A global leader in metal flow engineering · 2013 Half Year Results 2 August 2013 François Wanecq,...

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2013 Half Year Results2 August 2013

François Wanecq, Chief Executive

A global leader in metal flow engineering

1

Disclaimer

1

This presentation, which has been prepared by Vesuvius plc (the “Company”), includes statements that are, or may bedeemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may","will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-lookingstatements include matters that are not historical facts and include statements regarding the Company’s intentions, beliefsor current expectations. By their nature, forward-looking statements involve risk and uncertainty because they relate tofuture events and circumstances. A number of factors could cause actual results and developments to differ materially fromthose expressed or implied by the forward-looking statements. Any forward-looking statements in this presentation reflectthe Company’s view with respect to future events as at the date of this presentation and are subject to risks relating tofuture events and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations,growth strategy and liquidity. The Company undertakes no obligation publicly to release the results of any revisions or up-dates to any forward-looking statements in this presentation that may occur due to any change in its expectations or toreflect events or circumstances after the date of this presentation.

This presentation comprises information which is already in the public domain, and includes extracts from theAnnouncement of the 2013 Half Year Results (2 August 2013). You should read the whole of this Announcement. Noreliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness.None of the Company, its advisers, or any other party is under any duty to update or inform you of any changes to theinformation contained in this presentation.

22

Solid progress in implementation of Strategy

• Portfolio rationalisation– Sold Precious Metals Processing– Disposed of VGT Dyko and Canadian installation business

• Self-help actions to drive margin improvement– Closed loss-making Solar Crucibles operations in China– Improved flexibility of cost base

• Focus on working capital management and cash generation– Reduced inventory days– Increased cash conversion

• Deliver superior returns to shareholders– £30m share repurchase programme initiated– Interim dividend declared of 4.75 pence per share

3

Solid H1 trading performance

819

729773

0

100

200

300

400

500

600

700

800

900

H1 2012 H2 2012 H1 2013

Revenue

3

80

51

71

0

10

20

30

40

50

60

70

80

90

H1 2012 H2 2012 H1 2013

Trading Profit

9.7%

7.1%

9.2%

0

2

4

6

8

10

12

H1 2012 H2 2012 H1 2013

Trading Margin

• Revenue and Trading Profit still below levels of H1 2012• Recovered from H2 2012 - as expected, reflecting stable market conditions and self-help actions• Headline pro-forma EPS 15.9 pence - close to 16.5 pence delivered in H1 2012

%£m £m

4

0

10

20

30

40

50

60

70

80

90

H1 07 H1 08 H1 09 H1 10 H1 11 H1 12 H1 130

50

100

150

200

250

H1 07 H1 08 H1 09 H1 10 H1 11 H1 12 H1 13

4

Steel markets: some improvement in our major markets vs. H2 2012

Steel production - EMEAmt

Steel production – NAFTAmt

Source : World Steel Assoc. Source : World Steel Assoc.

H1 2013 up 0.4% vs. H2 2012H1 2013 up 3.5% vs. H2 2012

5

H1 Trading Review : Steel Flow Control Revenue

5

Revenue performance better than end-markets

EMEA:• Impact of Metallurgica acquisition• Increased market penetration

Americas:

• Improved product mix in South America• Fall in revenue from temporary customer shutdowns

mitigated by value pricing

Asia ex. China:• Weakness in Korea• India strong – new capacity

China:• Lower revenue but better margins• New management’s strategy to focus on higher quality

segments

Revenue by region

0

20

40

60

80

100

120

140

EMEA Americas Asia

H1 2012 H2 2012 H1 2013£m

6

H1 Trading Review : Advanced Refractories Revenue

6

Revenues reflect restructuring initiative to exitlow-margin business

EMEA:• Disposal of VGT-Dyko

Americas:• Winding-down of Canadian installation business

prior to disposal

Asia:• Disposal of Andreco-Hurll• Focus on quality segments• Good performance in S.E. Asia and India

Revenue by region

0

20

40

60

80

100

120

EMEA Americas Asia

H1 2012 H2 2012 H1 2013£m

7

H1 Trading Review : Steel Margins

7

£m (as reported) H1 2012 H2 2012 H1 2013

Revenue

Steel Flow Control 278 264 279

Advanced Refractories 252 224 235

Total Revenue 530 488 514

Total Trading Profit 51 32 43

Trading Margin % 9.6% 6.5% 8.3%

• Disposals have reduced overall revenue but delivered margin improvement

• Benefits from operational self-help actions coming through in trading margin

• Market penetration of Vesuvius technology and focus on value pricing delivering further benefit

9.6%

6.5%

8.3%

0

2

4

6

8

10

12

H1 2012 H2 2012 H1 2013

%Margin progression

8

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

H12008

H22008

H12009

H22009

H12010

H22010

H12011

H22011

H12012

H22012

H12013

Nafta Europe

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

H12008

H22008

H12009

H22009

H12010

H22010

H12011

H22011

H12012

H22012

H12013

Nafta Europe

8

Foundry markets : improvement from H2 2012 but still lower than H1 2012

Light vehicle production Truck production

Source : LMC Automotive. Source : LMC Automotive.

9

H1 Trading Review : Foundry revenue

9

Revenue by regionRevenues recovered from H2 2012EMEA:• Light vehicle production up 7.1%

• Heavy truck production down 8.5%

Americas:• NAFTA light vehicle production up 9.4% vs. H2 2012

• Heavy truck production in NAFTA up 2.5%

• Reduced activity in mining & railroad sectors

Asia:• Closed loss-making Solar Crucibles operations

• Difficulty in specific sectors such as windmills

0

20

40

60

80

100

120

140

EMEA Americas Asia

H1 2012 H2 2012 H1 2013£m

10

H1 Trading Review : Foundry margin

10

• Destocking effect ended

• Foundry revenue down 9.5% (excl. Solar Crucibles) reflecting reduced end-market activity

• Trading profit down 19.4% y-o-y (excl. Solar Crucibles) in line with normal operational leverage

• Significant progress made on trading margin vs.H2 2012 - cost reduction measures and better product mix

• Losses from Solar Crucibles business eliminated following closure of Chinese operations

£m (as reported) H12012

H22012

H12013

Revenue

Foundry (excl. Solar Crucibles) 283 237 256

Solar Crucibles 6 4 3

Total Revenue 289 241 259

Total Trading Profit 29 19 28

Trading Margin % 9.9% 8.3% 10.8%

12.2%

10.3%10.9%

0

2

4

6

8

10

12

14

H1 2012 H2 2012 H1 2013

% Margin progression (excl. Solar Crucibles)

11

H1 Trading Summary

• Market conditions generally stable, no further deterioration seenfollowing the downturn in H2 2012

• Good performance delivered across the Group; revenue and trading profitrobust against reduced y-o-y end-market demand

• Initial improvement in trading margin coming through from restructuringinitiatives and drive to improve quality of business

11



Chris O’Shea, CFO


13

Income Statement

13

(Headline, pro-forma) H1 2013 H1 2012 Change(vs. H1

2013)

H2 2012 Change(vs. H1

2013)£m £m £m

Revenue 773 819 -6% 729 +6%

Trading Profit 71 80 -11% 51 +37%

Trading margin % 9.2% 9.7% 7.1%

Net finance costs (8) (8) (6)

Share of JV 1 (1) 1

Profit before Tax 64 71 -10% 46 +38%

Effective tax rate % 26.5% 20.0% 31.5%

Tax (17) (22) (10)

Non-controlling Interest (3) (3) (2)

Net Earnings 44 46 -4% 34 +28%

Earnings per share (p) 15.9 16.5 -4% 12.4 +28%

Dividend per share (p) 4.75

14

Revenue progression year-on-year

14

£m

• Revenue down 5.7% on H1 2012

• Underlying(1) revenue 5.2% lower

• Disposals in line with strategy to exitlow-margin businesses

• Successful integration ofMetallurgica acquisition

• Solar reflects closure of loss-makingoperations in China

• Limited currency impact in H1

(1) Also excludes Solar Crucibles

773

-7 -3

-41

5819

680

700

720

740

760

780

800

820

840

H1 2012 Acquisitions& disposals

SolarCrucibles

Currency Underlying H1 2013

15

Trading profit progression year-on-year

15

£m

71

-1

-16

2

6

80

0

10

20

30

40

50

60

70

80

90

100


SolarCrucibles


• Trading profit reduced by 11%

• Underlying(1) profit down 19%

– Reflects normal operational leverageand one-off items

• Closure of Solar Crucibles operationsin China had positive impact ontrading profit

(1) Also excludes Solar Crucibles

16

514

-7

-14

5

530

500

505

510

515

520

525

530

535

H1 2012 Acquisitions &Disposals


Steel Performance year-on-year

16

43

-10

251

0

10

20

30

40

50

60

H1 2012 Acquisitions &Disposals


£m£m

Includes c. £6m adverse one-off items

Revenue Trading profit

17

259

-3

-27

289

200

210

220

230

240

250

260

270

280

290

300

H1 2012 Solar Crucibles Currency Underlying H1 2013

Foundry Performance year-on-year

17

28-1

-6

6

29

0

5

10

15

20

25

30

35

40

45

50

H1 2012 Solar Crucibles Currency Underlying H1 2013

£m£mRevenue Trading profit

18

71

52

13

51

0

10

20

30

40

50

60

70

80


SolarCrucibles


Sequential revenue & trading profit progression

18

773

-4 -1

22

27

729

600

620

640

660

680

700

720

740

760

780

800


SolarCrucibles


£mRevenue Trading profit

£m

Reflects.£6m reductionin bad debt charges

1919

71 72

-21

193

0

10

20

30

40

50

60

70

80

90

100

Trading Profit Depreciation Working Capital Capex Cash generated

• Cash generated represents 102% ofTrading Profit

• Improvement in working capitalperformance• 25.8% of sales (12 month average)

• Inventory reduction programme makingprogress• 78 days (12 month average)

• Capital expenditure in line with full yearexpectations

Cash generated from continuing operations

£m

2020

72

48

38

-6

-19-7

-3

1

0

10

20

30

40

50

60

70

80

Recurring Free Cash Flow represents110% of Headline Earnings

One off items include:

• H1 Restructuring• £3.0m charge – trailing costs related

mainly to closure of Solar Crucibles

• Total cash costs of £7.3m

• £14.2m provision remaining - c.£5mexpected to be spent in H2

• Demerger costs• £3.1m - remaining cash cost

Free Cash Flow from continuing operations

£m

2121

295

273

38

37

8 6

26 112

0

50

100

150

200

250

300

350

OpeningNet Debt

Free CashFlow

BusinessDisposals

ShareBuyback

Pension Dividend Other FXTranslation

ClosingNet Debt

Net Debt

£m

Disposal of European Precious MetalsProcessing completed at end May• Proceeds €56.8m – subject to usual

closing balance sheet adjustments

• Net profit on disposal of £19.6m

Share buy-back programme initiated• To return up to £30m of proceeds of

PMP disposal

• 2.8m shares purchased by 30 June– £8.4m cash out in period

• No impact on reported H1 EPS

22

Pensions update

22

• UK defined benefit Plan fully funded as at 31 December 2012• Based on latest triennial valuation – recently approved by Trustee• Results from 10 years de-risking initiatives, including £320m pensioner buy-in in 2012, and

Company contributions• Annual £4.7m cash contribution to Plan ceased in July 2013• Voluntary contributions of £2m per annum from January 2014 – to strengthen Plan position

• Total net deficit of all Group post-retirement plans at £58m at 30 June 2013

• IAS19 (revised) adopted - prior year comparators re-stated• Impact on H1 2012 : trading profit reduced by £0.5m; Interest charge increased by £0.1m

Pension charges (£m) H1 2013 H1 2012

Trading profit (2.9) (2.2)Net interest (0.9) (0.1)

23

Dividend Policy

23

Dividend growth will be driven by long-term earnings growth

Full-year 2012 base dividend of 14.25 pence per share• Vesuvius’ share of Cookson full-year dividend of 22.5 pence

– Interim 7.5 pence– Final 15.0 pence

• 9.5 pence Vesuvius• 5.5 pence Alent

2013 dividend• Interim dividend of 4.75 pence declared

• Final dividend will be proposed based on full-year results

24

Financial strategy

24

• Financial flexibility essential

• Conservative balance sheet stewardship

• Focus on cash generation

• Cost control

• Efficient working capital management

• Improve returns



François Wanecq, Chief Executive


26

Strategy

26

• Maintain technology leadership

• Increase penetration of value creating solutions

• Capture growth in developing markets

• Improve cost leadership

• Build technical services offering

Long-term revenue growth,ahead of our end markets

Higher trading margins andreturns on capital employed

Strong cash flow generation

Attractive shareholder returns

27

Strategy - continued

27

• Maintain technology leadership

• Increase penetration of value creating solutions

• Capture growth in developing markets

• Improve cost leadership

• Build technical services offering

Robotic tube changer in Korea

New lining concepts for blastfurnace troughs

New management in Chinaimproving quality & value selling

Lean manufacturing programme

In longer term development

2828

Solid progress in implementation of Strategy

• Portfolio rationalisation– Sold Precious Metals Processing– Disposed of VGT Dyko and Canadian installation business

• Self-help actions to drive margin improvement– Closed loss-making Solar Crucibles operations in China– Improved flexibility of cost base

• Focus on working capital management and cash generation– Reduced inventory days– Increased cash conversion

• Deliver superior returns to shareholders– £30m share repurchase programme initiated– Interim dividend declared of 4.75 pence per share

29

Outlook

29

FY 2013:

• Self-help actions expected to consolidate trading margin recovery in second half

• Visibility remains limited - activity levels after summer shut-downs will be key indicator ofend-market conditions in the second half of the year

Medium term:• Continued actions in 2013 will take us further towards achieving our medium-term goals:

o Revenue growth, ahead of our end-markets

o Higher trading margins – aim to return to levels previously achieved

o Enhanced returns on capital employed

o Strong cash flow generation

Global leader in metal flow engineering - well positioned to deliver returns for shareholders

31

Revenue and trading margins : 5-year summary

31

(1) Includes allocation of Corporate overheads previously reported separately(2) Excluding Solar Crucibles

£m FY2008 FY2009 FY2010 FY2011 FY2012

Revenue 1,358 1,100 1,451 1,645 1,538

Steel 866 753 980 1,078 1,018

Foundry 492 347 471 567 520

EBIT 162 54 157 182 143

Steel 98 49 104 107 84

Foundry 64 5 53 75 59

EBIT margin 11.9% 4.9% 10.8% 11.1% 9.3%

Steel 11.3% 6.5% 10.6% 9.9% 8.3%

Foundry 13.0% 1.4% 11.3% 13.2% 11.3%

A global leader in metal flow engineering · 2013 Half Year Results 2 August 2013 François Wanecq,...

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