"There is no shortage of evidence to show that most investors (and analysts) are pretty hopeless at forecasting how companies will perform. The equity strategist James Montier once warned that using forecasts as part of the investment process was ..."
Shares are bouncing back, and it's not difficult to see why. Following on from my post regarding world steel production in June, the World Steel Association has just announced that world steel production for July was 6.3% up on July 2016.
This all seems to contradict the company's downbeat comments in its interim announcement. Was the idea behind that to get the new CEO off to a good start, I wonder?
The company needs to explain the apparent contradiction to the market (or to us all and not just privately to analysts).
Following Vesuvius' comment about steel production "slowing", you'd expect there to be a massive sell-off of steel stocks generally to match the damage Vesuvius has done to its own share price. But that hasn't happened. Bizarre.
Very good results, but market spooked presumably by the "global steel production slowing" comment. However, this appears to contradict the latest press release from the World Steel Association just a few days ago which reported a 3.2% increase in production in June compared to June last year, and a 4.5% rise in the first half of this year compared to the first half of 2016.
If if the purpose of the comment was to create a buying opportunity, then they appear to have succeeded.
Read Panmure Gordon & Co's note on VESUVIUS PLC (VSVS), out this morning, by visiting https://www.research-tree.com/company/GB00B82YXW83
"Vesuvius will issue a trading update on Thursday and we expect the management to remain cautious about trading, particularly given that China appears to be reversing its policy of cutting capacity. However, we continue to believe that the fundamentals of the steel industry are improving and... We believe as its exports are made increasingly unwelcome across the world, China will have no option but to cut capacity as domestic stocks rise and losses mount. US steel prices are up more than 50% and this matters more to Vesuvius as..."
"Broker Panmure Gordon warned that FTSE 250-listed Vesuvius is likely to be hit by the same industry pressures as German rival SGL Carbon, which issued a profit warning on Tuesday.
SGL Carbon warned that, despite its cost-cutting efforts, it expects group profit to decline significantly in 2016 due to renewed pressure on prices in the graphite electrode market.
"It appears that steel customers are starting to reduce and/or postpone their demand for graphite electrodes already for first quarter of 2016," Panmure said.
Analysts expect Vesuvius to face similar pressures, particularly from its US and European customers, some of whom are having to close plants.
Panmure believes the consensus EPS forecast of 30.6p and 31.2p for 2015 and 2016 remains "too high" and expects pressure on revenues and margins particularly in 2016."
"Investec took a look at the UK industrials space, upgrading IMI to 'buy' from 'hold', while cutting Spectris to 'hold' from 'buy' and both Vesuvius and Weir to 'sell' from 'hold'.
Investec said that for most companies, trading in September will have been weak, not terrible, just weaker than consensus expectations.
"This will be confirmed by the upcoming trading update season, but has been previewed by the slew of broad-based profit warnings globally and recent conversations we've had."
On IMI, it said investors still generally buy into chief executive Mark Selway's s strategy and plans even if the doubling of profit target to 2018 looks a challenge.
"We view IMI as being at the better quality end of the UK industrials universe and the operational actions being delivered will only enhance this medium-term. While short-term earnings momentum is negative (although probably not as bad as currently assumed) we see cash generation, the balance sheet and dividend yield as attractive and the valuation as undemanding."
As far as Vesuvius is concerned, the brokerage said management has continued to improve the operational performance in recent years, but multiple end market headwinds will overshadow these efforts for the time being.
"We downgrade our EPS expectations for Vesuvius more than for almost any other company we cover as trading in both divisions continues to deteriorate. We are well below consensus and comfortable being so."
Finally, it said Weir looks vulnerable to profit revisions greater than consensus expectations reflect.
"The impact of copper and gold will be felt in terms of lower volumes and pricing, particularly in FY16E, we believe."
Investec said this outturn is not factored into current guidance or consensus estimates."
Yes, not a bad time to offload part of your holding, after a good run in recent weeks ahead of next Tuesday's results announcement. My guess though is that any good news is now in the price, and the shares will temporarily retreat - especially if the market generally takes a breather. However, will they then recover before the geopolitical events you refer to send absolutely everything into a tailspin?
This game is not for the faint-hearted, is it?
I have been holding these since the demerger and watched them climb and climb, but finally sold half my holding at 462p, along with topsliocing a few other holdings, in anticipation that we might see some sell off generally with a potential grexit, or more mayhem in Europe and Ukraine
"LSE:VSVS:Vesuvius, the former steel arm of conglomerate Cookson, is doing more business now than it was a year ago, and a drive to restore margins at the molten metal engineer is going well. In fact, half-year results largely beat forecasts, ..."
"Contrary to expectations, following the demerger of Cookson Group into Alent and Vesuvius it was shares of the latter which outperformed. The firm sold unprofitable units, helping to compensate for the slowdown in steel production Stateside and in the Euren. It also hived off its precious metals unit before a collapse in the price of gold. Those measures improved margins and allowed for a 5.3% increase in the dividend. In fact, the firm is targeting a further improvement in margins.
The company will also gain from China's shift towards consumption. Even so, at 14 times' earnings the shares do not seem much more than a hold, as the speed of that change in China is not clear and achieving those targets hinges on achieving internal efficiencies, Tempus says. "
One month ago this was pushing on above 510; now its bouncing around 430 - a 16% drop.
What has changed in that time to the business, or the markets it operates in?
Do they do much business in Argentina, Turkey or South Africa? Not a lot I think. There is a fear that the reduction in US QI will mean there is less money sloshing about in the spending pockets of Emerging Markets, but is that really true? China's manufacturing has slowed a bit. (but the media always compare %s, rather than actual figures, and this often leads them to the wrong conclusions - 7.8% of 100 is less than 7.7% of 107.8.)
I am not saying what is the true value price of VSVS, just that the worth has not come down 16% in a month.
They must be nearing the end of this. They were going to spend £30m on it, and have so far bought 7.2m shares into Treasury. I think it started at a price of about 370 & now we're round 470. If the average price was halfway between those 2 figures (420) they would have spent over £30m already.
It will be interesting to see if the price drops back a bit when the buy back stops.
I still think 7.2m shares (or whatever the total ends up being) out of 278m shares (2.6%) is a very poor return for the precious metal business.
However, we are left with a more focussed business with a few less shares in circulation; and that should be good for the share price in the long term.
Vesuvius: JP Morgan raises target price from 420p to 497p reiterating an overweight rating; Exane moves target price from 410p to 455p and keeps a neutral rating; Deutsche Bank takes target price from 350p to 450p, while its hold recommendation remains unchanged.
I don't get it, profits, turnover and divi down but big increase in sp. I suppose long term view may be that should improve as world economies start to grow again. Big increase since cookson split and I got out at 5.00 so happy with that and will dip in again if sp goes down enough. Still hold alent
I read the results before market open; and concluded the market would be disappointed. I got that wrong. I'm not too sure why they received such a positive response.
The bit I liked the most was the pension deficit reduction. Too many old companies are having to make profits just to feed their old workers.
I think it has a good future, and I am sure the more focussed 2 parts will do better than the old 3 part Cookson - but at the moment VSVS is working in a depressed sector, and reporting falls in sales, profits etc., It's nothing to get excited about. Having said that I am very pleased with the recent rise.
I've set a target price of 563. Don't expect it to get there too soon, but it would be nice if it hit it in the next 6 months.
Well despite a dip in profits someone likes these results as it has been as high as 530p a share at one time today ad is still up over 14% on the day so far.
Maybe the following statement in the report helped?
"The Board intends to deliver attractive returns to shareholders, including long-term dividend growth, and has declared an interim dividend of 4.75 pence per share, payable on 7 October 2013 to shareholders on the register at 30 August 2013."
Assuming the interim is about 1/3 of the total year dividend that gives a yield of about 3% on today price.
I still hold an equal number of Vesuvius and Alent shares in my SIPP which are now at about 870p based on the old Cookson price (I paid about 122p for them). I wonder if others do too or whether they have given up on Alent which is doing well but not as well as Vesuvius and which looks likes it is going to have a lower dividend yield?
Vesuvius plc (the "Company") confirms that, in order to retain the ability to repurchase shares during its close period, it has entered into an irrevocable and non-discretionary arrangement with its broker, Bank of America Merrill Lynch, to commence on its behalf and within certain pre-set parameters, share repurchases under the Company's existing share repurchase programme which was announced on 3 June 2013.
The close period commences on 1 July 2013 and ends on the day prior to the announcement of the Company's results for the six month period to 30 June 2013.
It is intended that any shares purchased under this programme will be transferred into treasury.
"Metal flow engineering group Vesuvius (VSVS) has completed the sale of its precious metals processing division to a subsidiary of German industrial production group L Possehl & Co in a deal worth 56.8 million euros (48.34 million pounds). The company said that 30 million pounds of the funds would be returned to shareholders via a share buyback programme,k while the rest of the proceeds will go towards paying down borrowings. The shares increased by 1.5p to 382.1p."
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.