Vesuvius Plc · LSE:VSVS
Vesuvius — H1 2020 Earnings Presentation
33 slides from Vesuvius's earnings presentation, July 2020
Slide 1: Half Year Results July 2020
2020 HALF YEAR RESULTS JULY 2020 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 PERFORMANCE UPDATE Patrick André, Chief Executive FINANCIAL REVIEW Guy Young, Chief Financial Officer OUTLOOK Patrick André, Chief Executive Q&A 3
Slide 4: Performance Update
VESUVIUS pic PERFORMANCE UPDATE
Slide 5: Summary Financials
SUMMARY FINANCIALS Revenue Trading profit Return on sales £720.0m £51.1m 7.1% -19.0% -48.3% -402 bps Reported change Reported change Reported change -18.4% -48.7% -412 bps Underlying change Underlying change Underlying change Headline EPS Net debt / EBITDA Cash Conversion 11.6p 1.2x 139% -51.1% y/y
Slide 6: Rapid response to the Covid-19 crisis has helped mitigate impact of decline
RAPID RESPONSE TO THE COVID-19 CRISIS HAS HELPED MITIGATE IMPACT OF DECLINE IN BUSINESS ACTIVITY ✓ ALL END MARKETS ACROSS BOTH STEEL AND FOUNDRY STRONGLY IMPACTED BY COVID-19 CRISIS ✓ £12.3M OF RECURRING SAVINGS DELIVERED IN H1 2020 YEAR-ON-YEAR FROM PRE-EXISTING RESTRUCTURING PROGRAMME ✓ IN ADDITIO
Slide 7: Challenging environment in steel markets outside China
CHALLENGING ENVIRONMENT IN STEEL MARKETS OUTSIDE CHINA 5% 3% China 1% +1.4% Crude steel production growth in H1 2020/19 -1% Crude steel production volume H1 2020 -3% -5% EMEA (excl. Iran) -7% -13.0% -9% NAFTA -11% -17.6% -13% -15% South America Crude Steel -19.9% Production H1 20/19 Q1 20/19 Q2 20/1
Slide 8: Foundry end markets weak across the board in H1 2020
FOUNDRY END MARKETS WEAK ACROSS THE BOARD IN H1 2020 Medium/heavy Construction / General Light commercial agricultural Mining engineering vehicles vehicles equipment EMEA NAFTA CHINA INDIA SOUTH AMERICA NORTH ASIA 8
Slide 9: Covid-19 Response – Operational
COVID-19 RESPONSE – OPERATIONAL • Our priority remains the health and safety of our employees and other stakeholders • Steps taken include: Health & 1. re-configured production plants and office layouts to comply with social distancing Safety measures 2. enabled and encouraged remote-working where p
Slide 10: Covid-19 Response – Cost Reduction and Cash Preservation
COVID-19 RESPONSE – COST REDUCTION AND CASH PRESERVATION • COVID-19 crisis-related savings of £18.6m delivered in Q2, including a reduction in planned employee incentives of £5.9m • £7.8m in reduced employment costs (excluding incentives) £18.6m delivered • £4.9m in reduced discretionary spend in Q2
Slide 11: Pre Covid-19 restructuring programmes remain on track
PRE COVID-19 RESTRUCTURING PROGRAMMES REMAIN ON TRACK Recurring restructuring savings remaining to be delivered (cumulative all programmes) (£M) £1.9m £15.2m £6.2m £7.1m H2 2020 2021 2022 Total • £12.3m of the £19.4m recurring savings targeted for delivery in 2020 generated in H1 2020 • £15.2m of sa
Slide 12: Steel Division performance vs. regional steel volumes
STEEL DIVISION PERFORMANCE VS. REGIONAL STEEL VOLUMES Average price impact on Steel Division sales -1.2% South America Steel Division revenue growth H1 2020/19 Steel Division Sales: -2.2% Steel production: -19.9% 2% -30% -26% -22% -18% -14% -10% -6% -2% -2% 2% -6% NAFTA EMEA (excl. Iran) -10% Steel
Slide 13: Q2 2020 Sales Commentary
Q2 2020 SALES COMMENTARY • Q2 2020 sales decline of 26.2% on a reported basis versus Q2 2019 • Very slight improvement towards the end of Q2 relative to the 28% decline in year-on-year sales previously disclosed for April 2020 • The decline in the Foundry division has been more pronounced than in th
Slide 14: Continued focus on technological leadership
CONTINUED FOCUS ON TECHNOLOGICAL LEADERSHIP R&D investment New products as a % of sales • Continued investment in R&D despite the Covid-19 20% crisis 16% • Global R&D spend of £14.1m, representing 12% 2% of revenues (1.7% in H1 2019; 1.7% for 8% FY 2019) 4% New product launches 0% 2013 2014 2015 201
Slide 15: Continued focus on value-creating solutions: Steel
CONTINUED FOCUS ON VALUE-CREATING SOLUTIONS: STEEL ROBOT READY LADLE GATE (LTC) DURAGUN PRODUCT RANGE Safety, quality and consistency of operations are the Range of low moisture gunning repair products main drivers for the introduction of this new technology 15
Slide 16: Continued focus on value-creating solutions: Foundry
CONTINUED FOCUS ON VALUE-CREATING SOLUTIONS: FOUNDRY Launch of ENERTEK ISO Energy Efficient Crucibles ENERTEK ISO crucibles have an additional highly insulating external coating, suitable for induction melting ✓ Reduced temperature loss ✓ Reduced energy consumption ✓ Improved process consistency ✓ S
Slide 17: Divisional Performance – Steel
DIVISIONAL PERFORMANCE – STEEL KEY FINANCIALS 1 Underlying revenue1 / Return on Sales Reported 1000 Underlying 10.6% 800 £m H1 2020 H1 2019 Change change 7.5% 596.9 600 Revenue 516.3 614.9 -16.0% -15.5% 504.4 400 Trading Profit 38.9 65.3 -40.4% -41.3% 200 Return on Sales 7.5% 10.6% -308 bps -323 bps
Slide 18: Divisional Performance – Foundry
DIVISIONAL PERFORMANCE – FOUNDRY KEY FINANCIALS 1 Underlying revenue1 / Return on Sales Reported Underlying 12.2% 350 £m H1 2020 H1 2019 Change change 6.0% 270.9 300 Revenue 203.7 274.5 -25.8% -24.8% 203.7 250 200 150 Trading Profit 12.2 33.6 -63.6% -62.9% 100 50 Return on Sales 6.0% 12.2% -624 bps
Slide 19: Financial Review
FINANCIAL REVIEW LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING
Slide 20: Sales impacted by Covid-19 crisis
SALES IMPACTED BY COVID-19 CRISIS • H1 2020 Group revenues down 19% on a reported basis and down 18.4% on an underlying basis £889.4 -£11.6 -£10.0 £867.8 -£159.7 +£11.9 £720.0 £708.1 H1 2019 FX Adjustments CCPI acquisition H1 2019 Steel & Foundry H1 2020 CCPI acquisition H1 2020 Reported Underlying
Slide 21: Trading profit down but mitigating actions partially offset impact
TRADING PROFIT DOWN BUT MITIGATING ACTIONS PARTIALLY OFFSET IMPACT OF SALES DECLINE • Trading profit down £47.8m on a reported basis (-48.3%) and down £46.9m on an underlying basis (-48.7%) RoS 11.1% 7.1% £98.9 -£1.9 -£0.8 £96.2 -£56.8 +£11.31 £49.3 +£1.8 £51.1 -£1.4 H1 2019 FX CCPI H1 2019 Steel &
Slide 22: Income Statement
INCOME STATEMENT (£m unless indicated) H1 2020 H1 2019 Change (%) Actual Actual As reported Underlying1 Revenue 720.0 889.4 (19.0%) (18.4%) Trading Profit 51.1 98.9 (48.3%) (48.7%) ROS % 7.1% 11.1% -402bps -412bps Headline Post tax Share of JV Results 0.7 0.5 Net Finance Costs (5.9) (6.2) Headline P
Slide 23: Cash conversion of 139%
CASH CONVERSION OF 139% • Strong cash conversion rate of 139% (H1 2019: 83%) demonstrates our ability to generate cash through the cycle CASH CONVERSION: 139% £25.4 -£19.4 £1.2 £70.8 £4.7 £7.8 £51.1 H1 2020 Reported Depreciation Net Capex Trade Working Other Working Other Adjusted Trading Profit Cap
Slide 24: Cash inflow from reduced trade working capital
CASH INFLOW FROM REDUCED TRADE WORKING CAPITAL • £22.4m of cash released from working capital in Q2 2020 as a result of efficient management of inventories and receivables • Further reduction expected as inventories and receivables still have potential to adjust downwards to the lower level of busin
Slide 25: £229.7m net debt and 1.2x net debt / LTM EBITDA
£229.7M NET DEBT AND 1.2X NET DEBT / LTM EBITDA • Net Debt at 30 June 2020 was reduced to £229.7m from £245.8m at the end of 2019 • The positive impact of our cash flow in reducing Net Debt was partially offset by GBP weakness which meant that our debt denominated in dollars and euros translated int
Slide 26: Covenant headroom remains significant
COVENANT HEADROOM REMAINS SIGNIFICANT Net debt / EBITDA and headroom to covenant 0.25x Significant headroom against our debt 1.2x covenant limit of 3.0x net debt/LTM 1.7x 2.0x 1.7x 1.9x 1.8x EBITDA, which will expand to 3.25x once we redeem the USPP notes maturing in December, which we will repay ea
Slide 27: Liquidity doubled by fundraisings and free cash flow
LIQUIDITY DOUBLED BY FUNDRAISINGS AND FREE CASH FLOW The Group’s available committed liquidity stood at £706m at 30 June 2020, up from £353m at year-end 2019, as a result of the fundraising activities described below, plus the Group’s cash flow generation • In April 2020, as a result of the Covid-19
Slide 28: Outlook
VESUVIUS etc OUTLOOK
Slide 29: Outlook
OUTLOOK • Vesuvius demonstrated the strength and resilience of its flexible business model in H1 with a strong positive free cash flow generation • Our quick and decisive implementation of Covid-related cost savings measures, in addition to the planned delivery of the recurring savings from our rest
Slide 30: Q&A
VESUVIUS pic Q&A
Slide 31: Appendix
VESUVIUS pic APPENDIX
Slide 32: Currency Ready Reckoner
CURRENCY READY RECKONER Jun-20 Approximate • Rule of thumb for impact of a movement in currency against Trading Profit Unit change in annual sterling (1 unit change) profits (£m) USD 1 cent 0.41 ― Amounts shown are movements for each currency EUR 1 cent (0.13) ― Presented to show impact of a strengt
Slide 33: For further information, please contact
For further information, please contact: Euan Drysdale, Group Head of Corporate Finance euan.drysdale@vesuvius.com Pamela Antay, Head of Investor Relations pamela.antay@vesuvius.com LEADING THE WORLD OF MOLTEN METAL FLOW ENGINEERING