4 (17.3)

Hedging activities

The Group is exposed to certain risks relating to its ongoing business operations. The primary risks managed using derivative

instruments are foreign currency risk, commodity price risk and interest rate risk.

The Group’s risk management strategy is explained in Note 23.

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22. Derivative financial instruments and hedging activities continued

Derivatives designated as hedging instruments

Cash flow hedges

Commodity price risk

The Group enters into commodity swap contracts to reduce the volatility attributable to price fluctuations of aluminium and gas. To the

extent they continue to meet the criteria for hedge accounting, the commodity forward contracts are accounted for as cash flow hedges.

There is an economic relationship between the hedged items and the hedging instruments as the terms of the commodity swap

contracts match the terms of the expected highly probable forecast transactions (i.e. notional amount and expected payment date).

As all critical terms matched during the year, hedge ineffectiveness was immaterial. The hedge ratio is 1:1.

Interest rate risk

The Group enters into interest rate swaps to swap a portion of the interest arising from the Group’s syndicated rolling credit facility from

floating to fixed. Interest payments are highly probable, the hedged risk is the change in the market interest rate. The hedged items are

the interest rate cash flows on $100.0m of USD denominated debt and €120.0m of EUR denominated debt, the Group’s total debt is

shown in Note 19 to the financial statements.

The principal terms (notional, reset date, tenor) of the hedged items and the hedged instruments have been matched along with the

contractual interest cash flows, therefore creating an exact offset for these transaction resulting in a net fixed interest payable. As the

interest rate swaps and the hedged items are matched (equal and opposite terms of interest rate, date and maturity) this results in a

designated hedge ratio of 1:1 or 100%.

Hedge ineffectiveness can arise from:

– Changes in timing of the hedged item

– A reduction in the amount of the hedged item considered to be highly probable

– A change in the credit risk of Elementis or the counterparty to the derivative contract

– Foreign currency basis spreads

The effect of cash flow hedges in the consolidated income statement and the consolidated statement of other comprehensive income

is, asfollows:

Total hedging (loss)/

gain recognised

in OCI

Amount reclassified

from OCI to profit

or loss

Amount reclassified

from OCI to the

Balance Sheet

Line item in the

statement of

profit or loss

Year ended 31 December 2021

Interest rate swaps – cash flow hedges (0.1) 2.4 – Finance costs

Nickel forward contracts – cash flow hedges (1.2) 0.3 – Revenue

Aluminium forward contracts – cash flow hedges 1.2 – (2.3) Inventory

Year ended 31 December 2020

Interest rate swaps – cash flow hedges (2.5) 0.5 – Finance costs

Commodity forward contracts – cash flow hedges 1.1 0.4 – Cost of sales

Amounts reclassified from other comprehensive income to profit or loss are due to the hedged item affecting profit or loss in the period.

There were no instances of non-occurrence of hedged cashflows in either the current or comparative period.

IBOR reform

The Group adopted the ‘Interest rate benchmark reform – Phase 1 amendments in the prior financial year. These allow the Group to

continue hedge accounting for its benchmark interest rate exposures during the period of uncertainty arising from interest rate benchmark

reforms. The Group will continue to apply these amendments until the uncertainty arising from interest rate benchmark reform is no longer

present with respect to the timing and amount of the interest rate benchmark cash flows. Phase 1 temporary relief is expected to cease,

on a hedge-by-hedge basis, when the designated hedge relationship is amended and application of Phase 2 reliefs begins.

None of the Group’s current USD LIBOR linked contracts include adequate and robust fallback provisions for a cessation of the

referenced benchmark interest rate. The Group is monitoring the market and the output from various industry working groups managing

the transition to new benchmark interest rates, and will look to implement fallback language for different instruments when appropriate.

Details of the hedging relationships for which the Group has applied the ‘Interest rate benchmark reform – Phase 1’ amendments are

givenbelow.

Hedging instrument Notional

Asset

Liability

Interest rate

benchmark

USD Interest rate swaps – cash flow hedges $100m – (0.8)

USD–3m–

LIBOR

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

168 Annual Report and Accounts 2021 Elementis plc

Hedge of net investments in foreign operations

The Group seeks to denominate the currency of its borrowings in Euros and US dollars in order to match the currency of its cash flows,

earnings and assets which are principally denominated in those currencies.

The Euro and US dollar borrowings in Elementis Holdings Limited, are designated as net investment hedges, as the company’s functional

currency is GBP. The Group does not undertake derivative transactions to hedge the foreign currency translation exposures.

The Group analyses the Euro and US dollar net assets by subsidiary and the foreign currency borrowings in the name of Elementis

Holdings Limited are allocated against certain tranches of net assets for a specific subsidiary. Therefore, the critical terms of the Euro

and US dollar borrowings and their corresponding hedged items are the same.

The Group performs a qualitative assessment of effectiveness and it is expected that the value of the Euro and US dollar borrowings

inGBP and the value of the corresponding hedged items in GBP will systematically move in the opposite direction in response to

movements in the underlying exchange rates.

The main source of ineffectiveness in these hedging relationships is the impact of a decline in the carrying value of the hedged item compared

to the Euro and US dollar borrowings with the result that the value of the hedged item is less than the value of hedging instrument.

Foreign currency revaluation on the Euro and US dollar borrowings in the name of Elementis Holdings Limited are recorded in other

comprehensive income and deferred in the foreign currency translation reserve on the balance sheet as long as the hedge is effective.

Any ineffectiveness is recognised in the Income Statement for that year.

The impact of the hedged items on the statement of comprehensive income is as follows:

2021

Foreign

currency

translation

reserve

2020

Foreign

currency

translation

reserve

Year ended 31 December

Net investment in foreign subsidiaries (29.1) 25.0

Impact of hedging on equity

Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:

Cash flow

hedge

reserve

Foreign

currency

translation

reserve

As at 1 January 2020 (8.4) (69.0)

Effective portion of changes in fair value arising from:

Derivative cash flow hedging instruments (1.4) –

Amount reclassified to profit or loss 0.9 (0.2)

Foreign currency revaluation of the net foreign operations – 25.0

Foreign currency revaluation of borrowings – (3.6)

Foreign currency revaluation of pension scheme actuarial movements – (1.1)

As at 1 January 2021 (8.9) (48.9)

Effective portion of changes in fair value arising from:

Derivative cash flow hedging instruments (0.1) –

Amount reclassified to profit or loss 2.7 (0.4)

Amount reclassified to net assets (2.3) –

Foreign currency revaluation of the net foreign operations – (29.1)

Foreign currency revaluation of borrowings – 10.7

Foreign currency revaluation of pension scheme actuarial movements – –

As at 31 December 2021 (8.6) (67.7)

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23. Financial risk management

Risk management objectives

The Group has exposure to the following risks from its use of financial instruments:

– Credit risk

– Liquidity risk

– Market risk

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits

andcontrols and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect

changes in market conditions and the Group’s activities.

The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management policies and

procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group’s Audit

Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk

management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations, and arises principally from the Group’s receivables from customers.

Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the

Group’s customer base, including the default risk of the industry and country in which customers operate, has less influence on credit

risk. No single customer accounts for a significant proportion of the Group’s revenue.

Each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions

are offered. The Group’s review includes external ratings, where available, and in some cases bank references. Purchase limits are

established for each customer, which represents the maximum open amount without requiring approval from the Board of Directors.

Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

The Group applies the IFRS 9 simplified approach in establishing an allowance for expected credit losses (ECLs). Therefore, the Group

does not track changes in credit risk but instead recognises a loss allowance based on lifetime ECLs at each reporting date. A provision

matrix is used to calculate lifetime ECLs which takes into account the Group’s historical credit loss experience adjusted for historical

conditions that are not relevant to future cashflows and forward looking factors specific to the debtor and economic environment.

Investments

The Group limits its exposure to credit risk through a treasury policy that imposes graduated limits on the amount of funds that can

bedeposited with counterparties by reference to the counterparties’ credit ratings, as defined by Standard & Poor’s or Moody’s.

Management does not expect any counterparty to fail to meet its obligations.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting

datewas:

Carrying amount

2021

2020

Trade receivables 110.6 86.4

Cash and cash equivalents 84.6 111.0

195.2 197.4

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

170 Annual Report and Accounts 2021 Elementis plc

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

Carrying amount

2021

2020

North America 36.3 27.7

Europe 39.5 29.9

Rest of the World 34.8 28.8

110.6 86.4

Expected credit losses

Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix:

Gross 2021

Expected

credit loss

rate

Expected

credit loss

2021

Gross 2020

Expected

credit loss

rate

Expected

credit loss

2020

Not past due 97.7 0.1% (0.1) 78.1 0.8% (0.6)

Past due 0-30 days 9.3 0.0% – 8.2 0.0% –

Past due 31-120 days 2.6 0.0% – 0.9 66.7% (0.6)

Past due > 121 days 2.6 62.0% (1.6) 1.0 60.0% (0.6)

Total 112.2 (1.7) 88.2 (1.8)

The movement in the allowance for expected credit losses during the year was as follows:

2021

2020

Balance at 1 January 1.8 2.4

Released to income statement – administrative expenses – (0.6)

Amounts written off (0.1) –

Balance at 31 December 1.7 1.8

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing

liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and

stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group’s funding policy is

tohave committed borrowings in place to cover at least 125% of the maximum forecast net borrowings for the next 12 month period.

At the year end the Group had $330.3m (2020: $314.1m) of undrawn committed facilities, of which $295.0m (2020: $280.0m) expires

after more than 1 year. In addition, some suppliers have access to utilise the Group’s supplier finance programmes, which are provided

bythe Group’s banks. The net balance outstanding on these arrangements totalled $6.1m (2020: $4.9m) at the end of the period.

There is no cost to the Group for providing these programmes as the cost is borne by the suppliers. These programmes allow suppliers

tochoose whether they want to accelerate the payment of their invoices, by the financing banks, at a low interest cost.

Exposure to liquidity risk

The maturity analyses for financial liabilities showing the anticipated remaining contractual undiscounted cash flows, including future

interest payments, at current year exchange rates and assuming floating interest rates remain at the latest fixing rates are:

31 December 2021

Within

1 year

1 to 2

years

2 to 5

years

After 5

years

Total

Bank overdrafts – – – – –

Secured bank loan 12.4 405.4 93.8 – 511.6

Trade and other payables 161.0 – – – 161.0

Lease liabilities 6.4 4.8 12.1 26.5 49.8

Total non-derivative financial liabilities 179.8 410.2 105.9 26.5 722.4

Interest rate swaps 0.9 – – – 0.9

Commodity swap contracts 0.4 0.1 – – 0.5

Cross currency swaps – outflow – 113.7 – – 113.7

Cross currency swaps – inflow (1.4) (110.9) – – (112.3)

Total derivative financial liabilities (0.1) 2.9 – – 2.8

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23. Financial risk management continued

31 December 2020

Within

1 year

1 to 2

years

2 to 5

years

After 5

years

Total

Bank overdrafts 3.7 – – – 3.7

Secured bank loan 14.9 14.9 532.9 – 562.7

Trade and other payables 132.6 – – – 132.6

Lease liabilities 7.2 5.8 12.7 30.2 55.9

Total non-derivative financial liabilities 158.4 20.7 545.6 30.2 754.9

Interest rate swaps* 2.6 – – – 2.6

Cross currency swaps – outflow – – 122.4 – 122.4

Cross currency swaps – inflow (1.6) (1.6) (111.0) – (114.2)

Total derivative financial liabilities 1.0 (1.6) 11.4 – 10.8

* Assumes no change in interest rates from those prevailing at the balance sheet date.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income

orthe value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk

exposures within acceptable parameters, whilst optimising the return on risk.

The Group uses derivatives in the ordinary course of business, and also incurs financial liabilities, in order to manage market risks.

All such transactions are carried out within the guidelines set by the Board.

Market risk – currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a foreign currency other than the

respective functional currencies of Group entities, primarily the US dollar and the euro. The Group hedges up to 100% of current and

forecast trade receivables and trade payables denominated in a foreign currency. The Group uses forward exchange contracts to hedge

itscurrency risk, with a maturity of less than one year from the reporting date.

Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations of the Group,

primarily US dollar, but also euro and pounds sterling. This provides an economic hedge in instances where hedging derivatives are not

entered into. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net

exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short term

imbalances.

The Group’s net investment in overseas subsidiaries creates exposure to foreign exchange fluctuations. The risk is hedged by US dollar

and euro denominated drawdowns under the syndicated facility designated as the hedged item in net investment hedge relationships.

This mitigates the currency risk arising from the retranslation of a subsidiary’s net assets into pounds sterling, the functional currency

ofthe ultimate parent Elementis plc.

Currency risk sensitivity analysis

The following table illustrates the effect on the income statement and items that are recognised directly in equity that would result from

a10% strengthening of US dollar against the following currencies, before the effect of tax. The analysis covers only financial assets and

liabilities held at the balance sheet date and assumes that all other variables, in particular interest rates, remain constant.

2021 2020

Income

statement

Equity

Income

statement

Equity

Gain/(loss) from US Dollar strengthening 10% against Euro 0.3 0.2 0.5 0.6

Gain/(loss) from US Dollar strengthening 10% against Sterling 0.1 (26.4) (0.9) (28.9)

Market risk – interest rate

The Group’s policy is to borrow at both fixed and floating interest rates and to use interest rate swaps to generate the required interest

profile. These interest swaps are designated within cashflow hedging relationships with the interest payments on the borrowings they

are hedging. The risk being hedged is the exposure of the Group to market rate volatility on a portion of the core Group debt. The Group

policy does not require that a specific proportion of the Group’s borrowings are at fixed rates of interest.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

172 Annual Report and Accounts 2021 Elementis plc

Interest rate sensitivity analysis

A change of 100 basis points (1%) in interest rates would have impacted profit or loss by the amounts shown below. This analysis

assumes that all other variables, in particular foreign currency rates, remain constant.

2021 2020

100bps

increase

100bps

decrease

100bps

increase

100bps

decrease

Variable rate instruments – (loss)/gain (2.1) 4.9 (2.4) 1.2

Market risk – commodity price risk

The group is exposed to movements in the prices of commodities it purchases and sells such as aluminium and nickel. The volatility in

the prices of these commodities has led to the decision to enter into commodity swap contracts. The swap contracts do not result in

physical delivery, but are designated as cash flow hedges to offset the effect of price changes.

Commodity price sensitivity analysis

The following table details the Group’s sensitivity to a 10% increase in aluminium prices, which is management’s assessment of the

reasonably possible change, on average, over any given year. In 2021 and 2020 the Group’s aluminium purchases were fully hedged

andall aluminium swap derivatives achieved hedge accounting, there was no impact on profit or loss.

The table does not show the sensitivity to the Group’s total commodity exposure or the impact of changes in volumes that may arise

from increase or decrease in the respective commodity prices. The sensitivity analysis determines the potential effect on profit or loss

and equity arising from the Group’s aluminium swap contract positions as a result of the reasonably possible increases or decreases of

the respective aluminium price.

Effect

on profit

before tax

2021

Impact on

total equity

Effect

on profit

before tax

2020

Impact on

total equity

10% increase in aluminium prices – – – –

Other market price risk

Equity price risk arises from equity securities held within the Group’s defined benefit pension obligations. In respect of the US schemes,

management monitors the mix of debt and equity securities in its investment portfolio based on market expectations. The primary goal

ofthe Group’s investment strategy is to maximise investment returns, without excessive risk taking, in order to meet partially the Group’s

unfunded benefit obligations; management is assisted by external advisers in this regard. In respect of the UK scheme, the investment

strategy is set by the trustees and the Board is kept informed.

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence, sustain future

development of the business and maximise shareholder value. The capital structure of the Group consists of debt, cash and cash

equivalents and equity attributable to equity holders of the parent comprising capital, reserves and retained earnings.

The Group utilises a mix of debt funding sources including term loans and revolving credit facilities (RCF) from the Group’s syndicated

borrowing facility with differing maturities to ensure continuity and provide flexibility. The group is subject to two financial covenants

whichapply to the Group’s syndicated borrowing facility. Following the covenant relaxations granted during 2020 the group is required

tomaintain a ratio of net debt to EBITDA (pre IFRS 16) of less than 3.75x for all measurement points up to and including 31 December

2021 and less than 3.25x for all periods thereafter and a minimum net interest cover of 3.0x (in relation to earnings before net interest

expense and tax). The Net debt to EBITDA ratio stood at 2.6x times at 31 December 2021 (2020: 3.2x) and the Directors anticipate the

strong cash generation of the Enlarged Group to drive a material deleveraging profile going forwards, with leverage reducing to a net

debt to EBITDA ratio of around 1.5x in the medium term. Net interest cover at 31 December 2021 was 4.8x (2020: 3.7x).

The Board monitors the adjusted return on operating capital employed (ROCE) both including and excluding goodwill, as defined on page

184. The Group’s target is to achieve an adjusted ROCE (including goodwill) in excess of our weighted average cost of capital.

The dividend policy is set out in the Chairman’s statement on page 7.

Annual Report and Accounts 2021Elementis plc

173

Strategic report Corporate governance Financial statements Shareholder information

24. Leases

Group as Lessee

The Group has lease contracts for various items of property, plant, machinery, vehicles and other equipment used in its operations.

Disclosures in relation to Right of Use Assets are included within Note 11 – Property, plant and equipment.

The Group also has certain leases with lease terms of 12 months or less and leases of low-value assets to which the Group applies the

‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions.

The weighted average incremental borrowing rate applied to lease liabilities is 3% (2020: 4%).

The following are the amounts recognised in profit or loss:

2021

2020

Depreciation expense on right-of-use assets 5.0 5.2

Interest expense on lease liabilities 1.6 1.7

Expense related to short-term leases and low-value assets 0.8 1.0

Expense relating to variable lease payments not included in lease liabilities 0.9 0.9

Set out below are the carrying amounts of lease liabilities and the movements during the period:

2021

2020

As at 1 January 44.4 46.9

Additions 2.0 1.4

Disposals (0.1) –

Interest expense 1.6 1.7

Payments (6.7) (6.7)

Foreign exchange movements (1.0) 1.1

As at 31 December 40.2 44.4

The maturity analysis of lease liabilities is as follows:

2021

2020

Within one year 6.4 7.2

In the second to fifth years inclusive 15.2 16.5

After five years 18.6 20.7

40.2 44.4

25. Retirement benefit obligations

The Group has a number of contributory and non-contributory post retirement benefit plans providing retirement benefits for the

majority ofemployees and Executive Directors. At 31 December 2021 the main schemes in the UK and US were of the defined benefit

type, the benefit being based on number of years of service and either the employee’s final remuneration or the employee’s average

remuneration during a period of years before retirement. The assets of these schemes are held in separate trustee administered funds

or are unfunded butprovided for on the Group balance sheet.

The UK defined benefit scheme had a surplus under IAS 19 of $56.6m (2020: $7.9m). In accordance with the requirements of IFRIC

14 management have concluded that the right to reduce the minimum funding contributions when the deficit falls below $10.4m in

conjunction with the unconditional right to a refund of any surplus under any winding up of the plan provides sufficient evidence that

anasset ceiling does not exist and as such the full surplus has been recognised.

In addition the Group operates an unfunded post retirement medical benefit (PRMB) scheme in the US. The entitlement to these benefits

isusually based on the employee remaining in service until retirement age and completion of a minimum service period.

Other employee benefit schemes included in the table overleaf relate to two unfunded pension schemes, a long term service award

scheme in Germany and a special benefits programme for a small number of former employees of the Eaglescliffe plant. The Group also

acquired two further unfunded pension schemes and two long term service award schemes all in Germany as part of the SummitReheis

acquisition in 2017. These are included within this category.

The Group also operates a small number of defined contribution schemes and the contributions payable during the year are recognised

asincurred. The pension charge for the defined contribution pension schemes for the year is $6.2m (2020: $3.1m).

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

174 Annual Report and Accounts 2021 Elementis plc

Net defined benefit liability

The net liability was as follows:

UK pension

scheme

US pension

schemes

US PRMB

scheme

Other

Total

2021

Total market value of assets 774.9 130.1 – – 905.0

Present value of scheme liabilities (718.3) (131.8) (6.6) (9.0) (865.7)

Net asset/(liability) recognised in the balance sheet 56.6 (1.7) (6.6) (9.0) 39.3

UK pension

scheme

US pension

schemes

US PRMB

scheme

Other

Total

2020

Total market value of assets 788.9 130.7 – – 919.6

Present value of scheme liabilities (781.0) (142.5) (6.5) (9.8) (939.8)

Net asset/(liability) recognised in the balance sheet 7.9 (11.8) (6.5) (9.8) (20.2)

Employer contributions in 2021 were $0.7m (2020: $nil) to the UK scheme and $1.0m (2020: $0.8m) to US schemes. Top up contributions

tothe UK scheme in 2022 will be $0.7m based on the 2020 triennial valuation. Expected contributions to the US schemes in the next

year are $0.6m.

Movement in net defined benefit liability

The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit liability and

itscomponents.

UK pension

scheme

US pension

schemes

US PRMB

scheme

Other

Total

2021

Balance at 1 January 7.9 (11.8) (6.5) (9.8) (20.2)

Liabilities assumed as part of the acquisition of ICL Laboratories – – – (0.7) (0.7)

Included in profit or loss

Current service cost (0.7) (0.8) (0.1) (0.3) (1.9)

Past service cost – – – – –

Running costs (1.7) (0.4) – – (2.1)

Net interest income/(expense) 0.1 (0.2) (0.2) (0.1) (0.4)

(2.3) (1.4) (0.3) (0.4) (4.4)

Included in other comprehensive income

Re-measurements:

Return on plan assets excluding interest income 24.9 4.4 – – 29.3

Actuarial gains arising from demographic assumptions 11.1 (0.4) – – 10.7

Actuarial losses arising from financial assumptions 2.0 5.9 (0.5) 1.1 8.5

Actuarial (losses)/gains arising from experience adjustment 14.0 1.1 0.2 (0.2) 15.1

Exchange differences (1.6) – – 0.7 (0.9)

50.4 11.0 (0.3) 1.6 62.6

Contributions:

Employers 0.6 0.5 0.5 0.3 1.9

Surplus / (deficit) in schemes at 31 December 56.6 (1.7) (6.6) (9.0) 39.3

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175

Strategic report Corporate governance Financial statements Shareholder information

25. Retirement benefit obligations continued

UK pension

scheme

US pension

schemes

US PRMB

scheme

Other

Total

2020

Balance at 1 January 7.4 (9.9) (6.0) (8.6) (17.1)

Included in profit or loss

Current service cost (0.6) (0.8) (0.1) 0.1 (1.4)

Past service cost – (1.1) – – (1.1)

Running costs (1.2) (0.4) – – (1.6)

Net interest income/(expense) 0.1 (0.3) (0.1) (0.1) (0.4)

(1.7) (2.6) (0.2) – (4.5)

Included in other comprehensive income

Re-measurements:

Return on plan assets excluding interest income 61.6 12.3 – – 73.9

Actuarial gains arising from demographic assumptions – 0.3 – – 0.3

Actuarial gains arising from financial assumptions (65.4) (11.9) (0.4) (0.6) (78.3)

Actuarial losses arising from experience adjustment 5.9 (0.4) (0.3) (0.3) 4.9

Exchange differences 0.1 – – (0.8) (0.7)

2.2 0.3 (0.7) (1.7) 0.1

Contributions:

Employers – 0.4 0.4 0.5 1.3

Surplus / (deficit) in schemes at 31 December 7.9 (11.8) (6.5) (9.8) (20.2)

Plan assets

Plan assets comprise:

UK pension

scheme

US pension

schemes

US PRMB

scheme

Total

2021

Equities 231.7 45.8 – 277.5

Bonds* 466.0 14.0 – 480.0

Cash/liquidity funds 77.2 70.3 – 147.5

774.9 130.1 – 905.0

UK pension

scheme

US pension

schemes

US PRMB

scheme

Total

2020

Equities 289.1 56.1 – 345.2

Bonds* 436.9 13.8 – 450.7

Cash/liquidity funds 62.9 60.8 – 123.7

788.9 130.7 – 919.6

* Including LDI repurchase agreement liabilities.

To reduce volatility risk a liability driven investment (LDI) strategy forms part of the Trustees’ management of the UK defined benefit

scheme’s assets, including government bonds, corporate bonds and derivatives. The bond assets category in the table above

includesgross assets of $778.2m (2020: $845.3m) and associated repurchase agreement liabilities of $312.2m (2020: $408.4m).

Repurchase agreements are entered into with counterparties to better offset the scheme’s exposure to interest and inflation rates,

whilstremaining invested in assets of a similar risk profile. Interest rate and inflation rate derivatives are also employed to complement

the useoffixed and indexed linked bonds inmatching the profile of the scheme’s liabilities.

All equities, bonds and liquidity funds have quoted prices in active markets. Other assets include insured annuities, an insurance fund

and various swap products.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

176 Annual Report and Accounts 2021 Elementis plc

Within the UK pension scheme, the current asset allocation is approximately 43% in a liability matching fund consisting of gilts (fixed

interestand index linked), bonds, cash and swaps, 17% in a buy and maintain fund and 40% in an investment fund that includes various

equity and equity like funds. The aim of the trustees is to manage the risk relative to the liabilities associated with the scheme’s

investments through acombination of diversification, inflation protection and hedging of risk (currency, interest rate and inflation risk).

The US scheme currently has approximately 35% of its asset value invested in a range of equity funds designed to target higher returns

andthus reduce the pension deficit, with the balance invested in fixed income bonds and cash. The strategy is that as the deficit

reduces, a greater proportion of investments will be made into liability matching funds. Changes in the fair value of plan assets for

themajor schemes are as follows:

UK pension

scheme

US pension

schemes

US PRMB

scheme

Total

2021

Opening fair value of plan assets 788.9 130.7 – 919.6

Expected return 10.1 2.8 – 12.9

Running costs (1.7) (0.4) – (2.1)

Actuarial gains 24.9 4.4 – 29.3

Contributions by employer 0.6 0.5 – 1.1

Contributions by employees 0.1 0.1 – 0.2

Benefits paid (40.7) (8.0) – (48.7)

Exchange differences (7.3) – – (7.3)

Closing fair value of plan assets 774.9 130.1 – 905.0

UK pension

scheme

US pension

schemes

US PRMB

scheme

Total

2020

Opening fair value of plan assets 724.2 122.5 – 846.7

Expected return 13.6 3.5 – 17.1

Running costs (1.2) (0.4) – (1.6)

Actuarial gains 61.6 12.3 – 73.9

Contributions by employer – 0.5 – 0.5

Contributions by employees 0.1 – – 0.1

Benefits paid (35.2) (7.7) – (42.9)

Exchange differences 25.8 – – 25.8

Closing fair value of plan assets 788.9 130.7 – 919.6

Defined benefit obligation

Changes in the present value of the defined benefit obligation for the major schemes are as follows:

UK pension

scheme

US pension

schemes

US PRMB

scheme

Total

2021

Opening defined benefit obligation (781.0) (142.5) (6.5) (930.0)

Service cost (0.7) (0.8) (0.1) (1.6)

Past service cost – – – –

Interest cost (10.0) (3.0) (0.2) (13.2)

Contributions by employees (0.1) (0.1) – (0.2)

Actuarial gains/(losses)

– demographic assumptions 11.1 (0.4) – 10.7

– financial assumptions 2.0 5.9 (0.5) 7.4

– experience adjustments 14.0 1.1 0.2 15.3

Benefits paid 40.7 8.0 0.5 49.2

Exchange differences 5.7 – – 5.7

Closing defined benefit obligation (718.3) (131.8) (6.6) (856.7)

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177

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25. Retirement benefit obligations continued

UK pension

scheme

US pension

schemes

US PRMB

scheme

Total

2020

Opening defined benefit obligation (716.8) (132.4) (6.0) (855.2)

Service cost (0.6) (0.8) (0.1) (1.5)

Past service cost – (1.1) – (1.1)

Interest cost (13.5) (3.9) (0.1) (17.5)

Contributions by employees (0.1) – – (0.1)

Actuarial gains/(losses)

– demographic assumptions – 0.3 – 0.3

– financial assumptions (65.4) (11.9) (0.5) (77.8)

– experience adjustments 5.9 (0.4) (0.3) 5.2

Benefits paid 35.2 7.7 0.5 43.4

Exchange differences (25.7) – – (25.7)

Closing defined benefit obligation (781.0) (142.5) (6.5) (930.0)

Actuarial assumptions

A full actuarial valuation was carried out on 30 September 2020 for the UK scheme and at 31 December 2015 for the US schemes.

The principal assumptions used by the actuaries for the major schemes have been updated by the actuaries at the balance sheet date

and were as follows:

2021

Rate of increase in salaries 4.6 3.0

Rate of increase in pensions in payment 3.4 N/A

Discount rate 1.8 2.6

Inflation 3.6 2.3

2020

Rate of increase in salaries 3.9 3.0

Rate of increase in pensions in payment 2.9 N/A

Discount rate 1.3 2.2

Inflation 2.9 2.3

The assumed life expectancies on retirement are:

UK US

2021

years

2020

years

2021

years

2020

years

Retiring at 31 December

Males 22 22 21 20

Females 24 24 22 22

Retiring in 20 years

Males 23 24 21 21

Females 26 26 23 23

The main assumptions for the PRMB scheme are a discount rate of 2.6% (2020: 2.2%) per annum and a health care cost trend of 5.7%

(2020: 6.4%) per annum for claims pre age 65 reducing to 4.4% per annum by 2028 (2020: 4.4%). Actuarial valuations of retirement

benefit plans in other jurisdictions have either not been updated for IAS 19 purposes or disclosed separately because of the costs

involved and the considerably smaller scheme sizes and numbers of employees involved.

At 31 December 2021, the weighted average duration of the defined benefit obligations for the major schemes was as follows:

UK: 13 years

US: 10 years.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

178 Annual Report and Accounts 2021 Elementis plc

Sensitivity analysis

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

Assumption Change in assumption Impact on UK scheme Impact on US scheme

Discount rate Increased/decreased by 0.5% Decreased/increased by 7% Decreased/increased by 5%

Rate of inflation Increased/decreased by 0.5% Increased/decreased by 4% Increased/decreased by 0%

Rate of salary growth Increased/decreased by 0.5% Increased/decreased by 0% Increased/decreased by 0%

Rate of mortality Increased by 1 year Increased by 5% Increased by 4%

The sensitivity analyses above have been determined based on a method that extrapolates the impact on the defined benefit obligation as

a result of reasonable changes in key assumptions occurring at the end of the reporting period. These sensitivities have been calculated

to show the movement of the defined obligation following a change in a particular assumption in isolation, assuming no otherchanges in

market conditions.

26. Share based payments

The Group maintains a number of active share option and award plans and schemes for its employees. These are as follows:

Savings-related options

Options are granted under the tax-advantaged Save As You Earn (SAYE) share option scheme in the UK. The SAYE allows UK-based

eligible employees to acquire options over the Company’s shares at a discount of up to 20% of their market value at the date of grant.

Options are normally exercisable during the six month period following either the third or fifth anniversary of the start of the relevant

savings contract. Savings contracts are subject to the statutory savings limit of £500 per month.

US-based employees can enter into a similar share save scheme (Share Save). Employees can enter into two year savings contracts

saving up to a maximum of $2,000 per month, allowing eligible employees to acquire options over the Company’s shares at a discount

ofup to 15% of their market value at the date of grant.

Long-term incentive plan (LTIP) awards

The LTIP is a discretionary employee share scheme for Executive Directors and senior managers. The vesting of the awards are subject to

performance conditions over a three year period at the discretion of the Remuneration Committee. The performance conditions of the LTIP

are detailed in the Remuneration Report on pages 92 and 93. As approved at the 2018 AGM, restricted shares (i.e. shares that vest based on

time only) are awarded to participants below Board level. Shadow LTIPs are in place for senior managers based in China and Malaysia.

Deferred share bonus plan (DSBP) awards

The DSBP operates exclusively for the Executive Directors. Under this scheme, 50% of any cash bonus payable is awarded in shares and

deferred for two years. There are no other performance conditions other than continued employment.

Legacy Schemes

Prior to the introduction of the LTIP for senior managers, certain employees participated in the Executive Share Option Scheme (‘ESOS’).

The ESOS which (except for outstanding awards which will run their course) has been discontinued. The Company operated shadow

ESOS for a number of senior managers, who were employed or based in China or Malaysia.

Options were valued (as shown in the table below) using the binomial option pricing model. The fair value per option granted and the

assumptions used in the calculations are as follows:

2021 2020

Fair value per option (pence) 114.6 38.0

Expected volatility (%) 64 59

Risk free rate (%) 0.2 0.0

Expected dividend yield (%) 4.3 4.3

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous five years.

The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,

exercise restrictions and behavioural considerations. The Group recognised total expenses of $5.1m (2020: $3.5m) related to share

based payment transactions during the year.

Annual Report and Accounts 2021Elementis plc

179

Strategic report Corporate governance Financial statements Shareholder information

26. Share based payments continued

At 31 December 2021 the following options/awards to subscribe for ordinary shares were outstanding:

Exercisable

Year of grant

Exercise

price

(p)

From To

At 1 January

2021

’000

Granted

’000

Exercised

’000

Expired

’000

At 31

December

2021

’000

UK savings related share option

scheme

2017 207.40 01/10/20 01/04/21 11 – – 11 –

2018 163.91 01/01/22 01/07/22 29 – – 9 21

2019 121.33 01/11/22 01/05/23 21 – – 3 18

2019 121.33 01/11/24 04/05/25 – – – – –

2020 58.00 01/11/23 01/05/24 941 – 9 28 904

2020 58.00 01/11/25 01/05/26 52 – 10 41 –

2021 117.00 01/11/24 01/05/25 70 – – – 70

1,124 – 20 91 1,013

US savings related share option

scheme

2018 160.14 05/12/20 05/03/21 195 – – 195 –

2019 133.96 11/09/21 11/12/21 260 – 74 186 –

2020 63.11 16/09/22 16/12/22 1,372 – – 92 1,280

2021 133.71 15/09/23 15/12/23 123 – – 5 118

1,950 – 74 478 1,398

Executive share option schemes/

awards granted under the LTIP*

2010 52.16 06/04/13 06/04/20 – – – – –

2011

137.18 04/04/14 04/04/21 83 – – 83 –

2012

* 177.81 27/06/15 27/06/22 238 – – – 238

2015 290.20 01/04/18 01/04/25 16 – – – 16

2015 Nil 27/04/18 27/04/25 7 – – – 7

2016 218.17 04/04/19 04/04/26 21 – – – 21

2017

∆

Nil 07/03/17 07/03/27 92 – – – 92

2017

Nil 07/03/19 07/03/27 7 – – – 7

2017

Nil 07/03/20 07/03/27 17 – – – 17

2017

264.66 03/04/20 03/04/27 31 – – – 31

2017*

†

Nil 03/04/20 03/04/27 – – – – –

2018

Nil 05/03/20 05/03/28 73 – – – 73

2018

†

Nil 30/04/21 30/04/21 550 – 546 4 –

2018

†

Nil 30/04/21 30/04/28 1.194 – – 1,194 –

2018 Nil 27/06/21 27/06/21 7 – 7 – –

2018 Nil 29/10/21 29/10/21 36 – 36 – –

2018 Nil 21/12/21 21/12/21 – – – – –

2018 Nil 21/12/21 21/12/21 361 – 305 56 –

2019 Nil 03/01/21 30/01/29 – – – – –

2019 Nil 03/01/22 30/01/29 124 – – 124 –

2019 Nil 03/01/22 03/01/22 33 – 33 – –

2019



Nil 06/03/21 06/03/21 110 – 110 – –

2019

Nil 06/03/21 06/03/29 49 – – – 49

2019*

†

Nil 01/04/22 01/04/29 2,273 – – 36 2,237

2019*

†

Nil 01/04/22 01/04/22 1,069 – 24 36 1,009

2019 Nil 01/04/22 01/04/22 5 – – 2 3

2019 Nil 19/10/22 19/10/22 16 – – – 16

2020 Nil 04/01/23 04/01/23 20 –

– – 20

2020



Nil 05/03/23 05/03/23 188 – – – 188

2020

Nil 05/03/23 05/03/30 76 – – – 76

2020*

†

Nil 07/04/23 07/04/30 5,085 – – 229 4,856

2020 Nil 07/04/22 07/04/22 106 – – – 106

2020*

†

Nil 07/04/23 07/04/23 2,720 – – – 2,460

2020*

†

Nil 03/08/23 03/08/23 178 – – 18 160

2020 Nil 11/09/23 11/09/23 16 – – – 16

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

180 Annual Report and Accounts 2021 Elementis plc

2020*

†

Nil 30/12/23 30/12/23 137 – – – 137

2021* Nil 06/04/24 06/04/31 – 2,696 2,696

2021* Nil 06/04/24 06/04/31 – 1,545 – – 1,545

2021 Nil 07/04/24 24/05/31 – 13 – – 13

2021 Nil 06/04/24 16/08/31 – 20 – – 20

2021 Nil 06/04/24 01/09/31 – 9 – – 9

2021 Nil 06/04/24 13/09/31 – 23 – – 23

2021* Nil 06/04/24 01/10/31 – 159 – – 159

2021 Nil 29/10/21 29/10/21 – 2 2 – –

2021 Nil 06/04/24 13/12/31 – 84 – – 84

14,938 4,551 1,063 2,042 16,384

Footnotes to table on page 184

1 Where necessary option prices were adjusted for by a factor of 1.092715 to reflect the dilutive effects of the 2018 Rights Issue.

+ These options include cash settled shadow executive options granted to a number of executives on the same basis as the executive options (with the

same performance conditions and exercise provisions). These shadow options are included in the calculation of the total expenses recognised by the

Group related to share based payments. The closing balance of the 2011 and 2017 options shown above include no shadow options.

∆ Awards made as one-off agreements that borrow from the terms of the LTIP.

? These options include cash settled shadow LTIPs granted to a number of executives on the same basis as the LTIP (with the same performance

conditions and exercise provisions). These shadow LTIPs are included in the calculation of the total expenses recognised by the Group related to share

based payments.

# Conditional share award under the Deferred Share Bonus Plan.

~ Awards made as one-off agreements under the Deferred Share Bonus Plan (nil cost options).

* The closing balance of 2012, 2019, 2020 and 2021 LTIPs shown above include approximately 17,568, 52,772, 195,856 and 133,878 shadow LTIPs

respectively.

 Conditional share award under the Deferred Share Bonus Plan (nil cost award, structured as restricted share units).

The weighted average remaining contractual life of the above shares outstanding at 31 December 2021 was 5.8 years (2020: 5.3 years).

The weighted average exercise prices of options disclosed in the previous table were as follows:

2021

Average

exercise

price

(p)

2020

Average

exercise

price

(p)

At 1 January 17.6 44.4

Granted – 13.0

Exercised 9.4 1.3

Expired 31.4 83.8

At 31 December 11.9 14.6

Exercisable at 31 December 111.1 114.1

The weighted average share price at the date of exercise of share options exercised during the year was 118.9 pence (2020: 32 pence).

The number of exercisable options outstanding as at 31 December 2021 was 551,857 (31 December 2020: 631,868).

27. Related party transactions

The Company is a guarantor to the UK pension scheme under which it guarantees all current and future obligations of UK subsidiaries

currently participating in the pension scheme to make payments to the scheme, up to a specified maximum amount. The maximum

amount ofthe guarantee is that which is needed (at the time the guarantee is called on) to bring the scheme’s funding level up to 105%

of its liabilities, calculated in accordance with section 179 of the Pensions Act 2004. This is also sometimes known as a Pension

Protection Fund(PPF) guarantee, as having such a guarantee in place reduces the annual PPF levy on the scheme.

The Group consists of the Parent Company, Elementis plc, incorporated in the United Kingdom and its subsidiaries and associates.

In accordance with Section 409 of the Companies Act 2006 a full list of related undertakings, the country of incorporation and the

effectivepercentage of equity owned as at 31 December 2020 is disclosed in Note 11 to the parent company financial statements.

The remuneration of key management personnel of the Group, which is defined as the Board of Directors, is shown below:

2021

2020

Salaries and short term employee benefits 4.2 2.1

Other long term benefits 0.3 0.3

Share based payments 1.1 0.7

5.6 3.1

Full details of all elements of the remuneration of Directors is set out in the Directors’ Remuneration report on pages 87 to 113.

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Strategic report Corporate governance Financial statements Shareholder information

28. Movement in net borrowings

2021

2020

Change in net cash resulting from cash flows:

(Decrease)/increase in cash and cash equivalents (23.6) 3.2

Decrease/(increase) in borrowings repayable within one year 3.7 (1.4)

Decrease in borrowings repayable after one year 15.0 57.7

(4.9) 59.5

Currency translation differences 12.0 (13.4)

Decrease in net borrowings 7.1 46.1

Net borrowings at beginning of year (408.1) (454.2)

Net borrowings at end of year (401.0) (408.1)

Bank and

other

borrowings

Lease

liabilities

Total

financing

liabilities

Cash and

cash

equivalents

Net debt and

lease

liabilities

At 1 January 2020 (558.1) (46.9) (605.0) 103.9 (501.1)

Exchange rate adjustments (17.3) (1.1) (18.4) 3.9 (14.5)

Business disposed (see note 32) – – – 0.5 0.5

Cash flows from financing activities 56.3 5.0 61.3 (56.3) 5.0

Other movements – (1.4) (1.4) 59.0 57.6

At 31 December 2020 (519.1) (44.4) (563.5) 111.0 (452.5)

Exchange rate adjustments 14.8 1.0 15.8 (2.8) 13.0

Business disposed (see note 32) – – – 0.5 0.5

Cash flows from financing activities 18.7 5.1 23.8 (25.3) (1.5)

Other movements – (1.9) (1.9) 1.2 (0.7)

At 31 December 2021 (485.6) (40.2) (525.8) 84.6 (441.2)

29. Dividends

An interim dividend was not paid in 2021 (2020: nil) and the Group is not proposing a final dividend (2020: nil) for the year ended

31 December 2021. The total dividend for the year is nil cents per share (2020: nil).

The amount payable for the final dividend is $nil.

2021 2020

Interim Final Full-year Interim Final Full-year

Dividend per share (cents) – – – – – –

30. Contingent liabilities

As is the case with other chemical companies, the Group occasionally receives notice of litigation relating to regulatory and legal

matters. A provision is recognised when the Group believes it has a present legal or constructive obligation as a result of a past event,

and it is probable that an outflow of economic benefits will be required to settle the obligation. Where it is deemed that an obligation is

merely possible and that the probability of a material outflow is not remote, the Group would disclose a contingent liability.

The Group has not received any notice of litigation relating to events arising prior to the balance sheet date that is expected to lead to a

material exposure.

In 2013 the UK Government (through HMRC) introduced the UK Finance Company Exemption (‘FCE’) regime. Elementis entered into the FCE

regime during 2014. In October 2017 the European Commission opened a State Aid investigation into the regime. In April 2019 the European

Commission concluded that the FCE regime constituted State Aid in circumstances where Groups had accessed the regime using a financing

company with UK significant people functions; the European Commission therefore instructed the UK Government to collect any relevant

State Aid amounts. The UK government and other UK based international companies, including Elementis, appealed to the General Court

of the European Union against the decision in 2019. In Spring 2020 HMRC requested that affected Groups submit their UK significant people

function analysis. The deadline for submission of these analyses was delayed due to the impact of COVID-19 and Elementis submitted

its analysis to HMRC in July 2020. In December 2020 the UK government introduced legislation to commence collection proceedings.

Elementis received a charging notice from HMRC on 5 February 2021 which assessed for the maximum exposure of $19m (excluding interest).

This was paid to HMRC on 5 March 2021. A charging notice for associated interest of $1m was received on 24 June 2021 and paid on 7 July

2021. Whilst Elementis has lodged an appeal against the charging notice this does not defer the payment of the tax assessed. As Elementis

considers that the appeal will ultimately be successful, at 31 December 2021 an asset has been recorded within non current assets in the

accounts on the expectation that the charge will be repaid in due course. The UK Government’s appeal against the European Commission’s

decision was heard by the General Court of the European Union during October 2021 with a decision expected during 2022.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

182 Annual Report and Accounts 2021 Elementis plc

31. Events after the balance sheet date

There were no significant events after the balance sheet date.

32. Business exits

On 21 June the Group disposed of Eisenbacher Dentalwaren ED GmbH and Adentatec GmbH, the dental alloys businesses located in

Wörth am Main, Germany for consideration of €4.6m ($5.7m).

The results of Eisenbacher Dentalwaren ED GmbH and Adentatec GmbH, which have been included in the consolidated income

statement were as follows:

Year

ended 31 December 2021

Revenue 3.1

Cost of sales (2.0)

Gross profit 1.1

Distribution costs –

Administrative expenses (0.8)

Operating profit 0.3

Finance costs –

Profit before tax 0.3

Attributable tax expense –

Net profit 0.3

Revenue includes $nil related to inter-segment sales in 2021 (2020: $nil). Net cash outflow on disposal of $0.7m comprised

consideration received of $5.7m less cash disposed of $3.4m and disposal costs of $1.6m.

The Group recognised a total loss on current year disposal of:

Year

ended 31 December 2021

Consideration received 5.7

Net assets disposed of (see table below) (6.2)

Disposal costs (1.6)

Recycling of deferred foreign exchange gains 0.4

Loss on disposal (1.7)

Details of assets and liabilities at the date of disposal are provided in the following table:

2021

Goodwill 1.0

Property, plant and equipment 0.1

Inventory 1.5

Trade and other receivables 0.5

Cash and bank balances 3.4

Trade and other payables (0.1)

Income tax payable (0.2)

Total net assets disposed of 6.2

2020 Business exits

On 30 November 2020 the Group disposed of Elementis Specialties (Changxing) Ltd for consideration of RMB 12.6m ($1.9m).

The results of Elementis Specialties (Changxing) Ltd , which have been included in the consolidated income statement were as follows:

Year

ended 31

December

2020

Revenue –

Expenses –

Profit before tax –

Attributable tax expense –

Net profit –

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183

Strategic report Corporate governance Financial statements Shareholder information

32. Business exits continued

Revenue includes $nil related to inter-segment sales in 2020. Net cash outflow on disposal of $0.5m comprised consideration received

of $1.9m less cash disposed of $1.3m and disposal costs of $0.1m.

During the year, Elementis Specialties (Changxing) Ltd contributed $nil to the Group’s net operating cash flows and paid $nil in respect

ofinvesting activities.

The Group recognised a total loss on disposal of:

Year

ended 31

December

2020

Consideration received 1.9

Net assets disposed of (see table below) (1.7)

Disposal costs (0.1)

Recycling of deferred foreign exchange gains 0.2

Profit on disposal 0.3

Net assets disposed of are analysed as follows:

2020

Goodwill –

Intangible assets –

Property, plant and equipment 0.4

Inventories –

Trade and other receivables –

Cash and bank balances 1.3

Total assets 1.7

Trade and other payables –

Pensions –

Tax liabilities –

Total liabilities –

Net assets 1.7

33. Acquisitions

On 1 October 2021 the Group acquired a quality assurance business and associated laboratory based in Ludwigshafen, Germany for

consideration of €0.15m. The assets and liabilities acquired were as follows:

Note

Book value

at acquisition

Fair value

adjustments

Fair value of

assets/

(liabilities)

acquired

Intangible assets 10 0.1 – 0.1

Property, plant and equipment 11 0.3 – 0.3

Retirement benefit obligations 25 (0.7) – (0.7)

Total identifiable net liabilities acquired (0.3) – (0.3)

Goodwill 0.5

Total consideration 0.2

of which:

Consideration paid, satisfied in cash 0.2

The consideration for the acquisition has been allocated against identified net assets with the remaining balance recorded as goodwill.

The goodwill recognised on acquisition reflects both the capabilities’ of the acquired entity’s personnel and the synergistic opportunities

going forward, neither of which can be allocated to an identifiable intangible asset.

Financial statements

Notes to the consolidated financial statements continued

For the year ended 31 December 2021

184 Annual Report and Accounts 2021 Elementis plc

Company balance sheet

at 31 December 2021

Note

2021

£m

2020

£m

Non-current assets

Investments 6 780.1 776.6

Debtors 7 12.6 –

Total non-current assets 792.7 776.6

Debtors 7 – 12.7

Creditors: amounts falling due within one year

Creditors 8 (0.6) (0.6)

Net current (liabilities)/assets (0.6) 12.1

Total assets less current liabilities 792.1 788.7

Creditors: amounts falling due after more than one year

Amounts due to subsidiary undertakings (190.2) (188.5)

Net assets 601.9 600.2

Capital and reserves

Called up share capital 9 29.1 28.9

Share premium account 178.8 176.5

Capital redemption reserve 9 83.3 83.3

Other reserves 250.5 250.5

Share option reserve 9 20.7 20.4

Profit and loss account 39.5 40.6

Equity shareholders’ funds 601.9 600.2

The Company recognised a loss for the financial year ended 31 December 2021 of £2.1m (2020: £0.3m).

The financial statements of Elementis plc, registered number 3299608, on pages 185 to 192 were approved by the Board on 3 March 2022

and signed on its behalf by:

Paul Waterman Ralph Hewins

CEO CFO

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185

Strategic report Corporate governance Financial statements Shareholder information

Financial statements

Statement of changes in equity

for the year ended 31 December 2021

Financial statements

Statement of changes in equity

for the year ended 31 December 2021

Share capital

£m

premium

£m

Capital

redemption

reserve

£m

Other

reserves

£m

options

reserve

£m

Retained

earnings

£m

Total

£m

Balance at 1 January 2020 28.9 176.5 83.3 250.5 17.7 40.9 597.8

Comprehensive income

Loss for the year – – – – – (0.3) (0.3)

Total other comprehensive loss – – – – – – –

Total comprehensive loss – – – – – (0.3) (0.3)

Transactions with owners

Issue of shares by the Company – – – – – – –

Share based payments – – – – 2.7 – 2.7

Dividends received – – – – – – –

Dividends paid – – – – – – –

Total transactions with owners – – – – 2.7 – 2.7

Balance at 31 December 2020 28.9 176.5 83.3 250.5 20.4 40.6 600.2

Balance at 1 January 2021 28.9 176.5 83.3 250.5 20.4 40.6 600.2

Comprehensive income

Loss for the year – – – – – (2.1) (2.1)

Total other comprehensive loss – – – – – – –

Total comprehensive loss – – – – – (2.1) (2.1)

Transactions with owners

Issue of shares by the Company 0.2 2.3 – – (2.3) – 0.2

Share based payments – – – – 3.6 – 3.6

Dividends received – – – – – – –

Dividends paid – – – – – – –

Transfer – – – – (1.0) 1.0 –

Total transactions with owners 0.2 2.3 – – 0.3 1.0 3.8

Balance at 31 December 2021 29.1 178.8 83.3 250.5 20.7 39.5 601.9

The Company’s distributable reserves amount to £39.5m (2020: £40.6m) at the end of the period. The Company regularly reviews its

distributable reserves and makes dividend recapitalisations as and when necessary to ensure it can make all expected dividend

payments. The Company has sufficient subsidiary reserves to enable such recapitalisations in 2022 and going forward.

For more information on the dividend issued and the dividend per share please see Note 29 of the Group financial statements.

186 Annual Report and Accounts 2021 Elementis plc

Notes to the company financial statements of Elementis plc

for the year ended 31 December 2021

1. General information

Elementis plc is a public company limited by shares and is incorporated and domiciled in England. The address of its registered office is

Caroline House, 55-57 High Holborn, London, WC1V 6DX. The principal activity of the Company is to act as the ultimate holding

company of the Elementis Group of companies.

2. Basis of preparation

The Company’s financial statements have been prepared under the historical cost convention, in compliance with applicable United

Kingdom accounting standards, including Financial Reporting Standard 101 – ‘Reduced disclosure framework – Disclosure exemptions

from EU -adopted IFRS for qualifying entities’ (‘FRS 101’), and with the Companies Act 2006. The Company has presented its results

underFRS 101.

As a qualifying entity whose results are consolidated in the Elementis plc Consolidated financial statements on pages 128 to 174, the

Company has taken advantage of the exemption under FRS 101 from preparing a statement of cashflows and associated notes, the

effects of new but not yet effective IFRSs, disclosures in respect of transactions and the capital management of wholly owned

subsidiaries and key management personnel compensation disclosures.

As the consolidated financial statements include equivalent disclosures, the Company has also taken the disclosure exemptions under

FRS 101 in respect of group settled share-based payments under IFRS 2 Share based payment, IFRS 16 leases, disclosures required by

IFRS 7 Financial Instruments Disclosures and by IFRS 13 Fair Value Measurement.

By virtue of section 408 of the Companies Act 2006 the company is exempt from presenting an income statement and disclosing

employee numbers and staff costs.

As a consequence of the majority of the Company’s assets, liabilities and expenses originating in UK pound sterling, the Company has

chosen the UK pound sterling as its reporting currency.

3. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been

consistently applied to all the years presented, unless otherwise stated. The Company has adopted FRS 101 in these financial

statements.

Foreign currencies

Transactions in foreign currencies are recorded at the rates of exchange ruling at the date of the transaction. Monetary assets and

liabilities denominated in foreign currencies are translated using the contracted rate or the rate of exchange ruling at the balance sheet

date and the gains and losses on translation are included in the profit and loss account.

Investments

Investments in subsidiaries are included in the balance sheet at cost less accumulated impairment losses.

Potential indicators of impairment including the market capitalisation of the group dropping below the net assets of Elementis plc have

been considered. The recoverable amounts of cash generating units as determined for the impairment testing of goodwill also support the

recoverable amounts of the parent company’s investments.

Dividends on shares presented within shareholders’ funds

Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately

authorised and are no longer at the discretion of the Company.

Pensions and other post-retirement benefits

The Company participates in the Elementis Group defined benefit pension scheme. The assets of the scheme are held separately from

those of the Company. Details of the latest actuarial valuation carried out in September 2017 can be found in the 2018 Elementis plc

Annual report and accounts. Following the introduction of the revised reporting standard, any surplus or deficit in the Elementis Group

defined benefit pension scheme is to be reported in the financial statements of Elementis UK Ltd, which employs the majority of active

members of the scheme and is responsible for making deficit contributions under the current funding plan.

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187

Strategic report Corporate governance Financial statements Shareholder information

Financial statements

Notes to the company financial statements of Elementis plc continued

for the year ended 31 December 2021

3. Summary of significant accounting policiescontinued

Taxation

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes

and the amounts used for taxation purposes. Advance corporation tax recoverable by deduction from future corporation tax is carried

forward within deferred taxation or as ACT recoverable within debtors as appropriate.

There were no significant judgements or estimates necessary in2021.

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of IFRS 16 Leases.

There has been no impact from this standard on the Company’s financial statements.

Share based payments

The fair value of share options granted to employees is recognised as an expense with a corresponding increase in equity. Where the

Company grants options over its own shares to the employees of its subsidiaries it recognises in its individual financial statements

anincrease in the cost of investment in its subsidiaries equivalent to the equity settled share based payment charge recognised in

itssubsidiaries’ financial statements, with the corresponding credit being recognised directly in equity. The fair value is measured at

grantdate and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the

options granted is measured using a binomial model, taking into account the terms and conditions upon which the options were granted.

The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only

due to share prices not achieving the threshold for vesting.

Classification of financial instruments issued by theCompany

Financial instruments issued by the Company are treated as equity only to the extent that they meet the following two conditions:

a. They include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial assets or

financial liabilities with another party under conditions that are potentially unfavourable to the Company.

b. Where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no

obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the

Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that the definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified

takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and

share premium account exclude amounts in relation to those shares.

Finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges. Finance payments

associated with financial instruments that are classified as part of shareholders’ funds, are dealt with as appropriations in the

reconciliation ofmovements in shareholders’ funds.

4. Profit for the financial year attributable toshareholders

As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account. A loss of

£2.1m (2020: £0.3m loss) is dealt with in the financial statements of the Company.

5. Directors’ remuneration

Details of Directors’ remuneration for the Company are included in the Directors’ Remuneration report within the Elementis plc Annual

Report and Accounts on pages 101-127.

188 Annual Report and Accounts 2021 Elementis plc

6. Investments

Unlisted

shares at

cost

£m

Unlisted

loans

£m

Capital

contributions

£m

Total

£m

Cost at 1 January 2021 0.1 759.0 17.5 776.6

Additions – – 3.5 3.5

Net book value 31 December 2021 0.1 759.0 21.0 780.1

Net book value 31 December 2020 0.1 759.0 17.5 776.6

The investment in unlisted loans is with Elementis Holdings Ltd, an indirect wholly owned subsidiary. The investments in unlisted shares

are in Elementis Group BV and Elementis Overseas Investments Ltd, both wholly owned subsidiaries. Capital contributions relate to

share based payment awards made to employees of subsidiary companies.

The trading subsidiaries and associates of Elementis plc, all of which are wholly owned, excluding Alembic Manufacturing Limited, where

the Group holds a 25% interest, are as follows:

Subsidiary undertakings Country of incorporation and operation

Alembic Manufacturing Ltd Personal Care products United Kingdom

Deuchem Co., Ltd Additives and resins Taiwan

Deuchem (HK) Trading Co Ltd Additives and resins

People’s Republic of China – Hong Kong

Special Administrative Region

Deuchem (Shanghai) Chemical Co. Ltd Additives and resins People’s Republic of China

Elementis Chromium Inc Chromium chemicals United States of America

Elementis Chromium LLP Chromium chemicals United Kingdom

Elementis (Shanghai)

New Material Co. Ltd Additives and resins People’s Republic of China

Elementis LTP Inc Chromium chemicals United States of America

Elementis Minerals BV Talc products Netherlands

Elementis Specialties (Anji) Ltd Organoclays People’s Republic of China

Elementis Specialties do

Brasil Quimica Ltda Coatings additives Brazil

Elementis Specialties Inc

Rheological additives, colourants, waxes,

other specialty additives United States of America

Elementis SRL Inc Personal Care products United States of America

Elementis UK Limited trading as: Rheological additives, colourants,

Elementis Specialties waxes, other specialty additives United Kingdom

Elementis Pharma GmbH Personal Care products Germany

Mondo Minerals Deutschland GmbH Talc products Germany

Elementis Minerals Nickel Oy Talc products Finland

Mondo Trading (Beijing) Company Ltd Talc products People’s Republic of China

1 Registered office Unit 6 Wimbourne Buildings, Atlantic Way, Barry Docks, Barry, South Glamorgan CF63 3RA, UK.

2 Registered office 92, Kuang-Fu North Road, Hsinchu Industrial Park, Hukou, Hsinchu Taiwan, ROC.

3 Registered office Flat P, 14/F, Haribest Industrial Building, 45-47 Au Pui Wan Street, Fotan, Shatin N.T Hong Kong.

4 Registered office 99 Lianyang Road, Songjiang Industrial Zone, Shanghai, China.

5 Registered office 1209 Orange Street, Wilmington, Delaware, 19801, US.

6 Registered office Caroline House, 55-57 High Holborn, London WC1V 6DX, UK.

7 Registered office: Kajuitweg 8, 1041 AR, Amsterdam, Netherlands.

8 Registered office Huibutai, Majiadu Village, Dipu Town, Anji County, Huzhou City, Zhejiang Province, China.

9 Registered office Rodovia Nelson Leopoldino, SP 375, Km 13,8, s/n, Bairro Rural, Palmital, São Paulo, Brazil.

10 Registered office Giulinistr. 2, 67065 Ludwigshafen, Germany.

11 Registered office Friedrichsallee 14, 42117, Wuppertal, Germany.

12 Registered office Talkkitie 7, 83500, Outokumpu, Finland.

13 Registered office Nan Zhugan Hutong no.6, floor 9, 01-007, Dongcheng District, 100010, Beijing, China.

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189

Strategic report Corporate governance Financial statements Shareholder information

Financial statements

Notes to the company financial statements of Elementis plc continued

for the year ended 31 December 2021

6. Investments continued

Non-trading and dormant subsidiaries of Elementis plc, all of which are wholly owned within the Group, are as follows:

Subsidiary undertakings Country of incorporation and operation

Agrichrome Ltd Non-trading United Kingdom

American Chrome & Chemicals Inc Dormant United States of America

Elementis America Shared Services Inc Dormant United States of America

Elementis Australia Ltd Dormant United Kingdom

Elementis Benelux NV Non-trading (in liquidation) Belgium

Elementis Catalysts Inc Dormant United States of America

Elementis Chemicals Inc Dormant United States of America

Elementis Chromium America Inc Dormant United States of America

Elementis Export Sales Inc Non-trading United States of America

Elementis Finance (Australia) Ltd Dormant United Kingdom

Elementis Finance (Europe) Ltd Non-trading United Kingdom

Elementis Finance (Germany) Ltd Non-trading United Kingdom

Elementis Finance (India) Ltd Non-trading United Kingdom

Elementis Finance (Ireland) Ltd Non-trading Ireland

Elementis Finance (Jersey) Ltd Non-trading Jersey

Elementis Finance (US) Ltd Non-trading United Kingdom

Elementis Germany GmbH Non-trading Germany

Elementis Germany Ltd Dormant United Kingdom

Elementis Global LLC Non-trading United States of America

Elementis GmbH Non-trading Germany

Elementis Group (Finance) Ltd Non-trading United Kingdom

Elementis Group BV Non-trading Netherlands

Elementis Group Ltd Dormant United Kingdom

Elementis Holdings Ltd Non-trading United Kingdom

Elementis London Ltd Dormant United Kingdom

Elementis Minerals Holding BV Non-trading Netherlands

Elementis Nederlands BV Non-trading Netherlands

Elementis New Zealand Ltd Dormant United Kingdom

Elementis NZ Ltd Non-trading New Zealand

Elementis Overseas Investments Ltd Non-trading United Kingdom

Elementis Pigments Inc Dormant United States of America

Elementis S.E.A. (Malaysia) Sdn Bhd Non-trading Malaysia

Elementis Securities Ltd Non-trading United Kingdom

Elementis Services GmbH Non-trading Germany

Elementis Specialties (India) Private Ltd Non-trading India

Elementis US Holdings Inc Non-trading United States of America

Elementis US Ltd Non-trading United Kingdom

H & C Acquisitions Ltd Dormant United Kingdom

H & C Lumber Inc Dormant United States of America

Harcros Chemicals Canada Inc Dormant Canada

Iron Oxides S.A. de CV Dormant Mexico

Mondo Minerals International BV Dormant Netherlands

NB Chrome Ltd Dormant United Kingdom

190 Annual Report and Accounts 2021 Elementis plc

Subsidiary undertakings Country of incorporation and operation

Reheis, Inc. Non-trading United States of America

SRL Coöperatief U.A. Non-trading Netherlands

SRLH Holdings Inc Non-trading United States of America

SRL International Holdings, LLC Non-trading United States of America

Talc Holding Finance Oy Non-trading Finland

Talc Holding Oy Non-trading Finland

WBS Carbons Acquisitions Corp Non-trading United States of America

1 Registered office: Caroline House, 55-57 High Holborn, London WC1V 6DX, UK.

2 Registered office: 1209 Orange Street, Wilmington, Delaware, 19801, US.

3 Registered office: Regus Brussels Airport, Pegasuslaan 5,1831 Diegem, Belgium.

4 Registered office: 8th Floor, Block E, Iveagh Court, Harcourt Road, Dublin 2, Ireland.

5 Registered office: 3rd Floor, 44 Esplanade, St Helier, Jersey, JE4 9WG.

6 Registered office: Stolberger Str.370, 50933, Köln, Germany.

7 Registered office: Strawinskylaan 411, 1077XX Amsterdam, Netherlands.

8 Registered office: Kajuitweg 8, 1041 AR, Amsterdam, Netherlands.

9 Registered office: KPMG, P O Box 1584, 18 Viaduct Harbour Avenue, Maritime Square, Auckland, New Zealand.

10 Registered office: 10th Floor, Menara Hap Seng, No. 1 & 3 Jalan P. Ramlee, 50250 Kuala Lumpur, Malaysia.

11 Registered office: Unit-B, Ground Floor, Jaswanti Landmark, Mehra Industrial Estate, L.B.S. Marg, Vikhroli (W), Mumbai 400079, India.

12 Registered office: C/o Stewart McKelvey Stirling Scales,44 Chipman Hill, Suite 1000 ON E2L 4S6, Canada.

13 Registered office: Calle San Ignacio N 105, 22106 Tijuana, Baja California Mexico.

14 Registered office: Kajaanintie 54, 88620, Korholanmaki, Finland.

Notes:

• Other than Elementis Export Sales Inc, Elementis Group BV and Elementis Overseas Investments Ltd, none of the undertakings is held directly by the

Company. Equity capital is in ordinary shares and voting rights equate to equity ownership.

• All undertakings listed above have accounting periods ending 31 December, with the exceptions of (i) Elementis Specialties (India) Private Ltd for which

the relevant date is 31 March; (ii) Elementis Finance (India) Limited for which the relevant date is 31 March, and (iii) Elementis Finance (Germany) Limited

for which the relevant date is 30 September.

• Undertakings operating in the United Kingdom are incorporated in England and Wales. In the case of corporate undertakings other than in the United

Kingdom their country of operation is also their country of incorporation.

• All undertakings listed above have been included in the Consolidated financial statements of the Group for the year.

7. Debtors

2021

£m

2020

£m

Debtors: amount falling due after more than one year

Group relief receivable 12.6 –

Debtors: amount falling due within one year

Group relief receivable – 12.7

8. Creditors: amount falling due within one year

2021

£m

2020

£m

Accruals 0.6 0.6

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191

Strategic report Corporate governance Financial statements Shareholder information

Financial statements

Notes to the company financial statements of Elementis plc continued

for the year ended 31 December 2021

9. Share capital and reserves

2021

Number

’000

2021

£m

2020

Number

’000

2020

£m

Called-up allotted and fully paid:

Ordinary shares of 5 pence each

At 1 January 580,801 28.9 580,518 28.9

Issue of shares 1,057 0.2 283 –

At 31 December 581,858 29.1 580,801 28.9

During the year a total of 1,057,211 ordinary shares with an aggregate nominal value of £52,860 were allotted and issued for cash to

various employees at subscription prices between 0 pence and 134 pence on the exercise of options under the Group’s share option

schemes. The total subscription monies received by the Company for these shares was £0.2m.

The Company can redeem shares by repaying the market value to the shareholder, whereupon the shares are cancelled. Redemption must

be from distributable profits. The Capital redemption reserve represents the nominal value of the shares redeemed.

The share options reserve comprises amounts accumulated in equity in respect of share options and awards granted to employees.

Details of the shared based payments in the year are set out in Note 26 to the Elementis plc consolidated financial statements.

10. Related party transactions

The Company is a guarantor to the Elementis Group defined benefit pension scheme under which it guarantees all current and future

obligations of UK subsidiaries currently participating in the pension scheme to make payments to the scheme, up to a specified maximum

amount. The maximum amount of the guarantee is that which is needed (at the time the guarantee is called on) to bring the scheme’s

funding level up to 105% of its liabilities, calculated in accordance with section 179 of the Pensions Act 2004. This is also sometimes

known as a Pension Protection Fund (‘PPF’) guarantee, as having such a guarantee in place reduces the annual PPF levy on the scheme.

11. UK registered subsidiaries exempt from audit

The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the

year ended 31 December 2021. Unless otherwise stated, the undertakings listed below are all 100% owned, either directly or indirectly,

byElementis plc. The Company will guarantee the debts and liabilities of the UK subsidiaries listed below at the balance sheet date

inaccordance with section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the guarantee

asremote.

Name

Proportion of

shares held

by the

Company

(%)

Proportion

of shares

held by

subsidiary

(%)

Company

Number

Agrichrome Limited 100 – 2228826

Elementis Finance (Germany) Limited 100 – 5531634

Elementis Finance (India) Limited 100 – 12521304

Elementis Finance (US) Limited 100 – 9303101

Elementis Germany Limited 100 – 48664

Elementis Group (Finance) Limited 100 – 9303017

Elementis Group Limited 100 – 4048541

Elementis Overseas Investments Limited 100 – 8008981

Elementis Securities Limited 100 – 597303

Elementis US Limited 100 – 8005226

Elementis Finance (Europe) Limited 100 – 11717371

192 Annual Report and Accounts 2021 Elementis plc

Alternative performance measures and unaudited information

Alternative performance measures

A reconciliation from reported profit for the year to earnings before interest, tax, depreciation and amortisation (EBITDA) is provided to

support understanding of the summarised cash flow included within the Finance Report on pages 45 to 50.

2021

Profit

and loss

2020

Profit

and loss

Profit/(loss) for the year 2.5 (67.0)

Adjustments for

Finance income (11.0) (0.3)

Finance costs and other expenses after adjusting items 29.9 41.2

Tax (credit)/charge 3.3 (1.8)

Depreciation and amortisation 68.3 66.7

Excluding intangibles arising on acquisition (16.0) (15.5)

Adjusting items before finance costs and depreciation 81.5 109.5

Adjusted EBITDA 158.5 132.8

There are also a number of key performance indicators (KPIs) on pages 30 and 31, the reconciliations to these are given below.

Adjusted operating cash flow

Adjusted operating cash flow is defined as the net cash flow from operating activities less net capital expenditure but excluding income

taxes paid or received, interest paid or received, pension contributions net of current service cost and adjusting items.

2021

2020

Net cash flow from operating activities 66.7 107.1

Less: Capital expenditure (52.4) (40.0)

Add:

Income tax paid or received 30.9 8.5

Interest paid or received 23.5 23.7

Pension contributions net of current service cost 0.1 0.1

Adjusting items – non cash (13.2) (1.8)

Adjusting items – cash 20.4 12.2

Adjusted Operating cash flow 76.0 109.8

Adjusted operating cash conversion

Adjusted operating cash conversion is defined as operating profit after adjusting items divided by operating activities less net capital

expenditure but excluding income taxes paid or received, interest paid or received, pension contributions net of current service cost,

provisions including share based pay and adjusting items.

2021

2020

Operating profit from total operations after adjusting items 106.6 81.6

Operating cash flow 76.0 109.8

Add:

Provision and share based payments (1.9) 1.7

74.1 111.5

Adjusted operating cash flow conversion 70% 137%

Contribution margin

The Group’s contribution margin, which is defined as sales less all variable costs, divided by sales and expressed as a percentage.

2021

2020

Revenue 880.1 751.3

Variable costs (479.2) (410.8)

Non variable costs (66.0) (83.2)

Cost of sales (545.2) (494.0)

Annual Report and Accounts 2021Elementis plc

193

Strategic report Corporate governance Financial statements Shareholder information

Financial statements

Alternative performance measures and unaudited information continued

Adjusted Group profit before tax

Adjusted Group profit before tax is defined as the Group profit before tax from total operations (both continuing and discontinued) after

adjusting items, excluding adjusting items relating to tax.

Adjusted return on operating capital employed

The adjusted return on operating capital employed (ROCE) is defined as operating profit from total operations after adjusting items

divided byoperating capital employed, expressed as a percentage. Operating capital employed comprises fixed assets (excluding

goodwill), working capital and operating provisions. Operating provisions include self insurance and environmental provisions but exclude

retirement benefit obligations.

2021

2020

Operating profit after adjusting items 106.6 81.6

Fixed assets excluding goodwill 722.1 740.7

Working capital 164.0 141.4

Operating provisions (61.8) (58.8)

Operating capital employed 824.3 823.3

Adjusted return on capital employed % 13% 10%

Average trade working capital to sales ratio

The trade working capital to sales ratio is defined as the 12 month average trade working capital divided by sales, expressed as a

percentage. Trade working capital comprises inventories, trade receivables (net of provisions) and trade payables. It specifically excludes

repayments, capital or interest related receivables or payables, changes due to currency movements and items classified as other

receivables and other payables.

Adjusted operating profit/operating margin

Adjusted operating profit is the profit derived from the normal operations of the business. Adjusted operating margin is the ratio of

operating profit, after adjusting items, to sales.

Unaudited information

To support a full understanding of the performance of the Group, the information below provides the calculation of Net Debt/EBITDA as

per our banking covenants.

2021

2020

Revenue 880.1 751.3

Adjusted operating profit 106.6 81.6

Adjusted operating margin 12.1% 10.9%

Adjusted EBITDA 158.5 132.8

IFRS 16 adjustment (6.8) (6.4)

Adjusted EBITDA pre IFRS 16 151.7 126.4

Net Debt

401.0 408.1

Net Debt / EBITDA* 2.64 3.23

* Net Debt/EBITDA, where EBITDA is the Adjusted EBITDA on continuing operations of the Group on a pre IFRS 16 basis, is the definition of Net Debt/

EBITDA for Elementis’ core banking covenants.

1 See Note 28 – Net Debt excludes lease liabilities.

194

Annual Report and Accounts 2021 Elementis plc

Five year record

2021

2020

2019

2018

2017

Turnover

Continuing operations 880.1 759.3 883.4 833.2 797.7

Discontinued operations – – – 4.8 47.8

Group turnover 880.1 759.3 883.4 838.0 845.5

Operating profit after adjusting items

Continuing operations 106.6 81.6 123.0 132.6 122.7

Discontinued operations – – – (0.6) 5.4

106.6 81.6 123.0 132.0 128.1

Adjusting items before interest (81.9) (109.5) (31.1) (57.5) (30.9)

Profit/(loss) before interest 24.7 (27.9) 91.9 74.5 97.2

Other expenses (2.1) (1.6) (1.5) (1.6) (1.2)

Net interest payable (16.8) (39.3) (29.4) (17.9) (11.7)

Profit/(loss) before tax 5.8 (68.8) 61.0 55.0 84.3

Tax (3.3) 1.8 (14.6) (13.6) 33.3

Profit/(loss) attributable to equity holders of the parent 2.5 (67.0) 46.4 41.4 117.6

2021

2020

2019

2018

2017

Basic

Earnings/(loss) per ordinary share (cents) 0.4 (11.5) 8.0 7.9 23.3

Earnings per ordinary share after adjusting items (cents) 10.7 6.6 12.6 17.0 18.1

Diluted

Earnings/(loss) per ordinary share (cents) 0.4 (11.3) 7.9 7.9 23.0

Earnings per ordinary share after adjusting items (cents) 10.6 6.5 12.4 16.9 17.9

Dividend per ordinary share (cents) – – 8.55 8.65 8.80

Dividend per ordinary share rebased

(cents) – – 8.55 8.40 8.05

Interest cover (times)

4.8 3.7 5.5 8.0 13.5

Equity attributable to equity holders of the parent 901.0 860.4 906.2 915.6 702.3

Net (debt)/cash (401.0) (408.1) (454.2) (498.1) (291.1)

Weighted average number of ordinary shares in issue during the

year(million) 588.8 593.7 588.5 526.3 513.0

1 Ratio of operating profit after adjusting items to interest on net borrowings.

2 Following the rights issue in October 2018, dividend per share for periods prior to this have been rebased to reflect the bonus element resulting from

this rights issue.

Annual Report and Accounts 2021Elementis plc

195

Strategic report Corporate governance Financial statements Shareholder information

Registrars

Enquiries concerning shares or shareholdings, such as the

lossofa share certificate, consolidation of share certificates,

amalgamation of holdings or dividend payments, should be

addressed to the Company’s registrars:

Equiniti Group plc

Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA

Tel: 0371 284 2379 or +44 (0) 121 415 7043

For shareholders with hearing difficulties:

Tel: 0371 384 2255 or +44 (0) 121 415 7028

Lines are open between 8.30am and 5.30pm Monday to Friday

(excluding public holidays in England and Wales).

In any correspondence with the registrars, please refer to

Elementis plc and state clearly the registered name and address

of the shareholder. Please notify the registrars promptly of any

change of address.

Website

Our website (www.elementis.com) provides the following

information:

– Company news and information

– Details of our strategy

– The Company’s approach to sustainability and innovation

– A dedicated Investors’ section on the website which contains

up to date information for shareholders including:

– Share price and index chart information

– Financial results

– History of dividend payment dates and amounts

– Access to current and historical shareholder documents

such as the Annual Report and Accounts

Share dealing services

Equiniti provides a share dealing service that enables shares to be

brought or sold by UK shareholders by telephone or over the

internet. For telephone share dealing, please call 0345 603 7037

between 8.30am and 4.30pm (lines are open until 6.00pm for

enquiries), and for internet share dealing, please visit:

www.shareview.co.uk/dealing.

Electronic communications

Shareholders can elect to receive shareholder documents

electronically by registering with Shareview at www.shareview.co.uk.

This will save on printing and distribution costs, creating

environmental benefits. When you register, you will be sent an

email notification to say when shareholder documents are available

on our website and you will be provided with a link to that information.

When registering, you will need your shareholder reference

number, which can be found on your share certificate or proxy

form. Please contact Equiniti if you require any assistance or

further information.

Share fraud

Share or investment scams are often run from ‘boiler rooms’ where

fraudsters cold call investors offering them worthless, overpriced

or even non-existent shares, or offer to buy their shares in a

company at a higher price than the market value. Shareholders

areadvised to be very wary of any unsolicited advice, offers to

buy shares at a discount, or offers of free reports about the

company. Even seasoned investors have been caught out

bysuchfraudsters. The FCA has some helpful information.

Report a scam

If you are contacted by a cold caller, you should inform the

Company Secretary by email and also the FCA by using its share

fraud reporting form at www.fca.org.uk/scams or calling its

Consumer Helpline on 0800 111 6768.

If you have already paid money to a share fraudster,

pleasecontact Action Fraud on 0300 123 2040 or

www.actionfraud.police.uk.

Shareholder information

Shareholder services

196 Annual Report and Accounts 2021 Elementis plc

Corporate information

Financial calendar

26 April 2022 Annual General Meeting

26 April 2022 Q1 Trading Update

28 July 2022 Interim results announcement for the half year ending 30 June 2022

October 2022 Q3 Trading Update

Annual General Meeting

The Annual General Meeting of Elementis plc will be held on 26 April 2022 at 10.00am at the offices of Herbert Smith Freehills LLP,

Exchange House, Primrose Street, London, EC2A 2EG. Shareholders will also be able to attend the meeting online.

The Notice of Meeting is included in a separate document.

Company Secretary

Laura Higgins

Registered number

03299608

Registered office

Caroline House

55-57 High Holborn

London

WC1V 6DX

Principal offices

Elementis plc

Caroline House

55-57 High Holborn

London

WC1V 6DX

Tel: +44 (0)20 7067 2999

Elementis Global

469 Old Trenton Road

East Windsor

NJ 08512

Tel: +1 609 443 2000

Independent auditors

Deloitte LLP

1 Little New Street, London, EC4A 3TR

Joint corporate broker

JP Morgan Cazenove

60 Victoria Embankment, London, EC4Y 0JP

Joint corporate broker

Numis

Cheapside House, 138 Cheapside, London, EC2V 6LH

Public relations

Tulchan Communications

2nd Floor, 85 Fleet Street, London, EC4Y 1AE

Solicitors

Herbert Smith Freehills LLP

Exchange House, Primrose Street, London, EC2A 2EG

company.secretariat@elementis.com

Website

www.elementis.com

Annual Report and Accounts 2021Elementis plc

197

Strategic report Corporate governance Financial statements Shareholder information

ACT Advance Corporation Tax

AGM Annual General Meeting

AP Anti-perspirant

ART Annual Report team

AWC Average working capital

BEIS Department for Business, Energy and Industrial

Strategy

Board Board of Directors of Elementis plc

Brexit The withdrawal of the UK from the EU

CapEx Capital expenditure

CDP Carbon disclosure project

CEO Chief Executive Officer

CFO Chief Financial Officer

CGU Cash generating unit

CH4 Methane

CHRO Chief Human Resources Officer

Carbon dioxide

eg Carbo dioxide equivalent

Code UK Corporate Governance Code

Company Elementis plc

COSMOS Cosmetic Organic and Natural Standard

COVID-19 Coronavirus pandemic

CSA Climate scenario analysis

DEFRA Department for Environment and Rural Affairs

DE&I Diversity, Equality and Inclusion

DNED Designated Non-Executive Director

DSBP Deferred share bonus plan

EBITDA Earnings before interest, tax, depreciation

andamortisation

ECC Ethics and compliance council

ECL Expected credit losses

ELT Executive Leadership team

EMEA Europe, Middle East and Africa

EPS Earnings per share

ERG Employee resource group

ESC Elementis Sustainability Council

ESG Environmental, Social and Governance

ESOS Executive share option scheme

ESOT Employee share ownership trust

EU European Union

FCA Financial Conduct Authority

FRC Financial Reporting Council

FRS Financial Reporting Standards

FTSE Financial Times Stock Exchange

GAAP Generally Accepted Accounting Principles

GDP Gross domestic product

GDPR General Data Protection Regulation

GHG Greenhouse gases

GJ Gigajoule

GO Guarantee of Origin

Group Elementis plc and its subsidiaries

HMRC HM Revenue and Customs

H&S Health and safety

HGV Heavy goods vehicle

HSE Health, safety and environment

IAS Investment Association Standards

IASB International Accounting Standards Board

ICDA International Chromium Development

Association

IFRIC International Financial Reporting

Interpretations Committee

IFRS International Financial Reporting Standards

IPCC Intergovernmental Panel on Climate Change

ISDA International Swaps and Derivatives

Association

kg Kilogram

KPI Key performance indicator

kWh Kilowatt per hour

LTA Lost time accident

LTIP Long term incentive plan

M3 Cubic metres

M&A Merger and acquisitions

MWh Megawatt per hour

Mondo Mondo Minerals Holdings B.V. and its

subsidiaries

MT Metric ton

N2O Nitrous oxide

NED Non-Executive Director

NGFS Network for Greening the Financial Systems

NiSATs Non-ionic associative thickeners

OECD Organisation for Economic Co-operation

andDevelopment

OSHA Occupational Safety and Health Administration

PBT Profit before tax

PPA Power purchase agreement

PPF Pension protection fund

PRMB Post retirement medical benefit

R&D Research & Development

RCF Revolving credit facility

REACH Registration, Evaluation, Authorisation and

restriction of Chemicals

REC Renewable Energy Certificate

Rights Issue A one to four Rights Issue that was undertaken

by the Company in October 2018

ROCE Return on capital employed

s.172 Section 172 of The Companies Act 2006

SAYE Save as you earn

SID Senior Independent Director

SRSOS US savings-related share option scheme

SummitReheis SRLH Holdings, Inc. and its subsidiaries

SVP Senior Vice President

TCFD The Task Force on Climate-related

FinancialDisclosures

te Tonnes

TRIR Total recordable incident rate

TSR Total shareholder return

UK United Kingdom

UN United Nations

UNGC United Nations Global Compact

UN SDGs United Nations Sustainable

DevelopmentGoals

US United States

VOC Volatile organic compound

Shareholder information

Glossary

198 Annual Report and Accounts 2021 Elementis plc