Vesuvius plc, a global leader in molten metal flow engineering, releases the following Trading Update covering trading in the period from 1 July to 18 November 2015.
Since the announcement of our 2015 Half Year results in July, the Group continues to experience headwinds in trading performance due to the ongoing deterioration in global steel and foundry markets.
Our sales for the year to the end of October are 5.2% below the corresponding period last year at constant currency. However thanks to our ongoing self-help actions, we have maintained margins broadly similar to last year. This resilience to the adverse trading environment reflects our strategic progress and the mitigating actions of the restructuring programme announced earlier this year. These restructuring initiatives are being enhanced and, as outlined previously, we expect to see some early benefit in our 2015 results. The integration of Sidermes within our Technical Services business has progressed well, and we continue to look for opportunities in developing markets and to build our Technical Services offering to capture these important medium-term growth areas.
The challenges the global steel market has faced in recent months have been well documented. Global steel production for the year to date to September was 2.4% lower compared to the same period last year, as reported by the World Steel Association1. Although we saw growth in India, this was offset by a decline in China and EMEA and the continuing reduced levels in US production volumes.
Softening economic growth in China has lowered domestic steel demand with a resultant increase in export volumes to c.110 million tonnes on an annual basis. The cheaper price of these Chinese exports has increased pressure on other steel producers but as previously noted, anti-dumping trade tariffs are being imposed in various countries, and according to industry experts should provide more protection for steel producers in those jurisdictions going forward. Steel producers have also taken measures to preserve cash by destocking inventories, reducing purchases of consumables, curtailing production volumes and either mothballing or closing the least profitable plants. Steel producers in the US and UK have been hit particularly hard due to the strengthening of the US dollar and Sterling, coupled with weakening demand from the oil and gas industry. This destocking effect has amplified the decline in demand for Vesuvius products over the year.
Market conditions in the global foundry industry have remained challenging, particularly in mining in the US, Brazil and Australasia. Although there has been some improvement over the quarter in light vehicle production, most notably in North America and Europe, steel foundries principally servicing capital equipment continue to be affected by the reduction in capital expenditure in all of our major markets.
We continue to operate with a strong balance sheet and remain strongly cash generative. There has been no material change in our financial position from that reported in our Half Year results on 31 July 2015. The strengthening of Sterling during the year continues to impact the translation of our results, however the foreign exchange headwind is greatly reduced compared to the same period last year. We are maintaining our focus on working capital management to release cash and, in light of the prevailing trading environment, as previously announced we have reduced our 2015 capital investment programme by one third.
We expect the adverse market conditions to persist for the remainder of the year at least. We continue to face these challenges through a combination of ongoing self-help and enhanced restructuring actions. Overall, we expect our full year performance to be towards the lower end of the range of market expectations2.
François Wanecq (Chief Executive) and Guy Young (Chief Financial Officer) will be hosting a conference call for analysts and investors at 08.30 (UK time) today (19 November).
To join the call, please use the dial in number below:
+44 (0)20 3427 1913 all participants
Confirmation code: 8216741
A replay of the call will be available approximately one hour after the event for two weeks on the following number:
+44 (0)20 3427 0598 non-US participants
+1 347 366 9565 US participants
Confirmation code: 8216741
Vesuvius’ preliminary announcement of results for the year ending 31 December 2015 are expected to be announced on Thursday, 3 March 2016.
For further information please contact:
François Wanecq, Chief Executive
+44 (0) 207 822 0000
Guy Young, Chief Financial Officer
+44 (0) 207 822 0000
Nicolas Matheï, Group Head of Corporate Finance
+44 (0) 207 822 0000
Virginia Skroski, Investor Relations Manager
+44 (0) 207 822 0016
John Olsen/ Tim Roundtree/ Jamie Ricketts
+44 (0) 203 128 8100
About Vesuvius plc
Vesuvius is a global leader in molten metal flow engineering principally serving the steel and foundry industries.
We develop innovative and customised solutions, often used in extremely demanding industrial environments, which enable our customers to improve their manufacturing processes, enhance product quality and reduce energy consumption. These include flow control solutions, advanced refractories and other consumable products and – increasingly – related technical services including data capture.
We have a worldwide presence. We serve our customers through a network of low-cost manufacturing plants located close to their own facilities, and embed our industry experts within their operations, who are all supported by our global technology centres.
Our core competitive strengths are our market and technology leadership, strong customer relationships, well established presence in developing markets and our global reach, all of which facilitate the expansion of our addressable markets.
Our ultimate goal is to create value for our customers, and to deliver sustainable, profitable growth for our shareholders giving a superior return on their investment whilst providing each of our employees with a safe workplace where he or she is recognised, developed and properly rewarded.
Forward looking statements
This announcement contains certain forward looking statements which may include reference to one or more of the following: the Group’s financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters.
Statements in this announcement that are not historical facts are hereby identified as "forward looking statements". Such forward looking statements, including, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Vesuvius, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of Vesuvius and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements. Such forward looking statements should, therefore, be considered in light of various important factors that could cause actual results to differ materially from estimates or projections contained in the forward looking statements. These include without limitation: economic and business cycles; the terms and conditions of Vesuvius’ financing arrangements; foreign currency rate fluctuations; competition in Vesuvius’ principal markets; acquisitions or disposals of businesses or assets; and trends in Vesuvius’ principal industries.
The foregoing list of important factors is not exhaustive. When considering forward looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in documents the Company files with the UK regulator from time to time including its annual reports and accounts.
You should not place undue reliance on such forward looking statements which speak only as of the date on which they are made. Except as required by the Rules of the UK Listing Authority and the London Stock Exchange and applicable law, Vesuvius undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward looking events discussed in this announcement might not occur.
Vesuvius plc, 165 Fleet Street, London EC4A 2AE
Registered in England and Wales No. 8217766
1 The World Steel Association publishes monthly steel production figures approximately three weeks after the end of the month. As at 19 November 2015, the most recent data available is for the 10-month period to 30 September 2015
2 Current market expectations compiled from analyst notes for EBITA before restructuring and one-off items range from £125 million to £137 million.