Vesuvius Plc · LSE:VSVS
Vesuvius — FY2013 Earnings Presentation
45 slides from Vesuvius's earnings presentation, Mar 4, 2014
Slide 1: Results for the year ended 31 December 2013
A GLOBAL LEADER IN METAL FLOW ENGINEERING Results for the year ended 31 December 2013 4 March 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: Agenda
Agenda 1. Operational Review - François Wanecq 2. Financial Review - Chris O’Shea 3. Strategy and Outlook - François Wanecq 4. Q&A 3
Slide 4: Operational Review
A GLOBAL LEADER IN METAL FLOW ENGINEERING Operational Review François Wanecq, Chief Executive 4
Slide 5: Highlights
Highlights • Revenue of £1,511m, down 2.4%; 0.8% on an underlying basis(1) (2012: £1,548m) • Trading profit(2) of £140.0m, up 6.6% on a reported basis, 10.9% on an underlying basis(1) (2012: £131.3m(4)) • Return on sales(2) improved by 80 basis points to 9.3%; a 100 basis point improvement on an und
Slide 6: 2013 Performance
2013 Performance £m Revenue £m Trading Profit % Trading Margin 1,800 1,686 200 12.0% 181.3 10.8% 1,600 1,548 1,511 180 10.0% 9.3% 1,400 160 140.0 8.5% 140 131.3 1,200 8.0% 120 1,000 100 6.0% 800 80 600 4.0% 60 400 40 2.0% 200 20 0 0 0.0% 2011 2012 2013 2011 2012 2013 2011 2012 2013 • Revenue and Tra
Slide 7: Steel markets
Steel markets Steel production - EMEA Steel production – NAFTA mt mt 250 90 80 200 70 60 150 50 • 2013 down 0.1% versus 2012 40 • 2013 down 2.2% versus 2012 100 • H2 up 2.6% versus H1 • H2 down 0.8% versus H1 30 50 20 10 0 0 H1 07 H1 08 H1 09 H1 10 H1 11 H1 12 H1 13 H1 07 H1 08 H1 09 H1 10 H1 11 H1
Slide 8: Trading review: Steel division revenue
Trading review: Steel division revenue Steel Flow Control Advanced Refractories £m Revenue* by region Revenue* by region £m 2012 2013 250 2012 2013 250 200 200 150 150 100 100 50 50 0 0 Americas EMEA Asia-Pacific Americas EMEA Asia-Pacific Americas: • Strategic exit from low margin businesses recent
Slide 9: Steel: Outperforming the underlying markets
Sales and Steel Production Rebased to 100 Steel: Outperforming the underlying markets Sales and Steel Production Rebased to 100 160 180 140 NAFTA 160 140 120 120 100 100 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 2005 2006 20
Slide 10: Trading review: Steel division margins
Trading review: Steel division margins Y-o-Y Underlying £m 2013 2012 change change Underlying margin improvement 10.0% Revenue 8.7% 8.1% 8.0% Steel Flow Control 555.7 540.9 +2.7% +0.7% Advanced 6.0% 461.8 476.4 -3.1% +3.5% Refractories 4.0% Total Revenue 1,017.5 1,017.3 +0.0% +1.9% 2.0% Total Tradin
Slide 11: Foundry markets
Foundry markets Light vehicle production Truck production Nafta Europe Nafta Europe 800,000 25,000,000 700,000 20,000,000 600,000 500,000 15,000,000 400,000 10,000,000 300,000 • Nafta up 5.0% versus 2012 200,000 • Nafta down 3.3% versus 2012 5,000,000 • Europe down 2.5% versus 2012 100,000 • Europe
Slide 12: Trading review: Foundry revenue
Trading review: Foundry revenue £m Revenue* by region 2012 2013 Revenues lower than 2012 across the division 250 Americas: • Difficulty in US railroad and mining sector 200 • NAFTA truck production down 3% EMEA: 150 • European vehicle production volumes decreased 100 Asia-Pacific: • Japanese and Ind
Slide 13: 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 14: Trading review: Foundry division margins
Trading review: Foundry division margins Underlying margin improvement Y-o-Y Underlying 12.0% £m 2013 2012 10.4% change change 10.0% 8.7% Revenue 493.0 530.2 -7.0% -6.0% 8.0% 6.0% Trading Profit 51.3 48.2 +6.4% +12.6% 4.0% Trading Margin % 10.4% 9.1% +130bps +170bps 2.0% 0.0% 2012 2013 • Underlying
Slide 15: 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 China World ex. World ex China china • Sales in China represent less than 10% of revenue in both divisions • Recen
Slide 16: 2013 Trading Summary
2013 Trading Summary • Market conditions have remained challenging, continuing from reduced activity levels seen in second half of 2012 • Internal focus has been on self-help programmes and a disciplined approach to implementing our strategy • Margin recovery successfully initiated, despite unfavour
Slide 17: Financial Review
A GLOBAL LEADER IN METAL FLOW ENGINEERING Financial Review Chris O’Shea, CFO 17
Slide 18: Income statement – Headline results
Income statement – Headline results 2013 2012(1) Year on Year Change £m £m As reported Underlying(2) Revenue 1,511 1,548 -2.4% -0.8% Trading Profit 140.0 131.3 +6.6% +10.9% Trading margin % 9.3% 8.5% +80bps +100bps Net finance costs (17.3) (21.7) Share of JV 2.5 0.1 Profit before Tax 125.2 109.7 Eff
Slide 19: Revenue progression
Revenue progression £m 1,600 • Revenue down 2.4% on 2012 1,548 – Underlying revenue 0.8% lower 1,550 (43) 7 1,511 • Disposals in line with strategy to exit (5) 1,507 (12) 16 1,495 low-margin businesses 1,500 – 2013 revenue from disposed businesses of £15.8m 1,450 • Muted currency impact in full year
Slide 20: Trading profit progression
Trading profit progression £m 145 • Trading profit increased by 6.6% 1 140 140 14 139 – Underlying profit increased by 10.9% 135 131 (3) • Continued improvement in 130 (4) Metallurgica performance 125 125 • 2013 profits from disposed businesses of £1.3m 120 115 • Muted currency impact in full year d
Slide 21: Margin progression
Margin progression 10% • Underlying margins increased by 1.0% 9.3% 100 basis points 9% 8.5% (0.2)% • Self help actions driving 8.3% improvements 8% – Sustainable plan with many small improvements driving a better business 7% • FX movements restricting growth in margins – Strengthening of sterling in
Slide 22: Currency
Currency FX movements in income statement 2012 2013 2013 v 2013 2013 muted by 2 factors: Average Average 2012 Year End Year End Rates Rates Average Rates v 2013 • Relatively benign FX environment in H1 Rates Average Rates • Mix of strengthening of currencies (USD, EUR, RMB) USD 1.5847 1.5638 +1.32%
Slide 23: Currency – impact on 2013 results
Currency – impact on 2013 results £m £m Revenue Trading Profit 1600 1,511 150 140 1,423 130 1400 125 1200 100 1000 800 Margins Margins 75 9.3% 9.1% 600 50 400 25 200 0 0 As Reported Year End 2013 Rates As Reported Year End 2013 Rates 23
Slide 24: Steel Division Performance
Steel Division Performance £m Revenue £m Trading profit 1,100 100 95 1,050 90 88 1 89 9 1,017 (35) 16 1,018 1,002 83 19 85 (3) 1,000 (1) 1 80 950 75 70 900 65 60 850 55 800 50 2012 Acquisitions Currency Underlying 2013 Disposals 2013 2012 Acquisitions Currency Underlying 2013 Disposals 2013 & Dispos
Slide 25: Foundry Division Performance
Foundry Division Performance £m Revenue £m Trading profit 600 60 575 55 6 51 550 50 48 (3) 530 (6) (31) 525 45 500 493 40 475 35 450 30 425 25 400 20 375 15 350 10 325 5 300 0 2012 Currency Underlying 2013 Reported 2012 Currency Underlying 2013 Reported Movement Movement 25
Slide 26: Operating cash flow - continuing operations
Operating cash flow - continuing operations £m 200 16 (45) • Cash generated represents 107% 39 of Trading Profit • Improvement in working capital 150 performance 150 140 − 24.7% (12 month average) − 26.6% Dec 2012 − 25.8% June 2013 • Inventory reduction programme 100 progress continues − 77 days (12
Slide 27: Free cash flow from continuing operations
Free cash flow from continuing operations £m 160 150 (12) Recurring Free Cash Flow represents (30) 140 124% of Headline Earnings 120 One off items include: 108 (10) • Restructuring 100 (3) 95 – Total cash spend of £10m – £13m provision remaining - c.£9m 80 expected to be spent in 2014 60 • Demerger
Slide 28: Net debt
Net debt £m 350 13% reduction in Net Debt to £256m 295 (95) 300 10 256 Disposal of European Precious Metals 39 250 Processing completed at end May • Gross proceeds €57m 11 (34) 200 30 • Net profit on disposal of £19m 150 Share buy-back programme completed • Returned £30m of proceeds of PMP disposal
Slide 29: Debt Facilities
Debt Facilities £m • New US Private Placement 450 425 loan notes issued in Dec Facility maturities: 2013 400 USPP • Notes denominated in Euro 350 Bank Facility – undrawn and US Dollar, maturing Bank Facility - drawn between 2021 and 2028 300 – $101m equivalent 250 No significant refinancing required
Slide 30: Pensions update
Pensions update • Total net deficit of all Group post-retirement plans at £48m at 31 December 2013 (2012: £69m) • UK defined benefit Plan fully funded as at 31 December 2012 (last triennial valuation) – Results from 10 years de-risking initiatives, including £320m pensioner buy-in in 2012, and Compa
Slide 31: Dividend
Dividend • Proposed final dividend of 10.25 pence per share – Increase of 7.9% on 2012 final dividend of 9.5 pence • Full year dividend of 15.00 pence per share – Increase of 5.3% on Vesuvius’ share of Cookson full year 2012 dividend of 14.25 pence • £70.7 million total cash returned to shareholders
Slide 32: Financial strategy
Financial strategy • Financial flexibility essential • Conservative balance sheet stewardship • Focus on cash generation • Cost control • Efficient working capital management • Improve returns 32
Slide 33: Strategy and Outlook
A GLOBAL LEADER IN METAL FLOW ENGINEERING Strategy and Outlook François Wanecq, Chief Executive 33
Slide 34: Five strategic pillars
Five strategic pillars • Maintain technology leadership • Increase penetration of value creating solutions • Capture growth in developing markets • Improve cost leadership • Build technical services offering 34
Slide 35: Maintain technology leadership
Maintain technology leadership R&D Spend Progress in 2013: £m Enabling Technologies Foundry Steel Flow Control Advanced Refractories 30 • Increased R&D investment has seen 25 • 27 invention patents 20 • 124 patents filed, and • 189 patents granted in 2013 15 10 • Appointment of new CTO 5 0 2010 2011
Slide 36: Increase penetration of value creating solutions
Increase penetration of value creating solutions Awarded the full Successfully commissioned equipment of a major the first robotic handling steel plant in Spain with operation for Hyundai in new SERT stopper Korea rigging Progress in 2013 ELBYTM ladle bottom Lavagard trough gaining traction in Europ
Slide 37: Capture growth in developing markets
Capture growth in developing markets Building of new Foundry New Advanced Refractories plant in Changshu, China, to plant commissioned in Ras be commissioned in H1 2014 al Khaima, UAE $25m and replace two old factories added sales capacity in Liuhe and XianFan Progress in 2013 New Viso mix plant in
Slide 38: Improve cost leadership
Improve cost leadership • Launch of our group Quality program • Extension of Lean Manufacturing throughout the Group • Inventory reduction from 85 to 77 days (12 month average) Progress Progresses £m 12 month average inventory days in 2013 90 • Continued transfer of headcount towards low 2013 in cos
Slide 39: Build Technical Services offering
Build Technical Services offering Progress in 2013: • Longer-term vision • Internal R&D development leading to industrial testing in H1 2014 • Acquisition opportunities being evaluated 39
Slide 40: Strategy
Strategy • Maintain technology leadership Long-term revenue growth, ahead of our end markets • Increase penetration of value creating solutions Higher trading margins and returns on capital employed • Capture growth in developing markets Strong cash flow generation • Improve cost leadership Attracti
Slide 41: 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 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Pre Foseco acquisiti
Slide 42: Outlook
Outlook • Expect underlying trading environment during 2014 to be broadly similar to that in 2013 • If recent strength of Sterling continues it will have a negative impact on our reported growth in 2014 • Progressing with our plan to improve operational efficiency in all segments • Primary objective
Slide 43: Slide 43
Slide 44: 5 year history at constant currency
5 year history at constant currency(1) 2009 2010 2011 2012 2013 Revenue 1,134 1,444 1,616 1,543 1,511 Steel 760 951 1,039 1,018 1,018 Foundry 374 493 577 525 493 Trading Profit 61.6 161.7 171.7 127.6 140.0 Steel 49.3 97.5 100.7 82.2 88.7 Foundry 12.3 64.2 71.0 45.4 51.3 Margins 5.4% 11.2% 10.6% 8.3%
Slide 45: 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 Brazilian Real Works both for strengthening and £0.2 million weakening of currencies I