Vesuvius Plc · LSE:VSVS
Vesuvius — H1 2018 Earnings Presentation
31 slides from Vesuvius's earnings presentation, Jul 26, 2018
Slide 1: 2018 Half Year Results
A GLOBAL LEADER IN METAL FLOW ENGINEERING 2018 Half Year Results 26 July 2018 Patrick André 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 • Performance Update • Financial Review • Outlook 3
Slide 4: Performance Update
Performance Update VESUVIUS etc
Slide 5: Strong results for the half year ended June 2018
Strong results for the half year ended 30 June 2018 Revenue Trading profit Return on sales £897.0m £99.6m 11.1% +7.9% +15.4% +70bps Reported change Reported change Reported change +12.1% +20.3% +80bps Underlying change Underlying change Underlying change Working capital to Net debt / EBITDA Interim
Slide 6: Continued operational momentum
Continued operational momentum Key steel and foundry end markets favourable in H1 2018 and remain positively oriented Raw material cost inflation successfully addressed through sales price increases Elimination of Flow Control intercompany supply headwind Implementation of previously announc
Slide 7: Positive trends in steel markets
Positive trends in steel markets Crude steel production 7% growth China YTD May +5.4% 6% India Mexico +4.7% +4.8% Turkey 5% +4.3% South Korea 4% Italy +3.7% +3.9% 3% USA +2.8% France +1.8% Brazil 2% +1.4% Crude steel production EU28 growth (YTD May) +1.8% Russia +2.0% Japan China +5.4% 1% Ukraine +0
Slide 8: Steel Division continues to outperform underlying market growth
Steel Division continues to outperform underlying market growth Steel Division revenue growth (H1 2018 vs. 31% EEMEA1 H1 2017) South America Steel Division sales: +23% 28% Steel Division sales: +28% Steel production: +5.3% Steel production: +3.0% 25% China Steel Division sales: +23% 22% Increased St
Slide 9: Combined robot and refractory consumable offering at North Asian customer
Combined robot and refractory consumable offering at North Asian customer Vesuvius robot Vesuvius consumable Patented combination Robot + Consumable 9
Slide 10: Positive H1 2018 momentum in majority of Foundry end markets
Positive H1 2018 momentum in majority of Foundry end markets General Light vehicles Medium / heavy Construction engineering production commercial equipment / and mining vehicles agriculture (45% of Foundry) (24% of Foundry) (16% of Foundry) (15% of Foundry) • Strong performance EMEA of the Foundry D
Slide 11: Acceleration of our strategy to penetrate key developing markets
Acceleration of our strategy to penetrate key developing markets EEMEA1 China India S. America (16% of Group (8% of Group (8% of Group (7% of Group H1 ‘18 revenue) H1 ‘18 revenue) H1 ‘18 revenue) H1 ‘18 revenue) Revenue growth H1 2018/17 • Increasing penetration in key developing Steel Division +23%
Slide 12: Acceleration of our R&D efforts to support long-term profitable growth
Acceleration of our R&D efforts to support long-term profitable growth Flow Control Advanced Refractory Foundry Barlborough, UK Enschede, Netherlands Ghlin, Belgium Decision to expand Pittsburgh, USA our steel mechatronics Suzhou, China research facility Under expansion in Belgium Vizakhapatnam, Ind
Slide 13: Restructuring on track and new programme expanded by £7m
Restructuring on track and new programme expanded by £7m ● On track delivery of both original and new restructuring programmes ● Three European plant closures announced in July 2018 as part of the new restructuring programme ● Targeted savings from new programme increased by £7m to be delivered in 2
Slide 14: Overview of restructuring programmes
Overview of restructuring programmes Expansion of the new restructuring programme by £7m £7m £22m £3.3m £19.3m £15m Remaining £16m Remaining (2020–21) savings +£10m costs £20.3m of capex £14.5m +£5m (2018–20) Achieved Already of capex savings incurred £1.7m £4.8m Total targeted Increased New total T
Slide 15: Continued development of our Technical Services offering
Continued development of our Technical Services offering ● Flow Control developing value-creating solutions Technical Services offering reported revenue around the continuous casting process, leveraging £m the Sapotech investment 88 ● Advanced Refractories developing its combined refractory, robotic
Slide 16: Successful pass through of raw material price inflation
Successful pass through of raw material price inflation ● Pass through of raw material price inflation from 2017 has been successful overall ― Particular success in the Steel Division ― In Foundry, some raw material price inflation still to be recovered in certain end markets ● Prices of most raw ma
Slide 17: H1 2018 Divisional Performance
H1 2018 Divisional Performance 17
Slide 18: Divisional performance
Divisional performance Steel Division key financials Underlying revenue / Return on Sales Reported Underlying 900 10.3% 1 £m H1 2018 H1 2017 Change change 800 9.2% 1 Revenue 610.9 562.7 +8.6% +13.1% 700 611 9 600 540 8 Trading profit 63.0 51.7 +21.7% +26.5% 500 7 400 6 Return on Sales 10.3% 9.2% +11
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 2018 H1 2017 Change (% ) (£m unless indicated) Actual Actual As reported Underlying Revenue 897.0 831.5 +7.9% +12.1% Trading Profit 99.6 86.3 +15.4% +20.3% ROS % 11.1% 10.4% +70bps +80bps Post tax Share of JV Results 2.6 0.4 Net Finance Costs (4.8) (7.3) Headline Profit Before Ta
Slide 21: Underlying Vesuvius revenue up 12.1%
Underlying Vesuvius revenue up 12.1% ● Revenue up £65.5m on a reported basis (+7.9%) and up £97.1m on an underlying basis (+12.1%) ● £31.6m decrease from FX due to GBP being stronger on average in H1 2018 versus H1 2017 26.5 897.0 70.6 (£m) 831.5 31.6 799.9 Underlying increase £97.1m (+12.1%) (volum
Slide 22: Underlying Vesuvius trading profit up by 20.3%
Underlying Vesuvius trading profit up by 20.3% ● Trading Profit up £13.3m on a reported basis (+15.4%) and up £16.8m on an underlying basis (+20.3%) 2.8 3.3 4.1 3.7 5.0 99.6 7.4 (£m) 86.3 3.5 4.5 82.8 Drop-through from higher sales volume £11.9m H1 2017 FX H1 2017 Steel Foundry Restructuring FC EMEA
Slide 23: Trade working capital progress
Trade working capital progress Debtors days Trade working capital / Revenue 83 83 82 82 26.2% 81 80 80 79 79 79 24.9% 79 78 78 24.1% Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Debtor Days (12m) Creditor days 53 52 52 51 50 50 49 48 48 48 47 48 47 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-1
Slide 24: Cash flow progress
Cash flow progress ● Cash conversion broadly in line with half year 2017 end level. Less than 100% due to expansion of trade working capital required to fund increased sales and summer inventory build-up 77% 20.6 10.6 49.6 (£m) 99.6 16.7 76.7 H1 2018 Trading Depreciation Net capex Trade Working Othe
Slide 25: £281.8m Net Debt and 1.3x Net Debt / LTM EBITDA
£281.8m Net Debt and 1.3x Net Debt / LTM EBITDA ● Net debt up £7.5m at £281.8m, versus £274.3m at year end 2017 ― £76.7m operating cash flow generation from continuing operations offset by £19.5m income taxes, £33.8m dividend payment and £15.9m of other costs ● Strong balance sheet with Net Debt / L
Slide 26: Outlook
Outlook VESUVIUS etc
Slide 27: Positive market outlook in H2 2018
Positive market outlook in H2 2018 ● We are cautiously optimistic for H2 2018 as steel production remains positively oriented worldwide Steel ● We believe the upside to US steel production volumes due to the section 232 tariffs is Division c.7 - 9m tonnes by 2022 – c.9% - 11% growth from c.82m tonne
Slide 28: Outlook
Outlook ● We are cautiously optimistic regarding H2 2018 performance as the environment in our key end markets remains positive ● This strength in underlying markets and our continuing implementation of self-help measures underpins our confidence that our full year trading profit (EBITA) will be mar
Slide 29: Q&A
Q&A VESUVIUS etc
Slide 30: Appendix
Appendix VESUVIUS etc
Slide 31: Currency Ready Reckoner
Currency Ready Reckoner Jun-18 • Rule of thumb for impact of a movement in Approximate currency against sterling (1 unit change) Trading Unit change in annual profit profits (£m) Amounts shown are movements for each USD 1 cent 0.4 currency EUR 1 cent 0.4 Works both for strengthening and INR 1 ru