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Vesuvius PLC reported stable revenue for Q1 2025 compared to the same period last year, despite facing increased labor and raw material costs. The company anticipates full-year results slightly below previous guidance. Following the announcement, Vesuvius’ stock price fell by 2.56%, closing at 374.6, which is below its 52-week high of 509. According to InvestingPro analysis, the company maintains strong financial health with a current ratio of 2.03, indicating robust liquidity to meet short-term obligations.
Key Takeaways
- Q1 revenue remained consistent with the previous year.
- Trading profit impacted by higher labor and raw material costs.
- Stock price declined by 2.56% post-announcement.
- Cost-saving initiatives aim for £45 million in savings.
- Cautious outlook for the second half of 2025.
Company Performance
Vesuvius PLC’s performance in Q1 2025 showed resilience in maintaining revenue levels despite challenging market conditions. The company is navigating through increased costs and a competitive environment by focusing on technological differentiation and market share gains across its business units. The global decline in steel production and weak demand in end markets have posed additional challenges, particularly in Europe.
Financial Highlights
- Revenue: Consistent with the prior year.
- Trading profit: Lower due to increased costs.
- Cost savings: Targeting at least £45 million.
Market Reaction
Following the earnings call, Vesuvius’ stock experienced a decline of 2.56%, reflecting investor concerns over rising costs and a cautious outlook. The stock is currently trading below its 52-week high of 509, suggesting market apprehension despite the company’s strategic initiatives.
Outlook & Guidance
Vesuvius remains cautious about economic activity in the second half of 2025, with expectations for a more significant improvement in 2026. The company is adjusting its H1/H2 split expectations and continues to monitor economic uncertainties closely. Future earnings per share are forecasted at 0.59 USD for FY2025 and 0.64 USD for FY2026, with revenue projections of 2.42 billion USD and 2.47 billion USD, respectively. Trading at a P/E ratio of 10.48, the stock offers value potential, as highlighted in the detailed financial analysis available on InvestingPro, which covers over 1,400 stocks with comprehensive research reports.
Executive Commentary
CEO Patrick Andre emphasized the strength of Vesuvius’ technologically differentiated business model and highlighted India’s growth potential as a bright spot. Andre also noted the necessity of price adjustments in response to rising costs, indicating a strategic approach to maintaining profitability.
Risks and Challenges
- Increased labor and raw material costs impacting profitability.
- Global steel production decline affecting market demand.
- Economic uncertainty, particularly in Europe, posing challenges.
- Competitive pressures in the manufacturing sector.
- Dependence on successful integration of recent acquisitions like Pyromet.
Q&A
During the earnings call, analysts inquired about pricing strategies amidst rising costs and the progress of cost-saving measures. Discussions also focused on market conditions in the steel and foundry segments, with particular interest in the company’s strong position in the Indian market.
Full transcript - Vesuvius PLC (VSVS) Q1 2025:
Conference Moderator: Good day, ladies and gentlemen, and welcome to the Vesuvius PLC Spring Trading Update. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session through the phone lines and instructions will follow at that time. I would like to remind all participants this call is being recorded. I will now hand over to the CEO of the CCS PLC, Patrick Andre, to open the presentation.
Please go ahead.
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Good morning, everyone. So my name is Patrick Andre. I am the chief executive officer of the business use, and with me this morning is Mark Collis, our chief financial officer. So we’ll update you about our trading performance in q one this year. The key message is that we’ve performed well with both revenue and trading profit in line with our expectations.
This was in the context of challenging end markets with on the steel side, global steel production remaining at a fairly low level, declining by 0.8% as compared with last year in the world, excluding China, Iran, Russia, and Ukraine. And in country end markets, even more difficult markets, as you know, because from the end markets, we have said that they were down on around 8% as compared with last year. This being said, as compared with q one last year, but remaining more or less flat as compared with the level of q four two thousand twenty four. The overall revenue top line was consistent with the one of the same period last year. Thanks to market share gains, positive market share gains in all three business units and fees thanks to our technological differentiation.
We have a very slight price decline of 0.5%. So decline, but very more than this one. Our trading profit, however, was lower than last year. This was expected, but it was lower than last year due to increase in our cost of labor and cost of raw materials, which in the first in the first quarter, beginning of the year, we could not offset with price increases. However, we are now planning to pass price increases for the rest of the year to compensate at least part of this this cost increases.
We continue to make very good progress in our future cost reduction program, and we are now very confident that we are on track to deliver at least £45,000,000 cost savings by 02/1928. And we continue to maintain on top of this a very tight control on all discretionary spend. The acquisition of Pyromet, which was completed earlier this year, is giving satisfaction, and we are making good progress with the integration of Pyrometh. Regarding the remaining of the year, we now anticipate our full year results to be slightly lower than our previous guidance on a constant currency basis with a level of uncertainty which remains high, of course, in the current context. This revision slightly down of our forecast is linked to more cautious approach of the second half of the year and as compared with what we were forecasting a couple a couple of months ago.
Looking ahead, we remain confident in the strength of our technologically differentiated business model, and we remain positive for the future year. Thank you very much for your attention, and then I now propose to open the floor for questions.
Conference Moderator: We’ll pause for a moment to send for the queue. We will take our first question from the line of Ashanti Mahanjala from JPMorgan. Your line is open. Morning, guys. Thanks for taking my my questions.
The first is on pricing, please. Just just in terms of to get a bit more color on on sort of pricing power and and sort of why you couldn’t offset cost. I guess, I appreciate markets are tough, but I would just we could get some color about the three main main businesses. And and then I guess, as as a follow-up, in terms of putting those price increases through now, I mean, how confident are you that you can do that, I guess, without losing market share going forward given the backdrop of tough, also, I guess, speaking about tariffs, etcetera as well. It’s just, like, a half off that you will be able to offset all that given the full the full commentary at the at the start of the year.
So that would be my my first question, please. And and then the second is just on the cost savings. At least 45,000,000, it sounds like a bit more confident than you were two three months ago. I guess how does that translate to from this year and and the full 12 to 40,000,000 that that you’ve got for at the start of the year, I guess. So that’s I guess to that.
Thank you. Thank you.
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Thank you very much. On your first question, clearly, we we see a more difficult pricing environment in all of three business units, both in steel and and in foundry. And this is linked to the fact that, first, of many of our customers, and we we understand that that are in a difficult situation in most places in the world and especially in Europe. So they are requesting for price decrease in the current environment. And at the same time, we have very aggressive competition everywhere, which creates an environment where passing price increases has been over the past few months more difficult than usual.
This being said, and even if we we we support our customers, we have to pass pricing figures. I believe that there is a global realization that those price increases are absolutely necessary to cover our cost increases. This is a high decision long term, including for our customers. And so we are now passing pricing figures in most parts of the world. And, yes, I am confident even if the the environment is sometimes a psychologically difficult one for understandable reasons.
I am confident that we will be able to pass those pricing figures to compensate. Or this year, probably only partially on the cost increase, but we believe that our business model to fully compensate cost increases with price increases remains absolutely and completely valid. The speed at which we will pass those price increases will probably be a little bit lower this year than usual, but the price increases will be passed. And by the way, are in the process of being passed as we speak because we are increasing prices as we speak. On the on the second point, cost savings, we are, I would say, a bit ahead of our expectations.
We are doing well, even very well in terms of cost cost decrease with a very good job being done by our teams all over the world to to show courage and determination in in cutting costs. And it’s not only short term discretionary plan, it’s really long term structural cost improvement. I’m very happy with the the job that our teams are doing worldwide. This is why we are now expecting to deliver at least £45,000,000 recurring cash cost savings by 02/1928. We will update the market regarding the year ’25, the in year ’25 savings at midyear, but we are working hard to do a bit better than what we previously guided on.
Conference Moderator: Okay. And so can I sort of follow-up on that stuff on the first part of pricing? So all your competitors now increasing pricing as well, just to clarify on that point?
Patrick Andre, Chief Executive Officer, Vesuvius PLC: We we see globally a realization that prices actually increase. Is it all of our competitors we we see in the coming months? But I would say we we we see, I think, in the way they talk about it, including in open communication, we we we we see a gradual realization that that when your cost increases when your cost increase, you have to increase your prices. So so I’m I’m I I believe that, generally speaking, the the industry is realizing that price increases are absolutely necessary. Yes.
Conference Moderator: K. Brilliant. Thank you very much. Your next question comes from the line of Steven Klepp from HSBC. Your line is open.
Stefan Klepp, Analyst, HSBC: Yeah. Hi. Good morning, guys. I’m a
Patrick Andre, Chief Executive Officer, Vesuvius PLC: little bit confused. So the last time
Stefan Klepp, Analyst, HSBC: we stepped together was on the March 6 when you updated on the full year. Q one was nearly done, and we didn’t talk about any price inflation and cost pressure at that point in time, and that prices are down, we didn’t mention as well. So what has changed? I mean, at that point in time, in March, the quarter was nearly over. And now you’re telling us everything is in line with regard to your expectations.
You’re plugging that topic for the first time. So why is when everything is in line with expectations that you’re taking down your guidance for the full year? Can you just tell me all these things after you for me?
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Okay, Stefan. So it’s quite simple. Regarding prices, the difficulty, the more important difficulty to pass pricing season was completely integrated in our in our guidance. So this is not new. It’s a fact to explain the fact that our q one trading profit is lower than last year, but this, as we mentioned in our communication, is in line with our expectations.
So there is nothing new there as compared to what we are expecting. What is different from the discussions of two months ago is our vision of the level of economic activity in history, nothing to do with pricing. There is nothing different in pricing today than what we were forecasting two months ago. What is different that we we see we are not focused on the magnitude of improvement of market in H2 today than what we were two months ago. That’s I hope I’m clear, Stefan, but the the it’s really what I’ve said is market is not absolutely not the situation in pricing.
I do I’m very right to say we already on the March 6 and already end of last year, could see that the pricing environment was more difficult than we grow. So this was integrated in our guidance, including, by the way, the fact that we would increase prices at some point and recover and compensate, but slower than usual. And so this has not changed. What has changed is our vision of the level of economic activity worldwide in the manufacturing sector in particular, which is our customer sector in H2, where we are more cautious, clearly more cautious today because we see uncertainty remaining for longer than plan. The only information that the people have about the the the economic environment where they operate is for the next ninety days.
As long as as long as we people do not have a longer horizon to planning, they will remain in a wait and see attitude with a negative impact on the level of consumption and the level of demand. This is exactly what we are seeing today. And as we are already mid May and we still do not have a clear vision of which economic environment we will operate in our customers will operate in in the coming months, but they are being even more cautious than what we are plan we were planning forecasting in the coming months. So this is the only difference between today and the previous guidance.
Stefan Klepp, Analyst, HSBC: Cautiousness of customers. I get that. And then the visibility, I totally get that as well. Can you talk about your different segments in steel and it’s all about foundry, what client behavior is looking like at the moment?
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Sorry? What what kind of
Conference Moderator: customer behavior?
Stefan Klepp, Analyst, HSBC: Client behavior is looking like. So, yeah, customer behavior is looking like.
Patrick Andre, Chief Executive Officer, Vesuvius PLC: The the the first, everywhere, our customers are adapting their level of production to what they see of their own end demand. And you can see that even in The United States, Cleveland Cliffs announced a few days ago that they would idle free steel plants in The United States despite despite the fact that The United States is protected by important barriers for for steel. The demand for steel is slowing down because the economy the economy is slowing down. So steel prices are good in The US, but steel production is not is not extremely good because the end demand is is weakening. So we see everywhere, and I think it’s a good thing, our customer adapting their level of production to the level of free demand to avoid inventories going up, which I think is a very sound very sound behavior.
And you have some some regions where our customers are in more difficulties than other. Clearly, the regions which remain the most difficult in terms of situation of our customers is is EU plus UK, where our customers not only are confronted with a relatively weak level of demand, but the situation of the energy sector is not favorable to them and is not helping our customers improve their cost base. So so you Europe remains today, by far, the most difficult region for our customers. So we we we see more, I would say, nervous customers in Europe than in the rest of the world.
Stefan Klepp, Analyst, HSBC: And on foundry, still sorry. If you can touch what foundry same story with foundry?
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Foundry is a bit the same story, but we don’t see we don’t see our customers in foundry. We don’t see degradation of the mood of our customers in foundry. It’s more of a stabilization at relatively low level. The we see a degradation of the mood of our customers in steel in Europe. We don’t see a degradation of the mood of our customers in in foundry.
They they we don’t see a recovery yet in foundry, but there is no big addition in foundry. In steel, the level of production remains stable at the low level in Europe, but we we can see that some of our customers are becoming probably more pessimistic about their future.
Stefan Klepp, Analyst, HSBC: Okay. Thank you so much. As
Conference Moderator: a reminder, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. Your next question comes from the line of Harry Phillips from Peel Hunt. Your line is open. Yes. Good morning, everyone.
Three questions, please. The first is just thinking on the China remittance and what have you and the tax incurred on that. And I was just wondering and in my very modest accounting, I would have whacked that tax through as an exceptional rather than put it through as you’re doing. So just wondering about the rationale around that. The second is thinking about the tariff sort of commentary of two months ago in the context of your guidance, and then how that fits into the current guidance.
So does that sort of the tariff analysis of two months ago still applying now, and that’s sort of factored into what’s the slightly below comment. And lastly, just thinking of the first half, second half split with these variables in there, if if you had a sort of idea of how everything might work through in that context would be a great help, please.
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Thank you. Thank you very much, Harry. I will I will let Mark answer your your first question. I will take the the the second one and the third before handing over to to to Mark. Regarding the tariff, we the direct impact of tariff will probably be lower than planned because we we have a few millions of impact, but we will compensate we are compensating this with price increases in The US.
So so at the end of the day, the net impact of on tariffs will probably be relatively low, close to zero. What has changed as compared with two months ago is the indirect impact of uncertainty on the tariff environment. And and we really see the the level of activity, and in particular, the level of activity that we are forecasting in the second half, lower than what we thought two months ago because the uncertainty is remaining longer than planned. This brings me to your third to your third question. In terms of balanced H1, H2, we are more 45, 60 five, if not 47, 60 three.
So some improvement. We are still weighted on with an improvement in h two, but our improvement in h two as compared with h one is more moderate than what we thought a couple of months ago. We believe there is a good reason to remain cautious on the the magnitude of improvement in h two. We see the improvement coming more in ’26 than the the the magnitude of improvement being more in ’26 than in ’25. Mark, maybe you
Mark Collis, Chief Financial Officer, Vesuvius PLC: can take the first question. Yeah. So thanks, Harry. It’s a it’s a good question. So a one off tax cost of 3,400,000 is right on the borderline of whether it would be treated as a separate reported item or not.
So I suspect I will kind of reconsider that at the at the first half when we formally produce our results and discuss them with with our auditors. I think you’re you’re right, though. It’s it’s a it’s a withholding tax charge. Obviously, every time you do a dividend, you pay withholding tax. But what we’re doing here, obviously, is repatriating first the Smith amount of cash that was was surplus in China and then drawing down on a normal course loan in China.
And the reason we’re doing that is is basically to benefit from the differential interest rates between China and and and The UK and and Europe. So there is clearly a a costing curve to achieve, and there is clearly a recurring benefit on the lower interest charge. So I think I’ll take that into into consideration. And if I can push it through the order commission orders, I’ll probably end up putting it in separate reported items.
Conference Moderator: Fabulous. Thanks very much indeed. Your next question comes from the line of Jonathan Hunn from Barclays. Your line is open.
Jonathan Hunn, Analyst, Barclays: Hey, guys. Good morning. I just have a few questions, please. Firstly, I just wanted you to talk a little bit about the level of profitability that you’re seeing in the two divisions thus far this year. And also just just maybe focusing on on foundry.
Obviously, you talked about foundry revenue being flat sequentially q one versus q four. Can we expect profitability in foundry to be flat h one versus h two of last year? That was the first question. The second one is just on India. I just need to give you a bit
Conference Moderator: more detail. Also, we’re hearing about,
Jonathan Hunn, Analyst, Barclays: you know, pricing pressure sort of price downs coming through in that market. Could you
Conference Moderator: just sort of spread out what you’re seeing between the sort
Jonathan Hunn, Analyst, Barclays: of flow control business there and also your factory business? And then third and final question, which is actually on capital allocation and share buyback. It looks like we’re pretty much through the the 50,000,000 in terms of returning that back to shareholders. But, obviously, you’re a lot more cautious now on the outlook for for h two. In terms of sort of future capital return to shareholders, is that gonna get pushed further out?
When is the next possible chance of
Conference Moderator: that probably 2026? Over the question. Thanks.
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Thank you very much, Jonathan. On terms of profitability by by by by division, the steel division clearly remains, as we speak, more profitable than than the foundry division. The the foundry division, we are making good progress to address the profitability, but the steel division remains more profitable than the the French division as we speak. And and inside the steel division, the flow control is more profitable than advanced factories. So the usual pattern remains true today.
This being said, I think that even in a difficult market environment, we are taking strong action, which I believe will improve the profitability of the front division progressively over the next two, three years. And we are taking structural actions, which I’m very positive will improve the profitability of the foundry division from the low level where they were in h two last year. Where where will we be in foundry in h one this year? It’s a bit bit too early to to tell because some of the deep restructuring actions that we are taking will take time to produce an impact. At this stage, I would not give a guidance on the h one profitability of from this because actions take place to take time to to produce an impact.
But I’m quite positive about the fact that progressively over the coming months, the profitability of foundry will will increase. Regarding India, India, we are doing quite well. The India is and remains and and will be a very, very bright spot for for the reviews. We are growing fast in India in a very profitable way in both steel and foundry or in the steel division, both fuel control and advanced factories are growing fast and profitably. We are taking advantage of the new capacity increases that we have invested in in India over the past three years.
And these capacities are seeing fast, especially in flow control especially in flow control where we our sales are growing and and we’ll grow even more in in the coming in the coming months and years because we we have contracts, new contracts that are being signed and negotiated. And and we are already starting the engineering studies for a further expansion in cooking coal in in India. So we are very happy with the the way things are moving in the in the country. And as both the factory also is doing extremely well in in India growing fast, faster than the market in a very profitable way. So our it’s not only volume, it’s also profitability, which is good in India.
India is a difficult market because everybody that that that basically the most important the fastest growing market in our sector worldwide, which everybody wants to be there. But we have a we have a very strong team. We have made the right choices in terms of industrial investments with this top of the top of the year investment in top of the art new capacity, the best technology, the best production cost, both in our historical Kolkata plant and in our new Visas plant. So this gives us a huge momentum on the market. Customers are happy to see us developing.
So we are developing fast profitably and system that profitably. And and we continue we we we we clearly will continue to do so in in the coming year. Regarding the the share buyback, so our our last program, I just completed. Yeah. April 1.
First of April. And, yeah, there would be a regular discussion at the board about what do we do next. And I I don’t know if it will be this year or or next year, but I I what I can tell you is that it’s a regular topic of discussion at the board level and that’s share buyback at some point. I’m sure we’ll be rediscussed at the board level. So it’s a the the the last program which has been completed in most even if nothing is decided today, should not be seen as the last one going forward.
And just to
Mark Collis, Chief Financial Officer, Vesuvius PLC: give you a bit of color, Jonathan, I mean, we will we we are seeing our CapEx coming down now in terms of the full year guidance we gave. So it’s logical we would just look at where we stand as we head towards the end of next year. So where we are in leverage, where we are with potential acquisitions, etcetera, etcetera.
Jonathan Hunn, Analyst, Barclays: Okay. Very clear. Got it. Thanks very much.
Conference Moderator: As a reminder, if you wish to ask a question, please press star followed by one on your telephone. And your next question comes from the line of Andrew Douglas from Jefferies. Your line is open.
Stefan Klepp, Analyst, HSBC: Good morning, guys. Most of my questions have been have been covered. I’ve just got two more, please. Can you give us an update on how you see the Chinese export market for steel? I think when we discussed this in March, you were pretty confident that this is going to be a good thing for you and that the Chinese government and the Chinese fuel market wouldn’t change their view, is that still is that still the case?
And then secondly, on advanced factories, we’ve been hoping for some regain of market share in both America and Europe. You talk about market share gains in all business units. So where about are we seeing the advanced refractory market share gains, please?
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Thank you, Andy. On the first part, we we keep exactly the same position as the one we had a few months ago. We we believe that it’s very positive that the Chinese government is now openly taking a stand in favor of reducing overcapacity of steel in China. And the Chinese government has even now given a goal and objective of reducing capacity by at least 50,000,000 tons. So we see we remain positive about the impact of that going forward.
However, we we also keep the same opinion that we expressed, I think, already at the time of our full year results March that it takes time for the Chinese government to get its will implemented on the ground at least twelve or eighteen months. So we are positive about the fact that going forward steel export from China will decline, which could be a very positive impact for steel production outside of China. But we don’t see that happening much in 2025. Maybe we’ll have a good surprise, but we are not betting on it. We see that more for twenty six or ’20 ’7 based on past experiences in China.
So we don’t expect a relief in ’25. And by the way, if you look at the Chinese next to the exports since beginning of the year, they are more or less flat at an elevated level of 20,000,000 ish per month. We we don’t see see that declining rapidly. The when I say rapidly in in the next few months, so in ’25. But as from ’26, yeah, there there could this this should be a boost to the steel market and so to our own sales outside of China where we realized 90% of profits.
Regarding advanced factory, things are progressing well. We are now clearly regaining market share in Europe. So we we are past the inflection point regarding advanced factory in Europe as we as we said, and it’s progressing nicely in a moderate way because we we we are not trying to to to disturb prices too much. That’s not a high barrier to do this kind of thing, obviously. But we are naturally regaining a little bit of market share in Europe.
And we have very good signs about the evolution of of situation in North America with we have a very positive signal. And I don’t believe that we will regain market share there in the first half, but we have ongoing discussion negotiations and some of them already concluded, which makes me very confident than the inflection point in terms of market share in North America will be this year, sometimes in the second half. So quite positive news about not only stabilization, but regain of market share, the start of the regain of market share of advanced factory in both Europe and North America, which were the two regions where our market share had been evolving over the past year.
Stefan Klepp, Analyst, HSBC: Okay. Thank you very much.
Conference Moderator: Your next question comes from the line of Steven Klett from HSBC. Your line is open.
Stefan Klepp, Analyst, HSBC: Yeah. Hi, Meegan. Sorry for that. It’s a question for Mark. Unfortunately, Patrick mentioned too many times that India is growing very profitably.
Can you tell us about your forecast about the minority position in your p and l for 2025? How should that develop? Well, I know Patrick
Mark Collis, Chief Financial Officer, Vesuvius PLC: can preach it because it’s true. And what I can tell you is that there
Conference Moderator: will be a there will be
Mark Collis, Chief Financial Officer, Vesuvius PLC: a ticket after the minority interest charge based on the results that I’m seeing. But I think it’s not you know, we’ve got other things in our minority minority interest charge. So if I have to give you a a ballpark number, I would at least think it’s a a half a million of additional minority interest charge today.
Stefan Klepp, Analyst, HSBC: Okay. Super. Thank you so much.
Conference Moderator: There are no further questions on the conference line. I wanna hand over to the management for closing remarks.
Patrick Andre, Chief Executive Officer, Vesuvius PLC: Thank you very much to all of you for your attention this morning. We remain, as usual, at your disposal for any questions together with Rachel and Mark. I wish you all a very good day. Goodbye.
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