Vesuvius reports trading in line with expectations

Vesuvius on Thursday said its sales in the year to date remain in line with expectations as cost saving measures and foreign exchange benefits offset a weak steel market.

The molten metal flow engineer said since its half year results in July end markets have remained “subdued” and is expected to continue for the rest of the year.

Steel markets have remained relatively flat with the latest World Steel Association global production statistics, excluding China, showing a 1.5% drop compared to last year. It has been partly mitigated by growth in India, driven by strong domestic demand and growth in exports.

Foundry markets remain mixed. Auto and heavy truck sales are varying by region while other foundry sectors such as agriculture, mining and rail remain “challenging”.

Despite the challenges, the group said restructuring measures will benefit profit margins. Vesuvius has raised its 2017 annualised savings target by £5m to £30m at a cost of £40m, up from a previous £35m.

As part of the restructuring, the company has closed plants Avezzano and Cagliari in Italy.

Meanwhile, a weaker pound against other currencies will provide a boost to the group’s full year results. It has provided a trading profit benefit of about £7m year to date. “Assuming current foreign exchange rates continue, the estimated benefit would increase to £11m for the full year,” the company said.

Vesuvius added that it continues to generate strong cash flows during the quarter but the weaker sterling against the dollar will negatively impact net debt. The group is focusing on tight working capital management in order to release cash.