Vesuvius sees full-year profit beating current consensus

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Vesuvius Plc (LON:VSVS), a provider of engineering services to the steel and foundry industries, said first-quarter revenue rose 7% from the year-earlier period, although it was lower than the same quarter of 2019, and that it expects profit for the year to be ahead of the current consensus.


“Although it is still early in the year and with the uncertainty remaining in how the pandemic might still impact some key regions like India and Brazil, based on the good commercial performance in Q1 and clear evidence of end markets continuing to improve, we expect to deliver group trading profit (EBITA) moderately ahead of the current consensus of GBP138mln for the full year 2021,” it said in a trading update.


World steel production, excluding China, rose 3.7% from the first quarter of 2020 and by 15.6% in China, according to the World Steel Association.


“A strong Q1 update followed on from the RHI Magnesita [RHIM} statement last week,” said Harry Philips an analyst at Peel Hunt.


“Organic revenue growth of 7.0% compares to global steel production ex China being up 3.7%. The key point here is that VSVS and RHIM are taking share from the smaller regional refractory companies, as the mills demand more ‘high-tech’ and ‘greener’ steel – this is a trend that we see going only one way,” said Philips.


Trends were also positive across key foundry end-markets in the first quarter, Vesuvius said. Global light vehicle and heavy commercial vehicle production grew 10.5% and 6.5%, respectively from the year-earlier quarter, as reported by IHS.


“Whilst in the first four months of the year we experienced some supply chain disruptions in the sea freight market and at some raw material suppliers, these have had only a limited impact on our ability to meet customer orders,” said Vesuvius. “They have, however, resulted in some temporary friction costs, which are expected to reduce throughout the remainder of the year.”


“Selling price increases are being implemented to compensate for raw material cost increases, thereby offsetting the impact on profit margins,” it said.

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