Vesuvius Plc · LSE:VSVS
Vesuvius — Investor Day (November 2018)
63 slides from Vesuvius's investor day presentation, November 2018
Slide 1: Capital Markets Day
CAPITAL MARKETS DAY NOVEMBER 2018 LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 2: Disclaimer
DISCLAIMER This presentation (which includes this document, the oral presentation of this document, any question-and-answer session that follows that oral presentation and any other materials distributed at, or in connection with, such presentation), which has been prepared by Vesuvius plc (the “Com
Slide 3: Agenda
AGENDA VESUVIUS STRATEGY Patrick André, Chief Executive FINANCIAL STRATEGY Guy Young, Chief Financial Officer Q&A COFFEE BREAK FLOW CONTROL Roel van der Sluis, President Flow Control ADVANCED REFRACTORIES Tanmay Ganguly, President Advanced Refractories FOUNDRY Glenn Cowie, President Foundry Q&A CLOS
Slide 4: Vesuvius Strategy
VESUVIUS etc VESUVIUS STRATEGY
Slide 5: Who we are, our vision, our mission
WHO WE ARE We are a solutions provider for customers active in extremely demanding industrial environments (molten metal) OUR VISION Leading the world of molten metal flow engineering OUR MISSION Good is not good enough Best is the only option 5
Slide 6: Acceleration of profitable growth strategy
ACCELERATION OF PROFITABLE GROWTH STRATEGY 2017 Return on Sales1: 9.8% 2020 Return on Sales1: 12.5% 1.Reinforce technology leadership 2.Increase penetration of value-creating solutions 3.Capture growth in developing markets 5 4.Improve cost leadership STRATEGIC 5.Develop our Technical Services offer
Slide 7: Acceleration of profitable growth strategy
ACCELERATION OF PROFITABLE GROWTH STRATEGY SUSTAINABLE RETURN ON SALES1 12.5% 9.8% REINFORCE GROW COST REVENUE LEADERSHIP 2017 2020E ORGANISATION AND PEOPLE TO MAKE IT HAPPEN Note: 1. Based on trading profit / EBITA margin 7
Slide 8: Acceleration of profitable growth strategy
ACCELERATION OF PROFITABLE GROWTH STRATEGY SUSTAINABLE RETURN ON SALES1 12.5% 9.8% REINFORCE GROW COST REVENUE LEADERSHIP 2017 2020E ORGANISATION AND PEOPLE TO MAKE IT HAPPEN Note: 1. Based on trading profit / EBITA margin 8
Slide 9: Crude steel production is structurally growing
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN CRUDE STEEL PRODUCTION IS STRUCTURALLY GROWING 2.5 WORLD CRUDE STEEL PRODUCTION (MT) CAGR ‘18 – ‘30 2.0 WORLD CAGR ‘18-’30: +1.3% Other WORLD EXCL. CHINA CAGR ‘18-’30: +2.0% +2.9% emerging markets1 1.5 +5.6% India 1.0 +
Slide 10: "High technology steel" is growing faster than crude steel
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN “HIGH TECHNOLOGY STEEL” IS GROWING FASTER THAN CRUDE STEEL VESUVIUS’ CRUDE STEEL PRODUCTION SEGMENTATION “HIGH TECHNOLOGY STEEL” GROWTH (World crude steel production 2017: 1,691 mt) VS. STEEL PRODUCTION GROWTH CAGR (201
Slide 11: "High technology steel" is growing faster than crude steel
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN “HIGH TECHNOLOGY STEEL” IS GROWING FASTER THAN CRUDE STEEL EXAMPLES OF APPLICATIONS OF “HIGH TECHNOLOGY STEEL” DRIVING GROWTH Wind turbines require Advanced steel cans are produced Increasing use of “near net shape1” hi
Slide 12: Foundry casting production is structurally growing
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN FOUNDRY CASTING PRODUCTION IS STRUCTURALLY GROWING WORLD CASTING PRODUCTION (MT) WORLD CASTING PRODUCTION BY END-USES 120 Railroad 100 Developed Valves / pumps 3% Other markets2 4% 5% Pipes / fittings 80 7% Other emergi
Slide 13: Complex castings growing faster than total casting production
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN COMPLEX CASTINGS GROWING FASTER THAN TOTAL CASTING PRODUCTION VESUVIUS OPERATES IN FOUNDRY SEGMENTS GROWING FASTER THAN THE UNDERLYING MARKET COMPLEX • CUSTOMERS REQUIRE MORE CASTINGS VALUE ADDED PRODUCTS AND SERVICES T
Slide 14: Vesuvius operates in foundry segments growing faster than the underlying market
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN VESUVIUS OPERATES IN FOUNDRY SEGMENTS GROWING FASTER THAN THE UNDERLYING MARKET EXAMPLES OF APPLICATIONS IN THE FOUNDRY INDUSTRY DRIVING GROWTH Development of more sophisticated Increased use of wind power Increasing de
Slide 15: Vesuvius' technological leadership enables outperformance of underlying markets
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN VESUVIUS’ TECHNOLOGICAL LEADERSHIP ENABLES OUTPERFORMANCE OF UNDERLYING MARKETS • >2% of sales spent on R&D, double our closest competitor • Target to increase New Product1 sales ratio to 20% (15% in 2017) ― New product
Slide 16: Vesuvius' technological leadership: advanced products and solutions
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN VESUVIUS’ TECHNOLOGICAL LEADERSHIP ENABLES OUTPERFORMANCE OF UNDERLYING MARKETS SELECTED EXAMPLES OF VESUVIUS’ ADVANCED PRODUCTS AND SOLUTIONS LASERS MATERIAL SCIENCE ROBOTICS COMPUTATIONAL Scanned image of a basic oxyg
Slide 17: Strong and growing presence in the most dynamic regions
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN STRONG AND GROWING PRESENCE IN THE MOST DYNAMIC REGIONS FOR STEEL AND FOUNDRY TOTAL GROUP REVENUE IN HIGH GROWTH REGIONS 34% (2014) 43% (H1 2018) EEMEA1 China India Latin America 16% 8% 8% 11% Group revenue H1 2018 Grou
Slide 18: Acceleration of profitable growth strategy
ACCELERATION OF PROFITABLE GROWTH STRATEGY SUSTAINABLE RETURN ON SALES1 12.5% 9.8% REINFORCE GROW COST REVENUE LEADERSHIP 2017 2020E ORGANISATION AND PEOPLE TO MAKE IT HAPPEN Note: 1. Based on trading profit / EBITA margin 18
Slide 19: 56 manufacturing facilities in 2020 versus historic base of 66
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN 56 MANUFACTURING FACILITIES IN 2020 VERSUS HISTORIC BASE OF 66... EMEA NAFTA 28 → 21 Asia 11 → 11 20 → 17 S. America 5→5 Manufacturing facilities in operation by 2020 Australia Manufacturing facilities closed since 2015
Slide 20: Increasing total production capacity in line with market growth
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN ... WHILE AT THE SAME TIME INCREASING TOTAL PRODUCTION CAPACITY IN-LINE WITH MARKET GROWTH LEAN MANUFACTURING AND INCREASED INVESTMENTS IN PLANT AUTOMATION HAVE SUPPORTED PRODUCTION CAPACITY GROWTH Newly installed autom
Slide 21: Ongoing restructuring programs
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN ONGOING RESTRUCTURING PROGRAMS ONE-OFF CASH COSTS (P&L + CAPEX) RECURRING CASH SAVINGS £109.3m £82.0m / year £2.3m 2021 £15.0m Capex £29.5m £10.6m 2020 £32.6m £14.5m P&L outstanding £14.9m 2019 outstanding £4.8m H2 2018
Slide 22: Acceleration of profitable growth strategy
ACCELERATION OF PROFITABLE GROWTH STRATEGY SUSTAINABLE RETURN ON SALES1 12.5% 9.8% REINFORCE GROW COST REVENUE LEADERSHIP 2017 2020E ORGANISATION AND PEOPLE TO MAKE IT HAPPEN Note: 1. Based on trading profit / EBITA margin 22
Slide 23: Entrepreneurial, decentralised, non matrix organisation
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN ENTREPRENEURIAL, DECENTRALISED, NON MATRIX ORGANISATION Patrick Andre CEO Executive Guy Young CFO Committee P&L managers Group Digital Services Foundry Flow Control Advanced Refractories Glenn Cowie Roel Van Der Sluis T
Slide 24: New corporate values to deliver our strategy
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN NEW CORPORATE VALUES TO DELIVER OUR STRATEGY Courage I have the courage to decide and do what is right, including when it is difficult, unpopular or not consensual. I am personally accountable for the consequences of my
Slide 25: Strong talent and performance management
GROW REVENUE REINFORCE COST LEADERSHIP ORGANISATION AND PEOPLE TO MAKE IT HAPPEN STRONG TALENT AND PERFORMANCE MANAGEMENT HIGH CALIBRE, INTERNATIONAL TOP 150 MANAGEMENT TEAM (24 NATIONALITIES) DEEP UNDERSTANDING OF LOCAL MARKETS DEVELOPING A STRONG TO LEVERAGE OUR SUCCESSION BENCH TECHNOLOGY AND PRO
Slide 26: Acceleration of profitable growth strategy
ACCELERATION OF PROFITABLE GROWTH STRATEGY SUSTAINABLE RETURN ON SALES1 12.5% 9.8% REINFORCE GROW COST REVENUE LEADERSHIP 2017 2020E ORGANISATION AND PEOPLE TO MAKE IT HAPPEN Note: 1. Based on trading profit / EBITA margin 26
Slide 27: Financial Strategy
FINANCIAL STRATEGY LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 28: Profitability – primary focus of finance
PROFITABILITY – PRIMARY FOCUS OF FINANCE 2018 MANAGEMENT CONFERENCE • Finance function equally aligned with the Group TOTAL SHAREHOLDER RETURNS strategy of profitable growth • Support in ensuring ongoing messaging and measurement of controllable elements of Total Shareholder return ― Revenue ― Profi
Slide 29: Capital allocation priorities
CAPITAL ALLOCATION PRIORITIES NET DEBT / EBITDA 1. ORGANIC GROWTH 1.75x Cost / benefit ratio Original restructuring programme Vesuvius target 1.25x net debt / EBITDA range Cost / benefit ratio 1.3x New restructuring programme 1.56x 1.25x 2. INORGANIC GROWTH OPPORTUNITIES • Strategic fit (incl. adjac
Slide 30: Lower fixed costs support margin stability
LOWER FIXED COSTS SUPPORT MARGIN STABILITY • Vesuvius’ restructuring programmes will reduce the fixed cost base across the Group ✓ Higher profitability ✓ Improved margin stability ✓ Increased financial flexibility • Since 2015, fixed costs as a proportion of total costs reduced by 250bps 30
Slide 31: Vesuvius is exposed to steel production, not steel pricing
VESUVIUS IS EXPOSED TO STEEL PRODUCTION, NOT STEEL PRICING VESUVIUS RETURN ON SALES VERSUS CRUDE STEEL PRODUCTION AND STEEL PRICING Steel production and pricing have been rebased to 100 130 12% 120 • Steel producers are cyclical due 10% to volatility in steel price... 110 Vesuvius Return on Sales 8%
Slide 32: Q&A
VESUVIUS etc Q&A
Slide 33: Flow Control
VESUVIUS pic FLOW CONTROL
Slide 34: Flow Control overview
FLOW CONTROL OVERVIEW REVENUE (£M) REVENUE BY GEOGRAPHY (2017) Asia - Pacific EMEA 327 305 27% 40% Americas H1 2017 H1 2018 33% TOTAL NUMBER OF EMPLOYEES BY REGION1 AMERICAS EMEA ASIA - PACIFIC ~1,400 ~1,800 ~1,400 31% 38% 31% 25% of total employees are present at customer sites Note: 1. Rounded tot
Slide 35: Flow Control overview: technology solution provider
FLOW CONTROL OVERVIEW VESUVIUS IS A TECHNOLOGY SOLUTION PROVIDER Consumables Robotics 1 Ladle lining Robotic casting technology 18 2 Purge plug at the ladle platform 3 Slide gate refractory Robotic casting technology 19 4 Shroud at the casting floor 5 Stopper 6 Dams, flow modifier and weirs LADLE 20
Slide 36: "High technology steel" is the key steel segment for Flow Control
“HIGH TECHNOLOGY STEEL” IS THE KEY STEEL SEGMENT FOR FLOW CONTROL USA + CANADA NORTH ASIA 60% EU 28 CHINA CAGR ’18-30E 37% CAGR ’18-30E 40% +4% CAGR ’18-30E 28% CAGR ’18-30E +3% "High technology steel" +3% +4% "High technology steel" % of steel production % of steel production "High technology steel
Slide 37: Flow Control strategy to outperform crude steel production
FLOW CONTROL STRATEGY TO OUTPERFORM CRUDE STEEL PRODUCTION INCREASE OUR CONTINUE TO GROW OUR EXPAND OUR ACCELERATE OUR PRESENCE CAPTURE SWITCH GLOBAL GLOBAL GLOBAL FLUX IN SELECTED TO “HIGH MECHATRONIC2 TECHNICAL BUSINESS EMERGING TECHNOLOGY BUSINESS SERVICE OFFERING ✓ Develop new offering MARKETS S
Slide 38: Technological leadership enables outperformance of crude steel production
VESUVIUS’ TECHNOLOGICAL LEADERSHIP ENABLES OUTPERFORMANCE OF CRUDE STEEL PRODUCTION ACCELERATION OF OUR CONTINUED FOCUS ON EXPANSION OF OUR COMMITMENT TO NEW PRODUCT SALES R&D FACILITIES TECHNOLOGICAL LEADERSHIP In 2019 we will launch 3 new products which will materially Ghlin, Belgium 15% impact ou
Slide 39: Reinforce our cost leadership
REINFORCE OUR COST LEADERSHIP OPTIMISED MANUFACTURING FOOTPRINT OPERATIONAL EXCELLENCE No. of Flow Control manufacturing facilities globally • Lean improvement programmes in place at all our plants • Review of all our plants to increase the level of automation • Focus on effective material use and l
Slide 40: 3 year roadmap: cultural shift
CULTURAL SHIFT TOWARDS AN ENTREPRENEURIAL, RESULTS ORIENTED ORGANISATION TECHNICAL PRODUCT SOLUTION PROVIDER TOTAL INCLUSIVE SOLUTION PROVIDER ✓ Steady-state is not an option – a culture 7 EMPOWERED, ACCOUNTABLE AND of continuous improvement is central RESULTS ORIENTED P&L MANAGERS to everything we
Slide 41: Advanced Refractories
VESUVIUS pic ADVANCED REFRACTORIES
Slide 42: Advanced Refractories overview
ADVANCED REFRACTORIES OVERVIEW REVENUE (£M) TOTAL EMPLOYEES1 267 241 ~2,500 H1 2017 H1 2018 REVENUE BY GEOGRAPHY (2017) REVENUE BY END-MARKET (2017) Asia - Pacific Other 22% EMEA (e.g. aluminium, 47% cement) 22% Ironmaking / Americas steelmaking 31% 78% Note: 1. Rounded totals as at June 2018 and in
Slide 43: Advanced Refractories overview: main product lines
ADVANCED REFRACTORIES OVERVIEW MAIN PRODUCT LINES Monolithics Bricks Precast shapes Tap Hole Clay Lasers Robots (Basic and aluminosilicate) (Basic and aluminosilicate) STEEL MILL ALUMINIUM PRIMARY AND SECONDARY SMELTERS Ironmaking Steelmaking Round top Blast melter furnace Electric Arc Reheat Furnac
Slide 44: Advanced Refractories' strategy to improve profitability
ADVANCED REFRACTORIES’ STRATEGY TO IMPROVE PROFITABILITY IMPROVING PROFITABILITY BY MAKING CLEAR CHOICES DEVELOPMENT ACCELERATE OUR INCREASE OUR GROW OUR ACCELERATE OUR OF ROBOTICS AND FOCUS ON NEW PENETRATION IN GLOBAL ALUMINIUM R&D EFFORT INSTALLATION HIGH MARGIN SELECTED BUSINESS TECHNOLOGY END M
Slide 45: Expand our leadership position in continuous casting
EXPAND OUR LEADERSHIP POSITION IN CONTINUOUS CASTING CURRENT VESUVIUS FUTURE POSITIONING POSITIONING Strategic plan Expand strong positioning Grow in EMEA, China, Market in NAFTA and India S. America and South East Asia leader 3 steps to deliver our strategy ✓ Differentiated product ✓Aggressive prod
Slide 46: Accelerate our focus on new high margin end markets
Image Source: bjreview.com ACCELERATE OUR FOCUS ON NEW HIGH MARGIN END MARKETS BASIC OXYGEN FURNACE AND ELECTRIC ARC FURNACE MARKET OVERVIEW COMMERCIAL SOLUTION STRATEGIC PLAN BASED ON VESUVIUS’ CURRENT CAPABILITIES Organic growth £1.2bn 2017 2022 (World ✓ High performance products Vesuvius’ current
Slide 47: Vesuvius technological leadership: NAFTA case study
Image Source: bjreview.com VESUVIUS TECHNOLOGICAL LEADERSHIP: NAFTA CASE STUDY Vesuvius was able to supply ONE OF THE a unique high performance LARGEST MINI- combination of Vesuvius doubled its share MILLS IN NAFTA of refractory material LASERS + ROBOTS business with this • Modernisation programme t
Slide 48: Reinforce cost leadership
REINFORCE COST LEADERSHIP RESTRUCTURING OF ADVANCED REFRACTORIES EMEA OPERATIONS 2020 2016 NEW MANUFACTURING FOOTPRINT OLD MANUFACTURING No. plants 3 FOOTPRINT No. lines 10 No. employees 292 No. plants 4 Increased production capacity No. lines 18 No. employees 426 c.£7m +300bps Recurring Return on S
Slide 49: Cultural shift towards an entrepreneurial, results oriented organisation
CULTURAL SHIFT TOWARDS AN ENTREPRENEURIAL, RESULTS ORIENTED ORGANISATION 6 EMPOWERED, ACCOUNTABLE AND ✓ Steady-state is not an option – a culture of RESULTS ORIENTED P&L MANAGERS continuous improvement is central to everything we do P&L managers fully responsible STRENGTHENING OUR for Return on Sale
Slide 50: Foundry
VESUVIUS pic FOUNDRY
Slide 51: Foundry overview
FOUNDRY OVERVIEW We are a solutions provider for our customers, supplying a combination of products, technical advice and application support to improve performance and quality of ferrous and non-ferrous castings REVENUE (£M) REVENUE BY GEOGRAPHY (2017) TOTAL EMPLOYEES1 Asia - Pacific 286 34% 269 EM
Slide 52: Foundry overview – key products
FOUNDRY OVERVIEW – KEY PRODUCTS FEEDING SYSTEMS CRUCIBLES Help avoid shrinkage defects and Containers that can withstand very high improve casting yields, reducing the temperatures, used to melt/store metals amount of non-productive metal FILTERS METAL TREATMENT Remove impurities from Equipment and
Slide 53: Our solutions deliver clear performance improvements
OUR SOLUTIONS DELIVER CLEAR PERFORMANCE IMPROVEMENTS Iron elevator housing customer Truck OEM customer Our feeding systems increased Our filters reduced scrap by 75% yield from 55% to 74% Automotive OEM customer Wind turbine customer Introduction of our automated metal Our coatings resulted in 50% t
Slide 54: Strategy to outperform the foundry market
STRATEGY TO OUTPERFORM THE FOUNDRY MARKET INCREASE OUR CONTINUE TO GROW OUR GLOBAL ACCELERATE NEW PENETRATION IN CAPTURE GROWTH IN ALUMINIUM BUSINESS PRODUCT LAUNCHES SELECTED EMERGING HIGH GROWTH ✓ Capture market share in primary ✓ New product launches across MARKETS SEGMENTS / PRODUCTS and seconda
Slide 55: Reinforce our cost leadership
REINFORCE OUR COST LEADERSHIP OPTIMISED MANUFACTURING FOOTPRINT OPERATIONAL EXCELLENCE No. of Foundry global manufacturing facilities • Investments in packaging and automation at our main plants • Lean improvement programmes in place at all our plants • Increased global raw material and product sour
Slide 56: Cultural shift towards an entrepreneurial, results oriented organisation
CULTURAL SHIFT TOWARDS AN ENTREPRENEURIAL, RESULTS ORIENTED ORGANISATION 6 EMPOWERED, ACCOUNTABLE AND RESULTS ORIENTED P&L MANAGERS ✓ Steady-state is not an option – a culture of continuous improvement is central to everything we do Foundry Manufacturing REINFORCING OUR Excellence (FME) project; COS
Slide 57: Q&A
VESUVIUS etc Q&A
Slide 58: Closing remarks
VESUVIUS etc CLOSING REMARKS
Slide 59: 12.5% return on sales in 2020
12.5% RETURN ON SALES IN 2020 • Structural growth in crude steel and metal casting volumes • Outperforming underlying markets due to exposure to “high technology steel” and complex castings Grow revenue • Vesuvius’ technological leadership enables outperformance of underlying markets • Strong and gr
Slide 60: Presenters' biographies
PRESENTERS’ BIOGRAPHIES LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 61: Presenters' biographies
PRESENTERS’ BIOGRAPHIES Patrick André Chief Executive Guy Young Chief Financial Officer • Appointed as a Director and Chief Executive of Vesuvius on • Appointed as a Director and Chief Financial Officer of Vesuvius on 1 September 2017 1 November 2015 • Joined Vesuvius as President of the Flow Contro
Slide 62: Presenters' biographies
PRESENTERS’ BIOGRAPHIES Roel van der Sluis Tanmay Ganguly Glenn Cowie President Flow Control President Advanced Refractories President Foundry • Appointed President Flow Control in October 2017 • Appointed as President Advanced Refractories in • Appointed as President of Foundry in 2014 November 201
Slide 63: For further information, please contact
For further information, please contact: Euan Drysdale, Group Head of Corporate Finance euan.drysdale@vesuvius.com Virginia Skroski, Investor Relations Manager virginia.skroski@vesuvius.com LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING