Vesuvius Plc · LSE:VSVS
Vesuvius — Investor Presentation (December 2012)
65 slides from Vesuvius's investor presentation, December 2012
Slide 1: Investor Pack
A global leader in metal flow engineering A global leader in metal flow engineering Investor Pack November / December 2012
Slide 2: An experienced international management team
An experienced international management team... ? 1 1
Slide 3: Supported by a strong Board
...supported by a strong Board John McDonough John Sussens Jeff Hewitt Jane Hinkley Insert CBE Senior Independent Non Executive Non Executive Chairman Director and Director and Director and Picture Remuneration Audit Committee Remuneration Here Committee Chair Chair Committee Chair Designate John jo
Slide 4: Disclaimer
Disclaimer NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART) IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION THIS PRESENTATION IS NOT A PROSPECTUS BUT AN ADVERTISEMENT AND INVESTORS SHOULD NOT ACQUIRE ANY NEW OR
Slide 5: Agenda
Agenda • Introduction to Vesuvius: A global leader in metal flow engineering • Key investment highlights • Financial performance and capital structure • Summary 4 4
Slide 6: Vesuvius overview
Vesuvius overview We are a global leader in metal flow engineering: • A global producer of process critical consumable products for the steel and foundry industries • State of the art global operations • Clear market leadership • Technology led • Low cost products critical to customer efficiency • A
Slide 7: Organised into 3 business segments
Organised into 3 business segments Steel Foundry PMP Steel Flow Control Advanced Refractories Foundry Technologies Precious Metals Processing Revenue1 (% of group) £533m (29%) £545m (30%) £608m (34%) £132m (7%) Overview Provides products, Provides installation Improves casting quality and foundry pr
Slide 8: A sustained effort on Corporate Responsibility
A sustained effort on Corporate Responsibility 77
Slide 9: A well positioned business: c.50% of sales in fast growing emerging markets
A well positioned business: c.50% of sales in fast growing emerging markets 2011 revenue1 by end-market2 2011 revenue1 by geography3 Process Industries Solar 10% ROW 2% 13% EU15 Precious Metals 28% 7% £1,818m £1,818m Foundry Steel Asia 29% 52% Pacific 28% Other NAFTA Europe 23% 8% Notes 1 Includes P
Slide 10: Our strategy
Our strategy Deliver superior returns to shareholders by: • maintaining technology and innovation leadership position; • enlarging the addressable market through increasing penetration of existing and new value-added solutions; • leveraging strong developing market positions to capture growth; • imp
Slide 11: Steel and Foundry business segments
Steel and Foundry business segments 1 0 10
Slide 12: Main products and markets – Steel business segment
Main products and markets – Steel business segment Steel business segment overview Steel business segment revenue by operating location • World leader in the supply of consumable Steel Flow Control ROW products used in the enclosed continuous casting process and a 12% leading supplier of Advanced Re
Slide 13: Main products and markets – Foundry business segment
Main products and markets – Foundry business segment Foundry casting process Ultimate end markets for castings Pipes & • World leader in the supply of consumable products and technical Medium Fittings Other services used in the production of metal castings which themselves & Heavy 2% 8% Railways hav
Slide 14: A profitable, flexible and growth generating business model
A profitable, flexible and growth generating business model Service & Global consistency presence Optimized Advanced manufacturing technology footprint knowledge 1 3 13
Slide 15: Agenda
Agenda • Introduction to Vesuvius: A global leader in metal flow engineering • Key investment highlights • Financial performance and capital structure • Summary 1 4 14
Slide 16: Steel and foundry are well positioned to deliver value for shareholders
Steel and foundry are well positioned to deliver value for shareholders Key investment highlights 1 Strong market positions Flexible Growth and 2 Long standing blue chip customer partnerships Sustainable 3 Flexible business model 4 Value pricing ability Profitable 5 Technology and know-how provider
Slide 17: Market leading positions across many of our products
Market leading positions across many of our products ensure the sustainability of the business model… Molten metal in steel industry Molten metal in foundries A world leader in flow control systems (slide gates) A world leader in filters A world leader in isostatically pressed refractories A world l
Slide 18: Long-established customer partnerships and industry recognition
…along with long-established customer partnerships and industry recognition Overview Steel Foundry • Long standing partnerships with industry leaders • Average length of relationships: 15+ years • Customer driven product development • Solid and diversified customer base • No customer greater than 10
Slide 19: Operational levers provide flexibility to adjust to market conditions
Operational levers provide flexibility to adjust to prevailing market conditions… Temporary workers in Europe1 • Reducing temporary workers in Europe • Adjusting hourly workers in ROW 16% Tier 1 • Hiring freeze • Curtailment of discretionary costs Employees in Europe eligible for flexible time agree
Slide 20: Flexibility of our businesses in 2009
…as demonstrated by the flexibility of our businesses in 2009 Short, but sharp, slowdown exacerbated by destocking of steel and foundry supply chains (worst since WWII) Revenue1,3 (£m) Trading Profit1,3 (£m) Return on Sales1,2,3 (%) 14.7% 761 103.9 734 11.9% 706 682 90.6 12.1% 11.8% 86.8 588 82.6 10
Slide 21: Key investment highlights: Profitable and cash generative
Key investment highlights Profitable and cash generative 2 0 20
Slide 22: Value pricing supported by low cost mission critical products
Value pricing is supported by low cost mission critical products…Growth Steel Case study – integrated steel mill • The steel production process is continuous and critically dependant on consistency of quality and productivity • Tundish package design increased quality and optimisation improved produ
Slide 23: Significant process efficiencies for customers
…and significant process efficiencies for customers Profitable Foundry Case study – North East Asian Foundry Casting SG Iron • The foundry process is highly sequential and critically • Solidification process modelling and spot feeding dependent on consistency of quality and productivity with Feedex
Slide 24: Profitability supported by technological leadership
Vesuvius profitability is supported by technological leadership A rich technological base Robotic casting technology – Steel business • Steel / Foundry businesses invented most state of the art technologies currently employed in their segment of the global steel / foundry industries • Recognised as
Slide 25: Flow Control Innovation
Flow Control Innovation 2 4 24
Slide 26: Foundry Innovation
Foundry Innovation 2 5 25
Slide 27: A continued shift of operations to align with customers
A continued shift of operations to align with customers… NAFTA facilities and headcount EU 15 facilities and headcount Other Europe facilities and headcount Employees Employees Employees 4,000 4,000 4,000 2222 3333 3,000 3,000 18 3,000 1111 11 2,000 2,000 2,000 2,580 1,681 3,086 10 10 2,737 1,000 1,
Slide 28: A continued focus on cost leadership
…with a continued focus on cost leadership… Manufacturing cost leadership Improved cost management and flexibility Site Locations Headcount 100 14,000 • Some 70 major manufacturing facilities across the world 12,296 JVs 78 12,000 1,107 • State-of-the-art facilities with low operating costs 80 72 JVs
Slide 29: Sustainable profit and cash flow over ten years
…delivering sustainable profit and cash flow over ten years EBITDA1 (£m) Operating cash flow1,2 (£m) 250 180 160 200 140 120 150 100 80 100 60 40 50 20 0 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Pre Foseco acquisition Post Foseco acquisiti
Slide 30: Opportunities remain for margin enhancement
Opportunities remain for margin enhancement • Exit less profitable product lines • Focus on higher margin products supported by selective acquisitions • New product introductions • Continuing to drive further operating efficiencies - lean manufacturing - groupwide quality program • Increased use of
Slide 31: Key investment highlights: Positioned for growth
Key investment highlights Positioned for growth 3 0 30
Slide 32: Attractive long term growth in Steel business sales due to flat products
Attractive long term growth in Steel business sales due to evolution towards flat products Vesuvius serves mainly the flat products market which will grow at a higher pace than global steel as developing markets evolve towards consumption driven economies Typical consumption of Flow Control products
Slide 33: Steel business segment outpaces market growth in steel production
Steel business segment outpaces market growth in steel production volumes by bringing new technical solutions 500 600 Sales and Steel Production Rebased to 100 Sales and Steel Production Rebased to 100 337% 450 401% 500 400 275% 350 400 300 250 300 148% 200 200 150 100 100 50 Vesuvius 0 2002 2003 20
Slide 34: Steel segment growth leverages foothold in BRIC countries
Vesuvius steel business segment growth leverages a strong foothold Growth in BRIC countries Russia • Present since 2000 • A leading supplier to many of the large flat steel producers • Facility construction planned in Bor Brazil • Full range of refractories produced in 2 plants China • A leader in i
Slide 35: Attractive long term growth in Foundry business sales
Attractive long term growth in Foundry business sales with significant developing market opportunity Foundry output Foundry sales £/T of total market casting (2010) Major segments requiring Vesuvius solutions have the highest Significant upside potential through continuing market penetration as grow
Slide 36: Foundry business segment outpaces market growth
Foundry business segment outpaces market growth through increased penetration of high added value solutions Growth 600 350 Sales and Casting Tonnes Rebased to 100 Sales and Casting Tonnes Rebased to 100 414% 193% 500 300 400 250 187% 200 300 154% 150 200 100 100 50 Vesuvius 0 0 outperforms 2002 2003
Slide 37: Foundry segment penetrates Russia and China
Vesuvius Foundry business segment penetrates Russia and China Growth after successful establishment in India and Brazil Russia • Developed business based on German- made Feeding Systems • Manufacturing entry strategy planned to support western-European automotive transplants China • Direct presence
Slide 38: History suggests current BRIC GDP growth to continue
History suggests current BRIC GDP growth to continue for foreseeable future 3,000 2,500 2,000 GDP indexed to 100 1,500 1,000 China to 2011 500 Russia to 2011 Brazil to India to 2011 2011 0 Year 0 Year 5 Year 10 Year 15 Year 20 Year 25 Year 30 Year 35 Year 40 Year 45 China rebased to 1990 Russia reba
Slide 39: A new strategy to deliver higher returns
A new strategy to deliver higher returns Growth Vesuvius will build a comprehensive technical services offering in metal casting engineering The Steel continuous casting process requires more knowledge Foundry casting has a huge potential of progression in monitoring and greater control of its opera
Slide 40: AVEMIS – Instrumentation for the steel caster
AVEMIS – Instrumentation for the steel caster Slag in Ladle SEN/SES Instrumentation: . Flow mode, . Flow rate, . Clogging index…. Slag in shroud detection XSVC: Sub-Meniscus Velocity Actual steel height In tundish XLEV-S: XHPS: Mould slag thickness Mould Level (Suspended) Q2 2012 XMFL: XLEV-L: Mould
Slide 41: SERT: integration of AVEMIS and Vesuvius systems
SERT: integration of AVEMIS and Vesuvius systems to create a control command unit Ladle Gate Purge Plug IPV & RADAR slag detection LADLE Vision Instruments Actuator/ Rigging Robot for ladle operations Mould Level Control Robot for tundish TUNDISH operations Tundish Gate Mould Level Sensor Break out
Slide 42: SERT: Instrumentation and automatisation of an iron foundry casting unit
SERT : Instrumentation and automatisation of an iron foundry casting unit Inoculant feeder Laser level measurement and pressure control Automatic mould pouring with stopper (UCERAM) Pouring unit positioning Inoculant checker Moulding rate optimisation 4 1 41
Slide 43: SERT: Case studies
SERT: Case studies Mechanical pipe joining system manufacturer • Installed a completely automated moulding and metal pouring system • Software systems to control the process and feed back live data • Customer benefits Consistent casting quality through process control Higher productivity through
Slide 44: Innovative solutions will improve margins and ROCE
Innovative solutions will improve margins and ROCE • A major part of our sales is already driven by engineering services - Installation of our gate systems commands around one third of our flow control sales - Main driver for building long term customer relations • Our permanent presence on the cast
Slide 45: Precious Metals Processing business segment
Precious Metals Processing business segment 4 4 44
Slide 46: Overview of Precious Metal Processing
Overview of Precious Metal Processing Overview Net sales value1,2 (£m), EBITDA1 (£m) and EBITDA margin1 (%) • A leading provider of fabricated precious metals (gold, silver, platinum) to the 10.2% 16.7% 20.4% 23.2% jewellery industry in UK, France and Spain • Strong recent performance in precious me
Slide 47: Strategy for Precious Metals Processing
Strategy for Precious Metals Processing Continued focus on cost control, working capital efficiency and strong cash generation • Maintain market leader position in current geographic markets – Exemplary customer service and value for money products • Expand successful coin blanks business in new geo
Slide 48: Agenda
Agenda • Introduction to Vesuvius: A global leader in metal flow engineering • Key investment highlights • Financial performance and capital structure • Summary 4 7 47
Slide 49: Demonstrated ability to respond to changing market conditions
Demonstrated ability to respond to changing market conditions… Revenue1,2,3 (£m) EBITDA2,3 (£m) and trading margin2,3 (%) 1,818 CAGR 6% 12.1% 11.4% 10.5% 1,629 231 239 223 1,509 5.6% 1,264 115 2008 2009 2010 2011 2008 2009 2010 2011 Notes 1 Includes Precious Metals Processing business segment at net
Slide 50: Evidenced by both main businesses over a sustained period
… evidenced by both main businesses over a sustained period Revenue1,2 (£m) EBITDA1,2 (£m) and trading margin (%) Steel business segment 12.4% CAGR 8% 1,078 11.5% 10.8% 980 866 7.7% 753 137 141 129 81 2008 2009 2010 2011 2008 2009 2010 2011 15.9% 14.0% 13.4% Foundry business segment CAGR 5% 608 99 1
Slide 51: Sustained cash generation
Sustained cash generation… • Strongly cash generative across the Free Cash Flow1,2 (£m) economic cycle 93 • Well invested business with strong capital base 36 44 44 • £240m of capital expenditure in the past 5 years 2008 2009 2010 2011 Notes 1. Calculated as net cash flow from operating activities a
Slide 52: Underpins a strong balance sheet
…underpins a strong balance sheet… • Substantial committed debt facilities • c.£600m with average maturity of 4.4 years and average cost of 3.6% • USPP $250m • $110m maturing Dec 2017 • $140m maturing Dec 2020 • Syndicated loan £425m • Maturing April 2016 • Investment grade facility with 16 banks •
Slide 53: Supports superior returns for shareholders
…and supports superior returns for shareholders • Dividend policy • First Vesuvius dividend will be the 2012 final dividend of 9.5p per share > Reflects Vesuvius share of Cookson 2012 final dividend • New Policy applicable for 2013 onwards • Strongly cash generative and well invested business • Reco
Slide 54: 2013 Guidance
2013 Guidance 2012 2013 Capital expenditure £50m £45m Restructuring charges £60m £5m - of which cash £15m £5m Pension payments - UK plan £7m £7m - US plan $7m $6m Tax - Cash ETR 23.5% 24 – 25% 5 3 53
Slide 55: Financial strategy
Financial strategy • Financial flexibility essential • Conservative balance sheet stewardship • Focus on cash generation • Cost control • Efficient working capital management • Improved returns 5 4 54
Slide 56: Agenda
Agenda • Introduction to Vesuvius: A global leader in metal flow engineering • Key investment highlights • Financial performance and capital structure • Summary 5 5 55
Slide 57: Near term priorities
Near term priorities • Adapt to market conditions – Flexibility in employment to reduce cost base – Continue to adjust manufacturing footprint to demand – Streamline the structure • Keep investing selectively for the future – Advanced refractory plant in Ras al Khaimah (UAE) – Foundry plant in China
Slide 58: Our strategy
Our strategy Deliver superior returns to shareholders by: • maintaining technology and innovation leadership position; • enlarging the addressable market through increasing penetration of existing and new value-added solutions; • leveraging strong developing market positions to capture growth; • imp
Slide 59: Appendix
Appendix 5 8 58
Slide 60: Income statement – Pro-Forma 'Stand Alone' reconciliation - EBIT
Income statement – Pro-Forma ‘Stand Alone’ reconciliation - EBIT • The income statements for Vesuvius previously disclosed in Cookson’s Annual Reports (the Engineered Ceramics and Precious Metals Processing businesses) and as included in the Vesuvius Prospectus (1 November 2012) were presented on th
Slide 61: Income statement – Pro-Forma 'Stand Alone' reconciliation - EBITDA
Income statement – Pro-Forma ‘Stand Alone’ reconciliation - EBITDA • The income statements for Vesuvius previously disclosed in Cookson’s Annual Reports (the Engineered Ceramics and Precious Metals Processing businesses) and as included in the Vesuvius Prospectus (1 November 2012) were presented on
Slide 62: Income statement – Pro-Forma 'Stand Alone' reconciliation - Segmental
Income statement – Pro-Forma ‘Stand Alone’ reconciliation - Segmental £m FY2008 FY2009 FY2010 FY2011 H12011 H12012 Revenue1 1,509 1,264 1,629 1,818 916 874 Steel 866 753 980 1,078 538 530 Foundry 526 378 515 608 313 289 Precious Metals Processing 117 133 134 132 65 55 EBITDA 222.7 114.8 230.5 238.9
Slide 63: Net Debt – Pro-Forma 'Stand Alone' reconciliation
Net Debt – Pro-Forma ‘Stand Alone’ reconciliation • The balance sheets for Vesuvius included in the Vesuvius Prospectus (1 November 2012) were presented on the basis of all of Cookson Group plc’s borrowings remaining with Vesuvius plc going forward. • Net debt at demerger will be split broadly based
Slide 64: Employee Benefits Plans Reconciliation
Employee Benefits Plans Reconciliation • UK: • US: – Closed to new members in 2004 and to future benefit – Cookson Americas Pension Plan (‘CAPP’) to remain with Vesuvius accruals in 2010 – Closed to new members and future benefit accruals in 2007 – 5,900 members (2,550 deferred; 3,350 pensioners) –
Slide 65: Slide 65