Vesuvius (LON:VSVS) expects 2026 trading profit to be broadly in line with 2025 on a constant-currency basis, as the company works to resolve production problems in North America and India while facing pricing pressure in Europe.
Chief Executive Patrick André said on the company’s trading update call that operational issues affecting North America had been largely addressed and that the production backlog had fallen materially. He said management remained confident the issues would be substantially resolved by year-end.
Trading in both Flow Control and Foundry was ahead of the same period last year and in line with expectations, André said. Advanced Refractories remained challenged by operational issues and a difficult European pricing environment.
North American recovery and lost demand
André said Vesuvius was catching up on maintenance and capital investment at key North American plants. Production capabilities at the most affected sites had improved significantly since the half-year, although the work was not complete.
The backlog accumulated in the first half had fallen significantly and was expected to be eliminated by year-end, he said. The company had also addressed about 75% of its staffing and position-upgrade needs in the operations, with the remainder targeted by the end of the year.
André said the improvements should remove a drag on North American volumes and allow the company to meet future demand. He also expects margins in the region to increase, arguing that additional staffing costs would be outweighed by higher volumes and more effective cost-reduction initiatives.
In Flow Control, André said Vesuvius had regained only a minor portion of the business it previously could not deliver. He expects most of the opportunity to recover that demand to come in 2027, particularly in North America.
Chief Financial Officer Mark Collis cautioned that the timing of recapturing unmet demand was difficult to estimate. He said the North American business was making as much money this year as last year, characterizing the impact as lost opportunity rather than lost profit.
European pricing pressure and India investment
André attributed Advanced Refractories’ difficulties in North America and India to operational issues, while describing European competition and pricing pressure, including from Chinese imports, as more structural. Vesuvius is restructuring and adjusting its European cost base in response, he said.
Collis said the European business facing competitive pressure from Chinese imports represented 10% of Vesuvius’ business. André added that Flow Control was performing well in Europe, unlike Advanced Refractories.
André said European steel production remained relatively soft in the third quarter. He expects the first signs of improvement in the fourth quarter and a more pronounced recovery in 2027 as the effects of EU steel safeguard measures emerge, although he cautioned that the outlook was uncertain.
In India, André said the company was on track to resolve its operational issues by year-end. Collis described the associated profit opportunity missed as being in the order of a few million pounds.
Vesuvius has also begun engineering studies for additional Indian Flow Control capacity. André said the company was considering bringing new capacity online in 2028 or 2029 to support continued growth. He said the Vizag Advanced Refractories plant could support future growth once its operational issues are resolved.
Cash, costs and outlook
Vesuvius remains on track to deliver at least £55 million in cost savings by 2028, including £10 million in 2026, André said.
Collis said working capital intensity had fallen below 23%, moving toward a long-term target of 21%. He expects year-end leverage to be around two, broadly consistent with the half-year and prior year, with a possibility of a slightly lower figure if working capital improves sufficiently.
André did not provide formal guidance for 2027, saying the company would address its outlook when it reports full-year 2026 results. He said the qualitative direction from 2026 to 2027 was positive, while European Advanced Refractories pricing pressure was likely to persist.
At the start of the call, André declined to comment on ongoing discussions with RHI beyond noting that the deadline in the published extension notice was Nov. 24. He said the board was working to determine what would be in shareholders’ best interests.
About Vesuvius (LON:VSVS)
We are a global leader in metal flow engineering, providing a full range of engineering services and solutions to its customers worldwide, principally serving the steel and foundry industries.
