Revenue of £488 million represented a 7% reduction compared with 2011 (down 3% at constant exchange rates). Overall the year was one in which the end-markets served by the division's customers deteriorated with the result that foundry industry profit ratios and cash flows suffered. Selling prices throughout the supply chain came under intense pressure, but the strength of Foseco's differentiated offering and customer relationships protected the business from its worst effects. However, some margin dilution did occur due to the difficulties in transferring the input cost increases of 2011 into selling price increases.

In a number of markets, China, India and Southern Europe in particular, weakened customer liquidity lengthened payment terms. However, once again, the strength of Foseco's market position and its disciplined receivables management systems meant that the effect was modest.


Image: Foundry crucible

On a more positive note, the year witnessed many important steps forward in the implementation of the Foundry strategy:

  • The project to expand manufacturing operations in China continued with the purchase of a greenfield site in the Changshu chemical park (55 miles north-west of Shanghai) expected to be completed by the second quarter of 2013. On this site a new feeding systems and coatings plant will be constructed for commissioning in 2014. The total investment in these new facilities is around £13 million, spread over the next two and a half years.
  • Molten metal filter manufacturing was established in the existing site in Suzhou, China to serve both the domestic market and South East Asia.
  • The Board approved the establishment of a dedicated central research and development facility in Enschede, the Netherlands, close to the Group's existing manufacturing facilities in the Netherlands and Germany. The site will be established as a dedicated R & D facility for foundry consumables and will include molten metal test facilities.
  • The central marketing & technology team was significantly strengthened during the year with the objectives of increasing the level of research and development activity, of ensuring the rapid commercialisation of new products and of providing greater support to emerging markets.
  • The Foundry division is led by the Foundry Executive Committee ("FEC") and during the year a number of changes took place. The chief executive of the China business took on the role of global Foundry Finance Director, bringing valuable knowledge of emerging markets to the FEC. A new FEC position of Vice President Greater China was created to ensure that this most important growth opportunity is represented in the FEC — the position was filled by the Area Director of Central Europe/Middle-East, which in turn brought to the Chinese business someone with strong connections to the European foundry industry — the origin of a considerable proportion of foreign direct investment into the Chinese foundry industry. The Vice President Europe was promoted into a position in the Steel division and was replaced by a senior executive transferring from the Fused Silica product line with considerable experience of technology-based industrial businesses. These changes highlight an important strength of Vesuvius — a cadre of geographically mobile senior executives whose skills are transferable across the Group, thereby facilitating the transfer of best practices and the Group's value-based culture.


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