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Engineer Vesuvius hit by decline in steel production

A drop in commodity prices and steel production have made for a tough time for the engineer
March 7, 2016

Falling steel production in its core markets of North America and Europe, and the strength of the US dollar and sterling against competitor steel-producing countries, has hammered Vesuvius (VSVS). The molten metal flow engineer is restructuring its operations to reduce its exposure to those areas of decline it considers structural, but achieving this cost £14.6m in 2015, further worsening the bottom line.

IC TIP: Hold at 328p

The group's steel division, which accounted for almost two-thirds of trading profit, has been hit hardest. The steel flow control and advanced refractory businesses saw a 15 per cent reduction in sales in the Americas, Europe and Africa, but this was partly offset by a slight increase in the Asia Pacific region. Elsewhere, the expansion of its technical services business through a series of recent acquisitions helped to drive a £22.9m increase in sales.

Declines in commodity and precious metal prices have impacted the group's foundry division. Revenue from the Americas fell 13 per cent as several foundries in the US closed, although there was good growth experienced in Mexico.

Analysts at HSBC are anticipating adjusted EPS to fall to 26.2p in 2016, from 28p in 2015.

VESUVIUS (VSVS)
ORD PRICE:328pMARKET VALUE:£890m
TOUCH:327-328p12-MONTH HIGH:530pLOW: 265p
DIVIDEND YIELD:5%PE RATIO:19
NET ASSET VALUE:322p*NET DEBT32%

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20111.6914136.021.8
20121.5517.0-7.014.3
20131.5110438.415.0
20141.4411136.816.1
20151.3277.417.616.3
% change-8-30-52+1

Ex-div: 7 Apr

Payment: 20 May

*Includes intangible assets of £684m, or 252p a share