Vesuvius Plc · LSE:VSVS
Vesuvius — FY2017 Earnings Presentation
41 slides from Vesuvius's earnings presentation, Mar 1, 2018
Slide 1: 2017 Full Year Results
A GLOBAL LEADER IN METAL FLOW ENGINEERING 2017 Full Year Results 1 March 2018 Patrick André Chief Executive 1
Slide 2: Disclaimer
Disclaimer This presentation, which has been prepared by Vesuvius plc (the “Company”), includes statements that are, or may be deemed to be, "forward looking statements“, which can be identified by the use of forward looking terminology, including the terms "believes", "estimates", "plans", "project
Slide 3: Agenda
Agenda • Strategy and Performance Update • Financial Review • Outlook 3
Slide 4: Strategy and Performance Update
Strategy and Performance Update 4
Slide 5: Strong results for the year ended December 2017
Strong results for the year ended 31 December 2017 Revenue Trading profit Return on sales £1.7bn £165.5m 9.8% +20.2% +24.2% +30bps Reported change Reported change Reported change +12.5% +16.1% +30bps Underlying change Underlying change Underlying change Headline EPS Net debt / EBITDA Full year divid
Slide 6: Main achievements 2017
Main achievements 2017 ✓ Global steel production up 5.3% in 2017 and positive momentum in the majority of Foundry end markets ✓ Significant outperformance of general market growth in both Steel and Foundry divisions due to market share gains and increased penetration of our value creating solutions
Slide 7: Profitable growth
Confirmation of the 5 execution priorities to support our profitable growth strategy 1 Reinforce our technology leadership 2 Increase penetration of our value-creating solutions 3 Capture growth in developing markets Profitable growth 4 Improve cost leadership and margins 5 Develop our Technical Ser
Slide 8: Focus on accelerating the delivery of results
Focus on accelerating the delivery of results Empowered, accountable and result-oriented P&L managers (global and local) Decentralised, proactive, Acceleration entrepreneurial business of results organization (no matrix) Leaner and more focused corporate structure 8
Slide 9: Record growth rate of steel production outside China in 2017
Record growth rate of steel production outside China in 2017 Annual global crude steel production (mt) • Record growth rate for steel production (World Steel Association) in the world excluding China: +4.9% 1,691 1,592 1,606 • …but, more than half of this growth is related to a 25mt decrease in Chin
Slide 10: Crude steel production growth
Favourable trends in majority of top-15 steel producing countries Growth in crude steel production (2017 vs. 2016) vs. 2017 steel production volume (Top-15 producers and EU-28) 24% Iran +21.4% 22% 20% 18% Turkey 16% +13.1% 14% Crude steel production growth Brazil 12% +9.9% China India (WSA reported)
Slide 11: Strong market share gain by Steel Flow Control in key markets
Strong market share gain by Steel Flow Control in key markets Steel production vs. Steel Flow Control revenue growth (2017 vs. 2016) by country (Top-13 steel producing countries) 88.0% 82.0% Turkey Sales: +79% 76.0% Steel: +13% 70.0% 70.0% Iran 64.0% 58.0% Sales: +47% Steel: +21% 52.0% 46.0% 46.0% B
Slide 12: Positive momentum in majority of Foundry end markets
Positive momentum in majority of Foundry end markets Vesuvius Medium/heavy Construction Foundry Light vehicles General commercial equipment / Mining Revenue growth production engineering vehicles Agriculture 2016/17 NAFTA +9% EMEA +10% China +13% South America +17% India +5% 12
Slide 13: Accelerating momentum in China
Accelerating momentum in China (8% of Group 2017 revenue) Steel Division Foundry Division Revenue growth 2016/17 Revenue growth 2016/17 Favourable market trends • Continued shift from long steel to +7% +13% higher quality flat steel • Steel industry consolidation expected to drive shift towards high
Slide 14: Increased penetration of value-creating solutions in China
Increased penetration of value-creating solutions in China Case study – Specialised products contract with major Chinese steel producer • A Vesuvius Transfer of Technology team Major Chinese was formed in China to transfer manufacturing Vesuvius steel producer know how from Vesuvius US plants to Ves
Slide 15: Continued progress in developing markets
Continued progress in developing markets India South America EEMEA1 (8% of Group 2017 revenue) (6% of Group 2017 revenue) (15% of Group 2017 revenue) Steel Division Foundry Division Steel Division Foundry Division Steel Division Foundry Division Revenue growth Revenue growth Revenue growth Revenue g
Slide 16: Strong performance in EU-28 and NAFTA
Strong performance in EU-28 and NAFTA EU-28 NAFTA (29% of Group 2017 revenue) (22% of Group 2017 revenue) Steel Division Foundry Division Steel Division Foundry Division Revenue growth 2016/17 Revenue growth 2016/17 Revenue growth 2016/17 Revenue growth 2016/17 +8% +7% +8% +9% • Outperformance of st
Slide 17: Previous restructuring programme above target + new £15m programme
Previous restructuring programme above target + completely new £15m restructuring programme Previously announced restructuring programme £5m £75m £70m £5m £60m Remaining £55m savings £16.8m 100% incurred Achieved savings £43.2m Total targeted Increased New total Total targeted Increased New total sa
Slide 18: Reinforcement of our technological leadership
Reinforcement of our technological leadership Significant R&D resources New product sales • 300 R&D staff distributed across 17 R&D centres • On track to reach 20% of sales from “new products”(1) ― New R&D centres in India and China ― Significant pipeline of new products to reach the • Global R&D sp
Slide 19: Develop our Technical Services offering
Develop our Technical Services offering • Vesuvius develops its Technical Services offering Technical Services offering reported revenue through: £m ― The Digital Services business ― Specialized entities in the other business units 88 delivering sales not directly related to our consumables sales 77
Slide 20: 2017 Divisional Performance
2017 Divisional Performance 20
Slide 21: Steel Division
Steel Division Key financials Underlying revenue / Return on Sales Reported 1200 1,143 Underlying 1,044 9 change 1,002 £m 2017 2016 Change 1000 9 8.8% 8.8% Revenue 1,148.7 942.0 21.9% 14.1% 800 9 8.4% 9 600 Trading profit 100.4 79.2 26.8% 18.9% 8 400 8 Return on Sales 8.7% 8.4% +30bps +40bps 200 8 2
Slide 22: Steel Flow Control Europe – Imports returned to historic levels
Steel Flow Control Europe – Imports returned to historic levels • Steel Flow Control EMEA achieved a 17.5% increase in underlying sales in 2017, exceeding our manufacturing capacity in the region • As explained at the H1 results, a significant • Measures were immediately taken proportion of this inc
Slide 23: Successful pass through of raw material price inflation
Successful pass through of raw material price inflation • Raw material price inflation accelerated in Q3 2017, before showing some signs of stabilisation in Q4 2017 • Total Group wide impact on 2017 Trading Profit of £6.8m • Measures taken to increase our own selling prices • Confirmation of our abi
Slide 24: Foundry Division
Foundry Division Key financials Underlying revenue / Return on Sales Reported 600 1 Underlying 535 change 502 490 1 £m 2017 2016 Change 500 12.2% 1 Revenue 535.2 459.4 16.5% 9.3% 11.9% 400 1 10.8% 1 Trading profit 65.1 54.1 20.3% 12.0% 300 1 Return on Sales 12.2% 11.8% +40bps +30bps 200 9 2015 2016
Slide 25: Foundry Division (continued)
Foundry Division (continued) Foundry key high margin products – c.60% of revenue Indexed to 100 Feeding Filters Coatings 120 120 120 100 100 100 80 80 80 60 60 60 40 40 40 20 20 20 0 0 0 2016 2017 2016 2017 2016 2017 25
Slide 26: Financial Review
A GLOBAL LEADER IN METAL FLOW ENGINEERING Financial Review Guy Young Chief Financial Officer 26
Slide 27: Income statement
Income statement 2017 2016 Change (% ) (£m unless indicated) Actual Actual As reported Underlying Revenue 1,683.9 1,401.4 20.2% 12.5% Trading Profit 165.5 133.3 24.2% 16.1% ROS % 9.8% 9.5% +30bps +30bps Post tax Share of JV Results 1.3 1.0 Net Finance Costs (13.9) (14.5) Headline Profit Before Tax 1
Slide 28: Underlying Vesuvius revenue up 12.5%
Underlying Vesuvius revenue up 12.5% • Revenue up £283m on a reported basis (+20.2%) and up £186m on an underlying basis (+12.5%) • £90.6m increase from FX due to GBP being weaker on average in 2017 versus 2016 45.4 5.5 1,683.9 141.0 90.6 1,492.0 (£m) 1,401.4 Underlying increase £186.4m (+12.5%) (Vo
Slide 29: Underlying Vesuvius trading profit up by 16.1%
Underlying Vesuvius trading profit up by 16.1% • Trading Profit up £32.2m on a reported basis (+24.2%) and up £23.1m on an underlying basis (+16.1%) 7.7 0.2 7.6 13.4 6.8 165.5 16.2 9.1 142.4 (£m) 133.3 2016 FX 2016 Restructuring Steel Foundry M&A FC Raw 2017 Reported adjustments Underlying savings E
Slide 30: Tax update
Tax update • 2017 full year ETR of 24.0% versus 28.0% in H1 2017 and 26.4% in 2016 2017 effective tax rate on • Lower than expected for the following key reasons Headline ― Lower tax charge in Mexico due to foreign exchange fluctuation performance before JVs and ― Increased value derived from tax lo
Slide 31: Trade working capital progress
Trade working capital progress Debtors days • We have made encouraging progress in our efforts 83 83 83 to reduce trade working capital with the ratio of 83 83 83 83 82 82 81 trade working capital / revenue down to 24.9% in 2017 80 80 79 from 26.6% in 2016 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 D
Slide 32: 104% cash conversion rate
104% cash conversion rate • Superior cash conversion performance versus 2016’s level of 94% due to successful working capital optimisation initiatives • Trade working capital increased by just £12.2m on a constant currency basis in 2017 despite sales growth of £191.9m on a constant currency basis 10
Slide 33: £274.3m Net Debt and 1.3x Net Debt / EBITDA
£274.3m Net Debt and 1.3x Net Debt / EBITDA • Net debt down c.£46m at £274.3m, versus £320.3m at end 2016 ― £93.1m free cash flow generation from continuing operations offset by £45.6m dividend payments and £27.3m cash restructuring costs • Strong balance sheet with Net Debt / LTM EBITDA at 1.3x 320
Slide 34: Strong balance sheet with significant liquidity
Strong balance sheet with significant liquidity Gross debt and available liquidity (£m) Update on pension deficit (£m) Total: 434.3* 29.4 10.2 6.8 0.6 11.6 24.6 Total: 360.8 146.3 45.2 1.8 0.3 16.5 153.7 263.4 161.9 Gross debt Liquidity Balance Return on Actuarial Service/ Net Cash FX Balance as at
Slide 35: Focused financial objectives to maximise free cash flow
Focused financial objectives to maximise free cash flow Cost control • Vigilant cost control and pass through of input cost inflation Restructuring • Delivering restructuring programmes on-time and on-budget Working capital • Clear impact of initiatives but further work still to be done optimisation
Slide 36: Outlook
Outlook VESUVIUS ete
Slide 37: Outlook
Outlook • Our main Steel and Foundry markets remain positively oriented at the beginning of 2018 • However, we expect a lower growth rate of steel production outside China in 2018 compared to 2017, as the significant decrease in Chinese steel exports which occurred in 2017 may not repeat in 2018 • O
Slide 38: Q&A
Q&A VESUVIUS ete
Slide 39: Appendix
Appendix VESUVIUS ete
Slide 40: 5 year history at constant currency
5 year history at constant currency(1) £m 2013 2014 2015 2016 2017 Group revenue 1,596.0 1,643.3 1,546.3 1,492.0 1,683.9 Steel 2 1,087.1 1,123.9 1,044.2 1,002.2 1,148.7 Foundry 508.9 519.4 502.1 489.8 535.2 Group trading profit 149.3 167.3 146.1 142.4 165.5 Steel 2 96.8 113.6 91.8 84.3 100.4 Foundry
Slide 41: Currency Ready Reckoner
Currency Ready Reckoner Dec-17 • Rule of thumb for impact of a movement in currency Approximate against sterling (1 unit change) Trading Profit Unit change in profits (£m) ▪ Amounts shown are movements for each currency USD 1 cent 0.3 EUR 1 cent 0.3 ▪ Works both for strengthening and weakening of cu