Vesuvius Plc · LSE:VSVS
Vesuvius — H1 2019 Earnings Presentation
40 slides from Vesuvius's earnings presentation, July 2019
Slide 1: 2019 Half Year Results
2019 HALF YEAR RESULTS JULY 2019 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 PERFORMANCE UPDATE Patrick André, Chief Executive FINANCIAL REVIEW Guy Young, Chief Financial Officer OUTLOOK Patrick André, Chief Executive Q&A 3
Slide 4: Performance Update
VESUVIUS Pic PERFORMANCE UPDATE
Slide 5: Resilient H1 2019 performance despite a challenging market environment
RESILIENT H1 2019 PERFORMANCE DESPITE A CHALLENGING MARKET ENVIRONMENT Revenue Trading profit Return on sales £889.4m £98.9m 11.1% -0.9% -0.7% +2bps Reported change Reported change Reported change -1.1% -0.5% +6bps Underlying change Underlying change Underlying change Headline EPS Net debt / EBITDA
Slide 6: Resilient operational performance in H1 2019
RESILIENT OPERATIONAL PERFORMANCE IN H1 2019 CHALLENGING STEEL MARKETS OUTSIDE OF CHINA AND LIGHT VEHICLE RELATED MARKETS IN FOUNDRY £5.8M OF RESTRUCTURING SAVINGS DELIVERED IN H1 2019 EXPANSION OF OUR RESTRUCTURING PROGRAMME WITH NEW RESTRUCTURING INITIATIVES TARGETING £16M OF INCREMENTAL ANN
Slide 7: Challenging environment in steel markets outside China
CHALLENGING ENVIRONMENT IN STEEL MARKETS OUTSIDE CHINA 12% 10% China +10.2% Crude steel production growth YTD May 2019/18 8% NAFTA +3.5% 6% South East Asia +3.5% 4% Crude steel production growth YTD May 2019/18 2% China +10.2% India EEMEA1 Rest of the world -0.2% +1.1% -0.1% 0% South America Crude s
Slide 8: Steel Division performance vs. regional steel volumes
STEEL DIVISION PERFORMANCE VS. REGIONAL STEEL VOLUMES 15% South East Asia Steel Division sales: +14% 12% Steel production: +3.5% NAFTA (excl. CCPI) 9% Steel Division sales: +4% Steel production: +3.5% China Steel Division revenue growth H1 2019/18 South America 6% Steel Division sales: +11% Steel Di
Slide 9: Challenging environment in foundry end-markets
CHALLENGING ENVIRONMENT IN FOUNDRY END-MARKETS END-MARKET PERFORMANCE IN H1 2019 FOUNDRY DIVISION PERFORMANCE General Light Medium/heavy Construction / IN H1 2019 engineering commercial agriculture vehicles* and mining vehicles* equipment EMEA EEMEA EU 28 NAFTA NAFTA CHINA CHINA INDIA INDIA SOUTH SO
Slide 10: Important strategic progress in H1 2019 in line with our objectives
IMPORTANT STRATEGIC PROGRESS IN H1 2019 IN LINE WITH OUR OBJECTIVES Acceleration of our R&D efforts with the expansion of our research centre in Suzhou, China Technology leadership Successful launch in H1 2019 of several innovative new products Quarterly waves of new product launches planned o
Slide 11: Continued focus on value-creating solutions: Steel
CONTINUED FOCUS ON VALUE-CREATING SOLUTIONS: STEEL LAUNCH OF OUR NEXT GENERATION INCREASED PENETRATION OF OUR HIGH PERFORMANCE SLIDE GATE PLATES ROBOTIC INSTALLATION AND LASER AND SYSTEMS MEASUREMENT CAPABILITIES Next generation Continued penetration lasers with increased Enhanced performance and si
Slide 12: Continued focus on value-creating solutions: Foundry
CONTINUED FOCUS ON VALUE-CREATING SOLUTIONS: FOUNDRY LAUNCH OF OUR NEW FILTER TECHNOLOGY FOR LARGE, HIGH VALUE STEEL CASTINGS Minimisation of air entrainment in the metal stream, preventing the generation of oxides Cleaner metal Improved fluidity enabling the use of finer filters further impro
Slide 13: CCPI synergies are ahead of expectation
CCPI SYNERGIES ARE AHEAD OF EXPECTATION Integration of CCPI Blanchester production into Vesuvius’ existing North American manufacturing footprint Expected synergies increased materially Total of £4m synergies to be delivered in 2020 Post synergies multiple c.4x EBITDA 13
Slide 14: £16m increase in recurring restructuring savings
£16M INCREASE IN RECURRING RESTRUCTURING SAVINGS RECURRING RESTRUCTURING SAVINGS REMAINING TO BE DELIVERED (CUMULATIVE ALL PROGRAMMES) (£M) 5.0 35.0 18.2 11.8 H2 2019 2020 2021 Total • In H1 2019 we delivered £5.8m of restructuring savings • CCPI synergies are included in the restructuring savings t
Slide 15: Divisional performance: Steel
DIVISIONAL PERFORMANCE STEEL KEY FINANCIALS Reported Underlying Underlying revenue1 / Return on Sales1 £m H1 2019 H1 2018 Change change 1 10.3% 10.6% 11% 1000 Revenue 614.9 610.9 +0.6% +0.4% 10% 800 603 605 9% 600 8% Trading profit 65.3 63.0 +3.7% +3.3% 400 7% Return on Sales 10.6% 10.3% +30bps +30b
Slide 16: Divisional performance: Foundry
DIVISIONAL PERFORMANCE FOUNDRY KEY FINANCIALS Reported Underlying Underlying revenue1 / Return on Sales1 £m H1 2019 H1 2018 Change change1 450 12.6% 12.2% 13% 400 12% Revenue 274.5 286.1 -4.0% -4.1% 350 300 286 275 11% 250 Trading profit 33.6 36.6 -8.2% -7.3% 10% 200 150 9% 100 Return on Sales 12.2%
Slide 17: Financial Review
FINANCIAL REVIEW LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 18: Income statement
INCOME STATEMENT H1 2019 H1 2018 Change (%) (£m unless indicated) Actual Actual As reported Underlying Revenue 889.4 897.0 -0.9% -1.1% Trading Profit 98.9 99.6 -0.7% -0.5% ROS % 11.1% 11.1% +2bps +6bps Post tax Share of JV Results 0.5 2.6 Net Finance Costs (6.2) (4.8) Headline Profit Before Tax 93.2
Slide 19: Resilient revenue performance
RESILIENT REVENUE PERFORMANCE • Revenue down £7.6m on a reported basis (-0.9%) and down £9.4m on an underlying basis (-1.1%) (£m) 897.0 +3.2 -11.1 889.1 -9.4 +9.7 889.4 879.7 H1 2018 FX BMI H1 2018 Steel & Foundry H1 2019 CCPI H1 2019 Reported adjustments disposal Underlying Divisions Underlying acq
Slide 20: Solid trading profit
SOLID TRADING PROFIT • Trading profit down £0.7m on a reported basis (-0.7%) and down £0.5m on an underlying basis (-0.5%) RoS 11.1% 11.1% (£m) 99.6 -0.8 -0.2 98.6 -4.4 +5.8 -1.9 98.1 +0.8 98.9 H1 2018 FX BMI H1 2018 Steel & Foundry Restructuring One-off H1 2019 CCPI H1 2019 Reported adjustments dis
Slide 21: Resilient return on sales performance in a challenging environment
RESILIENT RETURN ON SALES PERFORMANCE IN A CHALLENGING ENVIRONMENT Half yearly steel production volume for world excluding China vs. Vesuvius return on sales (%) World steel production excl. China Return on sales (%) 435,000 11.5% 11.0% 430,000 10.5% 425,000 10.0% 9.5% 420,000 9.0% 415,000 8.5% 410,
Slide 22: Trade working capital development
TRADE WORKING CAPITAL DEVELOPMENT Debtor days (12m) TRADE WORKING CAPITAL / REVENUE 79 78 78 77 77 26.6% 76 75 24.9% Dec-18 Jun-19 23.9% 23.9% Creditor days (12m) 58 56 56 55 54 52 Dec-18 Jun-19 Inventory days (12m) 2016 2017 2018 H1 2019 80 76 75 74 70 65 Dec-18 Jun-19 22
Slide 23: Cash flow progress
CASH FLOW PROGRESS CASH CONVERSION: 82.7% +24.9 -25.4 (£m) 98.9 -10.3 -6.3 81.8 H1 2019 Depreciation Net capex Trade working Other Operating Reported capital working cash flow trading profit capital 23
Slide 24: £307.0m net debt and 1.3x net debt / LTM EBITDA
£307.0M NET DEBT AND 1.3X NET DEBT / LTM EBITDA • Net debt up £59.0m at £307.0m, versus £248.0m at year end 2018 ― £81.8m operating cash flow generation from continuing operations offset by £25.6m income taxes, £37.2m dividend payment, £32.4m acquisition of CCPI and an adjustment of £29.6m to reflec
Slide 25: Outlook
VESUVIUS etc OUTLOOK
Slide 26: Outlook
OUTLOOK • We have experienced challenging end markets in H1 2019 and we do not expect a recovery in H2 2019 • Current market conditions do not change the fact that in the medium-term and beyond, our core end markets in both steel and foundry are structurally growing and we have the right strategy an
Slide 27: Q&A
VESUVIUS Pic Q&A
Slide 28: Appendix
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Slide 29: What we do
WHAT WE DO Steel Division Foundry Division Steel Advanced Product Lines Steel Flow Control Digital Services Foundry Technologies Refractories Revenue(1) % of Group 36% 31% 2% 31% Provides products, systems and Installation expertise and materials Provides products that Improves casting quality and f
Slide 30: Impact of new accounting standards
IMPACT OF NEW ACCOUNTING STANDARDS SUMMARY AT 30 JUNE 2019 IFRS 16 Leases has had the following impact after transition (1 January 2019) Previous lease After application of accounting, IFRS16, Net impact, £m £m £m Revenue - - - Depreciation - (4.6) (4.6) Other operating costs (5.6) - 5.6 Headline op
Slide 31: Impact of new accounting standards (previous guidance - February 2019)
IMPACT OF NEW ACCOUNTING STANDARDS (PREVIOUS GUIDANCE- FEBRUARY 2019) IFRS 16 Leases will have the following impact on transition (1 January 2019) Current lease After application of Net impact, accounting, IFRS16, £m £m £m Revenue - - - Depreciation - (9) (9) Income Other operating costs (10) - 10 s
Slide 32: Tax update
TAX UPDATE • In line with guidance provided at the 2018 full year results, our Effective Tax Rate (“ETR”) in H1 2019 was 28.0% (26.0% in H1 2018) • This resulted in an H1 2019 headline tax charge of £26.0m, £1.4m higher than H1 2018’s figure of £24.6m • The ETR increase is mainly due to a deferred t
Slide 33: Crude steel production is structurally growing
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 +0.5% China 0.5 Developed +0.2% markets2 0.0 '50 '54 '58 '62 '66 '70 '74 '78 '82 '
Slide 34: Growth potential for steel per capita
GROWTH POTENTIAL FOR STEEL PER CAPITA • Three heavily populated countries constitute considerable Steel Production per capita potential for growth 1.6 1.4 • All have low steel production tonnes per capita vs. peers, indicating expected growth in infrastructure and construction 1.2 development: 1.0 0
Slide 35: Growth potential for flat steel
GROWTH POTENTIAL FOR FLAT STEEL 80% Proportion of Flat Steel by Region (2018) 70% Increased c.400bps Since 2013 Proportion of Flat Steel Products (%) 60% 50% 40% 30% 20% 10% 0% US EU28 South Korea Brazil China India • Typical consumption of Flow Control products in flat steel is £1.5/T of steel vs £
Slide 36: Sustainability
SUSTAINABILITY REDUCING OUR CUSTOMERS’ REDUCING OUR OWN ENVIRONMENTAL FOOTPRINT: ENVIRONMENTAL FOOTPRINT: • Vesuvius delivers a wide range of solutions that help Change in fuel consumption across the Group in 2018 our customers improve the productivity of their operations, reducing their environment
Slide 37: Health & Safety
HEALTH & SAFETY • Health & Safety performance is linked to the Lost time injuries per million hours worked remuneration of all senior managers • Our objective is to identify, eliminate, reduce or control all workplace risk • Ongoing system of training, assessment and improvement is in place to focus
Slide 38: People and community
PEOPLE AND COMMUNITY PEOPLE ARE AT THE CENTRE VESUVIUS IN THE LOCAL COMMUNITY OF OUR BUSINESS • We have decided to focus our corporate social • Our objective is to support and drive a high- responsibility activities on two key areas: performance culture by truly engaged employees 1. Supporting educa
Slide 39: Currency ready reckoner
CURRENCY READY RECKONER Jun-19 • Rule of thumb for impact of a movement in currency against sterling (1 unit change) Approximate Trading profit Unit change in annual profits (£m) ― Amounts shown are movements for each currency USD 1 cent 0.5 ― Works both for strengthening and weakening of currencies
Slide 40: 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