31st Jul 2015 13:21
LONDON (Alliance News) - Molten metal flow engineering company Vesuvius PLC on Friday said its pretax profit fell in the first half of 2015 due to a reduction in global steel production and inventory volumes, prompted Vesuvius to announce it will restructure its operations to better align them with structural changes in its end markets.
The FTSE 250-listed group said its pretax profit in the first half fell to GBP37.9 million, down from GBP40.4 million a year earlier, as revenue declined to GBP702.6 million from GBP729.8 million a year earlier.
Vesuvius said the lower revenue had been partially offset by an improvement in its return on sales to 10%, which it said was thanks to actions taken by the company to improve productivity and to cut costs, while the underlying profitability in its foundry division improved thanks to cost-cutting measures.
The group said it will pay an interim dividend of 5.15 pence per share, up 3% from the 5.00p it paid a year earlier.
Vesuvius also said it has kicked off a restructuring programme in order to address the structural changes occurring in its end markets. The programme will result in the company booking a charge of around GBP20 million in 2015 and 2016, with cost savings of GBP10 million a year expected from 2017 onwards. Some benefits from the restructuring have already been seen and the group expects to meet market forecasts for the full year.
"In recent months, we have seen challenging end markets with a global decline in crude steel production, particularly in the US, our largest market. Against this backdrop, Vesuvius has made further strategic and operational progress," said Chief Executive François Wanecq.
Revenue in the company's steel division, which comprises its steel and foundry operations, fell 2.7% in the first half to GBP476.3 million from GBP489.5 million. Steel flow control products revenue was lower on the back of weakness in the Americas and Europe, Middle East and Africa regions, which was partially offset by better sales in Asia-Pacific.
The fall in revenue in steel flow control products was sharper than the overall decline in volumes in steel production, indicating that the declines were greater in countries where Vesuvius sells a higher amount of value-added products. EMEA revenue was hit by declining crude steel production in Turkey and Africa and by a significant fall in Ukraine, related to the ongoing turmoil in the country.
Americas steel flow control revenue also was down, thanks to a decline in pipe demand, but Asia-Pacific revenue rose despite crude steel production falling in the region, thanks to an outperformance in China and strong results from Korea and India.
Revenue for Vesuvius' Advanced Refractories business, which makes materials for lining blast furnaces and ladles, was down on the back of lower activity in North America, again driven by crude steel production falling.
In the company's foundry business, which makes products and provides service to the foundry industry, revenue was down on the back of mixed market conditions, with weakness in the Americas, a sluggish performance in EMEA, and variable results in Asia-Pacific.
By Sam Unsted; [email protected]; @SamUAtAlliance
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