Trading Statement

Vesuvius plc, a global leader in molten metal flow engineering and technology, announces the following update for the period 1 July to 31 October 2024.

Summary

• We have performed robustly in the period delivering market share gains, resilient pricing, and further cost reductions, despite a weakening of markets relative to H1 2024
• Steel markets outside of India and EEMEA remain subdued
• Foundry markets outside of India also remained subdued, with in particular, further significant weakening in EU27+UK
• Continued market share gains in Flow Control and Foundry, while achieving resilient net pricing
• In year recurring cost savings ahead of expectations, increasing from £6m to £9m in FY24
• Trading Profit expected to be slightly below FY23, reflecting market conditions, while maintaining RoS margin at c10.2%, both on a constant currency basis
• Working capital intensity on track against our year-end target of 23%
• Acquisition in Turkey in the strategically important and growing EEMEA market
• Second share buyback of £50m launched, supported by our strong balance sheet
• Growth initiatives in Flow Control and Asia remain on track, with projects completing around the year-end

Update on trading since 1 July

Steel markets (World ex China, Iran, Russia, and Ukraine) continued to weaken in both North America and the EU27+UK, while growth rates in India and EEMEA slowed. Chinese steel exports remain at elevated levels, with this impacting production in most regions outside of China.

Foundry markets outside of India also declined compared to H1, with the EU27+UK in particular, experiencing a significant decline compared to both the first half of FY24 and the same period in FY23. This level of Foundry activity was lower than originally anticipated.

We continued to gain market share in both Flow Control and Foundry, reflecting our strong technological differentiation, and continued to achieve a positive net pricing performance in Steel while also maintaining net pricing in Foundry, despite the challenging environment.

Over the period, therefore, the Steel division delivered in line with expectations, but the Foundry division was impacted by the weakness of the Foundry end-markets, which was more significant than anticipated. This was partially offset by increased in-year cost savings in both divisions, resulting in a slightly lower Group performance than anticipated.

Continued cost management

The three-year cost-savings programme is proceeding as planned. We continue to target recurring cash cost savings of at least £30m by 2026, with c. £9m expected to be delivered in 2024, and an exit run-rate in 2024 towards the top end of the indicated range of £10-15m. Total one-off cash costs in FY24 are expected to be c. £10m (£12m P&L impact including non-cash charges), which is part of the planned total of £40m (split between capex and cash operating costs). In addition, we have taken various short-term cost reduction actions to protect in-year profit, given the challenging market conditions.

Continued cash flow discipline

Average trade working capital as a percentage of revenue (on a 12-month rolling basis) continues to trend downward, towards our year-end target of 23.0%, and at the end of October 2024 was 90bps lower than the same point in 2023. Capex, excluding leases, for 2024 is expected to be around c. £100m, as anticipated at the beginning of the year.

Launching a second tranche share buyback

Following the recent completion of our first share buyback programme, we are now announcing a second programme for a further £50m, which we expect to be transacted in around 6 months, subject to regulatory limits. This demonstrates our confidence in the ongoing free cashflow generation of the business and our commitment to return capital to shareholders while maintaining a strong balance sheet. We expect leverage at the year-end to be towards the lower end of our target range. Full details of the share buyback are available in the separate announcement issued today.

Acquisition in the growing market of EEMEA

On 15 November 2024 we signed an agreement to acquire a 61.65% stake in Piromet AS, a Turkish business for €26.2m. Completion is subject to the typical regulatory approvals and is expected to occur in the first quarter of FY25. The acquisition will strengthen our Advanced Refractory business in the fast-growing region of EEMEA and will also allow us to leverage Piromet’s expertise in robotics and gunning.

Outlook

We expect both Steel and Foundry markets to remain subdued for the remainder of the year and remain cautious on the timing of a recovery. We are mitigating this temporary end market weakness with further actions, including higher in-year cost savings. We now anticipate trading profit for FY24 to be slightly below FY23 on a constant currency basis and in line with current market expectations.

We remain confident in the attractiveness of the long-term global steel and foundry market fundamentals and continue to focus on the execution of our self-help measures, which will leave us well placed when end-markets improve.

Technical guidance for FY24, update:

Net interest charge: c. £16m

Capex (excluding capitalised leases): c. £100m

Exceptional restructuring charge related to cost-saving programme: c. £12m

Restructuring costs, cashflow impact: c. £10m

Current shares in issue (ex ESOP and treasury shares): 256.5m

Glossary

EEMEA Europe, Middle East and Africa, excluding EU+UK

CONFERENCE CALL

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