Vesuvius slumps on Jefferies downgrade

Molten metal flow engineering company Vesuvius was under the cosh on Tuesday after Jefferies downgraded the stock to ‘underperform’ from ‘hold’ and cut the price target to 255p from 300p.

It said the company’s full year results highlighted a deteriorating macro environment, with earnings under pressure and enhanced restructuring measures unlikely to halt the declining financial trend.

“Following a strong bounce off the Feb-16 lows we find Vesuvius's valuation increasingly hard to justify, particularly given another round of EPS cuts,” Jefferies said.

It argued Vesuvius was in a tricky place, with its largest exposure to the developed world steel industry, which is in a distressed state.

Chinese steel exports into the DW are compounding matters, and are expected to remain close to peak levels.

Many of Vesuvius' DW customers, who already have highly leveraged balance sheets, are having to push increasingly aggressive price decreases throughout their supply chains.

“With little signs of these pressures abating, Vesuvius continues to be squeezed,” Jefferies said.

At 1417 BST, Vesuvius shares were down 5.5% to 288.50p.