Vesuvius Plc · LSE:VSVS
Vesuvius — H1 2014 Earnings Presentation
46 slides from Vesuvius's earnings presentation, Aug 1, 2014
Slide 1: 2014 Half Year Results
A GLOBAL LEADER IN METAL FLOW ENGINEERING 2014 Half Year Results 1 August 2014 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". These forward looking statements can be identified by the use of forward looking terminology, including the terms "believes", "es
Slide 3: Highlights
Highlights • Strong underlying performance – reported numbers impacted by Forex • Revenue of £729.8m, up 4.7% on an underlying basis(1); down 5.6% on a reported basis (H1 2013: £772.7m) • Trading profit(2) of £71.2m, up 14.3% on an underlying basis(1); up 0.7% on a reported basis (H1 2013: £70.8m) •
Slide 4: H1 Trading performance as reported; lower sales, higher margins
H1 Trading performance as reported; lower sales, higher margins Revenue Trading Profit ROS 80 +0.7% 12.0% £m £m 70.8 71.2 % +60 bps 900 70 773 -5.6% 10.0% 9.2% 9.8% 800 730 60 700 8.0% 50 600 500 40 6.0% 400 30 4.0% 300 20 200 2.0% 100 10 0 0 0.0% H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 • Re
Slide 5: H1 Underlying trading performance
H1 Underlying trading performance £m Revenue £m % ROS Trading Profit 800 730 +4.7% 80 +14.3% 12.0% 697 71.2 +83 bps 700 70 9.8% 62.3 10.0% 8.9% 600 60 8.0% 500 50 400 40 6.0% 300 30 4.0% 200 20 2.0% 100 10 0 0 0.0% H1 2013 H1 2014 H1 2013 H1 2014 H1 2013 H1 2014 • Revenue growth ahead of the underly
Slide 6: Steel markets
Steel markets Steel production - EMEA Steel production – NAFTA mt mt 220 200 +2.3% 180 +1.7% 160 140 120 • H1 14 up 2.3% versus H1 13 • H1 14 up 1.7% on H1 13 • Higher growth driven by EU and Middle East • Mexico seeing strong growth, Canada seeing small decline 100 H1 07 H1 08 H1 09 H1 10 H1 11 H1
Slide 7: Steel markets continued
Steel markets continued Steel production - India Steel production – Brazil mt mt 45 +1.4% 40 35 30 • H1 14 up 1.4% versus H1 13 • H1 14 down 1.5% on H1 13 25 20 H1 07 H1 08 H1 09 H1 10 H1 11 H1 12 H1 13 H1 14 Source : World Steel Assoc. Source : World Steel Assoc. • Recent moderation in growth in so
Slide 8: Trading review: Steel division revenue
Trading review: Steel division revenue Steel Flow Control Advanced Refractories Revenue* by region £m Revenue* by region £m H1 2013 H1 2014 125 H1 2013 H1 2014 125 +3.0% -2.1% 100 100 +4.3% +7.7% 75 75 +18.9% 50 +22.7% 50 25 25 0 0 Americas EMEA Asia-Pacific Americas EMEA Asia-Pacific Strategy – con
Slide 9: Trading review: Steel division margins
Trading review: Steel division margins Underlying margin 10.0% £m (on an underlying basis) H1 2013 H1 2014 % Change 9.7% 9.5% Revenue 9.0% Steel Flow Control 257.1 273.9 6.5% 8.5% 8.3% 8.0% Advanced Refractories 204.6 215.6 5.3% 7.5% Total Revenue 461.8 489.5 6.0% 7.0% Total Trading Profit 38.5 47.2
Slide 10: Foundry market
Foundry market Light vehicle production Truck production Nafta Europe 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 • Nafta up 2.2% versus H1 2013 • Nafta up 11.3% versus H1 2013 • Europe up 4.0% versus H1 2013 • Europe down 2.5% versus H1 2013 - H1 H2 H1 H2 H1 H2 H1 H2 H1
Slide 11: Mining capital expenditure
Mining capital expenditure • Mining is an important market for the Foundry division counting for about 7% of sales in average, mostly in the high value added steel casting segment • Mining capex being significantly reduced over 2013-2014 • Any increase in capex will take some time to filter through
Slide 12: Trading review: Foundry revenue
Trading review: Foundry revenue £m Revenue* by region Strategy – Extend the penetration of our value H1 2013 H1 2014 creating solutions 140 Mixed performance across the division +6.1% Americas: 120 • Continued softness in the mining sector 100 • Lower automotive parts production volumes in Brazil -3
Slide 13: Trading review: Foundry division margins
Trading review: Foundry division margins Underlying margin 12.0% 10.1% 10.0% £m (on an underlying basis) H1 2013 H1 2014 % Change 10.0% 8.0% Revenue 235.5 240.3 2.0% 6.0% Trading Profit 23.8 24.0 0.8% 4.0% Return on Sales % 10.1% 10.0% -12 bps 2.0% 0.0% H1 2013 H1 2014 • Underlying trading profit up
Slide 14: H1 2014 Trading Summary
H1 2014 Trading Summary • Solid underlying revenue growth with Vesuvius outperforming underlying markets • Strong growth in underlying trading profit • Margin recovery in line with our plan: 174 bps delivered since demerger • Internal focus continues on operational and strategic initiatives - discip
Slide 15: Financial Review
A GLOBAL LEADER IN METAL FLOW ENGINEERING Financial Review Chris O’Shea 15
Slide 16: Income statement
Income statement H1 2013 Change H1 2013 Change (Headline, pro-forma) H1 2014 Underlying (vs. H1 As reported (vs. H1 2014) 2014) £m £m £m Revenue 729.8 697.2 +4.7% 772.7 -5.6% Trading Profit 71.2 62.3 +14.3% 70.8 +0.7% Return on Sales % 9.8% 8.9% +83bps 9.2% +60bps Net Interest (9.2) (8.2) (8.5) Shar
Slide 17: Strength of currency continues to impact results
Strength of currency continues to impact results • Strengthening of 2014 H1 2013 H1 2014 H1 v 2014 H1 2014 H1 sterling in the Average Average 2013 H1 Period Average v Rates Rates End Rates Period second half of 2013 End Rates has continued into the first half of 2014 USD 1.67 1.54 -8.0% 1.71 -2.5% •
Slide 18: Underlying revenue grew 4.7% to £730 million…
Underlying revenue grew 4.7% to £730 million… • Revenue grew £33 million adjusting for £m Revenue 800 effect of disposal of VGT and Canadian 773 construction 750 5 730 17 11 • Revenue grew £23 million (3.2%) at 700 65 constant currency rates 10 650 • Underlying revenue growth in all regions 600 EM
Slide 19: …whilst underlying trading profit grew 14.3% to £71.2 million…
…whilst underlying trading profit grew 14.3% to £71.2 million… • Trading profit grew £8.9 million adjusting £m Trading Profit 80 for effect of disposal of VGT and Canadian construction 75 8.7 0.2 71.2 70.8 • Trading profit grew £8.8 million (14.1%) 70 at constant currency rates 65 8.4 0.1 60 55 50 H
Slide 20: …delivering further improvements in Return on Sales
…delivering further improvements in Return on Sales • Cost discipline maintained in operating £m Return on Sales 10% expenses 9.8% 9% 9.2% 8.9% 8% • Stable raw material price environment 7% 6% • Improved market penetration 5% • Currency translation effects reduce 2013 4% margins 3% 2% • Partially of
Slide 21: Underlying Steel division profitability improved by 131 bps
Underlying Steel division profitability improved by 131 bps £m £m Revenue 50 Trading Profit 550 525 514 8.7 47.2 500 28 490 45 475 462 42.9 42 450 10 9.7% 425 8.3% 40 38.5 400 4.3 0.1 8.3% 375 350 35 H1 FX M&A H1 Underlying H1 H1 FX M&A H1 Underlying H1 2013 2013 growth 2014 2013 2013 Growth 2014 Re
Slide 22: Underlying Foundry division profitability fell by 12 bps
Underlying Foundry division profitability fell by 12 bps £m £m Revenue 30 Trading Profit 300 27.9 275 259 5 240 250 236 225 24 25 24.0 10.8% 23.8 0.2 200 10.0% 4.1 10.1% 175 150 20 H1 FX H1 Underlying H1 H1 FX H1 Underlying H1 2013 2013 Growth 2014 2013 2013 Growth 2014 Reported Underlying Reported
Slide 23: High margin foundry markets experienced challenging conditions
High margin foundry markets experienced challenging conditions • Political issues impacting higher margin Foundry Margins businesses 12% Thailand 10.7% 10.0% 10.1% Ukraine 10% • Economic turbulence negatively affecting 8% activity at key foundry customers 6% Australia Brazil 4% Indonesia
Slide 24: Cash conversion of 63% driven by working capital…
Cash conversion of 63% driven by working capital… • Capital expenditure weighted towards £m Operating cash flow 100 second half of year 19.1 Full year capex expectation c.3.5% of full 90 year revenue 80 71.2 13.2 70 • Working capital outflow in line with 60 normal seasonality 50 44.7 Sales highe
Slide 25: …with improving metrics for receivables and inventory
…with improving metrics for receivables and inventory • Consistent reduction of working capital Inventory and Receivables Days (12 months moving average) metrics 90 80 85.0 8% reduction in inventory days compared to 81.0 June 2013 74.7 76.6 70 74.3 73.1 74.3 72.8 60 3% reduction in receivables d
Slide 26: Net debt increased by 2% to £261.7 million…
Net debt increased by 2% to £261.7 million… • Normal seasonality sees increase in net £m Net debt debt 270 27.7 1.0 261.7 260 • c.65% of full year dividend is paid in the 256.4 1.7 first half 250 240 • Reduced additional payments in pension scheme reflecting UK scheme surplus 230 21.7 220 • £3.9 mil
Slide 27: ..whilst the Group has significant headroom in its debt facilities
..whilst the Group has significant headroom in its debt facilities • £630 million of £m 425 450 committed facilities Facility maturities: Further £73 million of 400 USPP uncommitted facilities Bank Facility – undrawn 350 Bank Facility - drawn • Weighted average 300 maturity of committed 250 facili
Slide 28: Defined benefit employee benefit schemes
Defined benefit employee benefit schemes • UK, USA and Germany comprise 30 Jun 31 Dec over 90% of Group’s gross pension £ million 2014 2013 liabilities Net Pension Deficits Germany 35.1 32.6 • Increase in deficit due to reduction in USA 27.8 23.3 long term corporate bond yields Rest of World 13.4 12
Slide 29: Financial strategy remains consistent
Financial strategy remains consistent • Financial flexibility essential • Conservative balance sheet stewardship • Focus on cash generation • Cost control • Efficient working capital management • Improve returns 29
Slide 30: Strategy and Outlook
A GLOBAL LEADER IN METAL FLOW ENGINEERING Strategy and Outlook Francois Wanecq, Chief Executive 30
Slide 31: Delivering on the strategy
Delivering on the strategy New R&D facilities to open in • Maintain technology leadership Enschede in H2 2014. New location selected in Pittsburgh Success of robotics handling • Increase penetration of value creating solutions operations New Foundry Plant inaugurated in • Capture growth in developin
Slide 32: Robots in operation at Hyundai
Robots in operation at Hyundai • In July we celebrated the 1000th robotic tube change operation in Hyundai with no failures • Installation on new casters is due to continue in 2015 Video to play in meeting 32
Slide 33: Outlook
Outlook FY 2014: • Expect underlying trading environment to remain broadly similar for the second half of the year • If recent strength of Sterling continues it will have a negative impact on our reported growth for FY 2014 • Progressing with our plan to improve operational efficiency in all segment
Slide 34: Primary objectives for the medium term
Primary objectives for the medium term • Improve margins further • Increase our effort in research and development • Sustain our global leadership in core businesses • Further develop our penetration in China • Retain strong balance sheet to keep our financial flexibility • Progress our overall stra
Slide 35: Q&A
A GLOBAL LEADER IN METAL FLOW ENGINEERING Q&A 35
Slide 36: Appendix
A GLOBAL LEADER IN METAL FLOW ENGINEERING Appendix
Slide 37: 5 year history at constant currency
5 year history at constant currency 2009 2010 2011 2012 2013 2014 H1 Revenue 1,057.3 1,347.2 1,507.4 1,441.0 1,411.2 729.8 Steel 708.1 888.3 970.2 953.3 953.2 489.5 Foundry 349.2 458.8 537.3 487.7 458.0 240.3 Trading Profit 54.4 148.4 157.5 116.6 128.8 71.2 Steel 44.3 90.0 93.0 76.2 82.9 47.2 Foundr
Slide 38: Currency – Ready Reckoner
Currency – Ready Reckoner Currencies Approximate Change • Rule of thumb for impact of a in annual profits 1% movement in currency against sterling US Dollar £0.4 million Amounts shown are movements for each currency Euro £0.3 million Works both for strengthening and weakening of currencies India
Slide 39: Steel: Outperforming the underlying markets
Steel: Outperforming the underlying markets Sales and Steel Production Rebased to 100 Sales and Steel Production Rebased to 100 NAFTA Vesuvius Sales Value Steel Production Sales and Steel Production Rebased to 100 Sales and Steel Production Rebased to 100 800 Volumes 700 600 500 400 300 200 100 0 20
Slide 40: Foundry: Outperforming the underlying markets
Foundry: Outperforming the underlying markets Growth 200 200 Sales and Casting Tonnes Rebased to 100 Sales and Casting Tonnes Rebased to 100 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Vesuvius Sales 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2002 2003 2004 2
Slide 41: Growth opportunities - Steel
Growth opportunities - Steel Vesuvius serves mainly the flat products market which will grow at a higher pace than global steel as developing markets evolve towards consumption driven economies Typical consumption of Flow Control products in flat steel is £1.5 /T of steel vs £0.5/T of steel in long
Slide 42: Growth opportunities - Foundry
Growth opportunities - Foundry Foundry output Foundry sales £/T of total market casting (2013) Major segments requiring Vesuvius solutions have the highest Significant upside potential through continuing market penetration as growth: Ductile iron, Steel and Aluminium emerging markets move towards hi
Slide 43: Market leading positions across many of our products
Market leading positions across many of our products Molten metal in steel industry Molten metal in foundries A world leader in flow control systems (slide gates) A world leader in filters A world leader in isostatically pressed refractories A world leader in feeding systems A world leader in flow c
Slide 44: Main products and markets – Steel business segment
Main products and markets – Steel business segment Steel business segment overview Steel business segment revenue by operating location • World leader in the supply of consumable Steel Flow Control products used in the enclosed continuous casting process and a leading supplier of Advanced Refractori
Slide 45: Main products and markets – Foundry business segment
Main products and markets – Foundry business segment Foundry casting process Ultimate end markets for castings • World leader in the supply of consumable products and technical services used in the production of metal castings which themselves have a wide variety of uses in engineered products Gener
Slide 46: Our presence in China
Our presence in China £m Steel Division Revenue £m 70 Foundry Division Revenue 90 80 60 70 50 60 50 40 40 30 30 20 20 10 10 0 0 2011 2012 2013 2011 2012 2013 2013 Sales 2013 Sales China World ex. China • Sales in China represent less than 10% of revenue in both divisions • Recent management change i