LONDON (ShareCast) - (Sharecast News) - Molten metal flow engineering company Vesuvius updated the market in light of the Covid-19 coronavirus pandemic on Monday, reporting that it was taking specific site-by-site actions as well as complying with the government instructions and guidelines of the World Health Organization.
The FTSE 250 company said it has implemented action plans in each jurisdiction, including remote working where possible, as well as flexible working arrangements, enforcing social distancing and imposing travel restrictions.

It said its performance in the first quarter was "broadly in line" with its expectations at the time of its 2019 full-year results.

However, the trading environment in 2020 had become "considerably more uncertain", and the rate of spread of the virus in recent weeks and the measures imposed by governments to contain the outbreak, were expected to result in "significant" disruption to the business in the coming months.

"Although manufacturing plants across the group currently remain open, with the exception of South Africa, Argentina and Malaysia, there remains insufficient visibility to forecast the potential impact of the pandemic," the board said in its statement.

It explained that tight restrictions on the movement of goods and people were expected to put pressure on demand in its end markets.

"The situation is impacting key sectors that our foundry division serves including the automotive and construction industries.

"Likewise, we anticipate a significant impact on our steel division as steel producers reduce production to adjust to the slowdown in demand while restrictions are in place to contain the outbreak.

"In light of this, we are withdrawing our financial guidance for the year."

The Vesuvius board said guidance on the company's financial performance would be provided when there was greater clarity.

It said it had "significant" financial headroom, with December reported net debt-to-EBITDA at 1.0x, and interest cover at 21.8x, compared to its 3.0x maximum and 4.0x minimum covenant thresholds, respectively.

The firm said it also had sufficient liquidity to ensure it could continue to operate through a prolonged downturn.

At the end of February, its available resources stood at ?375m, with ?185m in available cash and ?190m in committed undrawn revolving credit facilities.

It said it had a debt maturity in December 2020 of $140m in US private placement notes, adding that it was "well advanced" in assessing multiple available refinancing options.

Vesuvius was also seeking access to additional government funding facilities.

The company said it was implementing several cost reduction plans to deliver savings of around ?30m over the rest of the year, including restricting all discretionary expenses, a hiring freeze on all non-critical roles, and accessing government programmes to reduce labour costs, in line with available local regulatory options, together with other flexible workforce solutions.

"In addition, given the impact that will be felt by all our stakeholders, the board and the group executive committee have elected to reduce their fees and salary by 20% for the next 6 months," the board confirmed.

"These savings are in addition to the ?19.4m of recurring savings from our ongoing restructuring programmes which we are targeting for delivery in 2020."

At the same time, the group said it was implementing a "strong" cash preservation action plan, including a ?20m, or 30%, reduction in its planned capital expenditures in 2020, the deferral of tax and social security payments "whenever possible" in accordance with local legislation, and a reinforced drive to reduce working capital in line with the decline in sales.

In light of the current business environment, the Vesuvius board said it had decided to withdraw its recommendation to pay the final dividend of 14.3p per share, which was announced with the publication of the full-year 2019 results.

The resolution relating to the proposed 2019 final dividend would thus not be put to a shareholder vote at the annual general meeting on 13 May.

It said it would keep the position under review, and would return to the payment of dividends when the situation was clearer and it considered it prudent to do so.

"Our priority during this crisis is to protect the health and safety of our employees and we are taking appropriate actions accordingly," said chief executive officer Patrick Andr?.

"In parallel, our business leaders are in constant communication with customers and are taking all necessary measures to guarantee the security of their supply as permitted by relevant local government regulations."

Andr? noted that the company was also implementing "significant, pre-emptive" cost control and cash preservation measures across the entire business, to preserve liquidity.

"With this set of measures, I am confident that the Group will not only meet the temporary challenges of the current crisis but emerge stronger once the market returns to its long-term growth path."

At 1602 BST, shares in Vesuvius were up 2.17% at 329.6p.

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