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.

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