Currency still a headwind for Vesuvius

The FTSE 250 firm said it had made good progress in addressing the temporary headwinds faced in 2017, and as a result, trading performance had exceeded expectations in the first quarter.

That performance underpinned the board's confidence in revising its expectations for trading performance for the full year to be marginally above previous guidance, despite a foreign exchange headwind, Vesuvius said.

In the first quarter, the group said it benefitted from continued growth in steel production, which increased 2.8% year-on-year in the world excluding China and 4.1% including China, as reported by the World Steel Association.

In foundry, the market environment also remained positive across the majority of the company’s end markets.

Vesuvius said its sales volume growth continued to outperform underlying market growth.

“For raw materials, our price pass through has been successfully implemented and the headwind addressed,” the board explained in its statement.

“Flow control's European production has been ramped up and successfully met the increased demand experienced in the first quarter of 2018.

“Delivery of our previously communicated restructuring programmes has continued as planned during the quarter.”

Vesuvius said the net impact of average first quarter exchange rates compared to 2017 averages had been a first quarter headwind of approximately £1.6m, with the main driver being a 7.9% strengthening in sterling against the dollar.

All things being equal, if month-end March rates were to persist for the remainder of the year, the board said it expected that would impact its 2018 trading profit by around 4.7%.

“Working capital management continues to show incremental improvement and cash flow remains strong, which has further reduced our net debt position at the end of the first quarter,” the board added.