Last checked at 27 Oct 2016 07:00
27 October 2016
Vesuvius plc ("Vesuvius" or "the Group")
Third Quarter 2016 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 2016.
SUMMARY
Since the announcement of our half year results in July and as anticipated, end markets have remained subdued overall. We expect this to continue for the balance of the year. However, the delivery of self-help and restructuring measures will continue to benefit profit margins, and we have further increased our 2017 annualised savings target. As set out below, recent and current foreign exchange trends are having a beneficial impact on trading profit.
TRADING
Since the announcement of our 2016 Half Year results in July, steel markets have remained relatively flat with the latest World Steel Association global production statistics (ex China) showing a decline of 1.5% versus last year. This is being partly mitigated by growth in India on the back of good domestic demand and growth in exports. Foundry markets remain mixed with auto and heavy truck sales varying by region while other foundry sectors such as agriculture, mining and rail remain challenging. In total, excluding the impact of foreign exchange movements, Group sales year to date remain in line with our expectations.
RESTRUCTURING
Ongoing progress is being made in the delivery of the previously stated restructuring programme with the recent announcement of two plant closures at Avezzano and Cagliari in Italy. These and the other restructuring measures previously announced lead us to increase our annualised savings target by £5m to £30m by the end of 2017 at a cost of £40m (previously £35m).
FOREIGN EXCHANGE
The Group's results have benefited from a foreign exchange tailwind during 2016 with most global currencies strengthening against Sterling between December 2015 and September 2016. In particular, there has been a significant movement since June as a result of the UK's decision to leave the EU. Average exchange rates of Sterling to US Dollar and Euro have fallen by 8.8% and 9.3%, respectively, between FY 2015 and 2016 YTD. This has provided a trading profit benefit of approximately £7m year to date. Assuming current foreign exchange rates continue, the estimated benefit would increase to £11m for the full year.
EFFECTIVE TAX RATE
During the year, the regional mix of where we earn profits has shifted away from lower rate to higher rate tax regimes. This is expected to result in our full year effective tax rate increasing to around 28% (previously 25.5%).
FINANCIAL POSITION
We have continued to generate strong cash flows during the quarter although the positive impact this should have had on net debt has been offset by the ongoing translation impact of a weaker Sterling to both the US Dollar and Euro. We are continuing to focus on tight working capital management in order to release cash.
CONFERENCE CALL
François Wanecq (Chief Executive) and Guy Young (Chief Financial Officer) will be hosting a conference call for analysts and investors at 08.30 (UK time) today (27 October).
To join the call, please use the dial in number below:
Conference call:
+44 (0)20 3043 2024 all participants
Confirmation code: 9085770
A replay of the call will be available approximately one hour after the event for two weeks on the following number:
Replay:
+44 (0)20 7984 7568 non-US participants
+1 719 457 0820 US participants
Confirmation code: 9085770
FUTURE EVENTS
Vesuvius' preliminary results for the year ending 31 December 2016 are expected to be announced on Thursday, 2 March 2017.
For further information please contact:
Shareholder/analyst enquiries:
Vesuvius plc François Wanecq, Chief Executive +44 (0) 207 822 0000
Guy Young, Chief Financial Officer +44 (0) 207 822 0000
Virginia Skroski, Investor Relations Manager +44 (0) 207 822 0016
Media enquiries:
MHP Communications John Olsen/Jamie Ricketts/Ollie Hoare +44 (0) 203 128 8100
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