Vesuvius results hurt by weak steel and foundry market

Vesuvius said its trading in 2012 was hurt by a weaker steel and foundry market in the second half.

Vesuvius said its trading in 2012 was hurt by a weaker steel and foundry market in the second half.

The group, which makes ceramic moulds and linings for steelmakers and foundries, saw revenues fall by 8.1% year-on-year to £1.5m and trading profit plunge 27.5% to £133m.

Headline profit before tax came to £110.0m, a 29.1% decline from the previous year's £156.5m, reflecting the costs of restructuring.

Chief Executive, Franois Wanecq, said the company has decided to exit low margin businesses and lower its fixed cost base to drive profitability and cash flow.

Last year the group sold its Andreco-Hurll refractory lining installation business in Australia, and closed a Solar Crucible facility in the Czech Republic. The US Precious Metals Processing operation, which provides semi-finished precious metals to the jewellery industry, was also sold in May.

A decline in global steel and foundry production also put a damper on the company's results.

In the second half, steel production in the European Union and North America fell by almost 10% compared to the first half.

Foundry in key end-markets such as heavy truck production in the US and Brazil, high-end automotive in Europe, and the global wind power sector, weakened significantly in the last half of the year.

"We reacted swiftly to this market downturn during the second half, closing a small steel consumables plant in China, transferring production to a larger, more efficient facility nearby," Wanecq said.

"We also exited the small, low margin VGT-Dyko brick refractories business in Germany."

He expects the company to increase margins as end-market start to recover this year.

A strong cash flow of £54.2m at year end, up from £32.1m a year earlier, will enable the group to invest in high value opportunities, he added.

The board recommended a final dividend of 9.5p per share, in line with the guidance set out at the demerger of its performance materials division to Alent.

RD

Recommended

Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
Share tips of the week – 1 July
Share tips

Share tips of the week – 1 July

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
1 Jul 2022
Bunzl: boring is good for business
Share tips

Bunzl: boring is good for business

Food-service distribution company Bunzl is not a terribly exciting business, but it looks cheap and could be a great investment, says Rupert Hargreave…
30 Jun 2022

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
How to invest in copper, the most important metal in the world
Industrial metals

How to invest in copper, the most important metal in the world

As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022