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Vesuvius plc releases trading update in Q3 2022

2022-12-02

Dec. 2, 2022 - Vesuvius plc, a global leader in molten metal flow engineering and technology, announced the following update covering trading in the period 1 July to 31 October 2022.


Summary

·      End markets have been weak during the second half to date, as expected

·      Vesuvius has continued to gain market share due to technological differentiation underpinned by R&D investment while passing through cost inflation

·      We now anticipate 2022 performance to be somewhat above expectations

·      We remain cautious on FY23 with some impact from continuing inventory reduction expected in the first half

·      Future market fundamentals remain attractive and we continue to invest to support medium term growth


Weakening end markets

In line with expectations, steel production has been weakening everywhere except in India which has shown moderate growth year to date. The impact of rising energy prices is particularly impacting European steel producers, with numerous shutdowns of blast furnaces announced and output curtailment from electric arc furnace mills. The impact in NAFTA is less severe to date.

 

While the light vehicle market is showing slight signs of improvement from an historically low level, most other Foundry markets are weakening, in line with the general economic environment. This is particularly the case in EMEA where the negative differential in energy prices with other world regions is strongly impacting the competitiveness of the industrial sector.

 

Resilient trading

Vesuvius has continued to outperform and gain market share, thanks to the technological differentiation of our products and solutions, resulting from our strong and continued investment into research and development.


At the same time, we have successfully pursued the dynamic management of our prices to compensate for the continuing increase of our cost factors resulting from the general inflationary environment. We have also initiated cost reduction action plans to adapt to the economic environment and prepare for an uncertain 2023.

 

Medium-term growth Initiatives on track

The future market fundamentals of both our steel and foundry markets remain positive and we continue to successfully implement our strategic initiatives to optimally position Vesuvius to benefit from this growth, in the medium term.

 

Our strategic expansions of capacity in high margin Flow Control products to support the growth regions of Turkey, Middle East Africa, India and South-East Asia are on track and will be fully operational by the end of 2023. In addition, we have now broken ground on a new Flux plant in India, which is due to be commissioned in early 2024.

   

On 8 October 2022, we acquired Bayuquan Magnesium Co (BMC), a world class basic monolithic refractory plant in China with revenues of RMB 120 million (c. £14 million) in 2021. BMC has been a long-standing manufacturing partner of Vesuvius Advanced Refractories and in recent years has supplied us with 100% of its production volumes. The acquisition secures strategically valuable basic monolithic volumes at a plant which benefits from very competitive local raw material access. It will support our further development in China, South-East Asia and North Asia.

 

Outlook

As anticipated, both our steel and foundry end markets are continuing to weaken in the short term.  However, due to our continuing market share gains, dynamic price management, cost reduction actions and a more gradual unwind of inventory, we now expect to deliver results somewhat above the analyst range of expectations(1) for the year to 31 December 2022.

 

Looking to 2023, visibility remains low and the precise timing of a return to growth is very difficult to predict. The unwind in our own inventory levels, which is a drag on fixed cost absorption, will continue into H1 of FY23. In this uncertain environment, we are simultaneously preparing to reinforce our cost reduction actions as necessary and maintaining the pace of our long-term growth initiatives to benefit fully from the market rebound when it materializes.  

 

Note

(1)   Company-compiled consensus for trading profit to 31 December 2022 is £199.7m, with a range of £194.0m to £209.4m, based on estimates published since our HY results on 28 July 2022.

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