UPDATE 2-Vesuvius expects lower revenue in 2013, cuts 8 pct jobs

Thu Mar 21, 2013 8:01am EDT

* Cuts 850 jobs

* Expects to dispose of precious metals processing unit

* 2012 headline pretax profit falls 29 pct, revenue drops 8 pct

* Shares down 4 pct

By Abhirup Roy

March 21 (Reuters) - Vesuvius Plc, a maker of ceramic moulds and linings for steelmakers and foundries, forecast lower revenue for 2013 and cut 850 jobs, or 8 percent of its workforce, as it expects weakness in the steel market to continue.

Vesuvius, formed in December when Cookson Group split it into two companies, said it expected to dispose of its precious metals processing business to focus on the steel and foundry markets, which would help margins towards the end of 2013.

Vesuvius expects trading in the first half of this year to be broadly similar to the second half of last year.

"We have experienced a significant decline in our steel and foundry market in this period (second half of 2012) but there is no further degradation today and so our expectation is that the market is stabilising at this level," said Chief Executive Francois Wanecq.

Steel production in its key European and North American markets fell about 10 percent in the second half from the first half, the company said.

Vesuvius on Thursday said it was in advanced discussions to sell its precious metals processing (PMP) business, which recycles and provides semi-finished gold, silver and platinum to the jewellery industry.

The company has already exited the solar crucible business where demand has not recovered since the solar industry went into a tailspin in 2011, hammered by overcapacity, falling government subsidies and trade disputes.

Vesuvius said it also closed a steel consumables plant in China and exit its brick refractories business in Germany as part of its restructuring, aimed at quitting low-margin businesses, reducing costs and improving cash flow.

2012 PROFIT DROPS

Vesuvius said headline pretax profit, excluding the PMP business, fell 29 percent to 110.9 million pounds ($167.8 million) in the year ended Dec. 31.

Revenue, excluding the PMP business, fell 8 percent to 1.55 billion pounds.

Revenue from its steel business, which makes flow control products and refractories, fell almost 6 percent and accounted for 65 percent of total revenue.

Free cash flow from continuing operations rose 69 percent to 54.2 million pounds.

Vesuvius shares were down 4 percent at 371.2 pence on the London Stock Exchange at 1140 GMT. They had risen nearly 20 percent up to Wednesday since the split went into effect on Dec. 19.

Cookson's former performance materials division is now called Alent Plc, which is yet to report results. Alent's shares, which were up 0.10 percent at 388.5 pence at 1141 GMT, have risen about 25 since the split.

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