Vesuvius Plc · LSE:VSVS
Vesuvius — FY2018 Earnings Presentation
38 slides from Vesuvius's earnings presentation, February 2019
Slide 1: 2018 Full Year Results
2018 FULL YEAR RESULTS FEBRUARY 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 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: Strong results for the year ended December 2018
STRONG RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018 Revenue Trading profit Return on sales £1,798.0m £197.2m 11.0% +6.8% +19.1% +120bps Reported change Reported change Reported change +10.7% +24.1% +120bps Underlying change Underlying change Underlying change Headline EPS Net debt / EBITDA Full year
Slide 6: Strong operational performance in 2018
STRONG OPERATIONAL PERFORMANCE IN 2018 BOTH OUR FLOW CONTROL BUSINESS UNIT AND FOUNDRY DIVISION OUTPERFORMED UNDERLYING MARKETS WE SUCCESSFULLY RECOVERED THE IMPACT OF 2017’S TEMPORARY HEADWINDS ― PRICE INCREASE INITIATIVES TO COVER RAW MATERIAL COST INCREASES ― DEBOTTLENECKING OF OUR FLOW CONTR
Slide 7: Strategy Update
STRATEGY UPDATE STRATEGY TO DELIVER LONG-TERM SUSTAINABLE AND PROFITABLE GROWTH • Confirmation of our five execution priorities • In 2018 we have started to accelerate the delivery of our strategy by: 1. Reinforce our technology leadership ― Reinforcing our presence in the high-end, 2. Increase the
Slide 8: CCPI Acquisition
, CCPI ACQUISITION Transaction highlights CCPI overview • US$43.4m (£33.1 million) acquisition on a cash free • A specialty refractory producer focused on tundish (steel debt free basis, funded from internal resources continuous casting) applications (65% of sales) and aluminium (35% of sales) • 8x
Slide 9: Globally favourable environment in steel markets
GLOBALLY FAVOURABLE ENVIRONMENT IN STEEL MARKETS 12% South East Asia +11.3% 10% Crude steel production growth 2018/17 USA & Canada 8% +4.8% China +6.6% 6% India +4.9% Crude steel production growth 2018/17 4% EEMEA1 +2.9% World +4.6% 2% Latin America China +6.6% +1.2% Rest of the world +2.5% EU 28 Cr
Slide 10: Steel Division continues to outperform underlying market
STEEL DIVISION CONTINUES TO OUTPERFORM UNDERLYING MARKET INCREASED PENETRATION OF OUR VALUE-CREATING SOLUTIONS AND PRICE INCREASES China 30% Steel Division sales: +24% Latin America Steel production: +6.6% 27% Steel Division sales: +27% Steel Division revenue growth 2018/17 Steel production: +1.2% 2
Slide 11: Flow control outperformance of steel production
FLOW CONTROL OUTPERFORMANCE OF STEEL PRODUCTION SUPPORTED BY POSITIVE PRODUCT MIX AND TECHNOLOGICAL LEADERSHIP CASE STUDY: FOOD PACKAGING INDUSTRY Vesuvius was able to supply a complete solution VESUVIUS ONE OF THE COMPUTERISED FLOW COMPLETELY MAIN STEEL MILLS MODELLING + HIGH REDESIGNED THE IN EURO
Slide 12: Globally favourable environment in foundry end-markets
GLOBALLY FAVOURABLE ENVIRONMENT IN FOUNDRY END-MARKETS General Medium / heavy Construction / Light engineering commercial agriculture vehicles* and mining vehicles* equipment EMEA US & CANADA CHINA INDIA LATIN AMERICA * Light vehicles and medium/heavy commercial vehicles production 12
Slide 13: Foundry Division's outperformance of end-markets
FOUNDRY DIVISION’S OUTPERFORMANCE OF END-MARKETS SUPPORTED BY PRODUCT MIX AND INCREASED PENETRATION OF VALUE-CREATING SOLUTIONS SELECTED VALUE-CREATING SOLUTIONS LAUNCHED DURING 2018 Thermal Data Wireless Workstation analysis acquisition communication touchscreen sensors devices New temperature meas
Slide 14: Strong and growing presence in the most dynamic regions
STRONG AND GROWING PRESENCE IN THE MOST DYNAMIC REGIONS FOR STEEL AND FOUNDRY 38% (2014) 45% (2018) EEMEA1 China India Latin America South East Asia 15% of Group 2018 revenue 8% of Group 2018 revenue 8% of Group 2018 revenue 11% of Group 2018 revenue 3% of Group 2018 revenue Revenue growth 2018/17 S
Slide 15: Increased investment to support new product launches
INCREASED INVESTMENT TO SUPPORT NEW PRODUCT LAUNCHES VESUVIUS TECHNOLOGICAL LEADERSHIP ENABLES OUTPERFORMANCE OF UNDERLYING MARKETS NEW PRODUCT SALES1 AS R&D EXPENDITURE* PERCENTAGE OF TOTAL SALES (At constant currency) c.2% 20% of sales 18% 33.6 16% 15.4% 32.6 14% 29.6 12% 10% 8% 7% 6% 4% 2016 2017
Slide 16: Continued growth of our Technical Service offering
CONTINUED GROWTH OF OUR TECHNICAL SERVICE OFFERING • Vesuvius continues to develop its Technical Service offering through the Digital Services business unit and digital services businesses within the Flow Control and Advanced Refractories business units • Benefit of moving several of our key data ca
Slide 17: Ongoing restructuring programmes on track
ONGOING RESTRUCTURING PROGRAMMES ON TRACK ORIGINAL RESTRUCTURING PROGRAMME NEW RESTRUCTURING PROGRAMME (2015 – 2020) (2018 – 2021) P&L costs Savings P&L costs* Savings £75.0m £60.0m / year £19.3m £22.0m / year £2.3m £2.4m 2020 £6.1m £8.4m 2021 £6.0m 2019 outstanding 2020 £75.0m £2.0m £16.4m outstand
Slide 18: Divisional Performance Steel
DIVISIONAL PERFORMANCE STEEL KEY FINANCIALS Reported Underlying Underlying revenue1 / Return on Sales1 £m 2018 2017 Change change 1400 10.5% 11% 10% Revenue 1,236.7 1,148.7 +7.7% +11.9% 1300 8.8% 1,219 9% 1200 Trading profit 128.3 100.4 +27.9% +32.6% 1,090 8% 1100 7% Return on Sales 10.4% 8.7% +160b
Slide 19: Divisional Performance Foundry
DIVISIONAL PERFORMANCE FOUNDRY KEY FINANCIALS Reported Underlying Underlying revenue / Return on Sales £m 2018 2017 Change change 630 12.3% 13% 610 12.0% Revenue 561.3 535.2 +4.9% +8.2% 12% 590 570 561 550 12% Trading profit 68.9 65.1 +5.7% +10.9% 530 519 11% 510 490 11% Return on Sales 12.3% 12.2%
Slide 20: Financial Review
FINANCIAL REVIEW LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 21: Income Statement
INCOME STATEMENT 2018 2017 Change (%) (£m unless indicated) Actual Actual As reported Underlying Revenue 1,798.0 1,683.9 +6.8% +10.7% Trading Profit 197.2 165.5 +19.1% +24.1% ROS % 11.0% 9.8% +120bps +120bps Post tax Share of JV Results 2.8 1.3 Net Finance Costs (11.1) (13.9) Headline Profit Before
Slide 22: Underlying Vesuvius revenue up 10.7%
UNDERLYING VESUVIUS REVENUE UP 10.7% • Revenue up £114.1m on a reported basis (+6.8%) and up £172.2m on an underlying basis (+10.7%) • £51.6m decrease from FX due primarily to strengthening in Sterling against US Dollar as well as appreciation against developing markets currencies in which Vesuvius
Slide 23: Underlying Vesuvius trading profit up by 24.1%
UNDERLYING VESUVIUS TRADING PROFIT UP BY 24.1% • Trading profit up £31.7m on a reported basis (+19.1%) and up £38.2m on an underlying basis (+24.1%) +14.0 +7.0 -4.0 -6.6 (£m) -3.0 196.5 +0.7 197.2 +32.2 -1.4 165.5 -6.8 -0.4 158.3 2017 FX Acquisitions / 2017 Steel & Fused Restructuring FC EMEA Invest
Slide 24: Significant growth in sales and trading profit despite unchanged asset base
WE HAVE BEEN ABLE TO SIGNIFICANTLY GROW SALES AND TRADING PROFIT DESPITE A BROADLY UNCHANGED ASSET BASE SALES AND PROFITABILITY ASSET BASE (SELECTED ITEMS) Change between 2015 – 2018 (constant currency) Change between 2015 – 2018 (constant currency) +40% +9.0% +20% -5.0% Sales Trading profit Propert
Slide 25: Trade Working Capital Progress
TRADE WORKING CAPITAL PROGRESS 600 Trade debtors and debtors days 85 TRADE WORKING CAPITAL / REVENUE 400 80 79 79 78 78 78 78 80 200 26.6% 0 75 24.9% Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 23.9% Trade debtors Debtor days (12m) Trade creditors and creditor days 200 54 55 52 53 52 55 150 49
Slide 26: Cash Flow Progress
CASH FLOW PROGRESS • Cash conversion of 91.0%. Lower than prior year due to expansion of trade working capital required to fund increased sales and higher capital expenditure 91.0% +41.0 -38.6 (£m) 197.2 -22.0 +1.8 179.4 2018 Depreciation Net capex Trade working Other Operating Reported capital work
Slide 27: £248.0m net debt and 1.0x net debt / LTM EBITDA
£248.0M NET DEBT AND 1.0X NET DEBT / LTM EBITDA • Net debt down £26.3m at £248.0m at year end 2018 ― £179.4m operating cash flow generation from continuing operations offset by £41.8m income taxes, £50.0m dividend payment and £29.8m of other costs • Strong balance sheet with Net Debt / LTM EBITDA at
Slide 28: Strong balance sheet with significant liquidity
STRONG BALANCE SHEET WITH SIGNIFICANT LIQUIDITY NET DEBT / EBITDA DEVELOPMENT CAPITAL ALLOCATION PRIORITIES 1.8x We are engaged in studies 1.3x to expand further our self-help 1.0x ORGANIC restructuring programmes GROWTH The result of these studies is expected during the course of 2019 2016 2017 201
Slide 29: Outlook
VESUVIUS etc OUTLOOK
Slide 30: Outlook
OUTLOOK • Despite a moderate slowdown in growth since the fourth quarter of 2018, we still expect our main Steel and Foundry markets to register a positive growth rate in 2019, albeit at a lower level as compared with the growth rates recorded in 2017 and 2018 • In this environment, we plan to conti
Slide 31: Q&A
VESUVIUS Pic Q&A
Slide 32: Appendix
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Slide 33: Tax Update
TAX UPDATE • The 2018 full year Group’s effective tax rate on headline profits before share of JV income is 26.0%. This is in-line with the ETR reported at H1 2018, and 2% higher than ETR reported FY 2017 (i.e. 24.0%) • The 2% increase versus 2017 level is due to the following reasons: ― Utilisation
Slide 34: 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 37% 29% 2% 32% Provides products, systems and Installation expertise and materials Provides products that Improves casting quality and f
Slide 35: 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 36: 5 Year History at Constant Currency
5 YEAR HISTORY AT CONSTANT CURRENCY 2014 2015 2016 2017 2018 Revenue (£m) 1,596.7 1,499.5 1,447.1 1,632.3 1,798.0 Steel 1,091.8 1,011.0 971.6 1,113.8 1,236.7 Foundry 504.9 488.5 475.5 518.6 561.3 Trading Profit (£m) 162.3 140.4 137.0 158.8 197.2 Steel 110.7 88.4 82.6 96.7 128.3 Foundry 51.5 52.1 54.
Slide 37: Currency Ready Reckoner
CURRENCY READY RECKONER Dec-18 • Rule of thumb for impact of a movement in currency against Trading Approximate sterling (1 unit change) Unit change in annual profit profits (£m) ― Amounts shown are movements for each currency USD 1 cent 0.3 EUR 1 cent 0.3 ― Works both for strengthening and weakenin
Slide 38: 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