Statement on COVID-19

RNS Number : 9458I

Vesuvius plc

06 April 2020

 

06 April 2020

Statement on COVID-19

Vesuvius plc ("Vesuvius", the "Group"), a global leader in molten metal flow engineering and technology, announces the following update in light of the COVID-19 pandemic, including the measures the Company is taking to ensure the welfare and safety of our employees worldwide and mitigate the risk to our business.

Safety and wellbeing

Vesuvius' priority is protecting the health and safety of our employees and their families, along with our customers, suppliers and other stakeholders. Vesuvius is taking specific site by site actions as well as complying with the instructions of the governments and health authorities in the countries in which we operate, and the guidelines from the World Health Organization, in order to protect our employees and prevent the spread of infection. The Group has implemented action plans in each jurisdiction, including utilising technology where possible to facilitate remote-working, flexible working arrangements, enforcing social distancing and imposing travel restrictions.

Impact on operations

Our performance in Q1 2020 was broadly in-line with our expectations at the time of our full year 2019 results on 27 February. However, the trading environment in 2020 has become considerably more uncertain and the rate of spread of the infection throughout the world in recent weeks and the measures imposed by governments to contain the outbreak are expected to result in significant disruption to our business in the coming months. Although manufacturing plants across the Group currently remain open, with the exception of South Africa, Argentina and Malaysia, there remains insufficient visibility to forecast the potential impact of the pandemic.

Tight restrictions on the movement of goods and people are expected to put pressure on demand in our end-markets. The situation is impacting key sectors that our Foundry Division serves including the automotive and construction industries. Likewise, we anticipate a significant impact on our Steel Division as steel producers reduce production to adjust to the slowdown in demand while restrictions are in place to contain the outbreak. In light of this, we are withdrawing our financial guidance for the year. Guidance on our financial performance will be provided when there is greater clarity.

Liquidity and financial headroom

The Group has significant financial headroom with December 2019 reported net debt/EBITDA at 1.0x and interest cover at 21.8x versus our 3.0x maximum and 4.0x minimum covenant thresholds, respectively. We also have sufficient liquidity to ensure we can continue to operate through a prolonged downturn. At the end of February, our available resources stood at £375m, with £185m in available cash and £190m in committed undrawn revolving credit facilities (RCF). We have a debt maturity in December 2020 of US$140m in US Private Placement (USPP) notes and we are well advanced in assessing multiple available refinancing options. We are also seeking access to additional government funding facilities.

Cost reduction and cash preservation

We are implementing several cost reduction plans to deliver savings of around £30m over the remainder of the year to mitigate the expected impact of COVID-19 on end markets and overall demand. These include:

-  restricting all discretionary expenses;

-  a hiring freeze on all non-critical roles;

-  accessing government programmes to reduce labour costs, in line with available local regulatory options, together with other flexible workforce solutions.

In addition, given the impact that will be felt by all our stakeholders, the Board and the Group Executive Committee have elected to reduce their fees and salary by 20% for the next 6 months.

These savings are in addition to the £19.4m of recurring savings from our ongoing restructuring programmes which we are targeting for delivery in 2020.

In parallel with the above, the Group is implementing a strong cash preservation action plan including:

-  a £20m (30%) reduction in our planned capital expenditures in 2020;

-  deferral of tax and social security payments whenever possible in accordance with local legislation;

-  a reinforced drive to reduce working capital in line with the decline in sales.

Dividend

In light of the current business environment the Board has decided to withdraw its recommendation to pay the final dividend of 14.3 pence per share announced with the publication of the full year 2019 results.  The resolution relating to the proposed 2019 final dividend will consequently not be put to a shareholder vote at the AGM to be held on 13 May 2020. The Board will keep this position under review and will return to the payment of dividends when the situation is clearer and it is considered prudent to do so.

Comment from Patrick Andr é, Chief Executive:

"Our priority during this crisis is to protect the health and safety of our employees and we are taking appropriate actions accordingly. In parallel, our business leaders are in constant communication with customers and are taking all necessary measures to guarantee the security of their supply as permitted by relevant local government regulations. We are also implementing significant pre-emptive cost control and cash preservation measures across the entire business to preserve liquidity. With this set of measures, I am confident that the Group will not only meet the temporary challenges of the current crisis but emerge stronger once the market returns to its long-term growth path."

This announcement contains inside information. The person responsible for the release of this announcement on behalf of Vesuvius plc is Guy Young, Chief Financial Officer.

For further information, please contact:
Shareholder/analyst enquiries:
Vesuvius plc	Patrick André, Chief Executive Guy Young, Chief Financial Officer Euan Drysdale, Group Head of Corporate Finance Pamela Antay, Head of Investor Relations	[phone] [phone] [phone] [phone]
Media enquiries:
MHP Communications	Andrew Jaques/ Ollie Hoare/ Peter Lambie	[phone]

About Vesuvius plc

Vesuvius is a global leader in molten metal flow engineering and technology, serving process industries operating in challenging high-temperature conditions.

We develop innovative and customised solutions, often used in extremely demanding industrial environments, which enable our customers to improve their manufacturing processes, enhance product quality and reduce energy consumption.  These include flow control solutions, advanced refractories and other consumable products and - increasingly - related technical services including data capture.

We have a worldwide presence.  We serve our customers through a network of low-cost manufacturing plants located close to their own facilities, and embed our industry experts within their operations, who are all supported by our global technology centres.

Our core competitive strengths are our market and technology leadership, strong customer relationships, well established presence in developing markets and our global reach, all of which facilitate the expansion of our addressable markets.

Our ultimate goal is to create value for our customers, and to deliver sustainable, profitable growth for our shareholders giving a superior return on their investment whilst providing each of our employees with a safe workplace where he or she is recognised, developed and properly rewarded.

Forward looking statements

This announcement contains certain forward-looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters.

Statements in this announcement that are not historical facts are hereby identified as "forward-looking statements". Such forward looking statements, including, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Vesuvius, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of Vesuvius and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements. Such forward looking statements should, therefore, be considered in light of various important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements. These include without limitation: economic and business cycles; the terms and conditions of Vesuvius' financing arrangements; foreign currency rate fluctuations; competition in Vesuvius' principal markets; acquisitions or disposals of businesses or assets; and trends in Vesuvius' principal industries.

The foregoing list of important factors is not exhaustive. When considering forward looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in documents the Company files with the UK regulator from time to time including its annual reports and accounts.

You should not place undue reliance on such forward-looking statements which speak only as of the date on which they are made. Except as required by the Rules of the UK Listing Authority and the London Stock Exchange and applicable law, Vesuvius undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this announcement might not occur.

Vesuvius plc, 165 Fleet Street, London EC4A 2AE

Registered in England and Wales No. 8217766

LEI: 213800ORZ521W585SY02

www.vesuvius.com

 

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