Vesuvius Plc · LSE:VSVS
Vesuvius — H1 2017 Earnings Presentation
38 slides from Vesuvius's earnings presentation, Jul 27, 2017
Slide 1: 2017 Half Year Results
A GLOBAL LEADER IN METAL FLOW ENGINEERING 2017 Half Year Results 27 July 2017 François Wanecq 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 • H1 2017 summary • Steel market update • H1 2017 Group and Divisional performance • Financial review • Outlook 3
Slide 4: Summary
Summary • Underlying revenue up 9.6% and trading profit up 26.7% on H1 2016 • Global H1 2017 steel production up 4.5%, with signs of a slowing trend in Q2 • Slowing growth and seasonality in Foundry to drive marginally lower sales in H2 2017 • Vesuvius has achieved steel market outperformance since
Slide 5: Steel Markets
Steel Markets VESUVIUS ete
Slide 6: H1 2017 steel production grew across all major markets
H1 2017 steel production grew across all major markets • World steel production up 4.5% in H1 2017, with China and rest of world both having grown at approximately the same rate. Our identified strategic growth markets of Brazil, India and China are growing fast (1) Size of bubble reflects relative
Slide 7: Steel Division sales outperforming underlying market
Steel Division sales outperforming underlying market (1) Size of bubble refers to relative size of Steel Division Revenue in each country (2) India includes Kazakhstan Source: WSA for steel production volumes, Vesuvius internal data for Vesuvius sales at constant currency 7
Slide 8: Recovery in sales vs. steel production in mature markets
Recovery in sales vs. steel production in mature markets NAFTA EMEA Sales and Steel Production Rebased to 100 170 120 110 150 100 130 90 110 H1 2017 vs H1 2016: +15.3% H1 2017 vs H1 2016: + 3.5% 80 90 70 70 H1 2017 vs H1 2016: +4.4% 60 H1 2017 vs H1 2016: + 2.6% 50 50 2007/H1 2007/H2 2008/H1 2008/H2
Slide 9: Emerging steel market outperformance since demerger
Emerging steel market outperformance since demerger 300 Sales and Steel Production Rebased to 100 140 130 250 120 110 200 100 Vesuvius 90 150 Sales 80 Value 70 100 Steel 60 Production 50 50 Volumes 130 140 125 130 120 120 115 110 110 100 105 100 90 95 80 90 Source: WSA for steel production volumes,
Slide 10: H1 2017 Group and Divisional Performance
H1 2017 Group and Divisional Performance 10
Slide 11: H1 2017 trading performance at constant currency
H1 2017 trading performance at constant currency • Revenue up 10.0% and Trading Profit up 27.0% on H1 2016, driven by restructuring programme and operating leverage from higher sales • Pace of revenue growth slowing and world steel production ex. China just 0.7% higher year-on-year in June Revenue T
Slide 12: Steel Division: H1 2017 overview
Steel Division: H1 2017 overview Comparison with H1 2016 (£m) Reported Underlying H1 2017 H1 2016 Change Change Revenue 562.7 443.1 27.0% 11.7% Trading Profit 51.7 33.2 55.5% 37.1% Return on Sales % 9.2% 7.5% 170bps 170bps • Underlying trading profit up 37.1% on H1 2016 and Underlying Half Year sale
Slide 13: Flow Control Europe – temporary intercompany supply
Flow Control Europe – temporary intercompany supply • Flow Control EMEA achieved a 15.6% increase in underlying sales in H1 2017, reflecting market share gains. However, much of this increase was supplied by imports into EMEA which impacted H1 profitability due to higher logistic and production cost
Slide 14: Technical Services progress
Technical Services progress • Business unit renamed “Digital Services” • The BU combines the recent acquisitions Technical Services Revenue contribution dedicated to data capture and process monitoring throughout Vesuvius Group (£m) to participate in industry digitalisation (industry 4.0) • It count
Slide 15: Foundry market
Foundry market Light vehicle production Truck production NAFTA Europe NAFTA Europe 14,000,000 350,000 Europe up 7.7% vs H1 2016 Europe up 2.4% vs H1 2016 12,000,000 300,000 10,000,000 250,000 8,000,000 200,000 6,000,000 150,000 NAFTA down 5.8% vs H1 2016 NAFTA down 0.2% vs H1 2016 4,000,000 100,000
Slide 16: Foundry Division: H1 2017 overview
Foundry Division: H1 2017 overview Comparison with H1 2016 (£m) Reported Underlying H1 2017 H1 2016 Change Change Revenue 268.8 225.2 19.4% 5.5% Trading Profit 34.6 25.9 33.6% 14.1% Return on Sales % 12.9% 11.5% 140bps 100bps • Underlying trading profit up 14.1% on H1 2016 and Underlying Half Year s
Slide 17: Foundry Division: H1 2017 overview (continued)
Foundry Division: H1 2017 overview (continued) • Foundry has successfully increased sales and gross margins across all of its high margin products, with increased volumes being supported by underlying market improvement, new product launches and cost reduction efforts Foundry Division – underlying b
Slide 18: Expanded restructuring programme
Expanded restructuring programme • Restructuring programme intended to adapt our footprint across different regions to fit the long-term market evolution and modernize our processes • £7.7m savings delivered in H1 2017, associated with previously announced projects – ahead of expectations for this p
Slide 19: Financial Review
A GLOBAL LEADER IN METAL FLOW ENGINEERING Financial Review Guy Young Chief Financial Officer 19
Slide 20: Income statement
Income statement H1 2017 H1 2016 Change (%) (£m) (£m) As reported Underlying Revenue 831.5 668.3 24.4% 9.6% Trading Profit 86.3 59.1 46.0% 26.7% Return on Sales 10.4% 8.8% 160bps 140bps Net finance costs (7.3) (7.9) Share of JV 0.4 (0.4) Headline Profit before Tax 79.4 50.8 Effective tax rate % 28.0
Slide 21: Underlying Vesuvius Revenue up 9.6%
Underlying Vesuvius Revenue up 9.6% • Revenue up £163.2m on a reported basis (+24.4%) and up £72.6m on an underlying basis (+9.6%) • £87.7m increase from FX due to majority of H1 2016 being pre-GBP weakening following Brexit vote £m 21
Slide 22: Underlying Vesuvius Trading Profit up by 26.7%
Underlying Vesuvius Trading Profit up by 26.7% • Trading profit up £27.2m on a reported basis (+46.0%) and up £18.2m on an underlying basis (+26.7%) • Trading margin up 160bps on a reported basis and 140bps on an underlying basis Return on sales: 8.8% 9.0% 10.4% £m 22
Slide 23: Advanced Refractories – raw material price development
Advanced Refractories – raw material price development • Raw material price increases have started to impact Advanced Refractories during Q2 2017 and there will be a lag before selling prices are adjusted upwards to reflect this • Key raw materials have increased substantially during Q2 Raw material
Slide 24: Steel: Revenue and Trading Profit year-on-year
Steel: Revenue and Trading Profit year-on-year Revenue £m Trading Profit £m 24
Slide 25: Foundry: Revenue and Trading Profit year-on-year
Foundry: Revenue and Trading Profit year-on-year Revenue £m Trading Profit £m 25
Slide 26: Working capital progress
Working capital progress • Multiple working capital initiatives starting to make an impact with Working Capital / Revenues down to 26.2% at end June 2017, from 26.6% at end June 2016 / year-end 2016 Group – Creditor Days Payable Working Capital Development / % of Sales £421m £434m £403m Debtor Days
Slide 27: 78% cash conversion rate
78% cash conversion rate • Cash conversion lower than prior year due to expansion of working capital required to fund increased sales £m 78% 27
Slide 28: £321.8m Net Debt and 1.6x Net Debt / EBITDA
£321.8m Net Debt and 1.6x Net Debt / EBITDA • Net debt up slightly at £321.8m, versus £320.3m at end 2016 ▪ £42.0m free cash flow generation offset by £30.8m final dividend payment and £15.6m restructuring costs • Strong balance sheet with Net Debt / LTM EBITDA at 1.6x £m 28
Slide 29: Focused financial objectives to maximise free cash flow
Focused financial objectives to maximise free cash flow • Cost control and pass through of increased raw material Cost control costs to maximise drop-through of increased sales to trading profit Restructuring • Delivering restructuring programme on-time and on-budget Working capital • Working capita
Slide 30: Outlook
Outlook VESUVIUS ete
Slide 31: Outlook
Outlook • From our strong start in Q1 2017, revenue growth slowed in the second quarter of the year, and looking ahead we expect seasonality in Foundry to drive marginally lower Group sales in H2 2017 vs H1 2017 • Whilst we have continued to identify and deliver benefits from our restructuring activ
Slide 32: Resilient profitability and strong cash flow generation
Resilient profitability and strong cash flow generation EBITDA £m (1) Operating cash flow £m (1) (2) (1) Company data as reported (2) Cashflow from operations before interest and tax and after capital expenditure 32
Slide 33: On the way to margin improvement
On the way to margin improvement • These results illustrate the operational leverage of our businesses ▪ Despite short-term headwinds in Flow Control, Return on Sales for our Steel division increased by 170bps ▪ Foundry Return on Sales increased by 100bps • Volumes captured in H1 2017 show our capac
Slide 34: Q&A
Q&A VESUVIUS ete
Slide 35: Appendix
Appendix VESUVIUS ete
Slide 36: Currency Ready Reckoner
Currency Ready Reckoner Approximate • Rule of thumb for impact of a change in Currencies Change movement in currency against annual profits sterling (1 unit change) US Dollar 1 cent £0.3 million ▪ Amounts shown are movements Euro 1 cent £0.2 million for each currency Indian Rupee 1 rupee £0.3 millio
Slide 37: Case study I – Managing continuous casting with temperature
Case study I – Managing continuous casting with temperature The Challenge ▪ To mitigate risk of receiving steel at the caster too cold to safely cast the complete ladle, customers increase the superheat of the ladle – at 1650°C, 10°C of superheat costs $2 per tonne of steel = $6m per year in a typic
Slide 38: Case study II – Managing steel ladle fleet with lasers and pyrometers
Case study II – Managing steel ladle fleet with lasers and pyrometers The Challenge ▪ In a steel plant, a ladle must often be set aside for logistical or maintenance reasons where it cools down, loses energy and damages its refractories The Solution ▪ Process Metrix lasers allow precise monitoring o