Third Quarter 2017 Trading Update

RNS Number : 3782W

Vesuvius plc

14 November 2017

 

14 November 2017

Vesuvius plc

Third Quarter 2017 Trading Update

Vesuvius plc, a global leader in molten metal flow engineering, releases the following Trading Update covering trading in the period from 1 July to 30 September 2017.

SUMMARY & OUTLOOK

Since the announcement of our 2017 Half Year results in July, global steel production growth has exceeded our expectations and overall our sales growth has continued to outperform the global steel market. At the same time, we continue to experience headwinds related to rising raw material prices and inter-company imports required by Flow Control in Europe. As a result, our Trading Profit expectation for full year 2017 remains unchanged.

Looking ahead, the growth in steel volumes implies positive prospects for Trading Profit growth during 2018, when we expect the headwinds of increased raw material cost and European Flow Control supply to have been substantially mitigated.

BOARD & SENIOR MANAGEMENT

As previously announced, Patrick André was appointed Chief Executive and Executive Director of Vesuvius plc with effect from 1 September 2017.  Patrick replaced François Wanecq, who retired from the Board of Directors on 31 August 2017 but will remain with the Group until 31 December 2017 to assist with the transition of responsibilities.

On 1 October 2017, Roel van der Sluis, previously President, Vesuvius North Asia, assumed the position of President, Steel Flow Control for the Group, succeeding Patrick André.  Roel continues to serve on the Group Executive Committee in his new role.

TRADING

In Q3 2017, we have benefitted from 6.7% year-on-year growth in global steel production, as reported by the World Steel Association.  In the year-to-date, steel volume growth of 5.6% has exceeded market expectations, resulting in the World Steel Association's recent upward revision of their demand growth forecasts for full-year 2017, from 1.3% to 2.8%. In Foundry, the market environment remains broadly positive across the majority of our end markets and the expected seasonality in sales in the second half has been confirmed.

RAW MATERIALS

As noted in our 2017 Half Year results, we started to experience significant price increases towards the end of the first half for several raw materials. The severity and repetitive nature of monthly increases since then have been greater than expected and are affecting several more of our key raw materials. Whilst our Advanced Refractories business has been most affected by these increases, we remain confident in our ability over time to recover all cost inflation through higher selling prices.

FLOW CONTROL EUROPE

As in H1 2017, we continue to rely on inter-company imports to meet growth in European Flow Control demand, which, as a region, has represented a significant proportion of the higher sales in the year to date. These inter-company imports have a higher cost base due to freight, overtime and export duties. The process of ramping-up European capacity so that reliance on these imports can be reduced remains on track, but is unlikely to have a material impact on reducing costs until late in Q4 2017.

RESTRUCTURING

We continue to make progress in the delivery of our restructuring programme. As reported previously, the incremental savings in H2 2017 will be relatively small, with almost all of the additional £20m of annual targeted savings announced in May and July 2017 due to be delivered in 2018-2020.

FOREIGN EXCHANGE

Average exchange rates of Sterling to US Dollar and Euro have fallen by 6.1% and 6.4%, respectively, between FY 2016 and the first nine months of 2017. This has provided a trading profit benefit of approximately £7.6m year to date. Assuming current foreign exchange rates continue, the estimated benefit would increase to £8.4m for the full year.

FINANCIAL POSITION

Our Net Debt / EBITDA ratio was 1.4x at 30 September, down from 1.6x at 30 June 2017.

WORKING CAPITAL

Despite the continued increase in sales, we have successfully reduced working capital in absolute terms, as a result of ongoing optimisation initiatives and a decline in the excess inventories built up in late 2016 related to closure of the Italian plants. Working capital as a percentage of sales improved to 25.8% at 30 September, down from 26.2% at 30 June.

CONFERENCE CALL

Patrick André (Chief Executive) and Guy Young (Chief Financial Officer) will be hosting a conference call for analysts and investors at 08.30 (UK time) today (14 November).

To join the call, please use the dial in number below:

Conference call:

[phone] all participants

Confirmation code: 4836301

A replay of the call will be available approximately one hour after the event for two weeks on the following number:

Replay:

[phone] non-US participants

[phone] US participants

Confirmation code: 4836301

FUTURE EVENTS

Vesuvius' preliminary results for the year ending 31 December 2017 are expected to be announced on Thursday, 1 March 2018.

For further information please contact:

Shareholder/analyst enquiries:

Vesuvius plc                            Patrick André, Chief Executive                                             [phone]

                                                  Guy Young, Chief Financial Officer                                     [phone]

Euan Drysdale, Group Head of Corporate Finance          [phone]

Virginia Skroski, Investor Relations Manager                  [phone]

Media enquiries:

MHP Communications           Andrew Jaques/James White/Ollie Hoare                         [phone]

About Vesuvius plc

Vesuvius is a global leader in molten metal flow engineering principally serving the steel and foundry industries.

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

www.vesuvius.com

 

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