Slide 1: Investor Pack March – April 2015
A GLOBAL LEADER IN METAL FLOW ENGINEERING Investor Pack March – April 2015 1
Slide 2: Results for the year ended 31 December 2014
A GLOBAL LEADER IN METAL FLOW ENGINEERING Results for the year ended 31 December 2014 3 March 2015 François Wanecq Chief Executive 2
Slide 3: 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 4: Highlights
Highlights • Revenue of £1,444m, down 4.4%; up 3.5% on an underlying basis(1) (2013: £1,511m) • Trading profit(2) of £142.8m, up 2.0% on a reported basis, up 11.6% on an underlying basis(1) (2013: £140.0m) • Return on sales(2) improved by 62 basis points to 9.9%; a 71 basis point improvement on an u
Slide 5: 2014 Underlying Trading Performance
2014 Underlying(1) Trading Performance £m Revenue £m Trading Profit % Return on Sales +3.5% +11.6% 1,600 1,441 160 12.0% +71bps 1,404 1,392 142.3 1,400 140 9.9% 127.5 10.0% 9.2% 1,200 120 113.6 8.1% 8.0% 1,000 100 800 80 6.0% 600 60 4.0% 400 40 2.0% 200 20 0 0 0.0% 2012 2013 2014 2012 2013 2014 2012
Slide 6: Revenue growth returns
Revenue growth returns Underlying Revenue Movement 4% 3.5% Underlying revenue grows in 2014 in both 3% divisions ahead of underlying market growth 2% Steel revenue +4.4% 1% Foundry revenue +1.8% 0% Refocusing the activities on the products where Vesuvius offers a unique value proposition has -1% -0.
Slide 7: Major steel markets
Major steel markets Steel production – EMEA Steel production – NAFTA Steel production – China mt mt mt 250 90 450 +0.9% 80 400 200 +0.5% 70 +2.1% 350 60 300 150 50 250 100 40 200 30 150 2014 up 0.5% versus 2013 2014 up 2.1% versus 2013 2014 up 0.9% versus 2013 50 20 100 10 50 0 0 0 H1 07H1 08H1 09H1
Slide 8: Emerging steel markets
Emerging steel markets Steel production – India Steel production – Brazil Steel production – South Korea mt mt mt 45 +2.3% 20 -0.7% 40 40 18 +7.5% 35 35 16 14 30 30 12 25 25 10 20 20 2014 up 2.3% versus 2013 8 2014 down 0.7% versus 2013 2014 up 7.5% versus 2013 15 15 6 10 10 4 5 2 5 0 0 0 H1 07H1 08
Slide 9: Trading review: Steel division revenue
Trading review: Steel division revenue Steel Flow Control Advanced Refractories £m Revenue* by region Revenue* by region £m 2013 2014 250 2013 2014 +1.0% 250 200 +4.7% -1.3% 200 +5.7% 150 150 +10.4% 100 100 +17.4% 50 50 0 0 Americas EMEA Asia-Pacific Americas EMEA Asia-Pacific Americas: Americas: •
Slide 10: Steel: Outperforming the underlying markets
Steel: Outperforming the underlying markets 160 180 Sales and Steel Production Rebased to 100 Sales and Steel Production Rebased to 100 160 140 NAFTA 140 120 120 100 100 80 80 60 60 Vesuvius 40 Sales Value 40 20 20 Steel Production 0 0 Volumes 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2
Slide 11: Trading review: Steel division margins
Trading review: Steel division margins Y-o-Y Underlying £m 2014 2013 change change Underlying margin improvement 12.0% Revenue 9.8% 10.0% 8.7% Steel Flow Control 544.8 555.7 -2.0% +4.3% 8.0% 8.0% Advanced 436.6 461.8 -5.5% +4.5% Refractories 6.0% Total Revenue 981.4 1,017.5 -3.5% +4.4% 4.0% Total Tr
Slide 12: Foundry markets
Foundry markets Truck and Light vehicles represent approximately 40% of Foundry product line sales Light vehicle production Truck production NAFTA Europe Nafta Europe 25,000,000 800,000 700,000 20,000,000 600,000 500,000 15,000,000 400,000 10,000,000 300,000 200,000 • NAFTA up 16.7% versus 2013 • NA
Slide 13: Trading review: Foundry revenue
Trading review: Foundry revenue £m Revenue* by region Americas: 2013 2014 250 • Growth in NAFTA light vehicle and truck production offset +3.8% by: • Reduced foundry activity in Brazil 200 • Reduced mining activity EMEA: -1.1% • Increase driven by light vehicle production despite 150 decrease in tru
Slide 14: Foundry: Outperforming the underlying markets
Foundry: Outperforming the underlying markets 250 180 Sales and Casting Tonnes Rebased to 100 Sales and Casting Tonnes Rebased to 100 160 200 140 120 150 100 80 100 60 40 50 20 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 15: Trading review: Foundry division margins
Trading review: Foundry division margins Underlying margin flat Y-o-Y Underlying 12.0% £m 2014 2013 change change 10.0% 10.0% 10.0% Revenue 463.0 493.0 -6.1% +1.8% 8.0% 6.0% Trading Profit 46.4 51.3 -9.5% +1.8% 4.0% Trading Margin % 10.0% 10.4% -35bps +1bps 2.0% 0.0% 2013 2014 • Underlying trading p
Slide 16: Foundry – going forward
Foundry – going forward • Foundry industry supported by industrial and infrastructure spend in China over the past decade • Foseco grew strongly in this period • Performance dropped off in 2012 No real recovery in 2013/14 • New management appointed to restore Foseco’s innovation leadership and rep
Slide 17: Financial Review
A GLOBAL LEADER IN METAL FLOW ENGINEERING Financial Review Chris O’Shea Chief Financial Officer 17
Slide 18: Income statement
Income statement 2014 2013 Year on Year Change £m £m As reported Underlying(1) Revenue 1,444 1,511 -4.4% +3.5% Trading Profit 142.8 140.0 +2.0% +11.6% Trading margin % 9.9% 9.3% +62bps +71bps Net finance costs (16.4) (17.3) Share of JV 1.4 2.5 Profit before Tax 127.8 125.2 Effective tax rate % 26.0%
Slide 19: The FX position remains mixed…
The FX position remains mixed… 2014 2013 2014 Average 2014 Period 2014 Period Average Average Rates v End Rates End Rates v Rates Rates 2013 Average 2014 Average Rates Rates USD 1.65 1.56 (5.4%) 1.56 5.4% EUR 1.24 1.18 (5.3%) 1.29 (4.0%) BRL 3.87 3.37 (14.6%) 4.14 (7.0%) INR 100.49 91.58 (9.7%) 98.1
Slide 20: …but the cumulative effect of FX has been significant
…but the cumulative effect of FX has been significant 2014 Revenue, Trading Profits, and RoS at various historic FX scenarios 2014 Revenue 2014 Trading Profit & RoS 1650 165 10.0% 10.0% 10.0% 9.9% 1600 1621 160 161.4 1550 1558 155 1552 155.7 154.6 1500 150 £m £m 1450 145 1444 142.8 1400 140 1350 135
Slide 21: Underlying revenue grew 3.5%...
Underlying revenue grew 3.5%... • Revenue down £66 million on a reported £m Revenue basis 1600 1500 • Revenue grew £49 million on an 1,510.5 48.9 3.6 underlying basis 1,440.8 1,444.4 1400 104.6 14.0 1,391.9 • Further growth of £4 million from acquisitions 1300 Full year 2014 revenue of £19 million
Slide 22: …whilst underlying trading profit grew 11.6%
…whilst underlying trading profit grew 11.6% • Trading profit up £2.8 million on a £m Trading Profit 150 reported basis 145 0.5 14.8 142.3 142.8 140 • Trading profit grew £14.8 million on an 140.0 underlying basis 135 130 11.4 • Further growth of £0.5 million from 1.1 127.5 125 acquisitions 120 Fu
Slide 23: Underlying Steel division profitability improved by 106 bps
Underlying Steel division profitability improved by 106 bps £m £m Revenue Trading Profit 1100 100 13.9 0.5 1050 95 96.3 95.8 1,017.5 1000 90 40.9 3.6 88.7 977.8 981.4 950 85 66.6 14.0 936.9 5.7 1.1 81.9 900 80 850 75 800 70 2013 FX 2013 2013 Underlying 2014 2014 2014 2013 FX 2013 2013 Underlying 201
Slide 24: Underlying Foundry division profitability was maintained at 10%
Underlying Foundry division profitability was maintained at 10% £m Revenue £m Trading Profit 550 55 525 500 51.2 50 493.0 475 8.0 0.8 450 463.0 38.0 455.0 45 46.4 425 5.7 45.6 400 375 40 350 325 35 300 2013 FX 2013 Underlying 2014 2013 FX 2013 Underlying 2014 Reported Underlying Progression Reported
Slide 25: Cash conversion of 72% driven by working capital…
Cash conversion of 72% driven by working capital… • Capital expenditure 3.5% of revenue £m Operating cash flow Reinvestment rate of 133% recognising increased investment for the future 190 38.5 • R&D facilities • Foundry China 170 150 • Working capital outflow includes: 142.8 £6m retirement of f
Slide 26: Net debt increased by £11.9m to £268.3 million…
Net debt increased by £11.9m to £268.3 million… • Acquisition of ECIL Met Tec and Process £m Net debt 3.3 268.3 Metrix 270 3.2 23.4 Cash outflow of £23.4m in 2014 260 256.4 250 • Lower free cashflow due to reduced 240 41.2 cash conversion 230 220 • £41.2m dividend paid in 2014 210 200 • Reduced ad
Slide 27: …whilst the Group has significant headroom in its debt facilities
…whilst the Group has significant headroom in its debt facilities • £647 million of £m 450 committed facilities 425 Facility maturities: Further £77 million of 400 USPP uncommitted facilities Bank Facility – undrawn 350 Bank Facility - drawn • Weighted average 300 maturity of committed 250 facilit
Slide 28: Defined benefit employee benefit schemes
Defined benefit employee benefit schemes • UK, USA and Germany comprise over 31 Dec 31 Dec 90% of Group’s gross pension liabilities £ million 2014 2013 Net Pension Deficits • Increase in net deficit due to reduction Germany 39.9 32.6 in discount rates USA 35.6 23.3 Rest of World 20.0 12.6 UK 3.50%
Slide 29: Dividend
Dividend • Proposed final dividend of 11.125 pence per share Increase of 8.5% on 2013 final dividend of 10.25 pence • Full year dividend of 16.125 pence per share Increase of 7.5% on 2013 full year dividend of 15.00 pence • £43.6 million total cash returned to shareholders for 2014 2014 Interi
Slide 30: Financial strategy remains consistent
Financial strategy remains consistent • Financial flexibility essential Committed unutilised facilities of £344.0m • Conservative balance sheet stewardship Gearing of 1.48 • Focus on cash generation 2012 – 2014 cash conversion of 93.0% • Cost control ROS improved by 179 basis points from 2012 • Effi
Slide 31: Strategy and Outlook
A GLOBAL LEADER IN METAL FLOW ENGINEERING Strategy and Outlook François Wanecq Chief Executive 31
Slide 32: Delivering on the strategy
Delivering on the strategy New R&D facilities opened in Enschede; • Maintain technology leadership New location selected in Pittsburgh Introduction of a Stage Gate process Success of robotics handling operations • Increase penetration of value creating solutions Numerous installations of the patente
Slide 33: Maintain technology leadership
Maintain technology leadership R&D Spend (constant currency) Progress in 2014: Advanced Refractories Steel Flow Control Foundry Enabling Technologies £m • Launched rigorous Stage-Gate® process 30 for managing New Product Innovation 25 • Restructured R&D to enhance 20 collaboration across our busines
Slide 34: Increase penetration of value creating solutions
Increase penetration of value creating solutions The first robotic handling operation Increased INITEK installed in Korea has been running customer acceptance and for a year with 2,000 successful improved design of tube changes. converters We received orders to install robots on the ladle platform i
Slide 35: Increase penetration of value creating solutions continued
Increase penetration of value creating solutions continued Introduction of our SMART MOLD Awarded several new FLUX FEEDER (PDM300) in tundish management Mexico contracts in NAFTA incorporating the latest fully automated smart robotics installation equipment Progress Progress in 2014 in 2014 Installa
Slide 36: Capture growth in developing markets
Capture growth in developing markets Conversion of casters with Building of new Foundry our gate tube changer and plant in Changshu, China, automatic mould level control commissioned, replacing two • Sail Bokaro (India) old factories in Liuhe and • Baotou (China) XianFan • Formosa (Vietnam) Progress
Slide 37: Improve Cost Leadership
Improve Cost Leadership • Launch of our group Quality Breakthrough program has allowed us to reduce by 32% number of repeat customer complaints over 3 years • Extension of Lean Manufacturing throughout the Group • Progresses Inventory reduction from 76.6 to 73.7 days (12 £m 12 month average inventor
Slide 38: Build Technical Services offering
Build Technical Services offering • Successful launch of Accuoptix in Germany with several new customers secured for the coming months • Acquisition of ECIL Met Tec in Brazil producing data capture devices for temperature, oxygen and hydrogen content data capture • Acquisition of Process Metrix sell
Slide 39: Capital markets day
Capital markets day • A capital markets day will be held on 18 – 19 June 2015 • Located close to Düsseldorf, Germany • Opportunity to visit GIFA – METEC • Agenda focused on mid-term: Vesuvius plc 30 months on Market perspectives Technology evolutions China: market opportunities, existing pre
Slide 40: Outlook for 2015
Outlook for 2015 • Trading environment to remain broadly similar to 2014 • Margins to improve further with self help actions and focus on value adding products • Increase investment in research and development To restore the flow of new products in Foundry To support our initiative towards techn
Slide 41: Q&A
A GLOBAL LEADER IN METAL FLOW ENGINEERING Q&A 41
Slide 42: Appendix
A GLOBAL LEADER IN METAL FLOW ENGINEERING Appendix
Slide 43: 5 year history at constant currency
5 year history at constant currency(1) 2010 2011 2012 2013 2014 Revenue 1,342.2 1,501.5 1435.2 1,405.9 1,444.4 Steel 886.6 968.0 950.8 950.9 981.4 Foundry 455.6 533.5 484.4 455.0 463.0 Trading Profit 147.9 156.8 115.9 128.6 142.8 Steel 90.1 93.0 76.0 83.0 96.4 Foundry 57.8 63.8 39.9 45.6 46.4 Margin
Slide 44: Currency – Ready Reckoner
Currency – Ready Reckoner Currencies Approximate • Rule of thumb for impact of a Change in 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 Chinese Renm
Slide 45: 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 46: 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 Asia products used in the enclosed continuous casting process and a Pacific Americas leading supplier
Slide 47: 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 48: Main products and markets – Foundry business segment
Main products and markets – Foundry business segment Foundry casting process Ultimate end markets for castings Pipes & Railroad 4% • World leader in the supply of consumable products and technical Fittings 2% services used in the production of metal castings which themselves Power Light Vehicles Gen
Slide 49: Growth opportunities – Foundry
Growth opportunities – Foundry Foundry output Foundry sales £/T of total market casting (2014) 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 50: World truck market evolution
World truck market evolution GLOBAL QUARTERLY TRUCK PRODUCTION TRENDS (GVW > 6 tonnes) (Source; LMC Automotive May 2014 Forecast Update) 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q
Slide 51: Mining capital expenditure has fallen significantly since 2012
Mining capital expenditure has fallen significantly since 2012 160,000 140,000 RoW Australia North America 120,000 100,000 $millions 80,000 60,000 40,000 20,000 0 2011 2012 2013 2014 2015E Source: Bloomberg, JPMC Research 51
Slide 52: A continued shift of operations to align with customers
A continued shift of operations to align with customers NAFTA facilities and headcount EU 15 facilities and headcount Other EMEA facilities and headcount Employees Employees Employees 4,000 4,000 4,000 2222 3333 20 3,000 11 3,000 3,000 11 2,000 2,000 2,000 2,580 1,725 3,086 10 10 2,811 1,000 1,000 1
Slide 53: Confirmed resilient profit and strong cash flow generation
Confirmed resilient profit and strong cash flow generation EBITDA (1, 2) £m Operating cash flow (1, 2, 3) £m 250 160 200 140 120 150 100 80 100 60 50 40 20 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Pre Foseco