Vesuvius Plc · LSE:VSVS
Vesuvius — FY2019 Earnings Presentation
39 slides from Vesuvius's earnings presentation, February 2020
Slide 1: 2019 Full Year Results
2019 FULL YEAR RESULTS FEBRUARY 2020 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 AND PERFORMANCE UPDATE Patrick André, Chief Executive FINANCIAL REVIEW Guy Young, Chief Financial Officer OUTLOOK Patrick André, Chief Executive Q&A 3
Slide 4: Vesuvius Strategy and Performance Update
VESUVIUS STRATEGY AND PERFORMANCE UPDATE 4
Slide 5: Resilient financial results and strong cash flow despite challenging market conditions
RESILIENT FINANCIAL RESULTS AND STRONG CASH FLOW DESPITE CHALLENGING MARKET CONDITIONS Revenue Trading profit1 Return on sales Adjusted operating cash flow £1,710.4m £181.4m 10.6% -£87.6m, -4.9% -£15.8m, -8.0% -40bps £217.7m Reported change Reported change Reported change +21.3% -5.7% -9.0% -40bps C
Slide 6: Challenging environment in steel markets outside China
CHALLENGING ENVIRONMENT IN STEEL MARKETS OUTSIDE CHINA 10% China 8% +8.3% 1 6% USA & Canada EEMEA +0.7% +1.1% Crude steel production growth 2019 4% India 2% +1.8% Crude steel production volume 2019 -1% -3% Crude steel production growth y-o-y -5% Latin America EU27 + UK 2019 vs. 2018 -8.2% -4.9% Incl
Slide 7: Steel Division performance vs. regional steel volumes
STEEL DIVISION PERFORMANCE VS. REGIONAL STEEL VOLUMES 14% China Steel Division sales: +8% USA & Canada 10% Steel production: +8.3% Steel Division sales: +8% Steel production: +0.7% 6% Steel Division revenue growth 2019 Latin America Steel Division sales: -4% 2% Steel production: -8.2% Crude steel pr
Slide 8: Challenging environment in foundry end-markets in 2019
CHALLENGING ENVIRONMENT IN FOUNDRY END-MARKETS IN 2019 General engineering Medium / heavy Construction / Light vehicles* and mining Commercial vehicles* agriculture equipment EMEA NAFTA CHINA INDIA SOUTH AMERICA NORTH ASIA In-line with the experience of our Steel Division, Foundry end markets also w
Slide 9: Intensified restructuring efforts were fundamental in adapting our business
INTENSIFIED RESTRUCTURING EFFORTS WERE FUNDAMENTAL IN ADAPTING OUR BUSINESS TO THE CHALLENGING ENVIRONMENT RECURRING RESTRUCTURING SAVINGS STILL TO BE DELIVERED £6.2m £1.9m £27.5m £19.4m 2020 2021 2022 Total • £16.4m of recurring savings delivered in 2019 (£14.0m in 2018) • Eight plant closures with
Slide 10: Accelerating efforts to extend our technology leadership position
ACCELERATING EFFORTS TO EXTEND OUR TECHNOLOGY LEADERSHIP POSITION ACCELERATION OF OUR NEW PRODUCTS1 AS A R&D EFFORTS PERCENTAGE OF SALES > 10 INCREASED TO 16.3% FROM 15.4% IN 2018 SUCCESSFUL 20% NEW PRODUCT 18% 16.3% LAUNCHES IN 2019 16% Opening of Flow Control’s new R&D 14% centre in Suzhou, Chin
Slide 11: Continued focus on value-creating solutions: Steel
CONTINUED FOCUS ON VALUE-CREATING SOLUTIONS: STEEL LAUNCH OF OUR NEW GENERATION INCREASED PENETRATION OF OUR OF LADLE SLIDE GATE PLATES ROBOTIC INSTALLATION AND LASER AND SYSTEMS AND NEW HIGH MEASUREMENT CAPABILITIES PERFORMANCE TUNDISH SLIDE GATES • We gained our first important mechatronics custom
Slide 12: Continued focus on value-creating solutions: Foundry
CONTINUED FOCUS ON VALUE-CREATING SOLUTIONS: FOUNDRY LAUNCH OF OUR NEW LAUNCH OF A UNIQUE FEEDING COATING FOR THE LATEST SYSTEM TECHNOLOGY ENGINE TECHNOLOGY FOR ALUMINIUM CASTING Improved inner cleanliness of the casting helping automotive foundries meet the Improved casting yield increasingly c
Slide 13: Divisional performance Steel
DIVISIONAL PERFORMANCE STEEL KEY FINANCIALS Reported Underlying Underlying revenue1 / Return on Sales1 £m 2019 2018 Change change 1400 10.4% 10.0% 11% 10% Revenue 1,195.3 1,236.7 -3.3% -4.4% 1300 1,225 1200 1,172 9% Trading profit 120.1 128.3 -6.5% -7.7% 8% 1100 7% Return on Sales 10.0% 10.4% -40bps
Slide 14: Divisional performance Foundry
DIVISIONAL PERFORMANCE FOUNDRY KEY FINANCIALS Reported Underlying Underlying revenue / Return on Sales £m 2019 2018 Change change 12.3% 11.9% 650 12% Revenue 515.1 561.3 -8.2% -8.7% 600 564 11% 550 515 10% Trading profit 61.3 68.9 -11.0% -11.3% 9% 500 8% 450 7% Return on Sales 11.9% 12.3% -40bps -40
Slide 15: Reinforced and more diverse leadership team
REINFORCED AND MORE DIVERSE LEADERSHIP TEAM Karena Cancilleri Thiago Avelar Tanmay Ganguly President of President of President of Foundry Division Advanced Refractories Flow Control Since October 2019 Since January 2020 From April 2020 15
Slide 16: Intensification of our efforts on sustainability
INTENSIFICATION OF OUR EFFORTS ON SUSTAINABILITY We have intensified our efforts to reduce energy consumption per metric tonne of product manufactured ─ Commitment to reduce by a further 10% by 2024, after the reduction of 10% already achieved since 2014 Our biggest contribution to reducing glob
Slide 17: Financial Review
FINANCIAL REVIEW LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 18: Underlying revenue down 5.7% reflecting weakness in global steel and foundry markets
UNDERLYING REVENUE DOWN 5.7% REFLECTING WEAKNESS IN GLOBAL STEEL AND FOUNDRY MARKETS • Revenue down £87.6m on a reported basis (-4.9%) and down £102.9m on an underlying basis (-5.7%) (£m) 1,798.0 +9.8 -18.3 1,789.5 -102.9 1,686.6 +23.8 1,710.4 2018 FX BMI 2018 Steel & Foundry 2019 CCPI 2019 Reported
Slide 19: Resilient return on sales at 10.6%
RESILIENT RETURN ON SALES AT 10.6% • Trading profit down £15.8m on a reported basis (-8.0%) and down £17.7m on an underlying basis (-9.0%) RoS 11.0% 10.6% (£m) 197.2 +0.1 -0.7 196.6 -33.8 +15.3 -1.9 +2.7 178.9 +2.5 181.4 2018 FX BMI 2018 Steel & Foundry Restructuring One-off IFRS 16 2019 CCPI 2019 R
Slide 20: Income statement
INCOME STATEMENT 2019 2018 Change (%) (£m unless indicated) Actual Actual As reported Underlying Revenue 1,710.4 1,798.0 -4.9% -5.7% Trading Profit 181.4 197.2 -8.0% -9.0% ROS % 10.6% 11.0% -40bps -40bps Post tax Share of JV Results 1.0 2.8 Net Finance Costs (11.0) (11.1) Headline Profit Before Tax
Slide 21: Through the cycle strong cash generation
THROUGH THE CYCLE STRONG CASH GENERATION • Since 2015, world steel production excl. China has grown 10% (CAGR 2015-2019 of 2.4%) and over the same period we have succeeded in growing our trading profit by 46% and our adjusted operating cash flow by 75% • We remain confident in our 2018 Capital Marke
Slide 22: Trade working capital progress
TRADE WORKING CAPITAL PROGRESS • Stable working capital / revenue ratio in 2019 despite the market slowdown, due to strong discipline in manufacturing network to adjust production to sales without building significant excess inventory TRADE WORKING CAPITAL / REVENUE Debtor days (12m) 79 78 78 77 26.
Slide 23: Operating cash flow increased by 21.3% to £217.7m
OPERATING CASH FLOW INCREASED BY 21.3% TO £217.7M CASH CONVERSION OF 120%1 +49.7 -60.12 +64.1 -17.4 217.7 (£m) 181.4 2019 Depreciation Net capex Trade working Other working Adjusted Reported capital capital operating trading profit cash flow Notes: 1. Excluding the impact of the IFRS 16 adjustment,
Slide 24: £245.7m net debt and 1.1x net debt / LTM EBITDA
£245.7M NET DEBT AND 1.1X NET DEBT / LTM EBITDA • Net debt down £2.0m at £245.8m at year end 2019 ― £217.7m operating cash flow generation from continuing operations offset by £44.5m income taxes, £53.9m dividend payment, £32.4m acquisition of CCPI and an adjustment of £29.5m to reflect the reclassi
Slide 25: Strong balance sheet with significant liquidity
STRONG BALANCE SHEET WITH SIGNIFICANT LIQUIDITY NET DEBT / EBITDA DEVELOPMENT CAPITAL ALLOCATION IN 2019 1.8x 1.3x Excluding IFRS lease adjustment £65.4m 1.0x 1.0x ORGANIC Cash capital expenditure GROWTH £30.0m Restructuring cash costs 2016 2017 2018 2019 INORGANIC £33.3m PENSION DEFICIT DEVELOPMENT
Slide 26: Outlook
VESUVIUS etc OUTLOOK
Slide 27: Outlook
OUTLOOK • Our two main end markets of Steel and Foundry were especially weak during the fourth quarter of 2019 and we expect this abnormally low level of activity to continue at least in Q1 2020 and to weigh on performance in H1 2020 • The potential impact of the Covid-19 health crisis is difficult
Slide 28: Q&A
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Slide 29: Appendix
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Slide 30: Impact of new accounting standards
IMPACT OF NEW ACCOUNTING STANDARDS IFRS 16 Leases has had the following impact after transition (Year ended 31 December 2019) Previous lease After application of accounting, IFRS16, Net impact, £m £m £m Revenue - - - Depreciation - (10.6) (10.6) Income Other operating costs (13.3) - 13.3 statement H
Slide 31: Tax update
TAX UPDATE • The Group’s Effective Tax Rate (“ETR”), based on the income tax costs associated with headline performance of £43.8m (2018: 48.4m), was 25.7% (2018: 26.0%) • The guidance issued at the 2019 H1 results stated a forecast ETR of 28.0% for the full period. The reduction in the ETR for the 2
Slide 32: What we do
WHAT WE DO Steel Division Foundry Division Steel Advanced Product Lines Steel Flow Control Steel Digital Services Foundry Technologies Refractories Revenue(1) % of Group 37% 31% 2% 30% Provides products, systems and Installation expertise and materials Provides products that Improves casting quality
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: Sustainability
SUSTAINABILITY REDUCING OUR CUSTOMERS’ REDUCING OUR OWN ENVIRONMENTAL FOOTPRINT: ENVIRONMENTAL FOOTPRINT: • Vesuvius delivers a wide range of solutions that help our Change in fuel consumption for the main fuels across the Group in 2019 customers improve the productivity of their operations Coal Ele
Slide 35: Health and safety
HEALTH AND SAFETY HEALTH AND SAFETY PERFORMANCE IS Lost time injuries per million hours worked LINKED TO THE REMUNERATION OF 12 BUSINESS UNIT MANAGEMENT 10 8 • We are committed to rapidly evolve towards a global best in 6 class organisation in terms of safety 4 2 • Several new initiatives were launc
Slide 36: 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 responsibility • Our objective is to support and drive a high-performance activities on two key areas: culture by truly engaged employees 1. Supporting educat
Slide 37: 5 year history at constant currency
5 YEAR HISTORY AT CONSTANT CURRENCY £m 2015 2016 2017 2018 2019 Revenue 1,514.3 1,447.1 1,643.0 1,807.8 1,710.4 Steel 1,023.0 971.6 1,121.6 1,243.6 1,195.4 Foundry 491.3 475.5 521.4 564.2 515.1 Trading profit 142.5 137.0 159.8 197.3 181.4 Steel 89.9 81.1 97.3 128.1 120.1 Foundry 52.6 55.9 62.5 69.2
Slide 38: Currency ready reckoner
CURRENCY READY RECKONER Dec-19 • Rule of thumb for impact of a movement in currency against Approximate change sterling (1 unit change) Trading profit Unit in annual profit (£m) USD 1 Cent 0.6 ― Amounts shown are movements for each currency EUR 1 Cent 0.1 ― Works both for strengthening and weakening
Slide 39: For further information, please contact
For further information, please contact: Euan Drysdale, Group Head of Corporate Finance euan.drysdale@vesuvius.com Pamela Antay, Head of Investor Relations pamela.antay@vesuvius.com LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING