Vesuvius grows profits by 2% despite slip in revenues after mixed 2014

By Laura Syrett
Published: Monday, 23 March 2015

Margin improvements boosted full year earnings for Vesuvius while strong performance in Asia rewards investment. The company is now planning a shift towards tech for future growth.

Refractories producer Vesuvius Plc in March reported a narrow 2% increase in trading profits for the full year 2014 to £142.8m ($219.4m*), up from £140m a year ago.

Headline earnings were up by 3% to £90.3m from £87.7m over the same period, while earnings per share rose by nearly 5% to £0.334/share for the latest reporting period from £0.319/share for the full year 2013.

The company’s revenues were down by 4.4% last year, however, to £1.44bn from £1.51bn the previous year.

"During 2014, we made encouraging progress in line with our objectives and strategy, against a backdrop of mixed trading conditions," said Vesuvius’ CEO, Francois Wanecq.

He said that the company had improved its margins on the back of "moderate" underlying revenue growth, which was reported as a positive 3.5% overall, and singled out potential in Vesuvius’ "addressable markets" in Asia and China, where the company has recently invested in R&D to serve local foundry customers.

Sales of steel flow control products were strong in all regions, the company said in its earnings statement, while advanced refractories performed well in the Americas and Asia-Pacific.

Vesuvius also briefly outlined its efforts to streamline its product portfolio and increase productivity, with a focus on value-added products and services to help stave off the effect of price deterioration and market competition.

"Development of our quality improvement programme has helped to restore our pricing ability and to regain market share," Vesuvius said in a presentation accompanying the results.

RHL1  

Vesuvius’ CEO, Francois Wanecq, said he expects this year’s trading
environment to be broadly flat with 2014 for refractory products.
Vesuvius

Steel

Vesuvius pointed to an overall increase in steel production in major global markets in 2014, with South Korea posting the strongest growth in output at 7.5%, followed by India at 2.3% and the North American Free Trade Agreement (NAFTA) region at 2.1%.

Expansion in China and the Europe, Middle East and Africa (EMEA) markets was less encouraging, however, at just 0.9% and 0.5% growth, respectively, while Brazil saw a 0.7% decline in steel production.

The company’s steel flow control products benefitted from strong automotive demand in the Americas and sales of fluxes through its Metallurgica arm in EMEA, pushing revenues up by 1% Vesuvius said. Asia-Pacific markets were also good performers for steel flow control, recording a 10.4% increase in sales income.

For its advanced refractories offerings, Vesuvius’ EMEA revenue was pinched by declines in Russia and Ukraine, falling by 1.3%, but the introduction of premium products and solutions in the Americas and Asia-Pacific delivered sales growth of 5.7% and 17.4%, respectively, in these regions.

Foundry

Vesuvius said that despite the weakness in foundry markets in the Americas resulting from reduced foundry and mining activity in Brazil last year, its sales of foundry products had outperformed underlying markets, quantified by the number of metal tonnes cast, in Europe, the US, India and China, thanks to growth in light vehicle production.

Trading profit for the company’s foundry division fell by 9.5% last year to £46.4m from £51.3m in 2013, with revenues down 6.1% to £463m from £493m over the same period.

Demand from the mining sector, which accounts for around 7% of Vesuvius’ foundry revenue experienced "significant difficulties" in 2014, Vesuvius said.

Acquisitions and outlook

In addition to technology investments in China, Vesuvius recently opened a new R&D facility in the Netherlands and last year acquired California, US-based Process Metrix and Brazil’s ECIL Met Tec to expand its technical services capabilities.

The company also said that it had installed new management at its foundry arm, Foseco, to restore the business’ innovation leadership as well as focusing on cost-cutting and capturing market share in China.

Vesuvius’ statement did not mention whether it plans to renew its bid to acquire UK-based rival Morgan Advanced Materials, after its approach to the company was rejected without discussion in late 2014.

"We expect the underlying trading environment in the current year to be broadly similar to that experienced in 2014," Wanecq said. "We are progressing with our plan to improve operational efficiency across the group and these actions should drive further improvement in our trading margins during 2015."

*Conversion made March 2015