3rd Mar 2015 13:32
LONDON (Alliance News) - Molten flow engineering company Vesuvius PLC's shares were trading higher on Tuesday after it reported a rise in 2014 pretax profit as lower revenue and a hit from the strength of sterling were offset by a decline in costs and better profit margins.
The company said its pretax profit for 2014 was GBP111.2 million, compared with GBP104.1 million in 2013. Revenue fell 4.4% to GBP1.44 billion from GBP1.51 billion, but it cut its manufacturing and administrative costs in the year to improve profitability. Its translated overseas revenue was hit hard by the strength of sterling, and the company said overall revenue would have been up 3.5% if exchange rates had remained constant over the year.
Steel division revenue fell 3.5% to GBP981.4 million from GBP1.02 billion, but would have been up 4.4% if exchange rates had remained the same. Underlying trading profit, stripping out the currency movements, increased 17.1% in the division and its underlying profit margin was 9.8%, a significant improvement on the 8.7% it reported last year.
Vesuvius said the margin improvement was down to higher value-added products and services sales in its Steel Flow Control business in Korea, South East Asia, India and North America. The Steel Flow Control unit supplies products to channel and control the flow of molten steel.
The margin was also improved by a focus within its Advanced Refractories business on segments where it is able to add value to sales and a further refinement of its product range, by which Vesuvius is actively exiting lower margin sales and launching new premium product ranges. The Advanced Refractories unit makes specialist refractory materials for lining steelmaking vessels.
Revenue in the group's Foundry division, which supplies products and services to the foundry industry, fell 6.1% in 2014 and its margins weakened to 10% from 10.4% a year earlier, pulled lower by weaker activity in high-margin emerging markets.
Revenue declined across the division's regional segments, with a 9.5% drop in Asia-Pacific caused by a fall in automotive production in Thailand, a ban on the export of metallic ores from Indonesia and the continued deterioration of castings produced in the Australian mining industry. Europe revenue fell 3.3%, with solid light vehicle production offset by lower truck production volumes, particularly in northern Europe, while Americas revenue fell 6.7% as good light vehicle and truck production was dragged back by reduced foundry activity in Brazil.
The group has proposed a final dividend of 11.125 pence, meaning its total dividend for the year will be 16.125 pence, compared with 15 pence in 2013.
"During 2014 we made encouraging progress in line with our objectives and strategy, against a backdrop of mixed trading conditions," said Vesuvius Chief Executive Francois Wanecq. "We have delivered further margin progression on the back of moderate underlying revenue growth, and we have maintained our long-term trend of expanding our addressable markets by building further on our strong base in Asia, and in China in particular."
"We expect the underlying trading environment in the current year to be broadly similar to that experienced in 2014. 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," Wanecq added.
Vesuvius shares were up 4.8% to 498.00 pence Tuesday afternoon, one of the best performers in the FTSE 250.
By Sam Unsted; [email protected]; @SamUAtAlliance
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