28 July 2022

                                                                                                                                                                                                               

Half Year Results for the six months ended 30 June 2022

Strong financial performance driven by full mitigation of inflationary pressures and market share gains

Vesuvius plc, a global leader in molten metal flow engineering and technology, announces its unaudited results for the six months ended 30 June 2022.

 

Financial summary		H1 2022 (£m)	H1 2021 (£m)	Year-on-year change	Underlying change(1)
Revenue		1,015.9	808.1	+26%	+21%
Trading Profit (2) (adjusted EBITA)		127.4	73.3	+74%	+69%
Return on Sales (2)		12.5%	9.1%	+340 bps	+350 bps
Operating Profit		122.3	68.5	+79%
Profit Before Tax		116.7	65.5	+78%
Headline Profit Before Tax (2)		121.8	70.3	+73%
Profit		84.9	46.3	+83%
Headline Earnings (2)		84.7	48.5	+75%
Statutory EPS (pence)		30.0p	15.9p	+89%
Headline EPS (2) (pence)		31.4p	17.9p	+75%
Adjusted operating cash flow (2)		33.1	37.9	(13%)
Cash generated from operations		69.0	50.2	+37%
Net Debt (2)		327.7	196.6	+67%
Dividend (pence per share)		6.5p	6.2p	+5%

 

 ⁽¹⁾ Underlying basis is at constant currency and excludes separately reported items and the impact of acquisitions and disposals.

⁽²⁾ For definitions of non-GAAP measures, refer to Note 15 in the Condensed Group Financial Statements.

 

Half Year 2022 Highlights

·       Revenue of £1,015.9m, an increase of +21% on an underlying basis

·       Trading profit (adjusted EBITA) of £127.4m, an increase of 69% on an underlying basis

·       These increases were driven by:

o  Selling price increases to fully mitigate inflationary pressures and cover the price lag from 2021

o  Market share gains across both divisions

o  Predicated on the relevance of our technology-driven business model that provides value for customers

·       Positive volume growth of c.2% in our Steel Division (excluding the impact of Universal business acquisition) in the world excluding China and Iran, despite a 4% decline in the corresponding steel production. Volume decline in China was limited to c.1% despite a 6.5% decline in the corresponding steel production. Flow Control volume growth worldwide was above the average of the Steel division

·       Despite market share gains, the Foundry division saw a decline in volume of c.3% due to continued weakness in the automotive market. It however delivered strong volume growth in key developing markets including Turkey (+9%), Brazil (+8%) and Vietnam (+6%)

·       The integration of the Universal Refractories business is proceeding as planned and performance remains ahead of our expectations

·       Strategic capacity expansion in Flow Control in Asia and EMEA remains on track

·       Trade working capital/sales increased, as planned, to mitigate supply chain disruptions, reaching 22.8% (12m average) versus 20.9% at FY2021

·       Net debt /adjusted EBITDA⁽²⁾ of 1.3x at 30 June 2022 versus 1.4x at FY2021

·       Doubling of our 2025 target for carbon footprint reduction from 10% to 20% (versus 2019 levels) and introducing an additional 2035 target of a 50% reduction

·       Proposed interim dividend of 6.5p, a 5% increase on the prior year

 

Comment from Patrick André, CEO:

"Despite difficult market conditions, we achieved a record level of trading profit and profitability in the first half of 2022 thanks to the benefits of the restructuring of our manufacturing footprint over the past years and our continued investment in Research and Development. These results confirm the long-term profitability potential of our activity under normal market conditions and the importance of our technology driven business model.

 

"In the coming months, we expect a further deterioration of our market environment. Vesuvius is, however, well prepared to confront this temporary slowdown thanks to our lean, entrepreneurial and decentralised organisation. This, together with the positive results of the first half, make us confident that full year Group trading profit (EBITA) will be towards the top end of the range of current analysts' expectations.⁽³⁾

 

"Beyond the current temporary slowdown of activity, we remain fully confident in the longer-term growth potential of both our Steel and Foundry end markets and are continuing at pace the implementation of our expansion programme through capital investments, in particular in Flow Control."

 

(2) For definitions of non-GAAP measures, refer to Note 15 in the Condensed Group Financial Statements.

(3) The range of analyst expectations as at 25 July 2022 for 2022 Trading Profit (EBITA) is between £155m and £199m compiled by Vesuvius.

 

Presentation of Half Year 2022 Results

Vesuvius management will make a presentation to analysts and investors on 28 July 2022 at 09.30 UK time at the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. For those unable to attend, the event will be livestreamed and can be accessed by clicking here. Participants can also join via an audio conference call. Please click here to register.  Once registered, you will be provided with the information needed to join the conference, including dial-in numbers and passcodes. Be sure to save this information in your calendar. 

 

For further information, please contact:
Shareholder/analyst enquiries:
Vesuvius plc	Patrick André, Chief Executive	+44 (0) 207 822 0000
	Guy Young, Chief Financial Officer Euan Drysdale, Group Head of Corporate Finance Rachel Stevens, Head of Investor Relations	+44 (0) 207 822 0000 +44 (0) 7584 641 315 +44 (0) 7387 545 271
Media enquiries:
MHP Communications	Andrew Jaques/ Rachel Farrington/Peter Lambie	+44 (0) 203 128 8570

 

About Vesuvius plc

 

Vesuvius is a global leader in molten metal flow engineering and technology principally serving process industries operating in challenging high‑temperature conditions.

 

We develop innovative and customised solutions, often used in extremely demanding industrial environments, which enable our customers to make their manufacturing processes safer, more efficient and more sustainable. These include flow control solutions, advanced refractories and other consumable products and increasingly, related technical services including data capture.

 

We have a worldwide presence. We serve our customers through a network of cost-efficient manufacturing plants located close to their own facilities, and embed our industry experts within their operations, who are all supported by our global technology centres.

 

Our core competitive strengths are our market and technology leadership, strong customer relationships, well established presence in developing markets and our global reach, all of which facilitate the expansion of our addressable markets.

 

Our ultimate goal is to create value for our customers, and to deliver sustainable, profitable growth for our shareholders giving a superior return on their investment whilst providing each of our employees with a safe workplace where they are recognised, developed and properly rewarded.

 

We think beyond today to create solutions that will shape the future for everyone. 

 

Forward looking statements

 

This announcement contains certain forward looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters.

 

Statements in this announcement that are not historical facts are hereby identified as "forward looking statements". Such forward looking statements, including, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Vesuvius, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of Vesuvius and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward looking statements. Such forward looking statements should, therefore, be considered in light of various important factors that could cause actual results to differ materially from estimates or projections contained in the forward looking statements. These include without limitation: economic and business cycles; the terms and conditions of Vesuvius' financing arrangements; foreign currency rate fluctuations; competition in Vesuvius' principal markets; acquisitions or disposals of businesses or assets; and trends in Vesuvius' principal industries.

 

The foregoing list of important factors is not exhaustive. When considering forward looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in documents the Company files with the UK regulator from time to time including its annual reports and accounts.

 

You should not place undue reliance on such forward looking statements which speak only as of the date on which they are made. Except as required by the Rules of the UK Listing Authority and the London Stock Exchange and applicable law, Vesuvius undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward looking events discussed in this announcement might not occur.

 

Vesuvius plc, 165 Fleet Street, London EC4A 2AE

Registered in England and Wales No. 8217766

LEI: 213800ORZ521W585SY02

www.vesuvius.com

Vesuvius plc

Half Year Results for the six months ended 30 June 2022

Vesuvius delivered its strongest ever half year performance, driven by full mitigation of inflationary pressures and market share gains

 

£m	H1 2022 Reported	Acquisitions / Disposals	H1 2022 Underlying		H1 2021 Reported	Currency	Acquisitions / Disposals	H1 2021 Underlying		Reported % Change	Underlying % Change
Revenue	1,015.9	(18.3)	997.6		808.1	13.7		821.8		25.7%	21.4%
Trading Profit	127.4	(2.9)	124.5		73.3	0.3		73.6		73.8%	69.1%
Return on Sales	12.5%		12.5%		9.1%			9.0%		+340bps	+350bps

 

Group trading performance  

In H1 2022, the Group generated revenues of £1,015.9m, an increase of 26% compared to H1 2021, on a reported basis. Underlying Group revenue, adjusted for the effects of currency translation and acquisitions/disposals, increased by 21%, driven primarily by selling price increases which fully mitigated inflationary pressures. Trading profit (adjusted EBITA) was £127.4m, an increase of 74% on a reported basis and 69% on an underlying basis. The Group achieved a return on sales of 12.5% in H1 2022, an increase of +340bps (+350bps on an underlying basis) which brings our return on sales for the last 12 months to 10.6%, in line with that delivered in 2019. This was our strongest ever half year performance, which was achieved despite a challenging back drop of steel production declines and broad-based inflationary pressures.

 

Market backdrop

Steel production in the world excluding China and Iran, which accounts for approximately 90% of Vesuvius' sales, decreased by -4% year-on-year to the end of June (Source: the World Steel Association), with all major geographies recording volume declines, except for India which grew by +9%. The production declines in EMEA excluding Iran, NAFTA and South America were -9%, -2% and -3%, respectively.

Non-automotive Foundry end-markets have achieved limited growth since H1 2021, with production in general engineering, mining & construction, power generation and railway & marine growing by +3%, +1%, +1% and -1%, respectively, according to Oxford Economics data.

This contrasts with global production of light vehicles and medium & heavy commercial vehicles which declined in H1 2022 versus H1 2021 by -3% and -28%, respectively, according to IHS data. Encouragingly, automotive end markets appear to have stabilised in H1 2022 versus H2 2021, with light vehicle volumes up +1% and medium & heavy vehicles up +5%. These figures are more likely to reflect a stabilisation than a return to growth given that automotive production is typically higher in H1 versus H2 as a result of summer plant shutdowns during the third quarter.

 

Strategic progress

Vesuvius' core strategic objective is to deliver long-term sustainable and profitable growth. We have a clear strategy to achieve this objective centred around our key execution priorities. We continued to make progress on these priorities in H1 2022, and believe we are well-positioned to deliver a robust performance in the coming months.

·      Reinforce our technology leadership

o  Maintained our industry-leading level of R&D investment, with a 19% increase in H1 2022 R&D spend to £17.6m, up from £14.8m in H1 2021

o  We are targeting a doubling in Robot Casting Technology ("RCT") customer installations by 2025

·      Develop our technical service offering and increase the penetration of our value-creating solutions

o  Flow Control: Continued development of our RCT range for the ladle make-up area. The Flow Control device and refractory consumables are tailor-made for robotic operations. These products increase the ergonomics of the process, consistency, productivity and reduce the cost of usage through greater efficiency of refractory consumption and reduced manpower requirement

o  Advanced Refractories: Further development of Vesuvius Advanced Robotic Gunning ("VARG"), where we have partnered with a major steel producer to commission the first VARG installation. VARG enables steel producers to undertake fully automated, "hands-free" furnace repair gunning on BOF enabled by a combination of advanced Vesuvius technology, systems and materials

o  Foundry: Product for the rotary cleaning of steel, a new steel treatment process that significantly reduces non-metallic inclusion defects in high integrity castings, reducing the need for costly rectification.

·      Capture growth in developing markets

o  Our Steel division delivered strong growth in Brazil, India, Vietnam and Turkey

o  Our Foundry division delivered strong growth in Brazil, Vietnam and Turkey

·      Improve our cost leadership and margins

o  Return on sales increased to 12.5%, up 350bps versus H1 2021

o  The Steel division return on sales improved 500bps to 13.7%, driven by the recovery of the cost headwinds which impacted the division in 2021 and 2022 and a favourable mix effect with higher sales of Flow Control products

o  The Foundry division achieved meaningful margin recovery compared to H2 2021, due to price increases and operational improvements at two important plants in Germany and the USA

 

Enhanced ambitious sustainability targets for reducing our carbon emissions

In alignment with our target to achieve net zero by 2050, we have enhanced our target for 2025 up to -20% (vs. 2019 levels), compared to our earlier target of -10%, which we exceeded in 2021. We have also added a staging-point target of -50% by 2035. Both targets are supported by a roadmap of actions to deliver these savings, including planning our first pilot study to convert gas kilns to electricity.

 

Good progress in integration of the Universal Refractories Inc ("Universal") business

Following the acquisition of the Universal business in December 2021, it has made a strong contribution to the Group to date, slightly ahead of plan. The acquisition reinforces our core tundish business (within Advanced Refractories) and expands our presence amongst the growing electric arc furnace ("EAF") steel producers in North America, while also further strengthening our Foundry business. During this initial period of integration, we have sought to maintain and develop the strong elements of the business, while realising synergies through the consolidation of both Advanced Refractories and Foundry production lines. We have also implemented our global health and safety standards and brought managers on to our incentive schemes, such that they have a financial interest in the performance of Vesuvius. These actions, combined with regular communication with the employee base, has facilitated high employee retention through the transition period.

 

Foreign exchange

The net impact of average H1 2022 exchange rates compared to 2021 averages has been an H1 2022 tailwind of approximately £2.6m at a trading profit level. The implied impact of average H1 2022 exchange rates, when compared to average 2021 exchange rates, would be a tailwind of 3% on our 2022 full year trading profit.

 

Selling price increases have fully mitigated all inflationary pressures

Our active management of selling prices has successfully offset all cost inflation to date, with the recovery in full of the cost headwind that impacted the Group in 2021. Our H1 2022 results bring our LTM margin to 10.6%, in line with that delivered in 2019. We do not expect raw material costs to continue to increase in 2022, although broader based inflation, energy and labour costs remain under pressure.

 

Working capital

As indicated previously, we have continued to see working capital growth in early 2022 due to higher business activity and our decision during 2021 to build-up raw material inventory to counteract the risk of supply chain disruption and ensure customer deliveries. This resulted in an increase in trade working capital/sales to 22.8% (12m average) versus 20.9% at year-end 2021.

 

A reduction of working capital intensity is contingent on an improved supply chain, which is not expected until late in 2022 or early 2023.

 

 

Tax

Our headline Effective Tax Rate ("ETR") for H1 2022 was 27.5% (H1 2021: 26.5%). This resulted in an H1 2022 headline tax charge of £33.2m (H1 2021: £18.5m).

 

Capital expenditure

Capex for the period was £38.6m, over double that in H1 2021 of £17.6m. Major projects included are the significant investment in additional Flow Control capacity at the Skawina plant in Poland, to support the growing EEMEA market, and the Flow Control capacity expansion in Kolkata, India to serve the fast-growing markets of both India and South-East Asia. 

 

Financial position and liquidity

As at 30 June 2022, Net Debt was £327.7m, up from £277.1m at the end of 2021. Our adjusted operating cash flow was £33.1m, after payment of £40.5m of dividends, £5.3m of net finance costs, and £23.6m of income taxes.

 

Our Net Debt/adjusted EBITDA ratio was 1.3x at 30 June 2022, versus 1.4x at 31 December 2021. This provides us with significant headroom against our debt covenant limit of 3.25x net debt/adjusted EBITDA. Our available committed liquidity was £416m at 30 June 2022, compared to £456m at 31 December 2021.

 

Quality, health and safety

The Board and the entire leadership team of Vesuvius place great emphasis on the importance of quality, health and safety in the workplace and in the communities in which we operate. Reliability in quality and delivery is vital to our customers as they use Vesuvius' products in critical areas of their own processes. The level of risk attached to a catastrophic failure is often such that, for people and equipment, no compromise can be accepted. We achieved a Lost Time Injury Frequency Rate (LTIFR) of 1.07 in the first half of 2022, broadly in-line with our record low level of 1.06 which we achieved in 2021.

 

Exposure to hostilities between Russia and Ukraine

We have ceased trading with all sanctioned customers in Russia. In parallel, having considered the approach taken by the majority of our peers and the effectiveness of stopping all trade with Russia, in that context we have now resolved to continue to supply non-sanctioned customers in Russia.

 

Potential gas supply issues in Europe

At the time of writing, there is political uncertainty regarding the sustainability of gas supplies from Russia into Europe over the coming months, which could impact both our operations and those of our customers. We have been reviewing possible scenarios and have put in place mitigation plans to support our operations in Europe, including, if necessary, the mobilisation of available production capacity in India, Mexico, the Middle East and China. As a result, we anticipate that we will be able to continue providing essential products and services to our European customers even in the case of a complete cessation of Russian gas imports. Furthermore, as our most energy intensive European based manufacturing processes were closed or transferred out of Europe in the framework of our European footprint restructuring two years ago, our exposure to rising European energy prices is now relatively limited.

 

Interim Dividend

The Board has declared an interim dividend of 6.5 pence per share, which is a 5% increase on the interim dividend for H1 2021 of 6.2 pence per share.

 

The interim dividend will be paid on 16 September 2022 to shareholders on the register at the close of business on 5 August 2022. Any shareholder wishing to participate in the Vesuvius Dividend Reinvestment Plan needs to have submitted their election to do so by 25 August 2022.

 

Outlook

In the coming months, we expect a further deterioration of our market environment. Vesuvius is, however, well prepared to confront this temporary slowdown thanks to our lean, entrepreneurial and decentralised organisation. This, together with the positive results of the first half, make us confident that full year Group trading profit (EBITA)⁽¹⁾ will be towards the top end of the range of current analysts' expectations.⁽²⁾

 

Beyond the current temporary slowdown of activity, we remain fully confident in the longer term growth potential of both our Steel and Foundry end markets and are continuing at pace the implementation of our expansion programme through capital investments, in particular in Flow Control.

 

(1)      For definitions of non-GAAP measures, refer to Note 15 in the Condensed Group Financial Statements.

(2)      The range of analyst expectations as at 25 July 2022 for 2022 Trading Profit (EBITA) is between £155m and £199m compiled by Vesuvius.

 

Operational Review

Vesuvius comprises two Divisions, Steel and Foundry. The Steel Division operates as three business lines, Flow Control, Advanced Refractories and Sensors & Probes.

 

Steel Division

Steel production in the world excluding China and Iran, which accounts for approximately 90% of Vesuvius' sales, decreased by 4% year-on-year to the end of June, with all major geographies recording volume declines, except for India which grew by9%. The production declines in EMEA excluding Iran, NAFTA and South America were -9%, -2% and -3%, respectively.

 

Vesuvius' Steel Division reported revenues of £744.0m in H1 2022, an increase of 31% compared to
H1 2021 on a reported basis. On an underlying basis, Steel Division revenue was up 25% (2% volume), with particularly strong performance in Turkey, Vietnam and India, where volumes grew 71%, 18% and 8%, respectively.

 

Flow Control strongly outperformed steel production in all regions, with underlying sales growth of 25% (4% volume growth). Volume growth in the world excluding China and Iran was 5%, versus a steel production decline of -4% in the year to June, reflecting our ability to continue gaining market share, even in a difficult cost and pricing environment, thanks to the technological differentiation of our product range. In Advanced Refractories, we achieved underlying sales growth of 24%, which included a volume decline limited to -1% (excluding the impact of the Universal business acquisition), as compared with a decline of 4% of world Steel volumes outside of China and Iran (-6.5% in China).  

 

Steel Division trading profit improved 106% to £101.7m. Return on sales expanded 500bps to 13.7%, driven by two key factors: (1) recovery of the cost headwind that impacted the Group in 2021 and 2022 and (2) a positive mix effect due to higher volume growth in the more profitable Flow Control products.

 

Steel Division		H1 2022 (£m)	H1 2021 (£m)	Change (%)	Underlying change (%)
Flow Control Revenue		402.6	315.5	28%	25%
Advanced Refractories Revenue		320.8	238.6	35%	24%
Steel Sensors &Probes Revenue		20.6	16.2	27%	22%
Total Steel Revenue		744.0	570.3	31%	25%
Total Steel Trading Profit		101.7	49.4	106%	97%
Total Steel Return on Sales		13.7%	8.7%	+500bps	+500bps

 

 

Flow Control

The Flow Control business unit supplies the global steel industry with consumable ceramic products, systems, robotics, digital services and technical services. These products are used to contain, control and monitor the flow of molten steel in the continuous casting process. The consumable ceramic products that Vesuvius supplies have a short service life (often a matter of a few hours) due to the significant wear caused by the extremely demanding environment in which they are used. These products must withstand extreme temperature changes, whilst resisting liquid steel and slag corrosion. In addition, the ceramic parts in contact with the liquid steel must not in any way contaminate it. The quality, reliability and consistency of these products and the associated robotic solutions and digital services we provide are therefore critical to the quality of the finished metal being produced and the productivity, profitability and safety of our customers' processes.

 

Flow Control Revenue		H1 2022 (£m)	H1 2021 (£m)	Change (%)	Underlying change (%)
Americas		155.4	101.9	53%	43%
Europe, Middle East & Africa (EMEA)		142.2	124.1	15%	19%
Asia-Pacific		105.0	89.4	17%	13%
Total Flow Control Revenue		402.6	315.5	28%	25%

 

In H1 2022, underlying revenues in the Group's Flow Control business increased by 25% year-on-year to £402.6m, driven by significant price increases and market share gains in all regions.

 

In EMEA excluding Iran, revenues grew 19% year-on-year on an underlying basis, resulting from significant price increases and a volume decline of -4%, which represents an outperformance versus steel production which declined by -9% in the year to June. Our outperformance in the region was greatest in Eastern Europe, Middle East and Africa ("EEMEA") (excluding Iran), where we experienced a volume decline of only -5% versus a -12% decline in steel volumes.

 

In the Americas, underlying revenues grew 43%, also driven by significant price rises. On a volume basis, we outperformed steel production growth in key markets including Mexico, Brazil and the United States, where our volumes grew 6%, 5%, and 1%, respectively, versus steel production decline in the year to June of -1%, -3% and -2% respectively.

 

In Asia Pacific, revenues grew +13% on an underlying basis, which included a mix of both price rises and volume increases. On a volume basis, we outperformed steel production growth in key markets such as Japan, Vietnam, India and China where our volumes changed +16%, +18%, +13% and -2%, respectively, versus changes in steel production in the year to June of -4%, -7%, +9% and -6%.

 

 

Advanced Refractories

The Advanced Refractories business unit supplies complete value-added solutions to its customers including specialist refractory materials and advanced installation technologies which harness mechatronic solutions, computational fluid dynamics capabilities and lasers. The specialist refractory materials are subject to extreme temperatures, corrosion and abrasion, they are in the form of powder mixes, which are spray-applied or cast onto the vessel to be lined ('monolithics') and refractory shapes (e.g. bricks, pads, dams and other larger precast shapes). The service life of the products that Advanced Refractories supplies into the steel making process can vary (some a matter of hours and others for a period of years) based upon the type of refractory and the level of wear caused by the demanding environment in which they are used. An integral part of our success depends upon our best-in-class installation technologies which improve the consistency and performance of installed Vesuvius refractories as well as the high level of collaboration with our customers.

 

Advanced Refractories Revenue		H1 2022 (£m)	H1 2021 (£m)	Change (%)	Underlying change (%)
Americas		120.1	80.3	50%	20%
Europe, Middle East & Africa (EMEA)		120.1	90.3	33%	34%
Asia-Pacific		80.6	68.0	19%	16%
Total Advanced Refractories Revenue		320.8	238.6	35%	24%

 

Advanced Refractories reported revenues of £320.8m in H1 2022, an increase of 24% on an underlying basis, driven by significant price rises and an outperformance of steel production volumes in several key regions, as we regained market share lost in 2021, when we were a first mover in raising prices to offset inflationary pressures.

 

On an underlying basis, revenues grew 20% in the Americas driven by price rises. In EMEA excluding Iran, underlying revenues grew by 34% during the period, driven by significant price rises and a volume decline of -4%, which represents a material outperformance of steel production, which was down -9% in the year to June.

 

In Asia Pacific, revenues grew 16% on an underlying basis, which included a mix of both price rises and volume increases. On a volume basis, we outperformed steel production growth in key markets such as Vietnam and China where our volumes grew 17% and 2%, respectively, versus steel production declines in the year to June of -7% and -6%.

 

Steel Sensors & Probes

The Steel Sensors & Probes business unit offers products to our customers to enable them to make their underlying processes more efficient and reliable. The business unit focuses on providing a range of products that enhance the control and monitoring of our customers' production processes, complementing Vesuvius' strong presence and expertise in molten metal engineering. These products include temperature sensors, oxygen, hydrogen and sublance probes, iron oxide and metal sampling for the steel, aluminium and foundry industries. By using these technologies, customers can focus on critical parameters within their processes, enabling them to refine their production methods to improve quality, lower production costs and maximise efficiency.

 

Steel Sensors & Probes Revenue		H1 2022 (£m)	H1 2021 (£m)	Change (%)	Underlying change (%)
Americas		13.8	10.5	31%	22%
Europe, Middle East & Africa (EMEA)		6.6	5.7	16%	21%
Asia-Pacific		0.2	0.1	287%	298%
Total Steel Sensors & Probes Revenue		20.6	16.2	27%	22%

 

Revenues in Steel Sensors & Probes were £20.6m in H1 2022, representing an underlying increase of 22% year-on-year. The strong performance was driven by price rises as well as new customer wins in both the Americas and EMEA.

 

Foundry Division

The Foundry Division is a world leader in the supply of consumable products, technical advice and application support to the global foundry industry to improve the performance and quality of ferrous and non-ferrous castings. Vesuvius operates under the brand FOSECO in the foundry market. The foundry process is highly sequential and is critically dependent on consistency of product quality and productivity optimisation. Working alongside customers at their sites, our engineers provide on-site technical expertise in addition to advanced computational fluid dynamics capabilities to develop the best customised solutions. The conditioning of molten metal, the nature of the mould used and, especially, the design of the way metal flows into the mould are key parameters in a foundry, determining both the quality of the finished castings and the labour, energy and metal usage efficiency of the foundry. Vesuvius' products and associated services to foundries improve all of these parameters.

 

Foundry Division		H1 2022 (£m)	H1 2021 (£m)	Change (%)	Underlying change (%)
Foundry Revenue		271.9	237.8	14%	14%
Foundry Trading Profit		25.7	23.9	7%	9%
Foundry Return on Sales		9.5%	10.1%	-60bps	-40bps

 

Despite an improved level of trading profit resulting from successful price increase initiatives, the profitability of the Foundry division in H1 2022 as measured by return on sales was negatively impacted by a significant volume decline in the light and heavy vehicles markets as compared with H1 2021, which was not compensated by the slight improvement in other markets.

 

Global production of light vehicles and medium & heavy commercial vehicles declined in H1 2022 versus H1 2021 by -3% and -28%, respectively, according to IHS data. Encouragingly however, automotive end markets appear to have stabilised in H1 2022 versus H2 2021, with light vehicle volumes up 1% and medium & heavy vehicles up 5%. These figures are more likely to reflect a stabilisation than a return to growth given that automotive production is typically higher in H1 versus H2 as a result of summer plant shutdowns during the third quarter.

 

Automotive production remains for the time being significantly below the pre-covid level of 2019, with global light vehicle production in H1 2022 versus H1 2019 down -16% and medium & heavy commercial vehicles down -22%, due to supply chain constraints such as the persistent semi-conductor shortage.

 

In parallel, non-automotive Foundry end-markets have only achieved limited growth globally since H1 2021, with production in general engineering, mining & construction, power generation and railway & marine changing by +3%, +1%, +1% and -1%, respectively, according to Oxford Economics data.

 

Vesuvius' Foundry Division reported revenues of £271.9m in H1 2022, an increase of +14% compared to H1 2021 on a reported basis. On an underlying basis, Foundry Division revenue was up +14%. This increase in revenues was driven by price increases despite a low single digit volume decline due primarily to continued weakness in automotive end markets.

 

The Foundry Division's margin, albeit lower than H1 2021, shows a meaningful recovery compared to H2 2021 (+240bps), when trading profit was negatively impacted by operational issues at two important plants in Germany and the USA as well as the time lag between price and cost increases, which has now been fully eliminated. Good progress has been made in resolving these operational issues and we expect them to be fully eliminated during 2022.

 

When compared to H1 2021, trading profit increased by 9% on an underlying basis to £25.7m.

 

 

Foundry Revenue		H1 2022 (£m)	H1 2021 (£m)	Change (%)	Underlying change (%)
Americas		67.2	48.6	38%	25%
Europe, Middle East & Africa (EMEA)		116.9	104.4	12%	18%
Asia-Pacific		87.7	84.7	4%	2%
Total Foundry Revenue		271.9	237.8	14.3%	13.5%

 

Foundry revenues in the Americas grew 25% year-on-year on an underlying basis, which reflects a significant increase in prices in addition to single digit volume growth in key end markets such as Brazil (8%), Mexico (3%) and the United States (3%). Volumes in the Americas benefitted from positive year-on-year growth in NAFTA automotive production.

 

In EMEA, underlying revenues increased by 18% compared to H1 2021, which was driven by price increases. Volumes posted a low single digit decline, driven by production declines of greater than 10% in both the light vehicle and medium & heavy vehicles markets.

 

In Asia Pacific, sales increased by 2% on an underlying basis, with a low single digit volume decline driven by weakness in China due to two key factors: the impact of further lock-downs resulting from an increase in Covid-19 infections; and a decline in automotive production with light vehicle and medium and heavy vehicle production down -5% and -52%, respectively.