Vesuvius plc
Annual Report 2021
VESUVIUS: black 85%
PLC: black 60%
VESUVIUS: white
PLC: black 20%
Think beyond.
Shape the future.
Annual Report
2021
Change
2021
2020
Reported
basis
Underlying
basis
1
Revenue
£1,642.9m
£1,458.3m
+12.7% +18.1%
Trading prot
2
£142.4m
£101.4m
+40.4%
+50.4%
Return on sales
2
8.7%
7.0%
+170bps +190bps
2021
2020
Change
Prot before tax
£127.6m
£64.5m
+97.8%
Headline earnings per share
3
35.3p
23.2p
+52.3%
Recommended nal dividend
15.0p
14.3p
Group full-year dividend
21.2p
17.4p
Year-end net debt
2
Net debt to EBITDA ratio
£277.1m
1.4x
£175.1m
1.2x
1. Underlying basis is at constant currency and excludes separately reported items and the impact of
acquisitions and disposals.
2. For denitions of alternative performance measures, refer to Note 4 of the Group Financial Statements.
3. Headline results refer to continuing operations and exclude separately reported items.
Our business
1
Our purpose
4
Vesuvius at a glance
6
Divisional overviews
10
Chairman’s statement
12
Chief Executive’s strategic review
14
Our strategy
16
Our external environment
18
Our markets
20
Business model
22
Section 172(1) Statement
– Our stakeholders
29
Risk, viability and going concern
Our performance
38
Key Performance Indicators
40
Financial review
44
Operating reviews
44
Steel Division
45
Steel Flow Control
46
Steel Advanced Refractories
47
Steel Sensors & Probes
48
Foundry Division
Sustainability
52
Non-nancial information statement
52
Introduction
53
Our Sustainability strategy and objectives
54
Our sustainability targets
55
United Nations Global Compact and
Sustainable Development Goals
56
Our principles, approach and
governance
58
TCFD
60
Our planet
78
Our customers
82
Our people
97
Our communities
Governance
104
Board of Directors
106
Group Executive Committee
107
Corporate Governance Statement
107
Chairman’s governance letter
108
Board Report
117
Audit Committee
125
Nomination Committee
130
Directors’ Remuneration Report
130
Remuneration overview
134
2020 Remuneration Policy
142
Annual Report on Directors’
Remuneration
154
Directors’ Report
160
Statement of Directors’ Responsibilities
161
Independent Auditors’ Report
Financial Statements
171
Group Income Statement
172
Group Statement of Comprehensive Income
173
Group Statement of Cash Flows
174
Group Balance Sheet
175
Group Statement of Changes in Equity
176
Notes to the Group Financial Statements
229
Company Balance Sheet
230
Company Statement of Changes in Equity
231
Notes to the Company Financial Statements
237
Five-Year Summary: Divisional Results
238
Shareholder Information
240
Glossary
Contents
Financial performance
19
20
21
Revenue
£m
£1,642.9m
1,642.9
1,458.3
1,710.4
19
20
21
Operating profit
£m
£132.7m
132.7
74.3
127.5
19
20
21
Statutory EPS
p
37.7p
37.7
15.3
29.8
19
20
21
Trading profit
2
£m
£142.4m
142.4
101.4
181.4
19
20
21
Headline earnings
2,3
£m
£95.6m
95.6
62.7
121.4
19
20
21
Free cash flow
2
£m
-£0.3m
113.5
121.5
-0.3
Forward-looking statements
This Annual Report contains certain forward-looking statements with respect to the operations,
strategy, performance, nancial condition and growth opportunities of the Vesuvius Group.
By their nature, these statements involve uncertainty and are based on assumptions and involve
risks, uncertainties and other factors that could cause actual results and developments to differ
materially from those anticipated.
The forward-looking statements reect knowledge and information available at the date of
preparation of this Annual Report and, other than in accordance with its legal and regulatory
obligations, the Company undertakes no obligation to update these forward-looking statements.
Nothing in this Annual Report should be construed as a prot forecast.
Strategic report
Think beyond.
Shape the future.
temperature conditions.
We think beyond today to create the innovative
solutions that will shape the future for everyone,
delivering products and services that help our
customers make their industrial processes safer,
more efcient and more sustainable.
In turn, we provide our employees with a safe
workplace where they are recognised, developed
and properly rewarded, and aim to deliver
sustainable, protable growth to provide
our shareholders with a superior return on
their investment.
Our purpose
1
Our business Our performance Sustainability Governance Financial Statements
We think beyond
today’s products
and shape the future
through innovation
4
Vesuvius at a glance
6
Divisional overviews
10
Chairman’s statement
12
Chief Executive’s
strategic review
14
Our strategy
16
Our external environment
18
Our markets
20
Business model
22
Section 172(1) Statement
– Our stakeholders
29
Risk, viability and
going concern
Our business
Vesuvius plc
Annual Report and Financial Statements 2021
Vesuvius plc
Annual Report and Financial Statements 2021
2
3
Our business
Our performance Sustainability Governance Financial Statements
£1,642.9m
£471.4m
Foundry
£1,171.5m
Steel
Our business
Our global presence
We are a global group
with a
business model based on offering
customised products, solutions
and services from production
facilities in close proximity to
our customers.
Our two divisions
– Steel and
Foundry – mainly serve the global
steel and foundry industries.
At a glance
Revenue
54
Production sites
75
Sales ofces
6
R&D centres
11,204
Employees
40
Countries
6
Continents
4
Vesuvius plc
Annual Report and Financial Statements 2021
£505.9m
19.9%
Foundry
80.1%
Steel
£644.8m
30.9%
Foundry
69.1%
Steel
£492.2m
34.9%
Foundry
65.1%
Steel
Americas
EMEA
Asia-Pacic
3,367
4,352
3,485
Employees
18
19
17
Production sites
21
28
26
Sales ofces
1 3 2
R&D centres
This map shows
our production,
R&D and
commercial sites
worldwide
5
Our business
Our performance Sustainability Governance Financial Statements
Operating review Operating review
45
47
B
L
A
S
T
F
U
R
N
A
C
E
Stack linings
repair
Tap hole
clay
Iron
trough
Torpedo
ladle
1
Convertor and
rening ladles
Continuous
caster
Blast
furnace
Steel slab,
billet or bloom
1
2 3
4
Steel
Division
Steel Flow Control
Steel Sensors
& Probes
Operating review
44
Our customers are steel
producers and other
high-temperature industries.
Vesuvius is a world leader
in the supply of refractory
products, systems and
solutions. These help our
customers increase their
efciency and productivity,
enhance quality, improve
safety and reduce their costs
and their environmental
impact.
Revenue
Return on sales
Trading prot
Overview
What we do
The Vesuvius Flow Control business unit supplies
the global steel industry with consumable
ceramic products, systems, robotics, digital
services and technical services. These products
are used to contain, control and monitor the ow
of molten steel in the continuous casting process.
How the process works
The continuous casting process enables
steel manufactured from a blast furnace
or an electric arc furnace to be cast without
interruption, whilst protecting it from the
atmosphere. Avoiding atmospheric contact is
crucial as it signicantly reduces contamination
and oxidation of the steel being produced.
Our products
The consumable ceramic products that
Vesuvius supplies have a short service life
(often a matter of a few hours) due to the
signicant wear caused by the extremely
demanding environment in which they are
used. These products must withstand extreme
temperature changes, whilst resisting liquid
steel and slag corrosion. In addition, the ceramic
parts in contact with the liquid steel must not in
any way contaminate it. The quality, reliability
and consistency of these products and the
associated robotic solutions and digital services
we provide are therefore critical to the quality
of the nished metal being produced and the
productivity, protability and safety of our
customers’ processes.
The Sensors & Probes business unit offers digital
measurement solutions to our customers to
enable them to make their underlying processes
more efcient and reliable. The business unit
focuses on providing a range of products
that enhance the control and monitoring
of our customers’ production processes,
complementing Vesuvius’ strong presence
and expertise in molten metal engineering.
These products include temperature sensors,
oxygen, hydrogen and sublance probes,
and iron oxide and metal sampling for the steel,
aluminium and foundry industries. By using
these technologies, customers can focus on
critical parameters within their processes,
enabling them to rene their production
methods to improve quality, lower production
costs and maximise efciency.
Divisional overviews
Business unit
£1,171.5m
2020:
£1,045.4m
8.7%
2020:
7.3%
£102.0m
2020:
£76.4m
6
Vesuvius plc
Annual Report and Financial Statements 2021
Impact
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Ladle
Tundish
Mould
Linings,
bottoms
Purging
plug
Slide-gate,
tube changer
Robotic
arm
Linings
Ladle
shroud
Sub-entry
nozzle
Tundish
slide-gate
Mould level
control
Robotic
arm
Flux
Stopper
and rigging
Tundish tube
changer
Temperature
measurement
Flux
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Rening
ladles
Convertor
linings and
repair
3
2
4
Steel Advanced
Refractories
What we do
Vesuvius’ Advanced Refractories business unit
supplies complete value-added solutions to
its customers, including specialist refractory
materials and advanced installation
technologies, which harness mechatronic
solutions, computational uid dynamics
capabilities and lasers.
Our customers and the process
Our main customers are steel producers and
manufacturers of steel production equipment,
where our products accompany the steel-making
process from its early steps all the way to the
end of production in the rolling mill. The specialist
refractory materials are subject to extreme
temperatures, corrosion and abrasion, and
are in the form of powder mixes, which are
spray-applied or cast onto the vessel to be lined
(monolithics) and refractory shapes (e.g. bricks,
pads, dams and other larger precast shapes).
The service life of the products that Advanced
Refractories supplies into the steel-making
process can vary (some a matter of hours and
others for a period of years) based on the
type of refractory and the level of wear caused
by the demanding environment in which they
are used. An integral part of our success
depends on our best-in-class installation
technologies which use robots and lasers
to track the performance of installed
Vesuvius refractories, as well as the high
level of collaboration with our customers.
Broader offer
In addition, Vesuvius’ Advanced Refractories
business unit supplies other high-temperature
industries such as primary and secondary
aluminium, copper, cement, petrochemicals
and energy from waste.
Business unit
Operating review
46
7
Our business
Our performance Sustainability Governance Financial Statements
Treatment/pouring ladle
Final
casting
Mould production
and pouring
Induction
furnace
1
2
3
What we do
The casting process is highly sequential and is
critically dependent on consistency of product
quality and productivity optimisation. Working
alongside customers at their sites, our engineers
provide on-site technical expertise in addition
to advanced computational uid dynamics
capabilities to develop the best customised
production solutions.
Our products
The conditioning of molten metal, the nature of
the mould used and, especially, the design of the
way in which metal ows into the mould are key
parameters in a foundry, determining both the
quality of the nished castings and the labour,
energy and metal usage efciency of the
foundry. Vesuvius’ products and associated
services to foundries improve all of these
parameters. Each of our products typically
represents a small element of the overall cost of
the foundry process but contributes signicantly
to product quality and yield, thus driving
efciency and reducing environmental impact.
In Foundry, customers are evolving towards more
sophisticated and increasingly complex castings
with increased requirements for cleaner and
lighter metal, resulting in a greater need for
Vesuvius’ products.
Our customers
We are also focused on expanding the
cross-selling opportunities between the
Advanced Refractories business unit and
Foundry Division. Foundries utilise the
refractory products manufactured by
Advanced Refractories, which allows
us to offer a complete product offering
to our customers.
C
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S
T
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T
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(
b
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)
3
Foundry
Foundry
Division
We are a world leader in
the supply of consumable
products, technical advice
and application support to
the global foundry industry,
improving casting quality
and foundry efciency.
Our primary customers are
ferrous and non-ferrous
foundries serving various
end-markets, from large
bespoke castings to
high-volume automotive
pieces. We operate in the
foundry sector under the
Foseco brand.
£471.4m
Revenue
2020:
£412.9m
2020:
6.1%
2020:
£25.0m
8.6%
Return on sales
£40.4m
Trading prot
Overview
Business unit
Divisional overviews
Operating review
48
8
Vesuvius plc
Annual Report and Financial Statements 2021
P
O
U
R
I
N
G
I
N
T
O
M
O
U
L
D
Linings
Stopper
rod
Nozzle
M
O
U
L
D
P
R
O
D
U
C
T
I
O
N
Drag
Cope
Pouring cup
Downsprue
Filter
Feeder
Cores, coating
Sand
binder
Runner
Mould
coating
2
1
Business unit
9
Our business
Our performance Sustainability Governance Financial Statements
19
20
21
Revenue
£m
£1,642.9m
1,642.9
1,458.3
1,710.4
10
Vesuvius plc
Annual Report and Financial Statements 2021
2021 was another challenging year for
Vesuvius. Despite a recovery across the
majority of our end markets starting at
the end of 2020, the COVID-19 pandemic
continued to result in operational restrictions
and promoted wide-spread global supply
chain and freight disruption together with
raw material and freight cost increases.
Throughout this uncertain trading
backdrop, our top priority remained the
health and safety of our people and other
stakeholders as they interacted with
Vesuvius. Despite all of our efforts, we lost
11 people to the pandemic during 2021.
We offer our sincerest condolences to all
those who have lost family and friends.
Throughout 2021 the Board prioritised
actions to respond to the continuing
pandemic, particularly where they
pertained to the well-being of our
employees. I am incredibly proud of the
great efforts that have been made across
the globe to enable our employees to
be vaccinated. In India, for example,
we made available private vaccinations
for all of our employees and their
immediate families.
Our local site managers have continued
to work tirelessly to implement measures
to protect and support our employees
whilst at the same time keeping our plants
operational to serve our customers.
On my visits to our sites I am consistently
struck by the dedication and focus of
our people and their commitment to
building the business through excellent
customer service.
We therefore start 2022 with renewed
vigour to face the challenges that lie
ahead. Whilst supply chain, freight issues
and cost ination may persist well into
2022, we know that our people have the
determination and capability to overcome
these challenges.
Strategy
We continued to progress our strategy
successfully in 2021. Despite the difcult
circumstances, the Board was happy to
support further key investments in the
Group. In December 2021, we acquired
the business of Universal Refractories,
which enhanced our presence and
expertise in the US and positions us
well for growth.
Alongside targeted M&A, we also invested
in our existing operations, commencing
a programme to increase capacity in
VISO* products and slide-gate capacity
in Europe and slide-gate capacity for
South East Asia. These investments will
strengthen Vesuvius’ manufacturing base,
which coupled with our ongoing R&D
investment – delivering regular new
product launches – reinforces Vesuvius’
position for the future.
Sustainability
Sustainability remains at the core of
our strategy and in 2021 we progressed
our plans to achieve our objective of
reaching a net zero carbon footprint at the
latest by 2050. Our Sustainability Council,
chaired by the Chief Executive, met on a
quarterly basis to oversee the Group’s
sustainability activity, monitoring progress
against our targets and assisting the
Group with identifying and assessing the
implications of long-term climate-related
risks and opportunities. Our operational
targets – driving emissions reduction;
increasing manufacturing efciency;
reducing waste; and critically, enhancing
the efciency of our customers’ operations
– are clear areas of focus for 2022 and
the future. The Board believes that the
ongoing formalisation and increased
breadth of our sustainability initiative is a
fundamental building block in the future
of Vesuvius – both as we examine our own
operations and as we further understand
how to contribute to better sustainability
outcomes for our customers.
All of our activities are underpinned by
our CORE values – Courage, Ownership,
Respect and Energy. We have considerable
pride in how our values and our commitment
to pursuing them run through Vesuvius
from top to bottom. These CORE values
promote our determination to be a
company that is at the forefront of active,
rather than reactive sustainability. They
are recognised annually – as they were
again in December – when we hosted the
global Vesuvius nals ceremony for our
“Living The Values Awards”.
Stakeholders
The Board values every opportunity to
engage with our various stakeholders.
The Non-executive Directors, both
collectively and individually, have always
sought to meet as many colleagues as
possible; and in doing so, they have
broadened and deepened their knowledge
and understanding of the global business.
Again in 2021, the pandemic restricted
the Board’s ability to travel to as many
locations as we would have liked. Where
possible, the Non-executive Directors
made physical site visits, including to
the European shared services centre in
Krakow, Poland, as well as visiting our
operations in Skawina in Poland, Borken
in Germany, Ghlin in Belgium, Suzhou in
China, and Charlotte, Cleveland and
Pittsburgh in the USA. In each case the
questions and feedback we received from
our employees gave valuable insights that
the Non-executive Directors could take
back into the Board’s deliberations
and discussions.
Where we have been unable to travel,
we have continued with ‘virtual’ site visits
conducting meetings with sites in China,
India and NAFTA.
The Group again conducted an employee
engagement survey in 2021 through our
I-Engage programme, and it is a pleasure
to see the participation rate remaining
reassuringly high, above 90% in both
of the past two years.
Maintaining strong
momentum during disrupted
trading conditions
Chairman’s statement
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under licence.
11
Our business
Our performance Sustainability Governance Financial Statements
Corporate Governance
We were delighted to welcome Dinggui
Gao as an independent Non-executive
Director in April. He brings with him
nearly 40 years of global operational
experience and has already made
a strong contribution to the Board.
Unfortunately, due to pandemic-related
restrictions, Board meetings started the
year being held virtually. However, it was a
pleasure to welcome the majority of Board
members back to in-person meetings in
June. Despite the challenges of remote
meetings the Board has learnt from this
experience and incorporated some
elements of it into regular Board meetings.
Dividend
Our dividend policy aims to deliver
long-term dividend growth, provided this
is supported by cash ow and underlying
earnings, and is justied in the context of
our capital expenditure requirements and
the prevailing market outlook. The Board
has recommended a nal dividend of
15.0 pence per share (2020: 14.3 pence
per share). If approved at the Annual
General Meeting, this nal dividend will
be paid on 27 May 2022.
Annual General Meeting
The Annual General Meeting will be
held on 18 May 2022. The Notice of
Meeting and explanatory notes containing
details of the resolutions to be put to
the meeting accompany this Annual
Report and are available on our website:
www.vesuvius.com.
Reections and farewell
Having served for nine years as the
Chairman of Vesuvius, this will be my last
Annual Report to shareholders. During the
year we commenced a process to select
my successor, more details of which are set
out in the Corporate Governance Report.
I am pleased to report that this process is
progressing well.
For my own part, I am delighted by the
progress Vesuvius has made during my
tenure and the organisation it has become.
I am particularly proud of the Board’s
detailed focus on global safety, especially
during the pandemic. Safety sits at
the core of the promise we make to our
employees and everyone who visits
Vesuvius sites. Much progress has been
made, and there is more to come.
The Board has also increased its focus
on quality processes and operational
performance, as well as maintaining
strong and robust governance and risk
management processes.
Vesuvius’ global management structure
has evolved to delegate authority to
managers to act locally with resilience and
agility. During the pandemic, this enabled
us to respond rapidly and effectively to
ensure that production was maintained
and customers were supplied as required.
This decentralised management structure,
which draws deeply on the skills of our
talented managers, remains the cornerstone
of Vesuvius’ exibility and responsiveness.
Meanwhile, we have invested signicantly
in R&D, underpinning one of the
cornerstones of Vesuvius’ strategy,
that of technology leadership. We have
rejuvenated our manufacturing footprint
to enable protable and cash-backed
growth, and developed our IT and systems
capability to deliver improved customer
management and systems security.
In doing all of these things, we have
strengthened Vesuvius for the present
and the future.
Vesuvius has a strong, cohesive and
diverse Board which embraces our
Group values and culture of open debate.
We continue to support and constructively
challenge management to deliver the
Group’s strategy.
I have every condence that your Directors
will continue to lead Vesuvius from strength
to strength and I wish them, and all of our
colleagues across the globe, the very best
in doing so in the years ahead.
John McDon
o
ugh CBE
Chairman
3 March 2022
John McDonough CBE
Chairman
On my visits to our sites I am consistently
struck by the dedication and focus of our
people and their commitment to building the
business through excellent customer service
12
Vesuvius plc
Annual Report and Financial Statements 2021
19
20
21
Trading profit
£m
£142.4m
142.4
101.4
181.4
During 2021, we delivered resilient results
and protected the health and safety of
our employees and the security of supply
to our customers, despite the persistent
COVID-19 crisis and unprecedented
supply chain disruptions.
Priority given to the protection of the
health and safety of our employees.
Best ever safety result
During 2021, our priority remained the
protection of the health and safety of our
employees. We remained focused on
adapting the lay-out of our operations to
ensure safe social distancing while enabling
the ramp-up of our production to cope
with the increased level of activity of our
customers. We also continued to promote
remote working whenever possible and
supported vaccination of our employees
and their families each time it was legally
possible to do so. I was deeply saddened
that despite these efforts, we lost 11 of
our colleagues to COVID-19 in 2021.
My thoughts remain with their families
and friends.
Throughout 2021, we maintained our efforts
to improve the safety performance of our
operations. Our Lost Time Injury Frequency
Rate (LTIFR) progressed further to 1.06
from 1.16 in 2020, our best result ever.
Despite this improvement, we remain
unsatised and will intensify our efforts
in 2022 to make further progress towards
our objective of zero accidents.
See more in the
Our people
section on p82–96Strong operational performance and
resilient nancial results despite very
challenging supply chain disruptions
In 2021, our two main end markets of Steel
and Foundry recovered signicantly from
the low point of 2020. In Steel, the recovery
was particularly strong in the world
excluding China, while in China, after a
positive start to the year, steel production
declined signicantly in the second half.
In Foundry, all sectors and all geographies
exhibited positive growth, with the notable
exception of the automotive sector,
which remained at a low level of activity,
equivalent to 2020, due to the persistent
shortage of semi-conductors.
At the same time as our end markets were
recovering, we were confronted with
extraordinary supply chain disruption
for raw materials and logistics services
– both in respect of pricing and in respect
of their physical availability, which
impacted businesses around the globe.
Thanks to our decentralised, entrepreneurial,
non-matrix business model, and the
dedication of our management teams and
personnel worldwide, we were able to react
quickly to these challenges, increasing
prices to compensate for raw material and
logistics costs increases, while at the same
time protecting the security of supply
to our customers. We had to declare a
temporary force majeure on two product
lines during the second half of the year but
were able in both cases to subsequently
nd solutions that avoided interrupting
the production of our customers.
In this challenging environment, our
Flow Control, Foundry and Sensors &
Probes business units registered strong
commercial performance, outperforming
their underlying markets and gaining
market share globally, while at the
same time adjusting prices upwards to
compensate for cost increases. Our
Advanced Refractories business unit
however, lost market share in 2021 as
priority was given very early in the year
to pricing over volumes to compensate for
raw material and logistics cost increases.
As a consequence of this overall strong
commercial performance, our underlying
revenue increased by 18% in 2021, to
£1,642.9m. This increase was made up
75% by volume increments and 25%
by price.
This strong growth in our revenue supported
a signicant increase in our trading prot
and return on sales: our trading prot was
£142.4m in 2021, compared with £101.4m
in 2020 and our return on Sales reached
8.7%, +190bps vs 2020 on an underlying
basis. Our trading prot and return on
sales were, however, negatively impacted
by the timing difference between the pace
of our price increases and the pace of the
raw material and logistics cost increases
we incurred. This generated a headwind
of £14m in trading prot for the full year,
although this headwind was fully eliminated
by year-end as cost ination was successfully
passed through to customers.
We continued to focus on cash generation
in 2021 and further reduced our working
capital intensity to 20.9% of sales, as
compared with 23.2% in 2020 and 24.0%
in 2019, despite investing in raw material
inventory to mitigate some of the supply
chain disruptions we experienced, and the
necessary increase in working capital
investment associated with a rebound
in our end markets.
Thanks to this effort, we maintained
our Net Debt to EBITDA ratio at 1.4x,
a very limited increase as compared
with 2020 (1.2x).
See
Financial review
section on p40–43
See
Our strategy
section on p14–15
Delivering resilient results, whilst
protecting our
employees and the
security of supply to our customers
Chief Executive’s strategic review
19
20
21
1.4
1.2
1.1
Net debt to EBITDA
1.4x
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under licence.
13
Our business
Our performance Sustainability Governance Financial Statements
Launch of an ambitious manufacturing
expansion programme to support
future organic growth in Flow Control
To support the strong growth and market
share gains of our Flow Control business,
we launched an important programme to
increase our VISO* and slide-gate plate
manufacturing capacity. These expansions
will increase the VISO* and slide-gate
capacity at our Skawina plant in Poland
by 35% and 100% respectively, as well
as increasing the VISO* capacity of our
Kolkata plant in India by 50%.
These strategically important investments
will support our ongoing expansion in the
fast-growing markets of EEMEA, India
and SE Asia.
Sustained R&D effort supporting
strong New Product launches
Despite the pandemic, in 2020 we resolved
to maintain our R&D investment. Thanks
to this decision, we were able to launch
27 new products in 2021, more than double
the number of new products launched in
2020. Consequently, our new product sales
ratio (the share in our turnover contributed
by products which didn’t exist ve years
ago) reached 15.3% in 2021 (vs 12.4%
in 2020).
In 2021, we continued to increase our
investment in R&D, in particular expanding
our mechatronics centre of excellence in
Belgium, which now supports both our
Flow Control and Advanced Refractories
robotics technology leadership. We also
decided to increase our R&D investment
to focus further on sustainability, with the
development of innovative products
and solutions that will lead the market
in helping our customers improve their
sustainability performance by reducing
their CO
2
emissions, and by improving
the safety of their people.
Expansion in North America through
the acquisition of the Universal
Refractories business
We were pleased to announce the
acquisition of the business of Universal
Refractories, Inc. at the end of 2021.
A specialty refractory producer based
in Pennsylvania, Universal Refractories
serves the Steel (tundish applications)
and Foundry (consumables) industries.
The acquisition delivers further expertise
to our core business in both the Steel and
Foundry markets in North America and in
particular provides new opportunities in
the growing sector of electric arc furnace
steel producers. We are looking forward to
the opportunity to integrate the Universal
teams and know-how into the Vesuvius
business and are expecting to derive
signicant synergies from this integration.
Signicant progress in our
sustainability journey
In 2020, we decided to launch a new
comprehensive action plan to accelerate
our sustainability efforts – bringing
together all of our environmental, social
and governance initiatives into a global
co-ordinated programme with clear
priorities, quantied targets, and
milestones. In particular, we made a
commitment to reach a net zero carbon
footprint at the latest by 2050.
2021 was the rst full year since the launch
of this new Sustainability strategy and,
on most parameters, we are running
ahead of schedule. In particular, we have
continued to make signicant progress in
the reduction of our carbon footprint with
a 16.5% reduction in our carbon intensity
as compared with our base year 2019
(versus 3.9% in 2020). We achieved this
by improving the energy efciency of our
plants worldwide (9% improvement as
compared with 2019) and shifting an
increasing number of our operations to
carbon-free electricity. We will make
further progress in 2022.
We also continued to advance in our
journey towards greater gender diversity.
Females now represent 21% of our top
management, a level that we consider
is still too low, but which represents a
signicant improvement as compared
with the level of 12.5% in 2019.
In parallel, we engaged in a comprehensive
multi-year programme to assess the
sustainability performance of our
suppliers worldwide, with a particular
focus on greenhouse gas emissions,
anti-bribery and corruption, and child
and forced labour. More than 40% of our
raw material supplier base has already
been assessed.
We are very proud to see these efforts and
progress starting to be recognised: our
MSCI rating progressed from BBB to
A and our EcoVadis rating increased
from Silver to Gold during the year.
Given our strategic focus in this area,
we expect to make signicant further
progress in 2022.
Board Chairman
As you will have read in the Chairman’s
statement, John McDonough CBE will be
stepping down from the Board later this
year. John has served as Chairman of the
Board since the Company demerged from
Cookson Group plc in 2012. Since then he
has successfully guided the Company
and worked tirelessly in the service of the
Group’s stakeholders. He has been a
source of invaluable advice and guidance
and has been a tremendous support to me
and the Board as a whole. On behalf of
the Group, I offer him my sincere thanks
for all that he has done for Vesuvius over
the years.
Outlook
Both our end markets of Steel and Foundry
remain positively oriented at the start of
2022. In 2021, Vesuvius demonstrated its
ability to successfully pass-through cost
ination through price increases and will
continue to do so in 2022, as necessary.
Strategic R&D and capacity investments
are proceeding as planned and will support
market share gains going forward. While
we remain concerned about the potential
direct and indirect impacts of recent
geopolitical events, which have led us to
suspend our deliveries to Russian customers
for the duration of hostilities, we are
nevertheless condent that the Group will
deliver a signicant improvement in
nancial performance in 2022.
Patrick André
Chief Executive
3 March 2022
Patrick André
Chief Executive
Vesuvius ended 2021 in a strong position,
our dedicated management teams have
laid the foundations for future growth
Strategic
objectives
Develop our technical
service offering and
increase penetration of
value-creating solutions
Reinforce our
technology
leadership
We are dedicated to accelerating the
achievement of our Strategic Objectives
to deliver protable growth. In particular,
we will focus our efforts on the high-quality,
high-technology segments of the steel
and foundry markets, and increase
the automation and efciency of our
manufacturing base. We will drive this
change with a team of skilful, motivated
and talented people.
In 2021, we dramatically stepped up
our new product launch programme
with 27 new products launched in
2021, vs 10 in 2020, including the
following highlights by business unit:
Flow Control:
launch of the Air-Shield *
Technology, which creates a better
seal between the two plates of our
slide-gate mechanism to increase the
yield and quality of steel produced.
Advanced Refractories:
launch of
the BASILITE* QuickStart composition
which is an energy-efcient tundish
lining developed to be used on
a ‘QuickStart’ heating cycle. It
eliminates the typical drying cycle,
increasing productivity and reducing
energy costs and CO
2
emissions.
Foundry:
launch of the new FEEDEX*
FEF sleeve range which eliminates
uoride emissions for high pressure
greensand iron casting customers.
This new range supports foundries
in reducing harmful emissions and
hazardous waste while delivering
high thermal and feeding
performance at the same time.
In 2021, Advanced Refractories
installed 21 laser and mechatronics
solutions at customer locations.
More than 30 projects are under
discussion for the future.
During 2021, we invested 1.8% of
our revenue in R&D. We remain
committed to spend c.2% of sales
on innovation every year. We invest
throughout the product cycle from
front-end innovation to existing
product development, focusing on
the projects that deliver the highest
impact to our customers.
In 2021, our Advanced Refractories
business unit invested signicantly
in the development of a new
mechatronic Centre of Excellence
in Ghlin, Belgium. This is now fully
operational and will be the global
agship for our Steel Division
mechatronic capability.
We continue to work on products
that combine developments in
robotics, automation and data
analytics capabilities with our
well-established material science
research and modelling ability.
In addition, bringing together
our diverse research capabilities
continues to strengthen our
technology leadership. We have
also increased our focus on products
that help our customers improve
their own safety performance and
environmental footprint.
Deliver protable growth
Maintain an efcient capital
structure
Think beyond in innovation
Generate value for our
shareholders
Always put safety rst
Run best-in-class sustainable
operations
Foster talent, skill and
motivation in our people
We measure and monitor our performance
against these Strategic Objectives through
our Key Performance Indicators (KPIs).
See our
Key Performance Indicators
on
p38
and
39
Execution priorities
Our technology has been widely
adopted by the most sophisticated
producers in the most advanced
markets. However, marked
differences remain in the penetration
of our solutions within the industry.
Consequently, there is a wider
audience of customers who we
believe can benet from our
solutions. As steel and foundry
markets in developing economies
become more quality focused, we
have the opportunity to signicantly
increase our penetration of these
markets through the value delivered
by our solutions.
Vesuvius was built and grew
through technology breakthroughs.
These enabled the steel continuous
casting and foundry industries
to improve signicantly their
efciency and quality. We focus
on delivering market-leading
technology which continues to drive
our unique value proposition and
underpins our ability to deliver
ongoing value enhancement to
our customers.
Our strategy
Progress in 2021
14
Vesuvius plc
Annual Report and Financial Statements 2021
Improve cost
leadership
and margins
Capture growth in
developing markets
Drive
sustainability
See our
Sustainability
section on
p50 to 101
We have continued to deliver on our
restructuring savings programme
with a further £4.1m of recurring
savings delivered in 2021.
Our rigorous working capital
management has also paid
dividends as we achieved a 20.9%
ratio of trade working capital to
sales, showing an improvement of
230 bps vs 2020 despite the build
up of inventory required to enable
us to serve our customers under
current market conditions.
Throughout 2021, our teams
continued to pursue opportunities
to implement lean practices and
automate processes in our plants
to increase productivity and quality.
We also focused on price
management in 2021 to respond
to the increase of our input costs
and adapt the price of our products
accordingly. This remains a strong
focus in 2022.
The sales volume of the Steel
Division in 2021 outperformed
steel production in the world by
13.7%, with particularly strong
performance
in India, Japan, China, South
America, Vietnam and EEMEA.
Our Foundry Division registered
strong sales growth in emerging
countries in 2021: with growth of
68% in South America; 36% in
India; 35% in Vietnam; and 52%
in Turkey. In China, although our
customers faced decreasing
activity through 2021, we
were able to grow by 12%,
outperforming the market.
In 2021, despite the challenging
environment created by the
COVID-19 pandemic, we made
good progress on our nine
sustainability targets. This
exemplies the commitment
of Vesuvius’ people to work
for a better tomorrow, for the
benet of all stakeholders.
In 2021, we spent time analysing
the risks and opportunities created
for the Group by climate change,
focusing on three long-term
scenarios. Work then took place to
ensure that these were accurately
reected in the Group’s strategic
planning. In 2021, we also launched
a sustainability assessment
programme for our suppliers and
developed a methodology to assess
the sustainability performance of
our products.
Our efforts have been recognised
with our MSCI rating improving from
BBB to A, and our EcoVadis rating
moving from Silver to Gold. Vesuvius
was also honoured to be included
in the
Financial Times’
European
Climate Leaders list.
Execution priorities
We continuously pursue initiatives
to adapt our business and our cost
base to the changing trading
environment. This is central to our
efforts to improve protability.
We have embedded the principles
of lean manufacturing across all
our sites, continuously focusing
on quality and productivity.
Building on our long-standing
presence in all markets, we can
leverage the high growth enjoyed
by our customers’ industries in
emerging markets, which are
large consumers of steel goods
and foundry castings.
In line with our updated Sustainability
initiative, we are taking steps within
the organisation to create a better
future for our planet, our customers,
our people and our communities.
We develop products that seek to
help our customers drive efciency
and reduce their environmental
footprint, and we are focusing on
our own operations to reduce our
environmental impact. We focus
on giving our employees
opportunities for growth and
development, and support wider
and deeper engagement with
our communities.
Progress in 2021
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under licence.
15
Our business
Our performance Sustainability Governance Financial Statements
Vesuvius has articulated a number of key execution priorities. These enable us to achieve our core
Strategic Objectives of delivering protable growth, generating value for our shareholders and
in line with our sustainability initiative delivering a better tomorrow for our stakeholders.
Foundry industry
customers
Steel industry
customers
The future
The pressure on the Steel and Foundry
industries to reduce greenhouse gas
emissions, particularly CO
2
, is increasing
signicantly as governments are enforcing
stricter regulations, especially in the EU,
the US and, recently, China.
Our customers will continue to focus on
reducing absolute energy consumption
and CO
2
emissions (through the elimination
of higher emission processes) and reducing
normalised energy consumption and CO
2
emissions via increased efciency.
Our customers are following several
different routes to deliver this reduction
and to comply with stricter regulations.
The rise of scrap availability and of its
recycling is supporting a shift to electric
arc furnaces away from blast furnaces,
to produce steel – in particular, in the US
and the EU. We also expect this trend to
gain momentum in China as the country
implements its strategy towards net zero.
Alongside this, the use of hydrogen in
steel production, particularly in the
EU27+UK, to manufacture ‘Green Steel’ is
gaining traction and more and more steel
producers are exploring hydrogen-based
steel-making technologies.
In addition, failure to introduce a Carbon
Border Mechanism Adjustment in more
regulated regions like the EU is likely to
accelerate the delocalisation of steel
production from these areas.
In Foundry, as the move to hybrid/electric
vehicles and low-carbon forms of transport
accelerates, the foundry industry will
shift away from manufacturing internal
combustion engines. We expect aluminium
and steel foundries to grow at a higher
rate than iron foundries to support the
manufacture of lighter-weight components
for vehicles. Governmental funding and
regulations are supporting these trends.
In construction, we also see a continued
trend of using lighter-weight steel and
glass to replace concrete.
Steel
Steel production is a highly energy-
intensive process. The World Steel
Association has estimated that the steel
industry generates between 7% and 9%
of global direct emissions from the use
of fossil fuel. However, steel continues to
play an integral part in the modern world.
Steel is a necessary material for the sectors
and technologies that will drive a more
sustainable economy. It is also innitely
recyclable and the by-products created
during steel making, along with the
waste energies, are valuable resources.
Vesuvius’ consumables enable our
customers to increase manufacturing
throughput whilst lowering energy
consumption. For several decades,
Vesuvius’ products have been assisting
the steel industry in reducing greenhouse
gas emissions by increasing yields and
end-product consistency, therefore
improving the energy efciency
of production.
Foundry
Foundries consume large amounts of
energy in heating metals, generating
signicant amounts of CO
2
. They are
experiencing a drastic change in their
end-markets as parts of the world shift
towards hybrid and electric vehicles,
accelerating a transition away from
traditional ferrous casting, as well as a
signicant movement towards green
electricity generation.
Vesuvius’ products help our Foundry
customers to maximise their energy
efciency and increase the ratio of
metal melted to nished end castings.
We systematically monitor the positive
CO
2
impact of our products.
Solutions for the changing
demands of business
Climate change and the Vesuvius proposition
How Vesuvius will respond
We work closely with our customers to
develop new products and technologies to
meet these challenges with sustainability
being a critical focus in new product
development.
Our Steel Division is participating in
hydrogen R&D projects to develop
solutions for the future of steel making.
Additionally, we continue to develop new
products with superior sustainability
characteristics.
Our Foundry Division teams are developing
new ltration, feeding, mould coating and
molten metal treatment products to support
the availability of higher-performance
metal and the manufacture of lighter-
weight components for the automotive
industry. They are also developing new
products for aluminium foundries to
support the fast-growing market in
electric vehicles.
Our external environment
Almost two thirds of Vesuvius’ revenue
comes from providing goods and
services to the steel industry. One third of
Vesuvius’ revenue is generated from the
provision of products and solutions to the
foundry industry. The remainder comes
from products sold to high temperature
industries such as aluminium, cement and
energy from waste.
16
Vesuvius plc
Annual Report and Financial Statements 2021
What’s happening
Companies face ever-increasing
regulation and scrutiny to ensure
safety and reduce emissions from their
operations and products.
Advancements in automation can help
transform production, bringing greater
consistency whilst lowering cost and
delivering signicantly improved safety
performance in a plant. Thus robotics can
support or even substitute operators in
hazardous production areas.
Market volatility is increasing and labour
shortage is a growing challenge, creating
uncertainty and requiring even more
exibility in production. Automation can
create more exible operations to enable
a more rapid response to changing
market conditions.
How we are responding
Vesuvius has the global and in-depth
capability to combine know-how in steel
mills and foundries with robotic capabilities
to deliver superior safety performance in
hazardous areas of production.
We provide laser technology to assess
refractory wear, allowing targeted repair
with our broad range of refractory
consumables and application solutions
– for efcient and safe operation.
We have invested signicant resources
in the development of our mechatronics
capabilities to shape the future operations
of steel and foundry plants with our current
robotics offering (e.g. Tundish, Continuous
Casting) as well as with new automation
capabilities in other areas. We are also
exploring new ways to integrate continuous
data capture into our solutions to give our
customers further insights into the use of
consumables in their production processes.
What’s happening
Our view on the long-term growth for the
global steel and foundry markets remains
positive. The importance of technology to
differentiate steel and foundry producers
continues to grow, supported by the
development of more demanding
product applications.
Whilst lower-quality construction steels
are currently beneting from solid growth,
this stems from government investment in
infrastructure programmes to shield their
economies from the ongoing impact of the
COVID-19 pandemic. We believe this is
only a temporary phenomenon.
Steel producers are increasingly focused
on supplying higher-quality steel grades
for automotive and power generation,
where the consistency of the nished
steel is fundamental. This is driving an
above-market growth forecast for
high-technology steel in all regions.
In foundries, there continues to be a trend
towards higher metal and process quality,
as they focus on a greater number of
applications that require castings to
combine high strength with thinner,
lighter proles and greater complexity.
How we are responding
Vesuvius is strongly positioned to facilitate
these upgrades and to benet from these
trends. We have a wide product and
service offering designed to support the
production of high-technology steel and
complex casted components across our
broad, global manufacturing base.
We continue to invest heavily in R&D
with dedicated centres of excellence to
think beyond what exists today.
Vesuvius’ innovative portfolio of
products and services, together with its
global footprint, enable us to provide
high-technology solutions to our
worldwide customers.
Technical upgrade of steel and foundry
Automation – safety and efciency
Improving quality with our new products
In Flow Control, we have enhanced our
Composite Design Technology (CDT) with
a new solution, the Surface Layer CDT, that
allows us to design a broader range of shapes
and sizes for our slide-gate plates and use a
greater proportion of recycled materials,
while maintaining a high level of performance.
By combining this technology and our innovation
on the composition of the plates, we can offer
high performing and sustainable products with
greater exibility in design.
Our Foundry Division launched a new lter
range this year, the STELEX* pureow lter, for
small castings in steel and other high temperature
alloys. This lter range minimises inclusions
to improve the purity of the metal, reduces
dependency on zirconia (which is often difcult
to source) and optimises ltration capabilities.
Leaving the most hazardous work to robots
In 2021, our Advanced Refractories business
unit commissioned several tundish spray robots
at customer sites allowing them to automate
the re-lining process of their tundishes, thus
increasing the safety and reliability of their
operations, and reducing the downtime of
their equipment.
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries, used under licence.
17
Our business
Our performance Sustainability Governance Financial Statements
Foundry industry end-markets
The most important end-markets for the
foundry industry are general engineering,
light vehicles, including passenger
cars and light commercial vehicles,
medium and heavy commercial vehicles,
construction, agriculture and mining
equipment, power-generation equipment,
and railroad.
Whilst the COVID-19 pandemic caused a
sharp decline in Foundry end-markets in
2020, end-markets rebounded in 2021
with particular improvements in general
engineering (12.7%) and mining and
construction equipment (19.2%). However,
the automotive market continued to suffer
from the severe semi-conductor supply
shortages in 2021, which signicantly
impacted light vehicle production,
especially during the second half of the
year, leading to only a slight increase in
production volume of 2.5% in 2021.
Above-average market growth
for highly sophisticated and
complex castings
The Foundry Division benets from its
capabilities to improve highly sophisticated
and complex castings, which are the
segments of the foundry market growing
the fastest. Foundry customers are
evolving towards these types of casting
because of increased requirements for
cleaner metal to cast complex shapes
with thinner sections.
Whilst Foundry Division products typically
represent less than 5% of a foundry’s
production costs, they contribute
signicantly to the improvement of
product quality and manufacturing
efciency, whilst reducing the
environmental impact of the casting
process and improving the ratio of
nished castings to the amount of
metal poured. The latter is a key
parameter for foundry efciency.
‘High-technology steel’
‘High-technology steel’ is our internal
segmentation that describes steel which
is either high performing, e.g. advanced
high-strength steel for automotive
applications, or for which the production
process to produce the steel is complex,
e.g. the near net shape production
process, which is a continuous casting
process that produces steel in very thin
slabs near to its nal required thickness.
These processes and steel grades, where
the consistency of the nished steel is
paramount, are gaining momentum
worldwide because they provide steel
producers with either differentiated
products or signicant benets in
terms of cost savings and a reduced
environmental footprint.
Our markets
Steel
Division
Business units
Flow Control
Steel production volume is the primary
driver of demand for Flow Control’s
products, whilst the trend for
‘high-technology steel’ allows us to
leverage our advanced solutions and
achieve above-market growth rates.
Advanced Refractories
Steel production volume and certain
other high-temperature industries,
such as aluminium, copper, cement,
petrochemical and energy from waste,
are the drivers for the Advanced
Refractories business unit’s
product demand.
Sensors & Probes
Steel production volume and the need
to increase the quality and consistency
of cast steel drives demand for our
Sensors & Probes business.
Foundry
Division
Higher sophistication, demanding
higher-quality metal and increasingly
complex castings is the long-term
driver for product demand for the
Foundry Division.
High-technology
–
Near net shape
production process
–
Stainless steel
–
Engineering steel:
bearing, shafts, tools, etc.
–
Automotive steel
Steel usage
Vesuvius’ internal segmentation of global
crude steel production
Steel type:
33%
High-technology
33%
Medium-technology
34%
Commodity
Flow Control business unit end markets
Steel type:
58%
High-technology
25%
Medium-technology
17%
Commodity
Commodity
–
Basic rebar
for concrete
reinforcement
Medium-technology
–
Construction sheets:
roong, cladding,
etc.
–
Heavy plates for
ship building, pipe
18
Vesuvius plc
Annual Report and Financial Statements 2021
Technology changes and
environmental drivers
New technologies, such as 3D printing,
are expected to continue to inuence the
metal casting industry, allowing for faster
prototyping and production of smaller
volume parts. Environmental regulations,
driven by the desire to reduce volatile
organic compound emissions and the
use of silica within the industry, are also
expected to continue to tighten.
This will drive the trend to nd processes
and consumable products which support
production efciency and reduce a
foundry’s impact on the environment.
Iron casting
Iron casting is split between grey and
ductile iron, with grey iron representing
most of the metal being cast. This is
a cost-efcient and robust process
producing components that do not
need to tolerate extreme mechanical
stress. All iron castings require lters and
coatings, but grey iron is not as reliant on
feeding system utilisation due to its lower
shrinkage on solidication. Conversely,
ductile iron production requires more
sophisticated consumable feeding
products to cope with the high shrinkages
of metal whilst solidifying.
Steel casting
Steel is used to cast components requiring
very high mechanical performance.
Steel casting is the most demanding
casting process due to higher melting
temperatures and greater tendency for
shrinkage. This drives greater demand
for consumables and technical expertise
in this segment.
Aluminium/Non-ferrous casting
Aluminium casting is the segment of the
foundry market growing the fastest,
capturing a signicant share of the light
vehicle market. Being molten below 700°C,
aluminium can be cast in iron moulds
which can then be reused. The casting
process growing the fastest is High Pressure
Die Casting (HPDC), supported by the
growth of electric vehicle production.
Vesuvius develops and supplies uxes,
lters and machines that rene the
composition and cleanliness of the metal.
Crude steel production is a structurally
growing market
The COVID-19 crisis has disrupted global
demand and supply chains around the world.
However, from the end of 2020, we have
observed a strong rebound in steel demand
and thus in production, as our customers
were restarting and increasing capacity to
meet their own customers’ demand. Despite
steel producers facing issues ramping up
production to meet full demand, crude
steel production in the world, excluding
China, increased by 12.5% in 2021
compared to the prior year, while China’s
crude steel production in 2021 decreased
by 3% , reversing a growth trend that has
been running for several years.
In 2021, we saw the driving forces behind
steel production changing, primarily
inuenced by decarbonisation targets
in the US, EU and China. China is now
targeting net zero by 2060 and limiting
crude steel outputs and exports. We believe
this action will benet other regions. 2021
saw a strong rebound in US and EU27+UK,
production at 18.3% vs 2020 and 14.8% vs
2020, respectively. However, we believe
the long-term growth will mostly come
from emerging regions, in particular from
India and South-East Asia, EEMEA and
Latin America.
Longer term, we expect global crude steel
production to grow at a rate of 1.3% per
annum and excluding China, at a rate
of 2.5%.
Notes to the above charts:
1. Eastern Europe, Middle East (incl. Turkey), Africa, Latin America and South East Asia.
2. EU27, UK, USA, Canada and North Asia.
3. Eastern Europe, Middle East (incl. Turkey) and Africa.
World crude steel production
(mt)
Changing driving forces in global crude steel production
0
500
1,000
1,500
2,000
2,500
‘50 ’54 ‘58 ’62 ‘66 ’70 ‘74 ’78 ‘82 ’86 ‘90 ’94 ‘98 ’02 ‘06 ’10 ’14 ’18 ‘22 ’26 ‘30
Year
Sources:
Historical data from World Steel
Association. Forecasts are management estimates.
Other emerging markets
1
India
China
Developed markets
2
-5
0
5
10
15
20
25
30
Crude steel production growth 2021
FY 2021
H1 2021 H2 2021
World
+
3.7% +14.4% -5.6%
China -3.0% +11.8% -16.3%
World excluding
China +12.5% +17.9% +8.0%
Crude steel production volume 2021
Crude steel production growth year-on-year
India
17.8%
China
-3.0%
South
East Asia
22.5%
Latin
America
15.4%
EU27 + UK
14.8%
NAFTA
16.6%
EEMEA
3
excl Iran
9.2%
19
Our business
Our performance Sustainability Governance Financial Statements
Business model
A protable, exible, cash-generative
model focused on sustainable growth
Financial capital
We use the cash generated by our business
to invest in innovation, people, operating
assets, technology and sales to generate
further growth.
Manufacturing capital
We have a global footprint, with
54 production sites on six continents,
giving us proximity to our customers.
Intellectual capital
We have six R&D centres of excellence,
together with dedicated R&D staff
worldwide, generating innovative
products and services that help our
customers make their industrial processes
safer, more efcient and more sustainable.
Human capital
We invest in developing our skilled
and motivated workforce of more than
11,000 people and provide them with
a safe environment in which to work.
Social capital
We champion our Values and our ethical
conduct. We maintain strong relationships
with customers and our wider stakeholder
groups.
Natural capital
We utilise high-quality raw materials,
secured through reliable and
well-developed and sustainable
supply chains.
We develop and manufacture
high-technology products
and solutions predominantly
for supply to the steel and
foundry casting industries,
operating a protable,
exible, cash-generative and
growth-building business
model. Over many years,
we have built the brand
equity of our Vesuvius and
Foseco products through
technology leadership,
reliability and service.
The sustainability of our model
The items we have now formalised in our
Sustainability initiative have long been at
the heart of Vesuvius’ value proposition.
We act as a responsible corporate
citizen, developing products that help
our customers to improve their efciency
and reduce their environmental impact.
Our key resources
What we do
Global presence
Using our global expertise to identify
and create market opportunities
Vesuvius is present on six continents, supporting the development
of global steel and foundry manufacturing processes with new
technologies. We have manufacturing capability in all the main
steel and foundry markets and hire and train local engineers.
Our local manufacturing, local expertise and global knowledge
of customers’ processes give us a special relationship with
our customers.
See more about
Our
global presence
on p4 and 5
Our sustainable competitive advantages
Optimised manufacturing
Low-cost lean manufacturing provides reliable
‘just-in-time’ products
Our successfully tested products can be produced at high
volumes across all of our manufacturing footprint, guaranteeing
cost-competitive and time-efcient delivery. We optimise
our cost-competitiveness by investing in low-cost production
sites and increasing production automation – and have
established manufacturing facilities to support our expansion
in emerging markets.
See more about
Our operations
on p44–49
R&D centres
of excellence
Employees
Production sites
6
11,204
54
20
Vesuvius plc
Annual Report and Financial Statements 2021
Our investors
Strategic
alignment
Our cash generative and low capital
intensity business provides returns
to our shareholders and underpins
sustainable growth.
Our customers
Strategic
alignment
Our investment in innovation creates
cutting-edge products and solutions,
delivering enhanced value for our
customers and differentiating us from
our competitors. Our technology solutions
improve customer safety and remove
operators from the most dangerous parts
of our customers’ processes. We embed
technical experts within our customers,
giving us a fundamental understanding
of their needs and delivering them
access to our global network of highly
skilled individuals.
Our suppliers
Strategic
alignment
Maintaining cost-effective access to
high-quality raw materials is vital to
our success. Our suppliers are critical
to our business.
Our people
Strategic
alignment
We focus on the health and safety
of all our staff. We engage with our
people, encouraging and rewarding
high performance to create an
environment where all can realise
their individual potential.
Our communities
Strategic
alignment
We are committed to maintaining
positive relationships with the
communities in which we operate.
Our social responsibility activities
complement our Values and we
encourage our employees to engage
with communities and groups local to
our operations.
Students and graduates
Strategic
alignment
Attracting new talent to Vesuvius is
vital for the Group’s continuing success.
Recruiting new students and graduates
feeds the talent pipeline and allows us
to tap into new sources of up-to-date
business ideas and R&D capability.
–
Our industry experts are embedded
at many customer locations and
are therefore ideally placed to
collaborate with customers to identify
their needs, and potential service and
process improvements. This also
enables us to grow our solutions and
service portfolio.
–
We develop high-technology products
that deliver quality enhancement,
efciency gains and energy savings
to our customers. We focus on
environmental sustainability in our
own business through the efcient
use of energy and natural resources.
–
Our model is protable by allowing
value pricing for bespoke products
and services. It generates growth
as we enlarge our market with
additional innovative products
and solutions.
–
Our model is resilient to end-market
volatility due to the exibility of our
diversied manufacturing footprint
and adjustable cost base, increasingly
supported by automation.
–
Our commitment to ethical business
delivers strong, long-term, sustainable
commercial relationships.
Advanced technology
Our technology centres develop value-adding solutions involving
engineered systems and high-value consumables
Our continuing investment in Vesuvius’ R&D centres of excellence
is reected in all areas of our offering. We have knowledge of
the most advanced ceramic and metallurgical techniques using
state-of-the-art equipment and the most advanced technologies
of ow simulation and nite element analysis. We are therefore
able to provide our customers with sophisticated, innovative,
custom-designed solutions.
Read more about our
Value-added solutions
on p14 and 15
Service and consistency
Serving our customers reliably, competitively and consistently
with consumables critical for their manufacturing processes
Alongside our global presence, we ensure a local service to
our customers, from inventory management to high-quality
technical support at their sites and the ability to swiftly
modify production and supply to reect changes in customer
requirements. Our knowledge of end-market processes,
specications and techniques around the world gives our
experts an unparalleled ability to support our customers.
Read more about
Our operations
on p44–49
Strategic
alignment
Deliver protable
growth
Generate value for
our shareholders
Maintain an
efcient capital
structure
Always put
safety rst
Think beyond in
innovation
Run best-in-class
sustainable
operations
Foster talent,
skill and motivation
in our people
How we deliver
The value we create
21
Our business
Our performance Sustainability Governance Financial Statements
Under Section 172 of the Companies Act 2006, the Directors have a duty to promote the
success of the Company over the long term for the benet of shareholders as a whole,
having regard to a range of other key stakeholders and interests.
The Board is responsible for the overall
direction of the Group. It focuses primarily
upon strategic and policy issues and is
responsible for the Group’s long-term
success. It sets the Group’s strategy,
oversees the allocation of resources and
monitors the performance of the Group,
to ensure that the Group is structured
appropriately for the challenges and
opportunities of the future.
In performing these duties, the Board is
focused on the sustainable success of the
Group in the long term, and the existence
of a culture that supports this success.
The Board recognises the need for the
Group to have effective engagement with,
and encourage participation from, all key
stakeholders to promote these long-term
interests. The Group’s key stakeholder
groups, reecting those who have the
biggest impact on the business and modes
of engagement, are outlined in the table
on pages 26 and 27. The Board has regard
to the activities undertaken throughout the
Group in considering its own Section 172
responsibilities.
Effective engagement with
stakeholders promotes the
long-term sustainability of the Group
Section 172(1) Statement
The Directors must have regard (among other matters) to the:
Likely consequences of any
decision in the long term
Interests of the Company’s
employees
Need to foster the Company’s
business relationships with
suppliers, customers and others
Impact of the Company’s
operations on the community
and the environment
Desirability of the Company
maintaining a reputation for high
standards of business conduct
Need to act fairly as between
members of the Company
22
Vesuvius plc
Annual Report and Financial Statements 2021
Vesuvius employee photography competition
Saugata Datta – see inside back cover
Likely consequences of any
decision in the long term
Throughout the year, the Board considered
the long-term consequences of the
decisions it made, focusing on the interests
of relevant stakeholders as appropriate.
Examples of how these activities impacted
some of the key decisions taken by the
Board during 2021 are given below.
Acquisition of the assets
and business of Universal
Refractories, Inc.
The Board approved the acquisition of
the assets and business of Universal
Refractories, Inc. in December 2021.
This is a strategically important
acquisition for Vesuvius, supporting our
commitment to shareholders to develop
our technical service offering.
It signicantly expands our North
American presence among electric arc
furnace steel producers, delivering
further expertise to our core business
in steel tundish applications, while also
further strengthening our Foundry
business. This allows us to enhance our
customer offering and will provide
further opportunities for our suppliers.
We are delighted to welcome 140 of
Universal’s employees to the Group.
Stakeholder alignment
–
Shareholders
–
Employees
–
Customers
–
Suppliers
Strategic alignment
Ongoing operational response
to the COVID-19 pandemic
Recognition of the impact of COVID-19
continued to play an important part
in the Board’s decision-making
throughout 2021. With the primary
focus remaining on protecting the
health and safety of employees, the
Board monitored the level of COVID-19
throughout the Group and the steps
that were being taken in each country
to enable employees to be vaccinated.
The Board also monitored the impact
of the pandemic on global supply
chains, in particular on the Group’s
ability to source and ship raw materials
to full customers’ orders on a timely
basis, and the increasing costs that
resulted. The Board oversaw the
Group’s response to these challenges,
and scrutinised the actions being taken
to promote continuity of supply and
ensure that the Group’s nancial
position was protected by the
pass-through of additional costs.
Stakeholder alignment
–
Employees
–
Shareholders
–
Customers
–
Suppliers
Strategic alignment
Capital investment in
VISO and slide-gate capacity
The Board approved the investment
in additional slide-gate capacity in
Europe, and VISO and slide-gate
capacity for South East Asia. The
Board considered the current Group
capacity and the need for expansion
to ensure that the Group was able to
continue to full customers’ orders on
a timely basis.
The Board noted that the new
equipment would produce products
more efciently, thus supporting the
Group’s sustainability objectives.
Consideration was given to the
appropriate geographical location
for the extra capacity as well as the
environmental consequences of
increased production. The Board noted
the actions taken to make adjustments
to project planning and the additional
improvements to legacy production
processes at the nominated sites.
The additional capacity will also create
additional jobs in Poland and India.
Stakeholder alignment
–
Shareholders
–
Employees
–
Customers
–
Suppliers
–
Communities
Strategic alignment
Strategic
alignment
Deliver protable
growth
Generate value for
our shareholders
Maintain an efcient
capital structure
Always put safety
rst
Think beyond in
innovation
Run best-in-class
sustainable
operations
Foster talent,
skill and motivation
in our people
See more about
Our strategy
on
p14
and
15
23
Our business
Our performance Sustainability Governance Financial Statements
Interests of the Company’s
employees
The Board takes the health and safety of
our employees as its primary responsibility.
Throughout 2021, it continued to monitor
the impact of the COVID-19 pandemic on
employees, focusing particularly on the
roll-out of vaccinations around the world
and any steps that Vesuvius’ businesses
could take to facilitate the availability of
vaccinations for their staff.
At each Board meeting, the Board received
a report on the Group’s performance
against Health and Safety KPIs and
reviewed, in detail, the circumstances of any
Lost Time Injuries that had been recorded
since its last meeting.
As part of the regular schedule of business
unit presentations, the Board reviewed
progress against the specic HR objectives
for each business unit and monitored the
initiatives that are being implemented
to enhance the career and personal
development of employees, and talent
development as a whole within the Group.
In October, the Company undertook its
third global employee engagement
exercise. The Board oversaw this process,
which commenced with an engagement
survey, aimed at canvassing the opinions
of all of our >11,000 employees worldwide.
The Board received feedback on the
results, including comparator data versus
the norm for other global manufacturing
companies and considered what this
indicated about the culture of the Group.
It reviewed management’s response
to the outcome of the survey and the
follow-up actions that would be
undertaken throughout the Group.
Further information about the survey
can be found on pages 91 and 92.
Further information about the work
of the Board’s Committees in considering
and supporting the interests of the
Company’s employees can be found
in the Nomination and Remuneration
Committee Reports on pages 125–153.
Need to foster the Company’s
business relationships with
suppliers, customers and others
During 2021, the Board received regular
updates from the Chief Executive on the
actions being taken throughout the Group
to ensure continuity of supply for the
Group’s customers despite the supply
chain disruptions caused by the COVID-19
pandemic and the increased cost of raw
materials and freight. The Board received
regular updates on the impact of the
pandemic on the Group’s suppliers,
and the availability and pricing of raw
materials. The Board discussed the need
to pass these increased costs through to
customers to protect the Group’s business
and the Chief Executive was tasked with
ensuring this was being appropriately
actioned throughout the Group. The Board
was then kept apprised of progress in
the price negotiations being undertaken
with customers.
The Board received presentations from the
business unit Presidents, Head of Strategy
and President Operations and Technology
on end-markets, the Group’s relationships
with customers and key matters of concern
to them. It discussed the steps being taken
by the Group to respond to customers’
ongoing requirements, and the research
and development, marketing and new
product launch strategies being actioned
to respond to these. The Board regularly
reviewed information on the Group’s
performance against key manufacturing
quality targets and was updated at Board
meetings on actions undertaken to rectify
any signicant quality issues or customer
complaints. The Board considered market
trends at each meeting and undertook a
thorough review of macro trends and their
likely long-term implications at the Board’s
annual strategy meeting.
Alongside the regular customer contact
maintained by the Chief Executive the
full Board visited a steel customer in
Belgium in September. This provided the
Directors with the opportunity to speak
directly to one of our customers about
their business and to hear from them
rst-hand about their immediate
challenges and longer-term expectations.
In addition to understanding business
unit-specic procurement and pricing issues
during the year, the Board also received an
update from the Group’s Chief Purchasing
Ofcer and discussed the Group’s
procurement organisation structure,
raw material supply, relationships with its
suppliers and its purchasing practices.
Impact of the Company’s
operations on the community
and the environment
The Group’s Sustainability initiative
ensures that sustainability is consistently
at the centre of the Group’s strategy. A key
tenet of Vesuvius’ business has always
been to support our customers’ efforts to
reduce their own environmental footprint
and improve safety on the shop oor
(especially exposure to hot metal).
The Sustainability initiative provides
further detail about the Group’s efforts
in this regard and the actions Vesuvius
has committed to take to reduce its own
environmental footprint and create a
better tomorrow for our people and
stakeholders.
The Board received bi-annual presentations
from the VP Sustainability on the work of
the Sustainability Council and the Group’s
progress against its sustainability targets.
It also received specialist advice on the
ongoing governance and regulatory
changes to ESG disclosure requirements.
The Board and Audit Committee monitored
the Group’s progress with TCFD compliance,
reviewing the results of the Sustainability
Council’s detailed scenario and risks and
opportunities analysis. Further details
of the Board’s oversight of the Group’s
sustainability activities can be found in the
Sustainability section on pages 50–101.
The Board recognises that the success
of the Group’s operations is dependent
on maintaining positive relations with
the communities in which we operate.
The Board encourages Vesuvius’ sites to
support their local communities through
charitable activities and community
events. As part of our commitment to
encourage more young people to pursue
careers in scientic and technical subjects,
Vesuvius looks for opportunities to develop
the next generation of leaders in our
sector and supports training and
education programmes. In 2021, this
included partnering with the Polytechnic
Faculty of Mons in Belgium, supporting
their Mechatronic Award and operating a
young apprentice programme in Piedade,
Brazil to provide professional training to
young people with minimal education.
Further examples of the Group’s activities
can be found in the Community section
on page 99.
Section 172(1) Statement
continued
24
Vesuvius plc
Annual Report and Financial Statements 2021
Desirability of the Company
maintaining a reputation for high
standards of business conduct
The Group’s Code of Conduct states that
Vesuvius must maintain an unquestioned
reputation for integrity. The Board takes
seriously the Group’s obligation to
maintain this high standard of business
conduct and assessed compliance with
this requirement through a variety of
mechanisms during 2021, including
reports from Internal and External Audit,
along with feedback from the Group’s
employee engagement survey.
Vesuvius agrees terms with its suppliers
and seeks to pay in accordance with
those terms.
When reviewing the Group’s tax strategy,
the Board ensured that the Group’s
approach to tax management reinforced
the need for the Company to maintain
a reputation for high standards of
business conduct.
In addition, the Board received formal
reports during 2021 on the Group’s
compliance activities, including the
Group’s risk assessment programme and
training practices, and specic issues raised
through the Group’s Speak Up helpline
and internal reporting processes. Further
details of the Group’s compliance activities
can be found in the Our communities
section on pages 97–101.
Need to act fairly as between
members of the Company
The primary focus of the Board’s business
decisions is on ensuring the long-term
sustainability of the Group. The Board
recognises that, in seeking to maintain
long-term protability, the Group is reliant
on the support of all of its stakeholders,
including the Group’s workforce, its
customers, suppliers and the communities
in which its businesses operate.
In taking capital allocation decisions during
2021, the Board was cognisant of the
need to balance the interests of different
stakeholders. Decisions on the Group’s
approach to investment opportunities,
working capital, capex, R&D, investment
in people, dividend policy and pension
contributions, taken during the year, were
all considered against this backdrop.
The Board is committed to communicating
with shareholders and other stakeholders
in a clear and open manner and seeks to
ensure effective engagement through the
Company’s regular communications,
the AGM and other investor relations
activities. During 2021, the Company
undertook an ongoing programme of
meetings with investors. The majority
of these meetings were led by the Chief
Executive and Chief Financial Ofcer,
and during 2021 a large portion were
conducted by virtual means.
In advance of each AGM, we write to our
largest shareholders inviting discussion
on any questions they might like to
raise and making the Chairs of the
Board, the Audit Committee and the
Remuneration Committee available to
meet shareholders should they so wish.
In addition, the Chair of the Remuneration
Committee wrote to our largest
shareholders and key governance
agencies in early 2022, to provide
additional detail on changes to the
Group’s executive remuneration
proposals and invite further engagement.
Feedback was received from the majority
of shareholders and governance agencies
and dialogue entered into with a number
of them regarding the specics of the
proposals. As a result of this engagement,
the Committee was pleased to be able
to implement these changes with the
support of shareholders. Further detail is
contained in the Directors’ Remuneration
Report on pages 130–153.
The Company reports its nancial results
to shareholders twice a year, with the
publication of its annual and half-year
nancial reports. In addition, to maintain
transparency in performance, we also
issued a number of trading updates
during 2021. Presentations or
teleconference calls were held by the
Chief Executive and Chief Financial
Ofcer with institutional investors and
analysts on each of these dates.
In a normal year all the Directors
attend the Company’s AGM, providing
shareholders with the opportunity to
question them about issues relating to
the Group, either during the meeting or
informally afterwards. In 2021 travel
restrictions operating in the UK curtailed
attendance at the AGM. It is hoped that
the majority of Directors will be able to
attend this year’s AGM in person.
Relations with shareholders
25
Our business
Our performance Sustainability Governance Financial Statements
Our Stakeholders
Why we engage Types of engagement undertaken
Issues relevant to the
stakeholder group
Our people
With our decentralised management model,
the dedication and professionalism of our
people, their capacity for owning their
roles and their drive for results are the most
signicant contributors to Vesuvius’ success.
We focus on the health and safety of
all our staff, and engage with our people,
encouraging and rewarding high
performance to create an environment
where all can realise their individual potential.
Fundamental focus on health and safety and the care of
all employees
Continuing dialogue between employees and their managers,
including the conduct of regular performance reviews
Competitive remuneration and benets strategy, emphasising
talent development with tailored career-stage programmes.
Living the Values and other award schemes celebrate
individual achievements
Global communication mechanisms include an internal
intranet, global email communications and a Vesuvius
app, alongside forums such as local ‘town hall’ meetings.
The Group is reconstituting its European Works Council,
operates local works councils and recognises trade unions
Wide-ranging internal training is offered on key job-related
issues, with programmes such as the Vesuvius University –
HeaTt – and the Foseco University
Health and safety
Diversity and inclusion
Remuneration evolution
International mobility
Employee engagement
Development and retention
Career opportunities
Sustainability performance
Students and graduates
Attracting new talent to Vesuvius is vital.
Recruiting new students and graduates feeds
the talent pipeline and allows us to tap into
new sources of up-to-date business ideas
and innovation.
The Group maintains contact with universities to identify and
develop talent and undertakes R&D collaborations which
complement our in-house R&D capability
Our businesses attend careers fairs and provide student
work placements and internships
Vesuvius’ website provides prospective applicants with
detailed information about the Group
Career opportunities,
personal development,
engagement and retention
Research and innovation
Training and mobility
Business sustainability
Customers
Engaging with our customers helps us to
understand their needs and identify
opportunities and challenges. Collaborating
with our customers enables us to use our
expertise to improve the safety and efciency
of their manufacturing processes, enhance
their end-product quality and reduce
their costs.
Senior-level dialogue is maintained with all key customers,
including Directors’ visits to customers’ sites, as appropriate
Our business model focuses on collaboration with customers,
to provide customised solutions, and more than 2,500 Vesuvius
representatives are embedded at customer locations
The Group manages customer relationships on a global
basis as required, complemented by diverse local
servicing capability
We engage with customers on safety leadership and support
their training requirements. During the pandemic there has
been a greater focus on virtual training
We provide technical customer training, including the
Foseco University, and participate in industry forums and
events. In 2021, the majority of these interactions had to be
conducted virtually with more focus on e-learning
Customer satisfaction
Product quality and
performance
Innovation and provision
of solutions
Health and safety
Sustainability performance
Suppliers and contractors
Maintaining a exible workforce through the
use of contractors and cost-effective access
to high-quality raw materials is vital to our
success. Our contractors and suppliers are
critical to our business.
In a normal year Vesuvius conducts regular visits to key
suppliers. In 2021, opportunities for such visits were
more limited
Senior-level relationships are built with large suppliers.
In 2021, the majority of these meetings were held virtually
All suppliers/brokers have regular interaction with the
Global Purchasing Team
Dedicated category directors build long-term relationships
and product expertise
There is a rigorous and consistent supplier accreditation
procedure
Effective working protocols, including work risk assessments,
are established with contractors
Operational performance
Responsible procurement
Trust and ethics
Payment practices
Section 172(1) Statement
continued
26
Vesuvius plc
Annual Report and Financial Statements 2021
Why we engage Types of engagement undertaken
Issues relevant to the
stakeholder group
Investors
Continued access to funding is vital to the
performance of our business. We work
to ensure that our investors have a clear
understanding of our strategy, performance
and objectives. Supportive investors are more
likely to provide the Company with funds
for expansion.
Vesuvius’ Investor Relations Strategy managed by the
Group Finance Director and Chief Executive includes regular
meetings with key and prospective investors
The Group’s Annual Report provides an overview of the Group.
Regular announcements and press releases are published to
provide updates on the Group’s performance and progress
The AGM provides all shareholders with an opportunity to
directly engage with the Board
There is ongoing dialogue with the Company’s analysts to
address enquiries and promote the business
Financial performance
Strong governance and
transparency
Sustainability performance
Diversity and inclusion
Director remuneration
Board performance
Lenders (banks and debt investors)
The Group needs to access funding to ensure
it has sufcient nancing to run the business
and fund future growth. We ensure that
our relationship banks have a clear
understanding of our strategy, performance
and objectives. We engage with lenders to
full our compliance obligations and to
ensure that we have clear knowledge and
awareness of market sensitivities and trends.
Group Treasury maintains an ongoing dialogue with key
lenders through the relationship banks and other local
banks in the countries in which Vesuvius operates. In 2021,
this dialogue was maintained by virtual means
The Group Treasurer, Group Head of Corporate Finance and
CFO hold regular meetings with key personnel from banks
and other lenders who provide the Group’s debt funding.
In 2021, these meetings were held virtually
Representatives from the banks are invited to the Group’s
results presentations
Annual Report and Financial Statements
Financial performance
Group internal control and
audit processes
Strategic planning and ability
to repay debt
Gearing and monitoring of
nancial covenant ratios
Business continuity planning
Transparency and ethical
behaviour
Communities
We are committed to maintaining positive
relationships with the communities in which
we operate. Our social responsibility activities
complement our Values and we encourage
our employees to engage with communities
and groups local to our operations.
Provision of work experience and internships to local university
students and school children
Sponsoring of charitable activities
Participation in local volunteering initiatives
Operational performance
Transparency and ethical
behaviour
Environmental performance
Environmental agencies
and organisations
Good environmental management is aligned
with our focus on cost optimisation and
operational excellence. We engage with
appropriate organisations to ensure that we
are complying with regulatory requirements,
and to publicise our performance.
Signatory to the UN Global Compact
Online Sustainability Report published on the Vesuvius website
Visits and inspection of sites by government agencies
Annual Report and Financial Statements
Response to environmental research as part of customer
and supplier due diligence
Participation in environmental and social responsibility
research and questionnaires
Governance and
transparency
Operational performance
Reporting on performance
metrics
Environmental performance
Governments and regulatory agencies
National governments set the regulatory
framework within which we operate.
We engage where appropriate to ensure
that we can help in shaping new policies,
regulations and standards, and ensure
compliance with existing requirements.
Transparent communication with government ofcials
as required
Participation in appropriate government and industry
working groups
Membership of industry associations and contribution to
best practice guidance
Lobbying and direct contact with appropriate bodies on
key business issues
Trust and ethics
Governance and
transparency
Pensioners and deferred pensioners
Providing for and managing future pension
liabilities in our dened benet schemes is an
important part of nancial planning.
Ongoing contact with members of the Group’s pension plans,
including annual member updates and contact on specic
regulatory developments
Contact with the trustees and custodians of the Group’s dened
benet plan
Trust and ethics
Financial performance
27
Our business
Our performance Sustainability Governance Financial Statements
Vesuvius adopts an open and honest
approach to employee communications,
with regular updates from senior
management across businesses and
operations within the Group. The Senior
Leadership Group comprising the
160 most senior managers in the Group
participates in monthly webcasts with the
Group Executive Committee, to ensure
clear communication of the Group’s key
targets and priorities. In September,
this Group met for a three-day off-site
leadership meeting to discuss the
organisation’s challenges and objectives
for 2022.
The Board and Group Executive
Committee usually visit operations
throughout the year, touring the sites,
meeting with employees and conducting
‘town hall’ meetings when they do. These
activities were curtailed during the rst
half of 2021 by COVID-19-related travel
restrictions, but some visits did take
place in the second half. Other regular
employee communications include
direct email updates on the nancial
performance of the Group, the industrial
environment in which Vesuvius operates
and other signicant operational
developments. The Company operates
an employee intranet which distributes
Company news and events, and
an employee ‘app’ for information
dissemination, as well as undertaking
local initiatives for employee
engagement on a site-by-site basis.
The HR department is the primary
point of contact for employees on
employment and workplace matters,
operating with an open-door policy
and advising employees of any local
legal, tax, pension or other employment
changes. There are numerous
employee-sponsored and led
representative bodies within Vesuvius
which differ with respect to jurisdiction
and geography.
The Group’s agreement constituting its
European Works Council (EWC) was
terminated in 2020, following notice
given by management, and with the
subsequent departure of the United
Kingdom from the European Union.
Management has nominated Poland
as its representative country under the
relevant legislation and has constituted
a Special Negotiating Body which is
engaged in discussions on the formation
of a new EWC Agreement and Council.
Senior management, supported and
facilitated by the HR department,
encourages open dialogue and consults
with all employee representative bodies,
as appropriate.
All members of the Group Executive
Committee participate in the Vesuvius
Share Plan and receive awards of
Performance Shares, which vest in
accordance with measures set against
nancial and sustainability targets.
For certain senior managers, awards
are made under the Vesuvius Medium
Term Plan (MTP). These managers
participate in the MTP at varying
percentage levels, and awards are
made in shares and based on the same
measures and targets as the Annual
Incentive Plan. In this way, a broad cadre
of management has incentives that are
aligned with shareholders’ interests.
In accordance with the UK Corporate
Governance Code, Jane Hinkley is the
designated Non-executive Director
responsible for overseeing engagement
with the workforce.
Vesuvius is a diverse, multinational Group,
with four business units, employing
more than 11,000 people located in
40 different countries. The Board has
adopted an approach that builds on
existing engagement initiatives and
targets specic issues for attention when
considering employee engagement.
These processes engage the entire Board
and are overseen by Jane Hinkley.
The primary mode of engagement for
Directors is through direct interaction
with the workforce during the Directors’
site visits.
During 2021, these engagement activities
were again curtailed by the COVID-19-
related travel restrictions. However,
during the latter part of the year, the
Chairman and each of the Non-executive
Directors were able to visit sites in
Belgium, China, Germany, Poland and
the US. The Non-executive Directors also
held a ‘virtual’ Board visit with managers
in Vesuvius India and South East Asia,
to hear more about the activities of
the Group there. During the visits the
Directors were able to interact with a
cross-section of different employees,
from various functions and organisational
levels. At most sites ‘town hall’ meetings
were held, providing the Non-executive
Directors with the opportunity to engage
with the workforce to explain the function
of the Board and also to explain how
executive remuneration aligns with wider
company pay policies. These meetings
gave the Non-executive Directors
the opportunity to hear the views of
employees and answer their questions
about the organisation. A more extensive
site visit schedule is currently being
planned for 2022, as soon as travel
restrictions allow.
In 2021, the Board also oversaw the
launch of the Group’s third employee
engagement survey. This provided the
Board with valuable insight into the
attitudes, engagement and concerns of
employees. The data was analysed in a
number of different ways, identifying
the results of various sub-groups of
employees and providing the Board
with a valuable opportunity to track
areas of organisational strength and
weakness. The Board considered the key
workforce-related issues highlighted
in the survey and other employee
feedback in reviewing management
actions with regard to employee
engagement. Further information about
the survey can be found on pages 91
and 92.
Employee involvement
Employee engagement
Section 172(1) Statement
continued
28
Vesuvius plc
Annual Report and Financial Statements 2021
The Board continually monitors the internal
and external risks that could significantly
impact the Group’s long-term performance
Risk, viability and going concern
The Group undertakes a continuous
process to review and understand existing
and emerging risks.
Risk management in 2021
Each year, the Board exercises oversight of
principal risks through a specic review of
the way in which the Group manages those
risks. This process provides the Board with
a clear understanding of the individuals
within the business responsible for the
management of each specic risk and
the mitigation in place to address it.
The Board also reviews and establishes
the Group’s risk appetite for those issues
identied as principal risks and the
associated adequacy of the steps being
taken to mitigate them.
The Board has overall responsibility for
establishing and maintaining a system of
risk management and internal control, and
for reviewing its effectiveness. The Group
undertakes a continuous process of risk
identication and review, which includes
a formal process, conducted annually,
for mapping risks from the bottom up,
with each major business unit and key
operational, senior functional and senior
management staff identifying their
principal risks. This assessment undergoes
a formal review at half-year. The results
are compiled centrally to deliver a
coordinated picture of the key operational
risks identied by the business. These risks
are then reviewed by the Group Executive
Committee. As part of this process, each
Director contributes their individual view
of the top-down strategic risks facing the
Group – drawing on the broad commercial
and nancial experience they have
gained both inside and outside the Group.
The results of this assessment are then
overlaid on the internal assessment of
risks to build a comprehensive analysis
of existing and emerging risk.
The process extends to cover both
nancial and non-nancial risks, and
considers the risks associated with the
impact of the Group’s activities on
employees, customers, suppliers, the
environment, local communities and
society more generally. As in previous
years, in 2021 the Group’s assessment
of principal risks was reviewed and
considered against any emerging risks
and uncertainties that were identied
through our Board review process.
The Board continues to monitor the
implications of emerging macro trends
on the business, including automation in
manufacturing, business digitalisation,
automotive electrication, and in
particular the signicant steps being taken
in our end-markets to combat climate
change as businesses commit to future
net zero emissions targets. All of these
could act as disruptors to our business.
Commentary on some of these areas is
contained in the Our external environment
section on pages 16 and 17 of this Report.
No additional critical macro trends were
identied in 2021.
The Board was able to return to
conducting physical site visits in 2021,
particularly in the latter part of the year.
The Board continues to believe that
this direct engagement with our staff
is the most effective way to assess the
‘temperature’ of the organisation – hearing
rst-hand about issues, concerns and
potential risks that might impact the Group.
The Directors’ views on each of the above
issues, and on emerging risks in general,
were independently gathered and
integrated into the management
discussions and actions taken on risk.
Risk remains an integrated part of all
business unit presentations to the Board,
informing the Board of the operational
approach taken to risk management on
a day-to-day basis.
Changes to risk in 2021
The effects of the COVID-19 pandemic
continued to be felt in certain geographies
and disciplines of the business in 2021.
Managing the physical risks to our staff
and in our interactions with customers
continued to be a priority, where our
protocols for remote working, social
distancing, and management of production
processes continued to be followed.
As with many companies, Vesuvius was
exposed to post-COVID-19 disruptions in
global trade, which placed supply chains
under stress and affected elements of the
Group’s nancial performance.
Against the backdrop of the continuing
pandemic, and its development during the
year, the Board continued to focus on the
Group’s existing risks, and the processes
to mitigate and manage them. It also
remained alert to other emerging risks.
The Board noted again the increasing
presence of cyber threats to business in
general, further commentary on which
is set out in the section on business
continuity below. Other emerging risks
were assessed, with the Board considering
security of raw material supply, business
disruption driven by increasing ination
and interest rates, and the continuing
work required to ensure that the Group’s
decentralised management and talent
pipeline can deliver the consistent protable
growth identied in the Group’s strategy.
It was noted that a number of these and
other issues were already addressed in
the Group’s principal risks and by related
mitigation activities.
29
Our business
Our performance Sustainability Governance Financial Statements
Issues identied in certain of the Group’s
principal risks materialised during the
year. The Group’s existing measures in
mitigation were initiated and additional
actions taken specic to the challenges
posed by the continuing COVID-19
pandemic. These were most notably:
Business interruption:
With the mandatory
shutdowns of 2020 predominantly behind
us, our manufacturing operations remained
operational throughout the year with
enhanced health and safety protocols in
place, in each case in line with prevailing
national rules. Remote working remained
the norm in many countries, with more
than 1,500 people still working from home
at year end. Vesuvius also experienced
the effects of the global trade disruption,
seeing signicant increases in price for
freight and raw materials, and disrupted
logistics, affecting the predictability of
our global supply chain. Our central
purchasing team focused on addressing
these issues, but two product line supply
interruptions were experienced.
End-market risk:
Whilst end-markets
began to pick up at the end of 2020, with
overall demand continuing to grow during
the year, our end-markets did not return
fully to pre-pandemic levels. We also saw
signicant raw material price increases
throughout the year. The Group’s
diversied sourcing strategy helped
mitigate this challenge, with raw material
costs offset by the implementation of
price increases.
People, culture and performance:
Across the Group, our people continued
to work in difcult circumstances and
lockdowns affected different parts of the
business. The protocols put in place in
2020 – access to virtual IT tools to support
remote working, increased PPE provision
and changes to site working conditions
– remained in force for all of the year.
Internal communication remained
a focus, building on the success of the
processes put in place in early 2020.
Once again, the focus on Values was
maintained, with our Living the Values
Awards competition running again on
a ‘virtual’ basis, with the Group’s senior
leadership participating to celebrate the
stories and achievements of our Values
nalists. Our annual Senior Leaders’
conference was held in person, with
enhanced health and safety protocols
in place for those who could travel, and
with a signicant number of staff who
could not travel joining remotely.
Health and safety:
Our very strong focus
on health and safety and the consistency
of its application across the Group
continued to place us extremely well to
respond to the pandemic’s challenges.
In certain jurisdictions our workforce was
affected more acutely than in others with
the development of the Omicron variant,
but operations were managed carefully to
ensure security of supply for our customers.
It is clear that the COVID-19 pandemic has
introduced shifts in working patterns and
trading environment that will not unwind
for several months, and in some cases
much longer. The Board continues to
monitor these changes, and in particular
the disruption that they could drive for
global businesses and, in particular, for
supply chain security. Consequently, the
mitigations established by the Group to
address its principal risks will remain
strongly relevant as 2022 progresses.
Despite these challenges, the Board has
not identied any overall material change
to the Group’s identied principal risks and
uncertainties, albeit that within those risks
a number of issues manifested themselves
in 2021. No new principal risks were
identied during the year. As such, the
Group’s statement of Principal Risk and
Uncertainties was unchanged in 2021
from 2020.
The crisis unfolding in Ukraine since the end
of the year has the potential to generate
direct and indirect impacts that are reected
in our Principal Risks, namely End Market
Risks, Protectionism and Globalisation and
Business Interruption. Whilst we are
concerned about the potential impact, we
will put our mitigation strategies into action
in order to minimise any impact on Vesuvius.
Climate change
The Group’s overall risk management
processes also incorporate consideration
of the potential impact of climate-related
risks on the Group. The Group does not
regard climate change itself to represent
a material stand-alone risk for the
Group’s operations.
Whilst a signicant proportion of the
Group’s revenue is generated from steel
manufacture and automotive castings,
industries that are under transition
as a result of their focus on improving
environmental performance, we believe
these changes will be positive for the
Group. The opportunities in the Group’s
business strategy, which is founded on
helping our customers to improve their
manufacturing efciency and the quality
of their products – and therefore reduce
their climate impact – will play a critical
part in the development of the Group
going forward. The Group recognises
that climate change could present further
uncertainty for the Group in terms of
increased regulation, evolution of the
geographical distribution of our customer
base and the costs of meeting more
onerous disclosure requirements.
Further information about the Group’s
consideration of climate-related risks
and opportunities can be found in the
Our planet section on pages 60–66.
The risks we associate with our
sustainability performance and our
end customers’ sustainability transition
– badged as ESG – are identied as a
separate element of the Group risk
register, recognising the work Vesuvius
can do to mitigate the environmental
impact of our customers’ processes.
Other elements of this risk are
incorporated into the appropriate
Principal Risk and Uncertainties that the
Group has identied. The Group continues
to focus internally on the action we can
take to drive our business’ sustainability.
In 2021, the Group made further progress
on its sustainability KPIs and continued
work on the Sustainability initiative
announced in 2020. Under this initiative
the Group will seek to drive a lower CO
2
intensity, reduce energy usage, and take
the steps necessary to meet the target
set of being emissions net zero by 2050.
Further information can be found in the
Our planet section on pages 60–77.
Risk mitigation
The principal risks identied are actively
managed in order to mitigate exposure.
Senior management ‘owners’ have been
identied for each principal risk, and they
manage the mitigations of that specic
risk and contribute to the analysis of its
likelihood and materiality. This analysis
is reported to the Board. The risks are
analysed in the context of our business
structure which gives protection against
a number of principal risks we face with
diversied currencies, a widespread
customer base, local production matching
the diversity of our markets and intensive
training of our employees. Additionally, we
seek to mitigate risk through contractual
measures. Where cost-effective, the risk is
transferred to insurers. Our processes are
not designed to eliminate risk, but to
identify our principal risks and seek to
reduce them to a reasonable level in the
context of the delivery of the Group’s
strategy.
Risk, viability and going concern
continued
30
Vesuvius plc
Annual Report and Financial Statements 2021
Business continuity
In partnership with our risk management
advisers and our insurers, we seek to
identify the most effective means of
reducing or eliminating insurable risks,
through a combination of risk management
and the placing of insurance cover.
Our insurer property loss control
programme is based upon insurer loss
modelling and focuses on insured losses.
The insurer’s loss control engineers
undertake a series of on-site inspections
focused on machinery breakdown, re,
natural catastrophe and other property
damage and business interruption risks.
These surveys yield a series of loss-reduction
recommendations. The execution of these
recommendations is agreed with site
management and then followed through
to completion.
In parallel, Vesuvius’ own loss
management programme focuses on
strategic sites and sites not covered by
insurers. Assisted by an independent
consultant, we undertake property loss
control and business continuity surveys
using Vesuvius’ bespoke risk and
exposure-based protocol.
These reports yield further risk reduction
recommendations, and improvement
actions and timescales are agreed and
followed through by site management.
To support the Group’s loss control
activities, risk management workshops
are conducted covering loss prevention,
emergency planning, crisis management
and business recovery. As the footprint of
the Group develops and, in certain cases,
production concentrates in a smaller
number of agship sites, business continuity
planning is conducted to ensure that
sufcient resilience remains in the
manufacturing network to address
projected supply interruptions.
With regard to re safety, the Group
monitors all re-related near misses or
minor dangerous occurrences. Any res,
including overheating, are reported and
analysed both locally and by senior
HSE management in order that safety
improvement initiatives can be prioritised
and communicated throughout the Group.
Underlying causes are established with
detailed analysis undertaken as a means
of proposing improvement priorities in
order that safety and process safety
initiatives can be targeted on a
risk-assessed basis.
The Group also focuses on cyber security
issues in terms of business continuity.
This is overseen by the Group’s IT
Committee which meets on a regular
basis to review and progress the Group’s
plans for tackling cyber issues. The Audit
Committee and Board receive regular
updates on the Group’s activities in this
area including general developments and
specic actions and activities within the
Vesuvius business. A comprehensive
plan was established in 2020 to further
strengthen Vesuvius’ overall IT security,
which is well progressed. During 2021,
we worked further to strengthen our IT
security seeking to protect against the risks
presented by developments in external
cyber threats. A holistic approach is taken
to addressing cyber challenges, focusing
on the improvement of the Group’s
overall IT infrastructure, procedures and
framework. The Group continues to run
regular training programmes on cyber/IT
security. See page 121 of the Audit
Committee Report for further information.
Internal control
The Group’s internal control system
is designed to manage, rather than
eliminate, the nancial risks facing
the Group and safeguard its assets.
No system of internal control can provide
absolute assurance against material
misstatement or loss. The Group’s system
is designed to provide the Directors with
reasonable assurance that problems are
identied on a timely basis and are dealt
with appropriately.
The Audit Committee assists the Board in
reviewing the effectiveness of the Group’s
system of internal control, including
nancial, operational and compliance
controls, and risk management systems.
The key features of the Group’s system of
internal control are set out in the table on
page 32.
Reviewing the effectiveness of risk
management and internal control
The internal control system covers the
Group as a whole and is monitored and
supported by the Group’s Internal Audit
function, which conducts reviews of
Vesuvius’ businesses and reports objectively
both on the adequacy and effectiveness
of the system of internal control and on
those businesses’ compliance with Group
policies and procedures. The Audit
Committee receives reports from the
Group Head of Internal Audit and reports
to the Board on the results of its review.
The Group also conducts a self-certication
exercise by which senior nancial,
operational and functional management
certify the compliance throughout the year
of the areas under their responsibility with
the Group’s policies and procedures and
highlight any material issues that have
occurred during the year.
As part of the Board’s process for
reviewing the effectiveness of the system
of internal control, it delegates certain
matters to the Audit Committee. Following
the Audit Committee’s review of internal
nancial controls and of the processes
covering other controls, the Board annually
evaluates the results of the internal control
and risk management procedures
conducted by senior management.
Since the date of this evaluation, there
have been no signicant changes in
internal controls or other matters identied
which could signicantly affect them.
In accordance with the provisions of the
UK Corporate Governance Code, the
Directors conrm that they have carried
out a robust assessment of the principal
risks facing the Company, including those
that threaten its business model, future
performance, solvency or liquidity.
They have also reviewed the effectiveness
of the Group’s system of internal control
and conrm that the necessary actions
have been taken to remedy any control
weaknesses identied during the year
and to the date of this report.
Further detail regarding the Audit
Committee’s review of the effectiveness of
the Group’s risk management and internal
control systems is contained in the Audit
Committee report on pages 120 and 121.
31
Our business
Our performance Sustainability Governance Financial Statements
Key features of risk management and internal control
Strategy and nancial
reporting
Comprehensive strategic planning and forecasting process
Annual budget approved by the Board
Monthly operating nancial information reported against budget
Key trends and variances analysed and action taken as appropriate
Vesuvius GAAP
Accounting policies and procedures formulated and disseminated to all Group operations
Covers the application of accounting standards, the maintenance of accounting records
and key nancial control procedures
Operational controls
Operating companies and corporate ofces maintain internal controls and procedures
appropriate to their structure and business environment
Compliance with Group policies on items such as authorisation of capital expenditure,
treasury transactions, the management of intellectual property and legal/regulatory issues
Use of common accounting policies and procedures and nancial reporting software used
in nancial reporting and consolidation
Signicant nancing and investment decisions reserved to the Board
Monitoring of policy and control mechanisms for managing treasury risk by the Board
Clearly delegated authority for capital expenditure, purchasing, customer contracts
and hiring
Risk assessment and
management
Continuous process for identifying, evaluating and managing any signicant risks
Risk management process designed to identify the key risks facing each business
Reports made to the Board on how those risks are managed
Each major Group business unit produces a risk map to identify key risks, and assess the
likelihood of risks occurring, as well as their impact and mitigating actions
Top-down risk identication undertaken at Group Executive Committee and Board
meetings
Board review of insurance and other measures used in managing risks across the Group
The Board is notied of major issues and makes an annual assessment of whether risks
have changed
Ongoing assurance processes by the legal function and Internal Audit including the annual
self-certication process
Externally supported ‘Speak Up’ whistleblowing line
Internal Audit
Reviews Vesuvius’ businesses and reports on the adequacy and effectiveness of their
systems of internal control and compliance with Group policies and procedures
Agrees action plans for the resolution of any improvement actions identied by their audits,
and monitors with local management and the business unit Presidents, progression with
their completion
Reports to the Audit Committee on the results of each audit and provides regular updates
on high-priority action items
The Audit Committee discusses the key risks identied by Internal Audit
Risk, viability and going concern
continued
32
Vesuvius plc
Annual Report and Financial Statements 2021
Viability process
Identify
Assess
Viability time horizon and
risk analysis framework
Principal risks
and stress scenarios
Viability against risk
scenarios, examining
probabilities and impacts
See Viability Statement
Model
Report
Principal risks
The risks identied on pages 34 and 35 are
those the Board considers to be the most
relevant to the Group in relation to their
potential impact on the achievement of its
Strategic Objectives. All of the risks set out
on these pages could materially affect the
Group, its businesses, future operations
and nancial condition, and could cause
actual results to differ materially from
expected or historical results. The Group
continues to focus on risk mitigation,
and whilst, as identied above, certain
elements of the Group’s risks have
manifested in 2021 as a result of the
continuing COVID-19 pandemic, the
principal risks remain the same. These
risks are not the only ones that the Group
will face. Some risks are not yet known
and some currently not deemed to be
material could become so.
Viability Statement
In accordance with the UK Corporate
Governance Code, the Directors have
assessed the viability of the Group over a
three-year period to 31 December 2024,
taking into account the Group’s current
position and the potential impact of the
principal risks and uncertainties. The
Directors have determined that three
years is an appropriate period over which
to provide the Viability Statement because
this is the Company’s planning cycle
and it is sufciently funded by nancing
facilities with average maturity terms of
approximately six years. The projected
cash ows for the next three years have
been based on the latest Board-approved
budgets and strategic plans.
In making this statement, the Directors
have carried out a robust assessment of
the principal risks that may threaten the
business model, future performance,
solvency and liquidity of the Group.
This is embodied in the annual review of a
three-year business plan which includes a
review of sensitivity to ‘business as usual’
risks, such as prot growth and working
capital variances, severe but plausible
events and the impact these could have on
the Group’s debt covenants and available
liquidity. The results take account of the
availability and likely effectiveness of the
mitigating actions that could be taken to
avoid or reduce the impact or occurrence
of the underlying risks. Whilst the review
has considered all the principal risks
identied by the Group, the following were
selected for enhanced stress testing: an
unplanned drop in customer demand;
debt recovery risk due to customer default;
business interruption due to the unplanned
closure of several key plants; and raw
material price ination. The Group’s
prudent balance sheet management,
exible cost base, ability to react quickly
to end-market conditions, access to
long-term capital at acceptable nancing
costs and well diversied international
businesses leave it well placed to manage
these principal risks.
In performing the stress testing, certain
assumptions were made, including that:
customer failures result in write-offs of the
full value of the receivables with no lost
revenue replacement; and cash ow is
supported by working capital releases,
restricted capital expenditure and
operating cost reductions. Under the
enhanced stress testing described above,
a potential breach of a covenant would
only occur in the event of an unforeseen
reduction in revenue of greater than 30%.
Accordingly, the Directors conrm that
they have a reasonable expectation that
the Group will be able to continue in
operation and meet its liabilities as they
fall due over the three-year period to
31 December 2024. Furthermore, the
Board believes that the Group continues
to be well positioned for success in the
longer term because of: our exposure
to end-markets that are growing faster
through the cycle than underlying global
GDP; our market-leading position that
is supported by ongoing investment in
innovation and R&D; our strong degree of
customer intimacy with around a quarter
of our employees working at customer
facilities; and the focus we have on
building quality teams with clear
organisational responsibility.
Going Concern Statement
The Directors have prepared cash ow
forecasts for the Group for a period in
excess of 12 months from the date of
approval of the 2021 nancial statements.
These forecasts reect an assessment of
current and future end-market conditions
and their impact on the Group’s future
trading performance.
The analysis undertaken includes a
plausible but severe downside scenario,
based on an assumed protracted
COVID-19 related demand impact,
despite emerging condence that the
worst of the pandemic may be behind us.
This downside scenario assumes a decline
in business activity and protability in
2022 and 2023 to the level achieved in H2
2020, the period half-year most severely
impacted by COVID-19. On a full-year
basis relative to 2021, this implies a c.14%
decline in sales and a c.34% decline in
trading prot. Even in this downside
scenario, the forecasts show that the
Group’s maximum net debt/EBITDA
(pre-IFRS 16 in-line with the covenant
calculation) does not exceed 1.3x, compared
with a leverage covenant of 3.25x.
The forecasts show that the Group will
be able to operate within the current
committed debt facilities and show
continued compliance with the Company’s
nancial covenants. On the basis of the
exercise described above and the Group’s
available committed debt facilities, the
Directors consider that the Group and the
Company have adequate resources to
continue in operational existence for a
period of at least 12 months from the date
of signing of these nancial statements.
Accordingly, they continue to adopt a
going concern basis in preparing the
nancial statements of the Group and
the Company.
33
Our business
Our performance Sustainability Governance Financial Statements
Risk
Potential impact
MitigationEnd-market risks
Vesuvius suffers an unplanned
drop in demand, revenue and/or
margin because of market
volatility beyond its control.
Strategic
alignment
Unplanned drop in demand and/or
revenue due to reduced production
by our customers
Margin reduction
Customer failure leading to increased
bad debts
Loss of market share to competition
Cost pressures at customers
leading to use of cheaper solutions
Geographic diversication of revenues
Product innovation and service offerings securing long-term
revenue streams and maintaining performance differential
Increase in service and product lines by the development of the
Technical Services offering
R&D includes assessment of emerging technologies
Manufacturing capacity rationalisation and exible cost base
Diversied customer base: no customer is greater than 10%
of revenue
Robust credit and working capital control to mitigate the risk
of default by counterparties
Protectionism and
globalisation
The Vesuvius business model
cannot adapt or respond
quickly enough to threats from
protectionism and globalisation.
Strategic
alignment
Restricted access to market due to
enforced preference of local suppliers
Increased barriers to entry for new
businesses or expansion
Increased costs from import duties,
taxation or tariffs
Loss of market share
Trade restrictions
Highly diversied manufacturing footprint with manufacturing
sites located in 26 countries
Strong local management with delegated authority to run their
businesses and manage customer relationships
Cost exibility
Tax risk management and control framework together with
a strong control of inter-company trading
Product quality failure
Vesuvius staff/contractors are
injured at work or customers, staff
or third parties suffer physical
injury or nancial loss because of
failures in Vesuvius products.
Strategic
alignment
Injury to staff and contractors
Product or application failures lead to
adverse nancial impact or loss
of reputation as technology leader
Incident at customer plant causes
manufacturing downtime or damage
to infrastructure
Customer claims from product
quality issues
Quality management programmes including stringent quality
control standards, monitoring and reporting
Experienced technical staff knowledgeable in the application
of our products and technology
Targeted global insurance programme
Experienced internal legal function overseeing third-party
contracting
Complex and changing
regulatory environment
Vesuvius experiences a
contracting customer base or
increased transaction and
administrative costs due to
compliance with changing
regulatory requirements.
Strategic
alignment
Revenue reduction from reduced
end-market access
Disruption of supply chain and route
to market
Increased internal control processes
Increased frequency of regulatory
investigations
Reputational damage
Compliance programmes and training across the Group
Independent Internal Audit function
Experienced internal legal function including dedicated
compliance specialists
Global procurement category management of strategic
raw materials
Failure to secure innovation
Vesuvius fails to achieve
continuous improvement in its
products, systems and services.
Strategic
alignment
Product substitution by customers
Increased competitive pressure
through lack of differentiation of
Vesuvius offering
Commoditisation of product portfolio
through lack of development
Lack of response to changing
customer needs
Loss of intellectual property protection
Enduring and signicant investment in R&D, with market-leading
research
A shared strategy for innovation throughout the Group, deployed
via our R&D centres
Stage gate process from innovation to commercialisation to foster
innovation and increase alignment with strategy
Programme of manufacturing and process excellence
Quality programme, focused on quality and consistency
Stringent intellectual property registration and defence
Principal risks and uncertainties
34
Vesuvius plc
Annual Report and Financial Statements 2021
Risk
Potential impact
MitigationBusiness interruption
Vesuvius loses production
capacity or experiences supply
chain disruption due to physical
site damage (accident, re,
natural disaster, terrorism), or
other events such as industrial
action, cyber attack or global
health crises.
Strategic
alignment
Loss/closure of a major plant
temporarily or permanently impairing
our ability to serve our customers
Damage to or restriction in our ability
to use assets
Denial of access to critical systems or
control processes
Disruption of manufacturing processes
Inability to source critical raw materials
Diversied manufacturing footprint
Disaster recovery planning
Business continuity planning with strategic maintenance of
excess capacity
Physical and IT control systems security, access and training
Cyber risks integrated into wider risk-management structure
Well-established global insurance programme
Group-wide safety management programmes
Dual sourcing strategy and development of substitutes
People, culture and
performance
Vesuvius is unable to attract and
retain the right calibre of staff,
fails to instil an appropriate
culture or fails to embed the
right systems to drive personal
performance in pursuit of the
Group’s long-term growth.
Strategic
alignment
Organisational culture of high
performance is not achieved
Staff turnover in growing economies
and regions
Stagnation of ideas and development
opportunities
Loss of expertise and critical business
knowledge
Reduced management pipeline for
succession to senior positions
Internal focus on talent development and training, with tailored
career-stage programmes and clear performance management
strategies
Contacts with universities to identify and develop talent
Career path planning and global opportunities for high-potential
staff
Internal programmes for the structured transfer of technical and
other knowledge
Clearly dened Values underpin business culture
Health and safety
Vesuvius staff or contractors
are injured at work because of
failures in Vesuvius’ operations,
equipment or processes.
Strategic
alignment
Injury to staff and contractors
Health and safety breaches
Manufacturing downtime or damage
to infrastructure from incident at plant
Inability to attract the necessary
workforce
Reputational damage
Active safety programmes, with ongoing wide-ranging monitoring
and safety training
Independent safety audit team
Quality management programmes including stringent
manufacturing process control standards, monitoring
and reporting
Environmental, Social and
Governance criteria
Vesuvius fails to capitalise on the
opportunity to help its customers
signicantly reduce their carbon
emissions as environmental
pressure grows on the steel
industry or Vesuvius fails to meet
the expectations of its various
stakeholders including employees
and investors.
Strategic
alignment
Loss of opportunity to grow sales
Loss of opportunity to increase margin
Loss of stakeholder condence
including investors
Reputational damage
Development and implementation of a new Sustainability
initiative, which includes stretching targets focused on reducing
the Group’s Energy usage, CO
2
emissions, waste and recycled
materials
R&D focus on products that assist customers to reduce carbon
emissions and improve their own sustainability measures
Skilled technical sales force to develop efcient solutions for
our customers
Globally disseminated Code of Conduct sets out standards of
conduct expected and ABC Policy adopted with a zero tolerance
regarding bribery and corruption
Internal Speak Up mechanisms to allow reporting of concerns
Extensive use of due diligence to assess existing and potential
business partners and customers
Strategic
alignment
Deliver protable
growth
Generate value for
our shareholders
Maintain an efcient
capital structure
Always put safety
rst
Think beyond in
innovation
Run best-in-class
sustainable
operations
Foster talent,
skill and motivation
in our people
See more about
Our strategy
on
p14
and
15
35
Our business
Our performance Sustainability Governance Financial Statements
38
Key Performance Indicators
40
Financial review
44
Operating reviews
44
Steel Division
45
Steel Flow Control
46
Steel Advanced
Refractories
47
Steel Sensors & Probes
48
Foundry Division
Our performance
We think beyond
today’s industrial processes
and shape the future
through research and
development
Vesuvius plc
Annual Report and Financial Statements 2021
36
37
Our business Our performance
Sustainability Governance Financial Statements
Key Performance Indicators
Financial KPIs
*
Strategic alignment
KPI
Purpose
Link to remuneration
Deliver
protable
growth
19
20
21
Underlying revenue growth
%
18.1
-12.7
-5.7
Provides an important indicator of organic
(like-for-like) growth of Group businesses
between reporting periods. This measure
eliminates the impact of exchange rates,
acquisitions, disposals and signicant
business closures
Generate value
for our
shareholders
19
20
21
Trading profit
£m
142.4
101.4
181.4
Used to assess the trading performance
of Group businesses
19
20
21
Return on sales
%
8.7
7.0
10.6
19
20
21
Headline profit before tax
£m
137.3
91.6
171.4
Used to assess the nancial performance
of the Group as a whole
19
20
21
Headline EPS
p
35.3
23.2
45.1
Used to assess the underlying earnings
performance of the Group as a whole
Annual Incentive
Plan and Vesuvius
Share Plan
– Read
more about these
on p145–150
19
20
21
Return on invested capital
%
7.5
4.9
8.6
Used to assess the nancial performance of
the Group
Annual Incentive
Plan and Vesuvius
Share Plan
– Read
more about these
on p145–150
Maintain an
efcient capital
structure
19
20
21
Free cash flow
£m
-0.3
113.5
121.5
Used to assess the underlying cash
generation of the Group
19
20
21
Average working capital to sales
%
20.9
23.2
24.0
One of the factors driving the generation of
free cash ow is the average working capital
to sales ratio, which indicates the level of
working capital used in the business
Annual Incentive
Plan
– Read more
about this on
p145–147
19
20
21
Interest cover
30.5x
14.5x
22.9x
Interest cover and Net debt to EBITDA are
used to assess the nancial position of the
Group and its ability to fund future growth
19
20
21
Net debt to EBITDA
1.4
1.2
1.1
* For denitions of alternative performance measures, refer to Note 4 of the Group Financial Statements.
38
Vesuvius plc
Annual Report and Financial Statements 2021
Non-nancial KPIs
Strategic alignment
KPI
Target/description
Link to remuneration
Always put
safety rst
19
20
21
Lost Time Injury Frequency Rate
1.06
1.16
1.55
LTIFR of below 1
Work-related illness or injuries which resulted
in an employee being absent for at least one
day – measured per million hours worked
Annual Incentive
Plan and Vesuvius
Share Plan
– Read
more about these
on p145–150
Think beyond in
innovation
19
20
21
Total R&D spend
£m
30.3
26.7
27.6
At constant 2021 currency
19
20
21
New product sales
%
15.3
12.4
16.3
Sales of products launched within the last
ve years as a % of total revenue
Annual Incentive
Plan
– Read more
about this on
p145–147
Run best-in-class
sustainable
operations
Total energy consumption
kWh per metric tonne of product packed
for shipment
-9.0%
10% reduction of energy consumption per
metric tonne of product packed for shipment
by 2025 (vs 2019)
Energy CO
2
e emissions
-16.5%
10% reduction of Scope 1 and Scope 2
Energy CO
2
e emissions per metric tonne
of product packed for shipment by 2025
(vs 2019)
Annual Incentive
Plan and Vesuvius
Share Plan
– Read
more about these
on p145–150
Wastewater
-2.8%
25% reduction of wastewater per metric
tonne of product packed for shipment
by 2025 (vs 2019)
Solid waste
-21.8%
25% reduction of solid waste (hazardous and
sent to landll) per metric tonne of product
packed for shipment by 2025 (vs 2019)
Annual Incentive
Plan
– Read more
about this on
p145–147
Recycled material
6.2%
7% of raw materials used in production to
be recycled materials from external sources
by 2025
Compliance training
100%
At least 90% of targeted staff to complete
Anti-Bribery and Corruption training
annually
Annual Incentive
Plan
– Read more
about this on
p145–147
Supply chain
52%
By the end of 2023, conduct sustainability
assessments of suppliers covering at least
50% of Group spend
Foster talent, skill
and motivation in
our people
Gender diversity
21%
30% female representation in Top
Management by 2025 (Group Executive
Committee plus key direct reports)
Annual Incentive
Plan and Vesuvius
Share Plan
– Read
more about these
on p145–150
39
Our business
Our performance
Sustainability Governance Financial Statements
The following review considers a number
of our nancial KPIs and sets out other
relevant nancial information.
Basis of preparation
All references in this nancial review are
to headline performance unless stated
otherwise. See Note 4.1 to the Group
Financial Statements for the denition
of headline performance.
Introduction
The year 2021 was still impacted by the
continued global pandemic and while we
are not yet free from the effects, we are
pleased with the performance of the
Group during the year.
The combination of a recovery in our
operating performance and focus on
working capital management provided
the capital for allocation across all of our
priority areas. We invested in organic and
inorganic growth, while also paying an
attractive dividend to our shareholders.
This was possible despite a backdrop of
challenging raw material price increases
and global supply chain disruption.
2021 performance overview
Positive trends in our key end-markets
of steel and foundry led to an increase
in reported revenue of £184.6m over
the prior year and by £251.2m on an
underlying basis (+18.1%).
Key challenges this year were the
implementation of price increases to offset
the signicant raw material cost increases
and management of temporary supply
chain related friction costs. Alongside this
we continued to deliver on our planned
restructuring programme in support of
reducing operating expenses.
Trading prot for the year 2021 was
£142.4m, 50.4% higher than the prior year
on an underlying basis. Return on sales
was 8.7%, higher than the prior year by
190 bps on an underlying basis.
The aforementioned supply chain
disruptions led to a conscious build-up of
inventory to ensure security of supply but
despite this our average trade working
capital to sales ratio for the prior
12 months improved further to 20.9%
at December 2021.
The Group’s cash conversion in 2021 of
32% was lower largely due to the impact of
the increase in absolute working capital to
sustain revenue growth as well as higher
investments in capex.
Dividend
The Board has recommended a nal
dividend of 15.0 pence per share to be
paid, subject to shareholder approval,
on 27 May 2022 to shareholders on the
register at 19 April 2022. When added to
the 2021 interim dividend of 6.2 pence
per share paid on 17 September 2021,
this represents a full-year dividend of
21.2 pence per share.
A strong recovery in operating
performance despite pricing and
logistics challenges
Financial review
Revenue
£1,642.9m
Reported
change 12.7%
Underlying
1
change 18.1%
Trading prot
2
£142.4m
Reported
change 40.4%
Underlying
1
change 50.4%
Statutory EPS
37.7p
Reported change 146%
Return on Sales
2
8.7%
Reported
change 170bps
Underlying
1
change 190bps
1. Underlying basis is at constant currency and
excludes separately reported items and the
impact of acquisitions and disposals.
2. For denitions of alternative performance
measures, refer to Note 4 of the Group
Financial Statements.
Revenue
£m
2021 Revenue
2020 Revenue
% change
As
reported
Acquisitions/
(disposals)
Underlying
As
reported
Currency
Acquisitions/
(disposals)
Underlying
Reported
UnderlyingSteel
1,171.5 (2.1)
3
1,169.4
1,045.4
(48.9) –
996.5
12.1%
17.4%
Foundry
471.4
–
471.4412.9
(19.8) –
393.1
14.2%
19.9%
Total Group
1,642.9
(2.1)
1,640.81,458.3
(68.7) –
1,389.6
12.7%
18.1%
Trading prot
£m
2021 Trading prot
2020 Trading prot % change
As
reported
Acquisitions/
(disposals)
Underlying
As
reported
Currency
Acquisitions/
(disposals)
Underlying
Reported
UnderlyingSteel
102.0
0.2
3
102.2
76.4
(4.2) –
72.2
33.6%
41.6%
Foundry
40.4
–
40.425.0
(2.4) –
22.6
61.3%
78.7%
Total Group
142.4
0.2
142.6101.4
(6.6) –
94.8
40.4% 50.4%
3. Impact of Universal acquisition.
40
Vesuvius plc
Annual Report and Financial Statements 2021
It remains the Board’s intention to deliver
long-term dividend growth, provided this
is supported by underlying earnings, cash
ows, capital expenditure requirements
and the prevailing market outlook.
Key Performance Indicators
We have identied a number of KPIs
against which we have consistently reported.
As with prior years, we measure our results
on an underlying basis, where we adjust
to ensure appropriate comparability
between periods, irrespective of currency
uctuations and any business acquisitions
and disposals.
This is done by:
–
Restating the previous period’s results
at the same foreign exchange (FX)
rates used in the current period
–
Removing the results of disposed
businesses in both the current and
prior years
–
Removing the results of acquired
businesses in both the current and
prior years
Therefore, for 2021, we have:
–
Retranslated 2020 results at the FX rates
used in calculating the 2021 results
–
Removed the results of Universal, which
was acquired during 2021
Objective: Deliver protable growth
KPI: Underlying revenue growth
Reported revenue for 2021 was £1,642.9m,
which equated to £1,640.8m on an
underlying basis. Reported revenue for
2020 was £1,458.3m, which equated
to £1,389.6m on an underlying basis.
2021 underlying revenue increased by
18.1% year-on-year. The increase in
revenue has been driven by a recovery
across most geographies in both steel
and foundry end-markets versus 2020,
and by price increases.
Objective: Generate value for
our shareholders
KPI: Trading prot and Return on Sales
We continue to measure underlying
trading prot of the Group as well as
trading prot as a percentage of sales,
which we refer to as our Return on Sales
or RoS.
Trading prot for 2021 was £142.4m
and Return on Sales was 8.7%. On an
underlying basis, trading prot increased
by 50.4% and Return on Sales by 190 bps.
The increase in trading prot and Return
on Sales is due to higher revenue, ongoing
delivery of benets from the restructuring
programme and income from recurring
recovery of overpaid taxes to and from
the Brazilian entities partially offset by
temporary friction costs linked to supply
chain disruptions.
The Steel Division recorded Return on
Sales of 8.7%, a 150 bps underlying
improvement from 2020. Trading prot
increased by 41.6% on an underlying basis,
to £102.0m during the period. Return on
Sales in the Foundry Division increased by
280 bps year-on-year on an underlying
basis, to 8.6% in 2021. Trading prot was
£40.4m representing a 78.7% increase on
an underlying basis versus prior year.
KPI: Headline PBT and Headline EPS
Headline prot before tax (PBT) and
headline earnings per share (EPS) are
used to measure the underlying nancial
performance of the Group. The main
difference between trading prot and
PBT is net nance costs which were
£6.4m in 2021, £4.5m lower than 2020.
Our Headline PBT was £137.3m, 49.9%
higher than last year on a reported basis.
After the inclusion of separately reported
expenses of £9.7m (2020: £27.1m) our PBT
of £127.6m was 97.8% higher than last
year on a reported basis. Headline EPS
from continuing operations at 35.3p was
52.3% higher than 2020.
Guy Young
Chief Financial
Ofcer
Positive trends in our key end-markets
of steel and foundry led to an increase
in revenue and trading prot
19
20
21
Average working capital to sales*
%
20.9%
20.9
23.2
24.0
19
20
21
Underlying revenue growth*
%
18.1%
18.1
-12.7
-5.7
19
20
21
Operating profit
£m
£132.7m
132.7
74.3
127.5
19
20
21
Headline earnings per share*
pence
35.3p
35.3
23.2
45.1
19
20
21
Statutory earnings per share
pence
37.7p
37.7
15.3
29.8
* For denitions of alternative performance
measures, refer to Note 4 of the Group
Financial Statements.
41
Our business
Our performance
Sustainability Governance Financial Statements
KPI: Return on invested capital (ROIC)
From 2022 onwards, the Group intends
to use ROIC as its key measure of return
from the Group’s invested capital.
The RONA performance measure will be
replaced with ROIC which provides a more
complete measure of Vesuvius’ returns.
ROIC is calculated as trading prot less
amortisation of acquired intangibles, plus
share of post-tax prot of joint ventures
and associates for the previous 12 months
after tax, divided by the average invested
capital (total assets excluding cash
plus non interest bearing liabilities),
at constant currency (being the average
over December and the previous year
end invested capital).
Our ROIC for 2021 was 7.5% (2020: 4.9%).
Objective: Maintain an efcient
capital structure
KPI: Free cash ow and working capital
Fundamental to ensuring that we have
adequate capital to execute our corporate
strategy is converting our prots into cash,
partly through strict management of our
working capital. The Group generated
adjusted operating cash ow of £45.6m
(2020: £172.9m), and a cash conversion
rate of 32% (2020: 173%) in the period.
2021 cash conversion was impacted by
growing working capital to sustain revenue
growth and higher investments in capex.
Free cash ow from continuing operations
was £(0.3)m in 2021 (2020: £113.5m).
We measure working capital both in terms
of actual cash ow movements, and as
a percentage of sales revenue. Trade
working capital as a percentage of sales in
2021 was 20.9% (2020: 23.2%), measured
on a 12-month moving average basis.
In absolute terms on a constant currency
basis trade working capital increased by
£106.0m in 2021.
KPI: Net debt and interest cover
Following the renancing of the Group’s
syndicated bank facility on 5 July 2021,
the Group had committed borrowing
facilities of £706.3m as at 31 December
2021 (2020: £586.6m), of which £308.1m
was undrawn (2020: £246.6m).
Net debt at 31 December 2021 was
£277.1m, a £102.0m increase from
31 December 2020. The increase is mainly
comprised of £45.6m from operations and
a favourable foreign exchange impact of
£13.8m, offset by payments of income
taxes of £30.1m, net nance costs of
£7.6m, the acquisition of the business of
Universal Refractories, Inc for £43.6m,
including related excess working capital,
payments of dividends of £55.5m and
£17.1m of additional leases.
At the end of 2021, the net debt to EBITDA
ratio was 1.4x (2020: 1.2x) and EBITDA
to interest was 30.5x (2020: 14.5x). These
ratios are monitored regularly to ensure
that the Group has sufcient nancing
available to run the business and fund
future growth.
The Group’s debt facilities have two
nancial covenants: the ratios of net debt
to EBITDA (maximum 3.25x limit) and
EBITDA to interest (minimum 4x limit).
Certain adjustments are made to the
net debt calculations for bank covenant
purposes, the most signicant of which
is to exclude the impact of IFRS 16.
During 2021, Vesuvius recognised a
further £3.5m (2020: £1.7m) of income
and interest of £1.9m (2020: £1.2m) in
relation to further recoveries of overpaid
indirect taxes, and interest, by the Brazilian
entities within the Group. The amounts
recognised do not represent the full
amount of income and interest claimed
as we do not yet have clarity on the ability
of the Group to fully utilise these credits.
The amounts recognised have been
presented as headline trading prot and
nance income given their recurring
nature as the original indirect tax expenses
were incurred over a prolonged period
and partial recovery has taken place in
the past two years.
Objective: Think beyond in innovation
KPI: R&D spend
We believe that our market-leading
product technology and services deliver
fundamental value to our customers and
that the primary mechanism to deliver that
value is to invest signicantly in research
and development. In 2021, we spent
£30.3m on R&D activities (2020: £26.7m at
constant 2021 currency), which represents
1.8% of our revenue (2020: 1.9%).
Financial risk factors
The Group undertakes regular risk reviews
and, as a minimum, a full risk assessment
process twice a year. As in previous years
this included input from the Board in both
the assessment of risk and the proposed
mitigation. We consider the main nancial
risks faced by the Group as being those
posed by a decline in our end-markets,
leading to reduced revenue and prot as
well as potential customer default. We also
monitor carefully the challenges that come
19
20
21
Net debt*
£m
£277.1m
277.1
175.1
245.8
19
20
21
Unutilised committed debt facilities
£m
£308.1m
308.1
246.6
174.2
Total R&D spend**
£m
19
20
21
£30.3m
30.3
26.7
27.6
19
20
21
Net defined benefit pension deficit
£m
£77.0m
77.0
2.1
8.5
19
20
21
Return on invested capital*
%
7.5%
7.5
4.9
8.6
Financial review
continued
* For denitions of alternative performance
measures, refer to Note 4 of the Group
Financial Statements.
** At constant 2021 currency.
42
Vesuvius plc
Annual Report and Financial Statements 2021
from broader nancial uncertainty, which
could bring lack of liquidity and market
volatility. Important but lesser risk exists in
interest rate movements, foreign exchange
rate movements and cost ination, but
these are not expected to have a material
impact on the business after considering
the controls we have in place. See Note 25
to the Group Financial Statements.
Our key mitigation of end-market risk is to
manage the Group’s exposure through
balancing our portfolio of business
geographically and to invest in product
innovation. We do so through targeted
capital investment in new and growing
businesses and a combination of capital
and human resource in emerging markets.
When considering other nancial risks,
we mitigate liquidity concerns by
nancing, using both the bank and private
placement markets. The Group also seeks
to avoid a concentration of debt maturities
in any one period to spread its renancing
risk. Following the renancing of the
Group’s syndicated bank facility on 5 July
2021, our liquidity stood at £455.7m at
31 December 2021. We dene liquidity
as undrawn committed debt facilities
plus our cash on balance sheet, less the
cash in China which is used as collateral
against an equivalent loan from
Standard Chartered.
Restructuring
In 2021, we beneted from £4.1m of
restructuring savings related to a full
period impact of actions taken during
2020. During the year, we reported nil
restructuring costs (2020: £6.1m) within
separately reported items. We are
carrying forward a restructuring
provision of £5.0m.
Vacant site remediation
The Group owns a number of disused
properties in the US, which do not form
part of our trading operations. In 2020,
costs of £10.3m (2021: nil) were incurred at
one of these sites to address the signicant
increase in the volume of water run-off
occurring in recent years. We engaged
waste management specialists and have
taken action to reduce the level of water.
We are in contact with the relevant
regulatory authorities and are currently
implementing remediation solutions,
including installation of a treatment
facility. These non-recurring costs were
treated as a separately reported item
in 2020. There was no impact upon
headline performance.
Taxation
A key measure of tax performance is the
Headline Effective Tax Rate (ETR), which
is calculated on the income tax associated
with headline performance, divided by the
headline prot before tax and before the
Group’s share of post-tax prot of joint
ventures. The Group’s headline ETR,
based on the income tax costs associated
with headline performance of £35.9m
(2020: £24.4m), was 26.4% (2020: 26.9%).
The Group’s total income tax costs for
the period include a credit on separately
reported items of £16.2m (2020: £5.7m)
which primarily relates to a credit
of £16.0m (2020: £nil) following the
recognition of certain US deferred
tax assets.
A tax credit reected in the Group
Statement of Comprehensive Income
in the year amounted to £13.0m (2020:
£3.2m debit) which primarily comprises
a £12.5m credit (2020: £2.8m debit) in
respect of tax on net actuarial gains and
losses on employee benets, inclusive of
the buy-in of the UK pension scheme and
the restatement of UK deferred tax from
19% to 25%.
We expect the Group’s headline effective
tax rate on headline prot before tax and
before the share of post-tax prots from
joint ventures to be between 27% and 28%
in 2022.
Capital expenditure
Capital expenditure in 2021 was £67.4m
(2020: £59.0m) of which £47.2m was in
the Steel Division (2020: £45.9m) and
£20.2m in the Foundry Division (2020:
£13.1m). Capital expenditure on revenue-
generating customer installation assets,
primarily in Steel, was £5.7m (2020: £8.7m).
Pensions
The Group has a limited number of
historical dened benet plans located
mainly in the UK, USA, Germany and
Belgium. The main plans in the UK and
USA are largely closed to further benets
accrual and all of the liabilities in the UK
have now been insured following a buy-in
agreement with Pension Insurance
Corporation plc (PIC) during December
2021. The Group’s net pension liability at
31 December 2021 was £77.0m (2020:
£2.1m liability).
The increase in the liability and resulting
charge of £80m through other
comprehensive income, is largely due to
the reduction of the surplus for the UK Plan
following the pension insurance buy-in
agreement with PIC. This nal buy-in
agreement secures an insurance asset
from PIC that matches the remaining
pension liabilities of the UK Plan, with the
result that the Company no longer bears
any investment, longevity, interest rate or
ination risks in respect of the UK Plan.
This increase in liability has been partially
offset by an increase in bond yields
resulting in a reduction in the value of
German and US liabilities.
Corporate activity
In December 2021, the Group acquired
the assets and substantially all of the
liabilities of Universal Refractories, Inc.
(“Universal”), a specialty refractory
producer based in Pennsylvania, USA,
which is focused on tundish (steel
continuous casting) applications as
well as consumable products for the
foundry industry.
Universal’s unaudited revenue and
EBITDA in the trailing 12 months to
October were US$40.5m and US$8.6m,
respectively. The acquisition will generate
attractive synergies and will be accretive
to Group Returns on Sale even before
synergies are considered.
The transaction valued Universal at
US$57.1 million (£42.6 million) on a cash
and debt free basis and was funded from
Vesuvius’ internal resources.
The Group expects the acquisition to
be highly synergistic. The acquisition
signicantly expands Vesuvius’ North
American presence among electric arc
furnace steel producers in the Group’s
focus area of steel tundish applications,
while also further strengthening the
Foundry business.
In the period since acquisition, Universal
has contributed £2.1m to revenue and
£(0.2)m to operating prot. In accordance
with IFRS3, the acquired inventory was
revalued to fair value less costs to sell,
resulting in a reduction to operating prot
of £0.6m.
Guy Young
Chief Financial Ofcer
3 March 2022
43
Our business
Our performance
Sustainability Governance Financial Statements
Vesuvius comprises two
Divisions, Steel and Foundry.
The Steel Division operates
as three business lines: Steel
Flow Control, Steel Advanced
Refractories, and Steel
Sensors & Probes.
Revenue
£m
£1,171.5m
Trading prot
£m
£102.0m
Steel production in the world excluding
China and Iran, which accounts for
approximately 90% of Vesuvius’ sales,
increased by 13% year-on-year with all
geographies recording positive volume
growth. Production growth was especially
strong in India (+18%), South America
(+18%) and NAFTA (+17%).
Vesuvius’ Steel Division reported revenues
of £1,171.5m in 2021, an increase of 12%
compared with 2020. On an underlying
basis, Steel Division revenue was up 17%,
with particularly strong performance in
the growing markets of South America,
India, Vietnam and EEMEA (EMEA
excluding EU 27+UK), where we grew
55%, 34%, 32% and 18%, respectively.
Flow Control strongly outperformed the
steel market in all regions, with underlying
sales growth of 21.5% (3.5% price impact),
versus global steel production growth
of 13% (excluding China and Iran).
In Advanced Refractories, we prioritised
prices over volumes.
As a whole, Steel Division revenues
incorporate a moderate average positive
price impact in 2021, as price increases
were progressively implemented during
the year to compensate for ination in raw
materials and freight costs.
Steel Division trading prot improved 34%
to £102.0m, with return on sales expanding
140bps to 8.7%. Raw material and freight
ination were fully compensated for by
year-end in both Flow Control and
Advanced Refractories.
Steel Division
Operating reviews
Steel Division
2021 (£m)
2020 (£m)
Change (%)
Underlying
change (%)
Steel Flow Control revenue
648.7
561.3
15.6%
21.5%
Steel Advanced Refractories
revenue
489.1
458.6
6.7%
11.0%
Steel Sensors & Probes revenue
33.7
25.5
32.0%
42.7%
Total Steel revenue
1,171.5
1,045.4
12.1%
17.4%
Total Steel trading prot
102.0
76.4
33.6%
41.6%
Total Steel Return on Sales
8.7%
7.3%
140 bps
150 bps
Crude steel production year-on-year change
2021/2020
2021/2019
China
-3.0%
3.1%
India
17.8%
6.1%
NAFTA
16.6%
-1.6%
South America
17.9%
9.3%
EMEA ex Iran
11.8%
4.2%
EEMEA ex Iran
9.2%
6.6%
EU 27+UK
14.8%
1.6%
World
3.7%
5.6%
World ex China & Iran
13.0%
8.5%
Source: World Steel Association (month-to-date totals may include revised data not available on a
monthly basis).
44
Vesuvius plc
Annual Report and Financial Statements 2021
Steel Flow Control
Pascal Genest
President,
Flow Control
19
20
21
Revenue
£m
£648.7m
648.7
561.3
626.3
The Flow Control business unit supplies
the global steel industry with consumable
ceramic products, systems, robotics,
digital services and technical services.
These products are used to contain,
control and monitor the ow of molten
steel in the continuous casting process.
The consumable ceramic products that
Vesuvius supplies have a short service life
(often a matter of a few hours) due to the
signicant wear caused by the extremely
demanding environment in which they
are used. These products must withstand
extreme temperature changes, whilst
resisting liquid steel and slag corrosion.
In addition, the ceramic parts in contact
with the liquid steel must not in any way
contaminate it. The quality, reliability
and consistency of these products and
the associated robotic solutions and
digital services we provide are therefore
critical to the quality of the nished metal
being produced and the productivity,
protability and safety of our customers’
processes.
Steel Flow Control revenue
2021 (£m)
2020 (£m)
Change (%)
Underlying
change (%)
Americas
217.0
182.9
18.7%
28.8%
Europe, Middle East & Africa (EMEA)
247.7
204.7
21.0%
26.2%
Asia-Pacic
184.0
173.7
6.0%
8.7%
Total Steel Flow Control revenue
648.7
561.3
15.6%
21.5%
In 2021, underlying revenues in the Group’s
Steel Flow Control business increased by
21.5% year-on-year to £648.7m, driven by
strong market recovery and market share
gains in all regions.
In EMEA excluding Iran, revenues grew
26% compared to 2020 on an underlying
basis, versus steel production growth of
12%. This outperformance was broad-
based, with revenue growth exceeding
20% in both the EU 27+UK and EEMEA
(EMEA excluding EU 27+UK).
In the Americas, underlying revenues grew
29%, outperforming steel production
growth of 17%. This outperformance was
mostly driven by revenue growth of 47%
in South America, while revenue growth
of 23% in NAFTA also outperformed
steel production.
In Asia-Pacic, revenues grew 9% on an
underlying basis, versus steel production
growth of 1%. Revenues in Vietnam,
India and China grew 38%, 31% and 7%,
respectively, versus steel production
growth of 18%, 18% and -3%.
Strategic highlights from the year
In 2021, we announced a £28m capacity
expansion, to be operational from late
2022, to support future organic growth
and market share gains. At our Skawina,
Poland plant, we will increase EMEA
capacity in VISO* products by 35% and
ladle slide-gates by 100%. This is intended
to serve EMEA, and in particular
fast-growing markets in EEMEA. At our
Kolkata, India plant, we will increase
capacity in VISO* products by 50%, to
serve the fast-growing markets of both
India and South East Asia.
We launched nine new products during
2021. Among them, the Air-Shield*
technology, a technology that creates
a better seal between the two plates
of our ladle slide-gate mechanism to
increase both the yield and quality of
steel produced.
We launched a new Composite Design
Technology (CDT) solution, the Surface
Layer CDT, which allows us to offer
high-performing products with a greater
exibility in design, while also enabling
a greater use of recycled materials.
A new generation of tundish shroud was
also launched, allowing our customers to
improve their productivity, whilst also
reducing usage of other consumables,
resulting in positive sustainability benets.
In terms of mechatronics, we continue to
develop additional features for our robotic
offering, helping customers to reduce the
exposure of their operators.
Looking forward
The successful completion of the
expansion projects at Skawina and
Kolkata will be a key focus in the coming
year, with the target that the expanded
capacity will be operational from late
2022. This expansion will support our
market share gains objectives from 2023.
We will also continue our efforts to develop
products with superior sustainability
characteristics, to help our customers
drive efciency and reduce their
environmental footprint.
45
Our business
Our performance
Sustainability Governance Financial Statements
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries,
used under licence.
Steel Advanced Refractories
Thiago Avelar
President,
Advanced
Refractories
19
20
21
Revenue
£m
£489.1m
458.6
489.1
539.8
The Steel Advanced Refractories business
unit supplies complete value-added
solutions to its customers including
specialist refractory materials and
advanced installation technologies
which harness mechatronic solutions,
computational uid dynamics capabilities
and lasers. The specialist refractory
materials are subject to extreme
temperatures, corrosion and abrasion,
they are in the form of powder mixes,
which are spray-applied or cast onto
the vessel to be lined (‘monolithics’) and
refractory shapes (e.g. bricks, pads,
dams and other larger precast shapes).
The service life of the products that
Advanced Refractories supplies into the
steel-making process can vary (some a
matter of hours and others for a period of
years) based upon the type of refractory
and the level of wear caused by the
demanding environment in which they
are used. An integral part of our success
depends on our best-in-class installation
technologies which improve the
consistency and performance of installed
Vesuvius refractories, as well as the high
level of collaboration with our customers.
Strategic highlights from the year
In December 2021, we acquired the assets
and substantially all of the liabilities of
Universal Refractories, Inc., a specialty
refractory producer based in Pennsylvania,
USA, which is focused on tundish (steel
continuous casting) applications as well
as consumable products for the foundry
industry. Universal is a strategically
important acquisition for Advanced
Refractories, which reinforces our core
tundish business and expands our North
American presence among electric
arc furnace (EAF) steel producers.
We made signicant progress with the
roll-out of our mechatronics products
and services across key regions. In Asia,
we commissioned a New Generation of
Tundish SMART Robots (Next Gen TSR*).
We continue to gain traction in marketing
our Gunning Robot combined with our
leading laser scanner technology in
North America (EAF) and Europe.
In 2021, we introduced ve new
value-added products, including
MgO-carbon bricks with an enhanced
binder system for better heat-life and new
Tundish Spray technology, increasing our
customers’ productivity and reducing their
energy costs and CO
2
emissions.
Looking forward to 2022
In January 2022, we commissioned our
new mechatronic Centre of Excellence
in Ghlin, Belgium. Our differentiated
technology is at the core of our strategy as
we continue to develop combined robotic
and laser technologies that further enhance
the efciency of our high-performance
refractory products.
Integrating Universal into our NAFTA
manufacturing footprint will be a key
project during the course of 2022.
In R&D, we will increase the focus on
delivering new products that improve
our customers’ environmental footprint.
Steel Advanced Refractories revenue
2021 (£m)
2020 (£m)
Change (%)
Underlying
change (%)
Americas
165.3
153.0
8.0%
13.4%
Europe, Middle East & Africa (EMEA)
187.7
187.8
-0.1% 3.1%
Asia-Pacic
136.1
117.9
15.5%
20.6%
Total Steel Advanced
Refractories revenue
489.1
458.6
6.7%
11.0%
Steel Advanced Refractories reported
revenues of £489.1m in 2021, an increase
of 11% on an underlying basis. In a number
of markets our growth lagged steel
production increases, as priority was given
to price increases over volumes, resulting
in a temporary loss of market share.
On an underlying basis, revenues grew
13% in the Americas, with strong
outperformance in South America,
which grew 68% versus steel production
growth of 18%.
In EMEA excluding Iran, revenues grew by
only 3% during the period as we continued
to exit unprotable contracts and also led
price increases during the rst half of the
year in product lines that were impacted
by higher raw material costs.
In Asia-Pacic, revenues grew 21% on
an underlying basis driven by strong
outperformance in India (+36%),
Vietnam (+30%) and China (+13%).
Volumes in H2 were negatively impacted
in NAFTA as we had to declare force
majeure as a result of disruptions to raw
material supply brought on by Hurricane
Ida in the US. Alternative raw material
supply and logistics support was obtained
and no customer suffered interruption
as a result.
46
Vesuvius plc
Annual Report and Financial Statements 2021
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries,
used under licence.
Steel Sensors & Probes
Davide Guarnieri
Director,
Sensors & Probes
19
20
21
Revenue
£m
£33.7m
33.7
25.5
29.52
The Steel Sensors & Probes business unit
offers products to our customers to enable
them to make their underlying processes
more efcient and reliable. The business
unit focuses on providing a range of
products that enhance the control and
monitoring of our customers’ production
processes, complementing Vesuvius’
strong presence and expertise in molten
metal engineering. This aims to create
new technologies that can be integrated
into expert process management
systems. These products include
temperature sensors, oxygen, hydrogen
and sublance probes, iron oxide and
metal sampling for the steel, aluminium
and foundry industries.
By using these technologies, customers
can focus on critical parameters
within their processes, enabling them
to rene their production methods to
improve quality, lower production costs
and maximise efciency.
Revenues in Steel Sensors & Probes
were £33.7m in 2021, representing an
underlying increase of 43% year-on-year.
The strong performance in the Americas
was driven by new customer wins,
especially in South America. In EMEA,
we also performed well and continued
to gain traction.
Steel Sensors & Probes revenue
2021
(£m)
2020
(£m)
Change
(%)
Underlying
change (%)
Americas
23.2
16.4
41.1%
56.3%
Europe, Middle East & Africa (EMEA)
10.1
8.9
13.6%
17.8%
Asia-Pacic
0.4
0.2
109.1%
116.5%
Total Steel Sensors & Probes revenue
33.7
25.5
32.0%
42.7%
Looking forward to 2022
In 2022, we will continue to execute our
revenue growth strategy. In particular,
our new facility in Mexico will increase our
service level and operational efciency in
the NAFTA market. A reinforced structure
in Asia will drive growth in this important
region. We will continue to invest in new
products and seek to integrate them with
robotic solutions to bring greater safety
and both operational and sustainability
efciencies to our customers.
47
Our business
Our performance
Sustainability Governance Financial Statements
The Foundry Division is a world leader
in the supply of consumable products,
technical advice and application
support to the global foundry industry
to improve the performance and quality
of ferrous and non-ferrous castings.
Vesuvius operates under the brand
FOSECO in the foundry market.
The foundry process is highly sequential
and is critically dependent on consistency
of product quality and productivity
optimisation. Working alongside
customers at their sites, our engineers
provide on-site technical expertise in
addition to advanced computational uid
dynamics capabilities to develop the best
customised solutions. The conditioning
of molten metal, the nature of the mould
used and, especially, the design of the
way metal ows into the mould are key
parameters in a foundry, determining both
the quality of the nished castings and the
labour, energy and metal usage efciency
of the foundry. Vesuvius’ products and
associated services to foundries improve
all of these parameters.
Non-automotive Foundry end-markets
across all regions saw signicant growth
in 2021, with production in the mining &
construction and general engineering
end-markets up 19% and 13%,
respectively, according to Oxford
Economics data. This was in contrast to
global production of light vehicles and
medium & heavy commercial vehicles
which remained weak with growth of only
2% and 0.5%, respectively, according to
IHS data. The disappointing automotive
markets (representing c.36% of Foundry
Division sales) reect the persistent
global shortage of semi-conductors,
which constrained the ability of OEMs to
ramp-up production.
Compared to 2019, mining & construction
and general engineering are both up 12%,
while global light vehicle production is
down 14% and medium & heavy
commercial vehicles is down 4%.
Vesuvius’ Foundry Division reported
revenues of £471.4m in 2021, an increase
of 14% compared to 2020. On an underlying
basis, Foundry Division revenue was
up 20%.
The Foundry Division also achieved
meaningful margin recovery, with trading
prot growing 79% on an underlying basis
to £40.4m, as Return on Sales increased
250bps to 8.6% in 2021. Protability was
impacted by the time lag we experienced
between cost increases and selling price
rises, although this was successfully
eliminated by year-end.
In H2 our volumes were negatively
impacted as automotive production
slowed further. In addition, we
experienced operational issues at two
important plants in Germany and the
USA. Both these factors are temporary in
nature and are expected to be eliminated
during 2022.
Foundry revenues in the Americas grew
27% year-on-year on an underlying basis,
driven by 15% growth in NAFTA, and very
strong performance in South America,
which was up 68%.
In EMEA, underlying revenues increased
by 17%, with EEMEA (EMEA excluding
EU 27+UK) growing at 18%.
In Asia-Pacic, we beneted from
continued strong performance in China,
where revenues grew 12% and India where
revenues grew 36%.
Foundry Division
2021 (£m)
2020 (£m)
Change (%)
Underlying
change (%)
Foundry revenue
471.4
412.9
14.2%
19.9%
Foundry trading prot
40.4
25.0
61.2%
78.7%
Foundry Return on Sales
8.6%
6.1%
250 bps
280 bps
Foundry revenue
2021 (£m)
2020 (£m)
Change (%)
Underlying
change (%)
Americas
100.4
85.6
17.4% 27.1%
Europe, Middle East & Africa (EMEA)
199.3
177.0
12.6%
17.3%Asia-Pacic
171.7
150.3
14.2%
19.1%
Total Foundry revenue
471.4
412.9
14.2%
19.9%
48
Vesuvius plc
Annual Report and Financial Statements 2021
Revenue
£m
£471.4m
Trading prot
£m
£40.4m
Foundry Division
Karena Cancilleri
President, Foundry
Strategic highlights from the year
In 2021, the Foundry Division launched a
number of important new products which
delivered both product performance
improvements as well as sustainability
performance improvements for
our customers.
The new FEEDEX
*
FEF sleeve range
supports foundries in reducing harmful
emissions and hazardous waste while
maintaining high thermal and feeding
performance. We launched the STELEX
*
Pureow lter, a lter for small castings
which improves the metal purity for highly
demanding casting applications, such
as automotive turbochargers. We also
launched the SEMCO
*
formaldehyde-free
coating, which helps our customers
reduce emissions of harmful substances
generated in the casting process.
The Foundry Division continued to focus
on digitisation, developing simulation tools
to provide further thermal and physical
data modelling to optimise casting quality.
We also launched an app for our leading
aluminium melt treatment equipment and
implemented a digital product selection
tool, to assist our application engineers.
Looking forward
We expect 2022 to be a record year in
terms of new product launches, as a result
of our extensive new product development
efforts to support the manufacture of
lighter-weight, high-performance metals
and components. We are focusing on
developing products for high growth
end markets such as wind turbines,
turbo-chargers and electric vehicles.
We will further complement our new
product development with simulation
and equipment solutions to create
a complete offering to respond to
increasingly complex technical customer
requirements. The technical work will
be further supported through several
meaningful external research partnerships,
several of which were initiated in 2021.
19
20
21
Revenue
£m
£471.4m
412.9
515.1
471.4
* Trademark of the Vesuvius Group of companies, unregistered
or registered in certain countries, used under licence.
49
Our business
Our performance
Sustainability Governance Financial Statements
52
Non-nancial information statement
52
Introduction: Towards a better
tomorrow
53
Our Sustainability strategy
and objectives
54
Our sustainability targets
55
United Nations Global Compact and
Sustainable Development Goals
56
Our principles, approach and
governance
58
TCFD
60
Our planet
78
Our customers
82
Our people
97
Our communities
Sustainability
We think beyond today’s
customer expectations
and shape the future
through application expertise
Vesuvius plc
Annual Report and Financial Statements 2021
50
51
Our business Our performance
Sustainability
Governance Financial Statements
We believe that we can create more
value for our customers, our shareholders
and our employees by embedding
sustainability in all aspects of our business
and strategy. Our long-term success is
tightly bound to our sustainability initiative,
with its primary focus on helping our
customers improve their operational
performance to enable them to deliver
on their own sustainability agenda.
At the same time we seek to benet the
communities in which we operate and
develop our people to build diverse,
engaged and high-performing teams
to promote our work.
We launched our formal Sustainability
strategy at the end of 2020 to bring
together all our environmental, social
and governance initiatives into one
coordinated programme. We developed
a new governance structure to support
our objectives and a new set of targets to
direct our efforts. The strategy was built
on four pillars: our planet, our customers,
our people and our communities,
identifying ten key areas of focus
across these pillars.
In 2021, despite the difculties created
by the COVID-19 pandemic and the
operational challenges facing the
business, we continued to deliver on our
commitments. The progress shown in
our key performance indicators illustrates
the engagement of our teams around
the world.
Key initiatives launched in 2021 included:
–
Further embedding sustainability into
the Group and business unit strategic
plans, via a more detailed analysis of
the risks and opportunities presented
by climate change and the evaluation
of three long-term scenarios
–
Building a methodology and tools to
evaluate CO
2
emissions avoided at
customers by using our products
–
Building a scorecard and assessing
the sustainability performance
of our existing products and new
product pipeline
–
Launching our Sustainable Procurement
Policy and Supplier Assessment
programme
Progress on our
sustainability roadmap
Introduction:
Towards a better tomorrow
–
Reducing Scope 1 and 2 emissions,
measuring Scope 3 emissions and
creating action plans to minimise these
–
Determining CO
2
emissions avoided
by customers, and creating further
action plans to maximise this
–
Switching to carbon-free electricity on
our sites wherever possible
–
Assessing new product developments
and technologies based on their safety
and environmental benets
–
Supporting education for women in
scientic elds
–
Increasing gender diversity in the
Group Executive Committee and
top management
–
Increasing employee engagement
–
Undertaking environmental impact
analysis of capital expenditure;
with the internal price of CO
2
emissions
reviewed every year
–
Seeking ISO 14001 certication of
manufacturing sites
–
Undertaking sustainability
assessments of suppliers
Areas of focus
Alexander
Laugier-Werth
VP Sustainability,
HSE & Quality
Non-nancial
information statement
This non-nancial information
statement provides information
on the Group’s activities and policies
in respect of:
Environmental matters
Our planet
p60–77
The Company’s employees
Our people
p82–96
Social matters
Our communities
p97–101
Respect for human rights
Our communities
p97
Anti-corruption
and anti-bribery matters
Our communities
p98
The statement also details, where
relevant, the due diligence processes
implemented by the Company in
pursuance of these policies.
Further information, disclosed in
other sections of the Strategic Report,
is incorporated into this statement
by reference, including:
Information on the Group’s
principal risks
Details of the Group’s principal
risks relating to these
non-nancial matters are
detailed in the Group’s
schedule of Principal risks
and uncertainties.
p34–35
Risk, viability and
going concern
p29–35
Details of the Group’s
business model
p20–21
Details of the Group’s
non-nancial KPIs
p39
52
Vesuvius plc
Annual Report and Financial Statements 2021
We create innovative solutions that
enable our customers to reduce their
manufacturing costs, improve quality and
safety performance, and help them to
become more efcient in their processes.
We aim to deliver sustainable, protable
growth to provide our shareholders with a
superior return on their investment, whilst
providing our employees with a safe
workplace where they are recognised,
developed and properly rewarded.
Our Sustainability initiative embodies this
purpose. It sets out the Group’s formal
objectives and targets for supporting
our customers, our employees and our
communities, and for protecting our
planet for future generations. It is
embedded in the Group’s overall strategy
and informs how we deliver on the Group’s
Execution Priorities.
The key objectives and priorities of our
Sustainability initiative are outlined here.
They were dened following the
identication and analysis of the Group’s
most important and material sustainability
risks and opportunities.
Creating a better tomorrow
for our planet, our customers,
our people and our communities
Our planet
–
To tackle climate change by
reducing our CO
2
emissions and
help our customers reduce theirs
with our products and services.
We are committed to reaching a
net zero carbon footprint at the
latest by 2050.
–
To engage in the circular economy
by reducing our waste, recovering
more of our products after they
have been used and increasing
the usage of recycled materials.
Our people
–
To ensure the safety of our people
and everyone else who accesses
our sites. This is our rst priority.
We take safety very seriously and
are constantly striving to improve.
–
To offer growth opportunities
to all our employees through
training and career progression
to develop diverse, engaged and
high-performing teams.
Our communities
–
To support the communities in
which we operate, with a focus
on promoting and supporting
women’s education in scientic
elds.
–
To ensure ethical business conduct
both internally and with our
trading partners.
–
To extend our sustainability
commitment to our suppliers and
encourage them to progress.
Our customers
–
To support our customers’ efforts
to improve safety on the shop
oor, especially exposure to
hot metal.
–
To help customers improve
their operational performance
and thereby reduce their
environmental footprint, and
especially their CO
2
emissions.
P60
P82
P97
P78
Our Sustainability strategy and objectives
During the year we were very pleased to
see our efforts and progress recognised
externally. In particular, our MSCI rating
progressed from BBB to A, and our
EcoVadis rating progressed from Silver to
Gold. Vesuvius was also honoured to be
included in the
Financial Times’
European
Climate Leaders list.
In December 2021, Vesuvius completed
the acquisition of the assets and business
of US-based Universal Refractories, Inc.
(“Universal”). In 2022, we will integrate
these operations into our sustainability
programme. All statements and gures
in this Sustainability section therefore do
not include the Universal business.
2022 will be dedicated to consolidating
and strengthening our sustainability plans.
We will continue educating and engaging
our employees at every level, detailing and
implementing action plans to progress
our strategy. Emphasis will be placed
on further dening our roadmap to net
zero and developing the support we
provide to our customers in their own
sustainability journey.
The content of the Sustainability section
is primarily based on our materiality
analysis, feedback from our internal and
external stakeholders, and requirements
of the UN Global Compact. We are
committed to transparent and thorough
reporting on our sustainability performance.
We would welcome any input or feedback
to: sustainability@vesuvius.com.
Alexander Laugier-Werth
VP Sustainability, HSE & Quality
53
Our business Our performance
Sustainability
Governance Financial Statements
Our sustainability targets
The Board has identied eleven signicant non-nancial KPIs for the business. For nine of these we have set stretching targets for the
Group to reach within set timeframes, which are set out below. The table below illustrates how achieving each target will contribute to
achieving our objectives.
KPI
Measure
Target
2021 progress vs 2019
Our
planet
Our
customers
Our
people
Our
communities
UN Sustainable
Development
Goals
Safety
Lost Time Injury
Frequency Rate
below 1
<1
1.06
3, 8
Energy
consumption
By 2025, reduce energy
consumption per
metric tonne of
product packed for
shipment (vs 2019)
-10%
-9.0%
9, 13
Energy CO
2
e
emissions
By 2025, reduce (Scope
1 and Scope 2) energy
CO
2
e emissions per
metric tonne of product
packed for shipment
(vs 2019)
-10% -16.5%
9, 12, 13
Wastewater
By 2025, reduce
wastewater per metric
tonne of product
packed for shipment
(vs 2019)
-25% -2.8%
6, 9, 12
Solid waste
By 2025, reduce solid
waste (hazardous and
sent to landll) per
metric tonne of product
packed for shipment
(vs 2019)
-25% -21.8%
9, 12
Recycled
material
By 2025, increase the
proportion of recycled
materials from external
sources used in
production
7%
6.2%
9, 12
Gender
diversity
By 2025, increase
female representation
in the top management
(GEC plus their key
direct reports
1
)
30%
21%
5
Compliance
training
Increase the
percentage of targeted
staff who complete
anti-bribery and
corruption training
annually
90%
100%
16
Supply chain
By the end of 2023,
conduct sustainability
assessments of suppliers
covering at least 50% of
Group spend
50%
52%
8, 10, 17
1. The Board has resolved to expand the Group to which the gender diversity target applies for 2022, to focus on the Senior Leadership Group of the Company which
comprises c. 160 individuals.
54
Vesuvius plc
Annual Report and Financial Statements 2021
In October 2020, Vesuvius became a
signatory to the United Nations Global
Compact. We have committed to base our
business approach on its ten Principles on
human rights, labour, environment, and
anti-corruption, and to engage in activities
which advance the development of the UN
Sustainable Development Goals (SDGs).
Communication on progress
Vesuvius reports annually on its
sustainability activities, commitments and
progress in the Annual Report and also in a
separate Sustainability Report published
each year.
This covers the environmental, social and
governance issues dened in the four
dimensions of the Group’s Sustainability
Charter: Our Planet, Our Customers,
Our People, Our Communities. In particular,
we include updates on key performance
indicators and progress against targets.
Vesuvius has identied the practices within
its operations that can directly or indirectly
contribute to the SDGs. We will focus our
efforts on the following seven SDGs – four
priority goals and three supporting goals
– which are particularly relevant to our
business and where we believe we can
make the most meaningful contribution.
United Nations Global Compact
Sustainable Development Goals
Principle 1
Businesses should
support and respect the protection
of internationally proclaimed human
rights within the scope of their inuence
Principle 2
Businesses should make sure
that they are not complicit in human
rights abuse
Principle 3
Businesses should uphold
the freedom of association and the
effective recognition of the right to
collective bargaining
Principle 4
Businesses should uphold
the elimination of all forms of forced
and compulsory labour
Principle 5
Businesses should uphold
the abolition of child labour
Principle 6
Businesses should uphold
the elimination of discrimination in
respect of employment and occupation
Environment
Principle 7
Businesses should support
a precautionary approach to
environmental challenges
Principle 8
Businesses should undertake
initiatives to promote greater
environmental responsibility
Principle 9
Businesses should encourage
the development and diffusion of
environmentally friendly technologies
Anti-corruption
Principle 10
Businesses should work
against corruption in all its forms,
including extortion and bribery
E
n
v
i
r
o
n
m
e
n
t
H
u
m
a
n
r
i
g
h
t
s
A
n
t
i
-
c
o
r
r
u
p
t
i
o
n
L
a
b
o
u
r
s
t
a
n
d
a
r
d
s
Priority SDGs
Supporting SDGs
Promote sustained,
inclusive and sustainable
economic growth, full and
productive employment
and decent work for all
Ensure sustainable
consumption and
production patterns
Build resilient
infrastructure, promote
inclusive and sustainable
industrialisation and
foster innovation
Take urgent action to
combat climate change
and its impacts
Ensure healthy lives and
promote well-being for
all at all ages
Ensure availability
and sustainable
management
of water and sanitation
for all
Achieve gender equality
and empower all women
and girls
55
Our business Our performance
Sustainability
Governance Financial Statements
Vesuvius is a geographically and culturally
diverse group, employing more than
11,000 people in 40 countries.
Our geographical diversity places us close
to our customers around the globe. It also
highlights the importance of maintaining
and applying strong and consistent values
and ethical principles in our worldwide
approach to business. Our employees’
engagement with our Values and culture
is vital to our success and the sustainable
delivery of the Group’s strategy.
Vesuvius has established a framework for
explaining and embedding the culture and
principles we consider to be fundamental
to our success. To do this we communicate
openly and transparently within the
organisation, through ‘town hall’ meetings,
senior management visits, management
feedback, performance evaluation,
measuring staff engagement and
responding to the feedback we receive.
Critically, there is ongoing and consistent
communication of our CORE Values and
the principles of our Code of Conduct.
This is underpinned by engaging staff
across the Group in both general
and targeted training, to ensure a
consistent understanding of our
policies and procedures.
This transparency of communication
also extends to our stakeholders.
We want to increase the knowledge
and understanding of our stakeholders,
through internal and external reporting
and transparent and meaningful
disclosure. Our Sustainability Report
is a key part of this.
Our CORE Values
The Group’s CORE Values – Courage,
Ownership, Respect and Energy – are
actively supporting the Group’s priorities,
encouraging consistent behaviours across
the Group to sustain our business success
in the future.
These Values, and the behaviours
underpinning them, convey the mindset
and attitudes we expect each employee
to show every day. They are at the heart
of the culture of the Group, promoting
our image to external stakeholders, and
underpinning the commercial promise
we provide to our customers. The Values
are reinforced through our performance
management systems and are celebrated
each year through our Living the Values
Awards which select regional and global
winners for each Value.
At each of our sites we display CORE
Values posters in local languages and
use tools such as screen savers as a
constant reminder of the behaviours
our people display.
Code of Conduct
Our Code of Conduct sets out the standards
of conduct expected, without exception,
of everyone who works for Vesuvius in any
of our worldwide operations.
The Code of Conduct emphasises our
commitment to ethics and compliance with
the law, and covers every aspect of our
approach to business, from the way that
we engage with customers, employees,
the markets and other stakeholders, to the
safety of our employees and workplaces.
Everyone within Vesuvius is individually
accountable for upholding its requirements.
We recognise that lasting business success
is measured not only in our nancial
performance, but in the way we deal
with our customers, business associates,
employees, investors and local communities.
The Code of Conduct is displayed
prominently at all our sites and is published
in our 29 major functional languages. It is
available to view at: www.vesuvius.com.
We continue to enhance the policies that
underpin the principles set out in the Code
of Conduct. These assist employees to
comply with our ethical standards and the
legal requirements of the jurisdictions in
which we conduct our business. They also
give practical guidance on how this can
be achieved.
Our principles, approach and governance
Health, safety and
the environment
Trading, customers,
products and services
Anti-bribery and
corruption
Employees and
human rights
Disclosure and investors
Government, society
and local communities
Conicts of interest
Competitors
I systematically say, decide and do what is right
for Vesuvius including when it is difcult, unpopular,
or not consensual
I express my opinions openly during discussions,
but I also defend Group decisions once they’ve
been taken, even if they do not correspond to my
initial position
I proactively take leadership responsibility on difcult
projects and topics that are important to the Group’s
performance, motivated by the perspective of success
rather than paralysed by the risk of personal failure
I demonstrate respect for other people’s ideas and
opinions even if I disagree with them
I welcome open debate
I listen to others, foster esteem and fairness with
customers, suppliers, co-workers, shareholders and
the communities where we operate
I communicate my objectives clearly and take time
to explain all decisions. I behave with the highest
level of integrity
I promote diversity at all levels of the Company
I am personally accountable for the consequences
of my actions and for the performance of the Group
in my area of responsibility or oversight, without
blaming external circumstances or the actions
of others
I demonstrate an entrepreneurial spirit, looking
for and seizing business opportunities and
I immediately address problems that come
up as soon as I become aware of them
I manage the Group’s money and resources as
though they were my own
I work hard and professionally in pursuit of
excellence
I constantly raise the bar and challenge the status
quo. For me, the sky is the limit
I lead by example, inspiring and motivating my
team to go the extra mile. I promote a positive
and energising work environment. I continuously
deliver outstanding customer experience and
innovative solutions
I never underestimate competitors and
permanently strive to reinforce the Group’s
leadership position
CORE Values Code of Conduct
C O
The Code covers:
R E
wnership
ourage
espect
nergy
56
Vesuvius plc
Annual Report and Financial Statements 2021
Vesuvius materiality assessment
Our Sustainability initiative focuses on our
most signicant sustainability issues and
opportunities. These are dened by our
ongoing materiality assessment, which
identies and prioritises issues based on
two criteria: the impact or likely impact on
the achievement of Vesuvius’ Strategic
Objectives; and the impact or potential
impact on Vesuvius’ stakeholders and
their interests. Our materiality assessment
is informed by our risk management
processes, which not only consider
immediate risks to the Group, but also
longer-term emerging macro trends
such as the electrication of light vehicles,
accelerating growth in demand for
renewable energies, technological
developments in iron and steel making
and policy changes impacting the cost
of CO
2
emissions, all of which could
profoundly affect our markets.
This report has been prepared in
accordance with the GRI Standards:
Core option.
In preparing our assessment, and
developing our Sustainability initiative,
we engage with various stakeholders,
formally and informally. Details of these
engagements and the parties involved
are described in our s172 disclosures on
pages 22 to 28. We undertake regular
surveys of Vesuvius’ operational teams to
collect data on management approaches,
systems, and performance relating to
environmental, safety, and human
resource management.
The Board of Directors formally reviews all
signicant sustainability programmes and
signs off the content of all sustainability
reporting disclosures. Our Sustainability
Council and VP Sustainability ensure that
we have a clear set of KPIs and targets to
track the Group’s progress.
Material sustainability topics
The material topics have been validated
as material by the Board; they apply in our
own operations and to varying degrees
in those of our suppliers. No change in
the relative prioritisation of topics was
recorded in 2021.
The exclusion of topics from this list does
not mean that they are not considered
important to Vesuvius or are not being
managed, but only that we have chosen
not to address them in detail in this report.
Where appropriate we have incorporated
some commentary on these additional
topics into our report. Details of water
stress and water consumption, biodiversity,
conict minerals and environmental
compliance are all included.
Material topics
Climate
change
–
energy efciency
–
CO
2
e emissions
–
renewable energy
–
sustainable products
Circular
economy
–
solid waste
–
recovered and recycled
materials
Protection
of the
environment
–
wastewater
–
solid waste
–
environmental management
–
responsible procurement
Human rights
–
modern slavery
–
gender diversity
–
employee well-being
–
responsible procurement
Employee work
relationships
and conditions
–
health and safety
–
employee representation
–
engagement and
development
–
values
Communities
–
education
–
business practices
–
supply chain
Governance
–
Code of Conduct
–
anti-bribery and corruption
–
privacy and data security
–
responsible procurement
Materiality assessment process
Step 1 Step 2 Step 3
Step 4
Step 5
–
Survey of key
internal and
external
stakeholders
–
Review of external
agency ratings
–
Benchmark of
current policies,
targets, reporting
practices vs peers
and customers
–
Interviews with
senior managers
and experts
–
Evaluation of
current activities
and reporting
–
Selection and
denition of a
broad set of metrics
–
Assessment of
capabilities
–
Selection of key
KPIs covering the
most important
objectives
–
Identication of
metrics and setting
of targets by
Group Executive
Committee
–
Approval by Board
of directors
–
Strategy launch
with Senior
Leadership Group
–
Constitution of
Sustainability
Council
–
Deployment
throughout the
Group
–
Ongoing dialogue
with internal
and external
stakeholders
–
Building action
plans and
monitoring progress
–
Reporting of
performance
against targets
and review of
objectives
57
Our business Our performance
Sustainability
Governance Financial Statements
Task Force on Climate-related Financial Disclosures
The Taskforce on Climate-related
Financial Disclosures (TCFD) has
developed a disclosure framework to
help companies improve and increase
the understanding of their reporting of
climate-related nancial information.
We have therefore aligned the reporting
of our existing Sustainability initiatives
to the risk management and reporting
recommendations of the TCFD.
The Board is pleased to conrm that, for
the year ended 31 December 2021, the
Group’s environmental disclosures are
reported in a TCFD framework. The table
below sets out where you can nd
information on how we have applied each
of the recommendations of the TCFD.
For a number of years we have disclosed
the metrics and targets we use to assess
and manage relevant climate-related
risks and opportunities. The core of
our Sustainability initiative remains our
commitment to continuing our progress to
create a better tomorrow for our planet.
Topic
Disclosure summary Vesuvius disclosure
Governance
Disclose the
organisation’s
governance
around climate-
related risks and
opportunities.
a
Describe the board’s oversight of
climate-related risks and opportunities.
Sustainability: TCFD
p59
Risk, Viability and Going Concern
p29–33
b
Describe management’s role in assessing
and managing climate-related risks
and opportunities.
Sustainability: TCFD
p59
Risk, Viability and Going Concern
p29–33
Strategy
Disclose the
actual and
potential impacts
of climate-related
risks and
opportunities on
the organisation’s
businesses,
strategy, and
nancial planning
where such
information is
material.
a
Describe the climate-related risks and
opportunities the organisation has identied
over the short, medium and long term.
Sustainability: Our planet
p60–63
b
Describe the impact of climate-related
risks and opportunities on the
organisation’s businesses, strategy
and nancial planning.
Sustainability: Our planet
p60–77
Our external environment
p16 and 17
Sustainability: Our customers
p80 and 81
c
Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a
2°C or lower scenario.
Sustainability: Our planet
p64–66
Risk
management
Disclose how the
organisation
identies,
assesses and
manages
climate-related
risks.
a
Describe the organisation’s processes
for identifying and assessing
climate-related risks.
Sustainability: Our planet
p60–63
Risk, Viability and Going Concern
p29–33
b
Describe the organisation’s processes
for managing climate-related risks.
Sustainability: Our planet
p60–63
Risk, Viability and Going Concern
p30
c
Describe how processes for identifying,
assessing and managing climate-related
risks are integrated into the organisation’s
overall risk management.
Sustainability: Our planet
p60–63
Risk, Viability and Going Concern
p29–33
Metrics and
targets
Disclose the
metrics and
targets used
to assess and
manage relevant
climate-related
risks and
opportunities
where such
information
is material.
a
Disclose the metrics used by the
organisation to assess climate-related risks
and opportunities in line with its strategy
and risk management process.
Sustainability
p54
b
Disclose Scope 1, Scope 2 and,
if appropriate, Scope 3 GHG emissions,
and the related risks.
Sustainability: Our planet
p68, 69 and 71
c
Describe the targets used by the
organisation to manage climate-related
risks and opportunities and performance
against targets.
Sustainability: Our planet
p68–75
58
Vesuvius plc
Annual Report and Financial Statements 2021
Governance structure
Board oversight
The Board holds overall accountability
for all matters related to sustainability
and the management of all risks and
opportunities, including the impact
of climate change on the Group.
The Group’s Audit Committee supports
the Board in ensuring climate-related
issues are integrated into the Group’s
risk management process and reviewing
the Group’s TCFD reporting. As the
Executive Director with key responsibility
for the delivery of the Group’s strategy,
our Chief Executive, Patrick André,
is ultimately responsible for the
Sustainability initiative.
The Board’s oversight of the Group’s
response to climate change is integrated
both into its monitoring of the Group’s
broader Sustainability strategy and
initiatives, and its approach to signicant
capital and other investments. The Board
formally discusses sustainability, including
reviewing the Group’s performance and
progress against the targets embedded
in our Sustainability initiative, particularly
those relating to climate, twice per year.
In 2021, the Board undertook a more
detailed assessment of the Group’s
climate-related risks and opportunities,
including reviewing an analysis of the
Group’s physical and transition risks.
It also considered the formulation of
three different climate-related scenarios
constructed to assess the potential
nancial implications of climate change
and assessed the impact of climate-
related risks and opportunities on
the Group’s strategy. Every capital
expenditure above £5m requiring Board
approval includes a sustainability
assessment, which includes climate-
related parameters.
The Remuneration Committee supports
the Group’s Sustainability initiative and
climate-change-related objectives,
through the alignment of the Group’s
remuneration strategy. All business unit
Presidents and each of the regional
business unit Vice Presidents have a part
of their annual incentive compensation
tied to performance targets on CO
2
emissions reduction. In addition, the
Remuneration Committee has determined
that commencing in 2022 the Group’s
Long-term Incentive Plan should also
include three ESG measures, focused
on a reduction in the Group’s Scope 1 & 2
CO
2
emissions, a reduction in the Lost
Time Incident Frequency Rate and an
improvement in the gender representation
in senior management.
Management oversight
In 2020, with the launch of the Group’s new
Sustainability initiative, a new governance
structure was established, comprising
a Sustainability Council, supported by
the new role of VP Sustainability, and a
clear set of KPIs and targets delineated.
The Vesuvius Sustainability Council is
chaired by the Chief Executive, and
comprises the Group Executive Committee,
VP Sustainability and regional Vice
Presidents from each business unit.
It meets on a quarterly basis and
oversees the Group’s sustainability activity,
monitors progress against our targets
and assists the Group with identifying and
assessing the implications of long-term
climate-related risks and opportunities.
The Council reports to the Board twice per
year. In 2021, it was integral in preparing
a complete climate change risk and
opportunities assessment for the
Group, exploring the potential impact
of climate change on business strategy
and evaluating the associated nancial
projections.
Scope 1, 2 and 3
CO
2
and CO
2
e emissions
Scope 1 covers direct emissions
from owned or controlled sources.
Scope 2 covers indirect emissions from
the generation of purchased electricity,
steam, heating and cooling consumed
by the Company. Scope 3 includes all
other indirect emissions that occur in
the Company’s value chain.
To illustrate the strategic alignment of our
sustainability agenda at Vesuvius, as of
1 January 2022, the VP Sustainability
reports directly to the Chief Executive.
The VP Sustainability leads the Group’s
sustainability activities, coordinating the
work of the Sustainability Council including
the Group’s assessment of climate-change
risks and opportunities and formulation
of climate-related scenarios. He is also
responsible for the collation of data to
assess the Group’s performance against its
sustainability targets and KPIs, producing
quarterly performance reports and
managing Group-wide communications.
Responsibility for the progress of the
Group against its sustainability objectives
lies with the Group Executive Committee
and, operationally, each business unit
President. These BU Presidents and the
Regional business unit Vice Presidents
are also responsible for communicating
the sustainability targets inside their
organisations and for implementing plans
– including overseeing capital allocation
and the selection of R&D priorities – to
achieve these targets and address the
climate-related risks and opportunities.
The VP Sustainability is responsible for
overseeing reporting on the Group’s
sustainability matters and metrics. Formal
channels for reporting a range of data
points are embedded in the organisation.
Escalation mechanisms, routine reviews,
and internal controls such as auditing
and due diligence are in place to
ensure transparency, consistency and
completeness of information. For certain
topics these are supported by independent
third-party verication.
59
Our business Our performance
Sustainability
Governance Financial Statements
Our planet
Supporting our customers
According to estimates from the World
Steel Association (WSA), on average for
2020, 1.89 metric tonnes of CO
2
were
emitted for every tonne of steel produced.
The WSA also estimated that the steel
industry generates between 7% and 9%
of global direct emissions from the use of
fossil fuels.
The iron and steel industries are taking
action to address the decarbonisation
challenge. We want to support them
and will work in partnership with them
to develop more sustainable solutions.
With around 10kg of refractory material
required per tonne of steel produced, the
careful selection and use of energy-saving
refractories can benecially impact
on the net emission of CO
2
in the steel
manufacturing process. In the foundry
process, the amount of metal melted
versus the amount sold as nished castings
is the critical factor impacting a foundry’s
environmental efciency. Vesuvius
continuously works with its customers
to increase this metal yield.
Climate-related risks and opportunities
The actions being taken by governments
and society around the world to mitigate
climate change, and the changes in
temperature and weather patterns resulting
from it, present both opportunities and
risks to Vesuvius. In its broadest context,
we believe that the need for climate
change initiatives will create ever greater
opportunities for the Group to support our
customers – to improve their efciency
and reduce their environmental impact.
Each year the Group undertakes a robust
assessment of the principal risks which
could have a material impact on the
Group. A number of sustainability risks
are recorded in this analysis (see the Risk,
Viability and Going Concern section on
p29–35). In line with the recommendations
of the TCFD, Vesuvius also undertakes
a review of the key climate-related
opportunities and risks that we foresee
impacting the Group over the short,
medium and long term.
The completed climate-related risk and
opportunity register was reviewed and
approved by the Audit Committee in 2021
and the signicance of climate-related
risks was considered in relation to
risks identied in the standard risk
management process. Climate-related
risks are reviewed every six months as part
of the Group’s standard risk management
process, to ensure the register reects
any material changes in the operating
environment and business strategy,
and to ensure that the management of
climate-related risks is integrated into
our overall principal risk management
framework.
The business units use the analysis of risks
and opportunities to inform their business
development priorities and focus their
R&D project portfolios. They factor climate
change risks and opportunities into their
business planning processes assessing the
long-term impacts on protability of both
the risks and opportunities.
Sustainability has always been at the
heart of Vesuvius’ business and the Group’s
analysis concludes that the opportunities
for the Group manifested by the global
pressure to mitigate climate change
outweigh the risks. Our technology helps
our customers improve their process
efciency and their environmental
footprint.
We describe the Group’s strategy
for addressing the climate-related
opportunities impacting our business in
‘Our external environment’
p16 and 17
Then, in more detail, we describe how
practically we are maximising those
opportunities to help our customers in the
‘Our customers’ section
p80 and 81
Vesuvius takes seriously its responsibility
for managing the impact of its operations
and its supply chain on the environment.
We recognise the nite nature of the
majority of natural resources and the
obligation we have to preserve the
environment for future generations.
Tackling climate change
We are committed to reducing the
environmental footprint of both our own
and our customers’ operations and to
growing our engagement in the circular
economy by reducing the amount of
waste we generate, recovering more of
our products after they have been used
and increasing the usage of recycled
materials.
Supporting policy development
To transition to a low-carbon global
economy, Vesuvius supports the call for
policymakers to:
–
Build a level global playing eld, including
carbon border adjustments and robust
and predictable carbon pricing for
companies. This will strengthen incentives
to invest in sustainable technologies and
to change behaviours
–
Develop the necessary energy production
and distribution infrastructure to provide
access to abundant and affordable
clean energy
Reducing our impact
Vesuvius actively participates in measures
to tackle climate change by reducing our
CO
2
emissions and use of raw materials,
and helping our customers reduce their
own CO
2
footprint thanks to the use of
our products and services. We have set
ourselves the goal of reaching a net zero
carbon footprint at the latest by 2050.
Vesuvius embraces society’s expectations
for greater transparency around climate
change, expressed by initiatives such as
the recommendations of the TCFD.
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Physical risks and business continuity
Thanks to signicant restructuring efforts
carried out since 2017, Vesuvius now
operates in a highly optimised global
footprint. Proximity with customers limits
transportation and associated CO
2
emissions, ensures higher exibility and
reactivity, and reduces working capital.
Yet, a signicant amount of redundancy for
most product lines remains, providing backup
in case of local disruption and ensuring
continuity of supply for our customers.
Vesuvius operates in 54 manufacturing
sites and six R&D centres of excellence
located in 40 countries, and from time
to time our operations can be subject
to physical damage driven by weather
events, such as severe storms and
ooding, water shortages or wildres
whose frequency and intensity may be
exacerbated by climate change. Such
events may also impact the manufacturing
capabilities of our customers, our tier 1
and lower tier suppliers and our supply
chain logistics.
Vesuvius has undertaken a comprehensive
analysis of our sites’ susceptibility to
physical risks arising from climate change.
In 2021, we built a weather event risk
map covering our 30 most material
manufacturing sites and R&D centres of
excellence. Of these, 18 were identied
as being high risk for at least one type
of weather event (ooding, hailstorm,
lightning, storms and tornadoes), and
three are located in areas of very high
water stress.
We anticipate that the occurrence of
adverse weather events will continue to
increase and we therefore manage our
business to prepare for them and mitigate
their impact when they do occur.
As the Group has restructured and
concentrated its manufacturing footprint
on a reduced number of locations, our
strategy to address short-term risks has
transitioned from a focus on redundant
capacity to improved prevention and risk
management. Sites are routinely audited
by our insurers and our external risk
manager. Their reports are combined
with water stress analyses (based on the
Aqueduct water risk atlas) covering
all our manufacturing sites and R&D
centres of excellence, to create our
physical risks map.
Local and product line business
continuity plans are maintained by our
manufacturing sites and are regularly
reviewed. Vesuvius sites maintain and
exercise emergency plans to deal with
such events as part of their normal risk
management and business continuity
processes. Exercises and drills are
organised covering IT disaster recovery,
re, explosion, weather and geophysical
events, and our processes are improved
based on the lessons learned.
In 2021, a Vesuvius manufacturing site in
Malaysia suffered damage from ooding
due to an abnormally intense rain storm.
This disrupted operations for a few days
but sound emergency and business
recovery planning meant there was
no material impact on the Vesuvius
business and assets. Customer operations
were unaffected.
Transition risks
We believe that the main climate change
transition risks facing the Group relate to:
1 the potential for carbon taxing or
emissions rights trading schemes
to be introduced or increased,
without effective border adjustment
mechanisms to accompany them, in
Europe and the US but not uniformly
elsewhere; and
2 the rapid transition from iron to
aluminium for light vehicles castings.
An increase in the cost of carbon emissions
would affect our manufacturing costs.
We are addressing this through our energy
efciency improvement initiatives and
conversion to non-fossil fuels wherever
possible.
A very rapid transition from iron to
aluminium for light vehicle castings would
affect our revenue in the iron castings
market. We expect this to be compensated
for by increased sales for aluminium
castings, and growing sales of products
for thin-section automotive component
iron castings and turbo-charger castings
for hybrid vehicles.
Sites with the highest exposure to weather events
Country
Site
Water stress
Flood –
water bodies
Flood –
precipitation
Hailstorm
Lightning
Wind –
tropical
storms
Wind –
extra
tropical
storms
Tornado
China
Anshan
Changshu
Belgium
Ostend
Italy
Muggio
Netherlands Hengelo
South Africa
Johannesburg
India
Kolkata
Mehsana
Puducherry
Pune
Vizag
USA
Champaign
Charleston
Chicago Heights
Wurtland
Japan
Toyokawa
Taiwan
Ping Tung
Brazil
Piedade
Resende
Sao Paulo
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Sustainability
Governance Financial Statements
Tackling climate change
Opportunities
Climate-related risks and opportunities analysis
Vesuvius considers the key climate-related opportunities and risks that we foresee impacting the Group over the following short,
medium and long-term time horizons.
Short term (2025)
Our current strategic plans operate within
this timeframe. Most of the intermediate
sustainability targets approved by the
Board were set with 2025 as a deadline.
This horizon encompasses our capital
expenditure cycle, allowing time to decide,
implement and measure the progress
of actions.
Medium term (2035)
This is the most likely horizon for the
regulatory frameworks (such as the EU
Emissions Trading System and Carbon
Border Adjustment Mechanism) currently
being dened in many regions to reach
their full effect. We anticipate that
the major adjustments to customers’
footprints and technology investments
will be in full swing by then.
Long term (2050)
This deadline has been retained by the
United Nations and many policy-making
bodies to set decarbonisation goals.
Vesuvius is committed to reaching net zero
by 2050 at the latest.
Opportunity
Description
Impact
Potential annual impact on trading prot in the short,
medium and long term
Short term
2025
Medium term
2035
Long term
2050
Products and services
Ability to
diversify
business
activities
Commercialise refractory solutions for
low-CO
2
emitting processes in the
production of aluminium to replace
carbon-based products
Increased revenue
and trading prot
Minor
Minor to
moderate
Minor to very
high
Commercialise refractory solutions
for hydrogen based Direct Reduction
Iron production and steel to replace
traditional refractory products
Insignicant Insignicant
to minor
Insignicant
to high
Markets
Access to
new markets
Accelerated growth of the wind
turbine market
Increased revenue
and trading prot
Minor Minor
Minor to high
Accelerated growth of the aluminium
castings market for electric vehicles
and light-weighting
Minor Minor
Minor to high
Accelerated growth of ferrous castings
for hybrid vehicles (turbo-chargers)
and thin-section castings for internal
combustion engines
Insignicant
to minor
Minor to
moderate
Minor to
moderate
Accelerated growth of the high technology
steel segment
Minor
Minor to high High to
very high
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Impact categories (trading prot)
We have assessed our risks and
opportunities, and sorted them according
to the following classication:
Very high (>£25m)
Major (£15–25m)
High (£10–15m)
Moderate (£5–10m)
Minor (£1–5m)
Insignicant (£0–1m)
Catastrophic (>£25m)
Major (£15–25m)
High (£10–15m)
Moderate (£5–10m)
Minor (£1–5m)
Insignicant (£0–1m)
Risks
Description
Impact
Mitigating actions being
undertaken
Potential annual impact on trading prot in the
short, medium and long term
Short term
2025
Medium term
2035
Long term
2050
Physical risks
Increased
frequency and
severity of extreme
weather events
(heatwaves, rain
and river ooding,
cyclones, snow)
Physical damage to
Vesuvius locations
and people
Business disruption
due to natural
disaster
Increased cost
due to physical
damage
Reduced revenue
from business
interruption
Mitigating actions for
severe weather events
and the associated risks
are included in the business
continuity plans of plants
and property, and
insurance is purchased
Minor Minor Minor
Transition risks – Policy and legal
Carbon taxing/
emissions rights
trading/border
adjustment
mechanisms
introduced or
extended
Increase in
manufacturing
costs
Increased
operating costs
(main risk in
Europe)
Capex to improve
energy efciency and
conversion to non-fossil
fuels to eliminate CO
2
emissions. Relocation
of manufacturing to
reect movements in
customer base
Minor
Insignicant
to moderate
Insignicant
to high
Transition risks – Market
Rapid transition
from iron to
aluminium for light
vehicle castings
Reduced volume
of internal
combustion
engine castings
and so risk of
revenue loss for
the Foundry
Division
Reduced revenue
from shrinking
market as some
iron castings will
disappear or be
converted to
aluminium (due
to conversion to
electric vehicles)
In ferrous, push to
develop sales of
feedex and coatings
for thin-section
automotive components,
and products for
turbo-charger casting.
Invest in R&D, marketing
and sales force
Minor
Moderate
to high
Moderate
to major
Transition from
Blast Furnaces –
Blast Oxygen
Furnaces converted
to Direct Reduction
Iron or Electric Arc
Furnaces (EAF)
for iron and steel
making
Share of EAF
in total steel
production
increases
Reduced size
of market where
Vesuvius is
strongest,
leading to weaker
positions in the
steel market
Adjust R&D and product
development priorities.
Redeploy sales force,
focusing on EAF market
Insignicant
Minor to
moderate
Minor to
moderate
Risks
Opportunities
Risks
63
Our business Our performance
Sustainability
Governance Financial Statements
Scenario analysis
Vesuvius has undertaken scenario analysis
to seek to quantify the likely impact of
climate change on the business and to
test the resilience of the Group’s strategy
to the changes that lie ahead.
We considered three scenarios, modelling
the potential nancial impact of 2°C,
3°C and 4°C temperature increases on
our business.
Best case scenario
In formulating our scenarios, we took as
our ‘best case’ a 2°C scenario. This was
based on the premise that despite the
tremendous acceleration of public
awareness, regulation, technology
development and capital allocation
in recent years, we doubt that there is
sufcient time for the 1.5°C target to
be achieved. We therefore identied
our most optimistic scenario as 2°C.
Our assumption is that any further
acceleration which would allow the planet
to get back onto a 1.5°C course would
reinforce the main characteristics and
accelerate the timeline of our 2°C
scenario, without fundamentally
changing its features.
From assumptions to strategy
The scenarios take as their starting point
the regulatory and macro-economic
assumptions underpinned by the
International Energy Agency’s WEO 2020
Stated Policies Scenario and Sustainable
Development Scenario. Supplementing
this we have identied, for each scenario,
the areas of our business in which changes
may occur, such as the evolution of
end-markets, customer footprint, pace
and breadth of technology transition in
iron and steel making, pace of conversion
from fossil fuels to clean electricity and
hydrogen, and evolution of the aluminium
market. We then evaluated the potential
magnitude of the risks and opportunities
in each scenario. We analysed the
implications for Vesuvius and considered
our strategic response in terms of our
manufacturing and our commercial
footprint, our portfolio of products
and services, the conversion of our
manufacturing processes to clean energy
and the prospects for our aluminium
casting business. With this approach, the
impacts on all key areas of the business
were covered (sales, R&D, manufacturing
and procurement). The outcomes of the
scenario analyses have been taken into
account in formulating plans for achieving
the Group’s strategy.
Tackling climate change
continued
4°C warming scenario
‘Good intentions
hampered by fear of
economic war’
3°C warming scenario
‘Closed doors’
2°C warming scenario
‘Global accord’
Incomplete policy and
scal packages distort
competition, slowing
down technology
development and
leading to geographic
shifts in steel supply
Regional/national
self-interest drives
economic policy,
competition wins over
cooperation, regulatory
framework and
technologies evolve
differently
High cooperation and
commitment to limit
emissions facilitates
technology development
and the transition to
a low carbon world
Three long-term scenarios
64
Vesuvius plc
Annual Report and Financial Statements 2021
4°C warming scenario –
‘Good intentions hampered
by fear of economic war’
3°C warming scenario –
‘Closed doors’
2°C warming scenario –
‘Global accord’
1
Regulatory and
macro-economic
environment
The European Union and United
States implement carbon
pricing mechanisms (taxation
or cap on trade), but no Carbon
Border Adjustment Mechanism
or Tariffs (or insufficient to prevent
the transfer of manufacturing
away from these regions)
The European Union and United
States implement carbon pricing
mechanisms (taxation or cap on
trade), and Carbon Border
Adjustment Mechanisms or
Tariffs to protect their industries
from delocalisation
All major economies implement
carbon pricing mechanisms.
The cost of CO
2
increases in all
regions at a comparable pace
2
Conversion of
power generation
from fossil fuels to
clean electricity
and hydrogen
–
Fast growth of non-CO
2
emitting electricity sources
(nuclear and renewable)
in Europe
–
The cost of fossil fuels increases
signicantly in Europe
–
Coal reduces progressively,
but does not disappear.
Natural gas continues to
grow outside Europe
–
Hydrogen does not become
available on a wide scale and
economically competitive until
well after 2040
–
Fast growth of non-CO
2
emitting
energy sources in Europe
–
The cost of fossil fuels increases
signicantly in Europe. Coal
reduces progressively, but does
not disappear, natural gas
continues to grow outside Europe
–
Hydrogen becomes available on a
wide scale in the USA and Europe
and economically competitive
between 2030 and 2040
–
Fast growth of non-CO
2
emitting
energy sources (nuclear and
renewable) in all regions
–
The cost of fossil fuels increases
signicantly (taxation), coal as
a source of energy disappears,
natural gas starts to reduce
–
Hydrogen becomes available
on a wide scale and economically
competitive between 2030
and 2040
–
Fast electrication of the
automotive industry
3
Technology
transition –
iron and
steel making
–
The transition in blast
furnaces to clean processes
(e.g. Direct Reduction Iron
(DRI), hydrogen, Carbon
Capture Storage (CCS),
Carbon Capture Utilisation
Storage (CCUS)) does not
happen on a large scale
–
US steel producers convert
blast furnaces to DRI and
Electric Arc Furnaces (EAF)
to benet from the low cost
and high availability of
natural gas
–
European iron making transitions
to clean processes (e.g. hydrogen,
DRI, CCS, CCUS). The speed of
the transition is dictated by the
availability of green hydrogen in
large quantities
–
Some US blast furnaces are
converted to hydrogen, others
to DRI+EAF
–
Chinese steel plants convert to
clean iron and steel making
processes, albeit at a slower pace
–
Little or no transition outside
China, the EU and USA
–
Fast transition of iron making to
clean processes in all regions; blast
furnaces are revamped ahead of
their normal schedule
–
European and Chinese integrated
steel making will grow primarily in
hydrogen-based iron production,
implementing CCS and CCUS
technologies as well
–
DRI + EAF will grow in the US
(beneting from the availability
of low cost shale gas) and Europe
–
Customers also invest to increase
the performance of furnaces,
including downstream of casting
4
High technology
steel market
High technology steel market
grows at 0.9% per year
High technology steel market grows
at 1.2% per year (light weighting
and material efciency efforts by
downstream industries accelerate
shift from lower to higher
performance grades)
High technology steel market grows
at 1.6% per year (light weighting
and material efciency efforts by
downstream industries accelerate
shift from lower to higher
performance grades)
5
Aluminium market
Aluminium market grows at
3% per year
Aluminium market grows at 5% per
year (driven by the demand for
transportation, construction and
packaging) until 2035. It accelerates
afterwards as the demand for hybrid
vehicles shifts to electric vehicles
Aluminium market grows at 7% per
year (driven by the demand for
transportation, construction and
packaging) until 2035. It accelerates
afterwards as the demand for hybrid
vehicles shifts to electric vehicles
Potential nancial
impact by 2035
(prot before tax)
£-5m to £0 £5m to £10m £15m to £20m
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Our business Our performance
Sustainability
Governance Financial Statements
Key factors impacting Vesuvius’ three climate
change scenarios
1 Regulatory and macro-economic drivers
differentiate our scenarios
Firstly, effective border adjustment
mechanisms to accompany carbon
taxation, or cap and trade systems in
regions with ambitious emissions reduction
objectives, will greatly support the
implementation of technologies required
to decarbonise steel making (including
the development of hydrogen as the
reducing agent). Conversely, the absence
or ineffective implementation of border
adjustments would lead to signicant
delocalisation of the steel industry and
a displacement of CO
2
emissions to other
countries rather than a signicant reduction
on a worldwide scale. This shift in our
customer footprint would lead to the need
to adapt our own manufacturing footprint.
Secondly, public policy will signicantly
affect the relative cost and availability of
non-CO
2
emitting energy sources vs fossil
fuels and respective infrastructures.
These will greatly inuence the pace
of deployment of various technologies
and industries (electric vehicles, green
hydrogen, decarbonised steel making).
Infrastructure, construction and other
downstream markets will also be
incentivised to reduce steel consumption,
accelerating the shift towards high
technology steel.
Finally, the level of international cooperation
to encourage and support less developed
economies to engage in the technology
transition will also affect our customer
manufacturing footprint.
2 The future of steel
All three scenarios assume that the strong
connection between world GDP and world
steel output will continue as there is no
signicant substitute for steel. The ght
against climate change is expected to
have a far-reaching impact on many
different industries translating into the
accelerated growth of the high-technology
steel segment in which Vesuvius has a key
presence. For example, solar and wind
power plants, where investment is growing
fast, are far more steel intensive per kWh
of installed capacity than their fossil
fuel equivalents. Likewise, hydrogen
transportation, another area of rapid
growth, also requires considerable
amounts of special grades of steel for
new pipelines and ships.
3 Technology transition
Our scenarios consider the pace and
extent of the technology transition in iron
and steel making. The Blast Furnace –
Basic Oxygen Furnace (BF-BOF) route
for steel making is signicantly more CO
2
intensive than the Electric Arc Furnace
(EAF) route. However, EAFs cannot
currently be used to produce all higher
quality steel grades and they rely on the
availability of scrap steel (itself a function
of the level of economic development).
Going forward, quality levels produced
by EAFs will continue to improve.
Various technologies to decarbonise
the BF-BOF route are being developed,
including solutions which seek to capture
the carbon as it is emitted and either
store or use it, or its replacement, by a
combination of Direct Reduction of
Iron (DRI) and EAF.
Hydrogen-based DRI associated with
EAFs has the potential to be nearly
carbon-free if carbon-free electricity and
hydrogen are available. We anticipate
that there will be a gradual reduction in
steel production via the BF-BOF route and
growth in the EAF route. The extent and
pace of this will depend on technologies
coming to maturity, the availability of
infrastructure (carbon-free electricity and
hydrogen), and regulatory frameworks.
Conclusion on strategic resilience
We estimate the nancial impact of the
opportunities and risks on the Group will
be most adverse under a 4° scenario
and most positive under a 2° scenario.
Under all three scenarios, we expect to
benet from the continuing growth in the
production of steel in line with GDP, along
with the accelerating shift towards higher
performance iron and steel castings,
as we support customers to maximise the
efciency and quality of their production.
With our technological expertise, strong
customer relationships and broad
manufacturing footprint, we expect to
play a key role in supporting our customers’
efforts to decarbonise their operations.
We also believe there is a low downside
for Vesuvius in all three scenarios as
approximately 75% of our business in Steel
is in the steel casting part of the operation
which, as a standalone process, is low CO
2
emitting (1% to 3% of a steel plant’s CO
2
emissions), and which we do not expect to
be affected by technology shifts that the
decarbonisation of iron and steel making
will require.
Whilst the electrication of light vehicles
and ongoing light-weighting efforts are
expected to translate into a shrinking of
the market for certain iron castings, it is
anticipated that this will be more than
compensated for by the growth in other
markets such as wind turbines and
aluminium castings.
Energy conservation and CO
2
e
emissions reduction
Vesuvius launched its Energy Conservation
Plan in 2011 and signicant progress has
been made. Between 2019 and 2021 the
Group achieved an overall reduction in
normalised (measured per metric tonne
of product packed for shipment) energy
consumption of 9% and a 15.5% reduction
in normalised CO
2
e emissions (Scope 1
and Scope 2, market based), comprising
a 16.5% reduction in normalised Energy
CO
2
e usage and a 12.6% reduction in
normalised Process CO
2
. Our energy
conservation plan is now in its third cycle
of improvement.
Managing our energy intensity not only
has an environmental benet but is also
part of our long-term strategy to enhance
our cost-competitiveness.
2025 energy targets
In 2020, the Board set a new objective
targeting a 10% improvement in the
Group’s normalised energy consumption,
measured per metric tonne of product
packed for shipment between 2019
and 2025.
2019 was selected as the baseline for all
GHG emissions data and targets, absolute
and relative, as this was the last year of
normal trading prior to the COVID-19
pandemic.
The Board also set a related target for
the Group to achieve a 10% reduction in
Energy CO
2
e emissions per metric tonne
of product packed for shipment (Scope 1
and Scope 2) vs 2019. This target covers
100% of Vesuvius’ operations and is to be
achieved without the use of any offsets.
The Group Energy CO
2
e emissions
reduction 2025 target has been cascaded
to all business units, which have built action
plans accordingly.
Each site monitors and reports its energy
consumption on a quarterly basis.
Performance and variation are analysed,
and improvement plans built accordingly.
Tackling climate change
continued
66
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Annual Report and Financial Statements 2021
Focus areas
In seeking to meet these new targets
and decarbonise our manufacturing
processes, the Group is focusing on
ve main areas:
–
Modernising and upgrading installed
equipment to reduce our energy
consumption
–
Investing to renew equipment to the best
available technologies and converting
to less CO
2
intensive energy sources
–
When possible, replacing high CO
2
e
emission electricity (generated from
coal) with greener electricity or other
sources of energy
–
Reducing our energy wastage,
recovering heat to feed processes
and hot water
–
Generating clean energy
Key Group initiatives for energy conservation
and for increasing energy efciency
1 Carbon-free energy sources
The Group supports the transition towards
renewable energy sources and cleaner
carbon-free technology when possible.
Our energy strategy includes an ongoing
effort to convert to carbon-free electricity
contracts whenever practical and
economically manageable, invest
in solar panels, and the conversion of
processes to electricity as soon as the
technology is cost-effective.
In 2021, nine sites converted to carbon-
free electricity contracts, taking the total
number to 12, representing 20% of our
manufacturing sites and R&D centres
of excellence.
We also inaugurated a solar panel
installation in our plant in Igorre in 2021
and launched projects in our Kolkata and
Vizag plants. 19 manufacturing sites
and R&D centres of excellence are also
investigating solar panel projects.
In 2021, 51% of the grid electricity
consumed in our sites was generated using
processes that did not emit CO
2
, of which
41% was generated from renewable
sources. At the end of 2021, four sites
were equipped with renewable energy
installations, and one had invested in a
combined heat and power installation.
2 Capital commitments and internal
CO
2
pricing
In 2020, we took the decision to include
an environmental impact analysis in
the evaluation of each of our capital
expenditure projects as these are the
key decisions that drive long-term future
sustainability performance, and CO
2
emissions in particular.
Our Environmental policy, which is the
responsibility of the Chief Executive and
the Group Executive Committee, covers
all our operations and states that all
our investment decisions will include an
analysis of their environmental impact.
An internal price for CO
2
emissions
(Scope 1 and Scope 2) is included in the
calculation of payback for all investments
reaching the threshold for approval by
the BU Presidents or Chief Executive.
Vesuvius views this shadow pricing
mechanism as a key mechanism to
ensure that the environmental impact
of long-term investment decisions is
understood. It seeks to ensure that the
best available technology is adopted,
even in locations where no external cost
for carbon is in place or foreseen.
The internal price of CO
2
was initially set
at €30 per tonne of CO
2
. This price is
reviewed annually and is applicable across
all business units and all regions for the
full year. It has been increased to €90
per tonne of CO
2
for 2022.
Key progress since 2019
Since 2019, four major projects have
helped signicantly reduce the Scope 1
CO
2
emissions of the Group by addressing
some of its most CO
2
e intensive installations
– closure of the Skawina bricks plant,
elimination of dirty coke oven gas as a fuel
in Wuhan with a new natural gas-red
tunnel kiln, transfer of the Tyler plant
activity to Monterrey, and replacement of
the burner system of the Olifantsfontein
rotary kiln.
We endeavour to use the best available
technologies to reduce CO
2
emissions in
all our major capital expenditure projects.
For example, we are taking advantage
of the closure of our Chinese plant at
Kuatang and relocation of its activity,
to replace all drying ovens and kilns with
new ones with an energy efciency
improvement target of 20%.
Many other projects are being undertaken
to upgrade or retrot equipment to
improve energy efciency and reduce CO
2
emissions. These include new refractory
furniture and installation of heat recovery
systems in ovens and kilns, upgrades of
compressors, replacement of light sources
with LED lights, solar panel installation
and the purchase of electric forklift trucks.
In 2021, the Board approved major
capacity expansion capital expenditure
projects totalling more than £20m.
Available technologies and their impacts
in terms of energy efciency and CO
2
e
emissions were systematically considered,
and the most efcient technologies for the
purpose selected. In addition, new capital
expenditure worth circa £1.7m dedicated
to 25 incremental improvement projects
with energy efciency and CO
2
emissions
reduction in their prime objectives was
approved in 2021.
In 2021, we analysed our CO
2
emissions in
detail (Scope 1 and Scope 2), evaluated
our Scope 3 emissions (using the GHG
approved Scope 3 Evaluator), initiated a
comprehensive survey of technologies in
development and of their level of maturity,
and started engaging with our suppliers of
key raw materials on their CO
2
emissions
levels and reduction plans.
Next steps
Our goal in 2022 will be to translate our
commitment to net zero into a precise
road map including short, medium and
long-term milestones. We also intend to
submit our rst CDP Climate Change
questionnaire in 2022.
In the short term (2025), various projects
are being studied, including the installation
of further solar panels, retrotting of
ovens and kilns or replacement of older
and less efcient ones, and burner
settings, loading and cycle optimisation.
We will also continue the conversion of our
electricity supply to carbon-free sources.
In the medium term (2035), we anticipate
that further emissions reduction will be
possible through further upgrades to
our ovens and kilns, and possibly the
combination of natural gas and renewable
energy such as green hydrogen to re
refractory materials.
In the longer term (2050), various
technologies are promising candidates for
the near zero emissions curing and ring
of refractory products (electricity, green
hydrogen, synthetic gas, biomass).
67
Our business Our performance
Sustainability
Governance Financial Statements
Energy consumption and Scope 1 and
Scope 2 CO
2
e emissions
While Vesuvius’ products differ signicantly
in the energy intensity of their manufacture,
most of our manufacturing processes
are not energy intensive nor do they
produce signicant quantities of waste
and emissions. Two of our 32 main
manufacturing processes (VISO and
Dolime production) account for 41%
of our energy consumption and 58%
of our location based CO
2
e emissions.
(We report in metric tonnes of CO
2
equivalents CO
2
e.)
A further ve processes consume 34% of
the Group’s total energy consumption and
represent 24% of our location based CO
2
e
emissions, giving a clear focus for 75% of
our energy and 82% of our emissions-
reduction initiatives.
The Group has clear targets for energy
saving, with ongoing efforts focused
on increasing the efciency of our
production processes. Dolime production,
which uses coal to calcine dolomite, is our
major emitter of CO
2
and, building on the
successes of previous years, continues to
be a clear focus for our investment to
reduce CO
2
emissions.
Vesuvius’ 2021 total energy costs of
£40.6m are c.2.5% of revenue. Only 1.3%
of the total energy requirements across the
Group are consumed in the UK, producing
less than 0.7% of the Group’s CO
2
e
location based emissions.
South Africa is the only country where
we exceed the threshold to be submitted
to a Carbon Tax or an Emissions
Trading Scheme.
Tackling climate change
continued
Normalised energy consumption and CO
2
e
emissions decrease
In 2021, the Group’s normalised energy
consumption decreased by 5.3% to 1,177
kWh per metric tonne (2020: 1,243), and
the Group’s normalised CO
2
e emissions
reduced to the lowest level ever recorded:
–
Location based: by 5.6% to 0.418 metric
tonnes CO
2
e per metric tonne product
packed for shipment (2020: 0.443)
–
Market based by 9.4% to 0.40 metric
tonnes CO
2
e per metric tonne product
packed for shipment (2020: 0.44)
These reductions which countered the
effect of the 13% increase in energy
consumed were primarily driven by
changes in product mix to lower energy
intensity products and the signicant
increase in production volumes (19.3%).
Natural gas use increased by 14.7%,
electricity consumption by 6.6% and coal
(a CO
2
intensive fuel) consumption by
9.8%, to 30.3 thousand metric tonnes in
2021 from 27.6 thousand metric tonnes
in 2020 . During 2021, the Group also
consumed 352 cubic metres of diesel
(+32.2% 2020: 266) primarily in the
operation of forklift trucks on its sites and
157 cubic metres of fuel oil, an increase of
26% (2020: 124). In total 509 cubic metres
of oils were used as fuel in 2021 (2020:390).
Scope 1
covers emissions from fuels
used in our factories and ofces,
fugitive emissions and non-fuel
process emissions.
Scope 2
relates to the indirect emissions
resulting from the generation of
electricity, heat, steam and hot water
we purchase to supply our ofces
and factories.
Vesuvius plc long-term energy consumption and normalised energy consumption (aggregate of Scope 1 and Scope 2)
2021
2020 2019 2018 2017
Total Energy consumption (million kWh)
1,159
1,026
1,176
1,4101,339
Energy consumption per metric tonne of product
packed for shipment (kWh/MT)
1,177
1,243 1,293 1,294 1,400
Greenhouse gas reporting
In reporting GHG emissions, we have used
the GHG Protocol Corporate Accounting
and Reporting Standard (revised edition)
methodology to identify our Location
based GHG inventory of Scope 1 (direct)
and Scope 2 (indirect) CO
2
e. We report in
metric tonnes of CO
2
equivalent (CO
2
e).
Our energy-related greenhouse gas
(GHG) emissions, reported as carbon
dioxide equivalents (CO
2
e), include direct
emissions of the three main GHGs (Carbon
Dioxide (CO
2
), Methane (CH
4
) and nitrous
oxide N
2
O).
Process related emissions of the following
in CO
2
equivalent and in metric tonnes are
not signicant:
–
Direct methane CH
4
Emissions
–
Direct nitrous oxide N
2
O Emissions
Emissions of the following in CO
2
equivalent and in metric tonnes are
not signicant:
–
Direct Sulphur Hexauoride (SF
6
)
Emissions
–
Direct HFC Emissions
–
Direct PFC Emissions
The Group also meets all its obligations in
relation to the Producer Responsibility
Packaging Waste regulations and the
Energy Saving Opportunity Scheme by
which the UK implemented the EU Energy
Efciency Directive.
All sites report their energy consumption
and GHG emissions on a quarterly basis.
Figures are veried for consistency and
coherence.
68
Vesuvius plc
Annual Report and Financial Statements 2021
Fuel consumption, emissions and normalised emissions for the main fuels consumed across the Group
(location based statutory reporting)
Location based statutory reporting of global GHG emissions (metric tonnes CO
2
e) and energy consumption (‘000 kWh) by type of fuel
and emission.
Fuel and emission
category
Energy used
‘000 kWh
2021
Energy used
‘000 kWh
2020
% change
CO
2
e ‘000
metric
tonnes
2021
CO
2
e ‘000
metric
tonnes
2020
% change
CO
2
e metric
tonnes per
metric tonne
of product
2021
CO
2
e metric
tonnes per
metric tonne
of product
2020
% change
Coal
224,846
204,693
10%
73
66
11%
0.074
0.079
-7%
Electricity
207,238
194,441
7%
100
92
8%
0.101
0.112
-10%
Ext.Heat
3,177
2,324
37%
1
1
40%
0.001
0.001
0%
LPG
77,379
61,605
26%
17
13
26%0.017
0.016
5%
Natural Gas
641,168
559,011
15%
117
103
14%
0.119
0.124
-4%
Other Fuels
5,643
4,308
31%
1
1
30%
0.001
0.001
9%
Total Fuels
1,159,451
1,026,382
13%
309
276
12%
0.314
0.334
-6%
Non-Fuel
Process
Emissions 89
101
14%
0.103
0.107
-4%
Fugitive
Emissions 1
1
30%
0.001
0.001
9%
Grand Total
1,159,451
1,026,382
13%
411
365
13%0.418
0.443
-6%
1. All fuel consumption is converted to ‘000 kWh for reporting.
2. In 2021, the Group consumed 58,288 thousand m
3
of natural gas.
3. Vesuvius does not use any alternative fuels (% used zero).
4. Heat from biomass 0.01%.
6. Fugitive emissions are leaks of greenhouse gases, for example from refrigeration
and air-conditioning units.
7. Location based Statutory Reporting of Global GHG emissions (metric tonnes of
CO
2
e) and energy consumption (‘000 kWh).
Global GHG emissions (kg of CO
2
e) and energy consumption (‘000 kWh) (Location based statutory reporting)
Emissions
and energy
sources
UK and
Offshore
CO
2
e ‘000
metric
tonnes
2021
Global
CO
2
e ‘000
metric
tonnes
2021
Proportion
relating to
the UK and
Offshore
Area
UK and
Offshore
CO
2
e ‘000
metric
tonnes
2020
Global
CO
2
e ‘000
metric
tonnes
2020
Proportion
relating to
the UK and
Offshore
Area
UK and
Offshore
energy
used
‘000 kWh
2021
Global
energy
used
‘000 kWh
2021
Proportion
relating to
the UK and
Offshore
Area
UK and
Offshore
energy
used
‘000 kWh
2020
Global
energy
used
‘000 kWh
2020
Proportion
relating to
the UK and
Offshore
Area
Combustion of fuel and operation of facilities including fugitive emissions (Scope 1)
2.433
311
0.8%
2.196
272
0.8%
12,688
949,036
1.3%
11,442
829,617
1.4%
Electricity, heat, steam and cooling purchased for own use (Scope 2)
0.480
101
0.5%
0.503
93
0.5%2,503
210,415
1.2%
2,619
196,765
1.3%
Total GHG emissions and energy
2.914
411
0.7%
2.699
365
0.7%
15,191
1,159,451
1.3%
14,061
1,026,382 1.4%
Change
8.0% 13.0%
12.6%
8.0%Vesuvius’ chosen intensity measurement
(location based statutory reporting)
Metric tonnes CO
2
e per metric tonne of
product packed for shipment
kWh of energy per metric tonne of
product packed for shipment
UK and
Offshore
2021
Global
2021
UK and
Offshore
2020
Global
2020
UK and
Offshore
2021
Global
2021
UK and
Offshore
2020
Global
2020
Emissions and energy reported above
normalised to metric tonnes CO
2
e
per metric tonne of product packed
for shipment
3.304
0.418
2.607
0.443
17,223
1,177
13,586
1,243
Change
26.7%
-5.6%
26.8%
-5.3%
Metric tonnes of CO
2
e per £m revenue
Total GHG emissions as metric tonnes
CO
2
e per £m revenue (location based)
26
250
27
251
Change
-1.0%
-0.1%
Methodology
We have reported to the extent reasonably practicable on all the emission sources
required under Part 7 of the Accounting Regulations which fall within our Group
Financial Statements.
Statutory Reporting is location based according to the GHG Protocol.
Scope 1 covers emissions from fuels used in our factories and ofces, fugitive
emissions and non-fuel process emissions.
Scope 2 relates to the indirect emissions resulting from the generation of electricity,
heat, steam and hot water we purchase to supply our ofces and factories.
We have used emission factors from the UK Government’s (DBEIS) and the IEA GHG
Conversion Factors for Company Reporting 2021 in the calculation of our GHG.
Scope 1 and Scope 2 emissions were veried by Carbon Footprint Ltd.
69
Our business Our performance
Sustainability
Governance Financial Statements
Tackling climate change
continued
Metric tonnes CO
2
e per metric tonne of product packed for shipment
2015 2016 2017 2018 2019 2020 2021
0.405
0.139
0.133
0.387
0.391
0.357
0.354
0.333
0.295
0.136
0.125
0.117
0.107
0.103
0%
-5%
-3%
-11%
-13%
-19%
-27%
Category
2
e
2
Global electricity usage
2021
2020 2019
Total electricity consumption (‘000 kWh)
207,238
194,441
214,336
Electricity from non-CO
2
emitting sources (‘000 kWh)
105,258
75,629
79,910
Electricity from non-CO
2
emitting sources (% of total)
51%
39%
37%
Electricity from renewable sources (‘000 kWh)
84,641
55,873
55,512
Electricity from renewable sources (% of total)
41%
29%
26%
Energy from renewable sources (‘000 kWh)
84,796
56,011
55,688
2021 CO
2
e emissions per region (market based)
Category
CO
2
e ‘000 metric tonnes % of total
Europe
260.5
66%
59.7
15%
19.9
5%
9.4
2%
42.4
11%
5-year evolution of Scope 1 and Scope 2 CO
2
e emissions (market based)
2021
2020 2019 2018 2017
CO
2
e ‘000 metric tonnes
393
364
429
499
531
CO
2
e metric tonnes per metric tonne of product packed
for shipment
0.398
0.440
0.471
0.4820.528
CO
2
e metric tonnes per million £ revenue (Scope 1 & 2)
238
249
250
277
315
2021 energy consumption by fuel type %
Category
Energy used ‘000 kWh
2021
641,168
55.3%
Coal
224,846
19.4%
Electricity
207,238
17.9%
LPG
77,379
6.7%
5,643
0.5%
3,177
0.3%
70
Vesuvius plc
Annual Report and Financial Statements 2021
Scope 3 emissions
Vesuvius’ Scope 3 CO
2
e emissions, mainly
upstream, contribute to a greater part of
our total CO
2
e emissions than our Scope 1
and Scope 2 emissions. In 2021, we
assessed the most relevant and influenceable
elements of our Scope 3 emissions, with a
goal to set material science-based targets.
Scope 3 CO
2
e emissions for 2019, 2020
and 2021 were evaluated using the
Quantis Scope 3 Evaluator software,
approved by the GHG protocol. The
evaluation covered 100% of operations.
The categories in the table above represent
more than 95% of Vesuvius’ total estimated
Scope 3 emissions.
Purchased goods and services represent
the largest category of Scope 3 CO
2
emissions. In 2021, we also undertook a
more focused evaluation of emissions
associated with raw materials using
publicly available average CO
2
emissions
factors. In addition, we started collecting
information on energy source, CO
2
emissions data and reduction plans from
our raw materials suppliers as part of the
RFQ process. Suppliers representing 25%
of the raw material spend have responded
to our requests.
Parallel to this, various initiatives have
been launched to reduce our Scope 3
CO
2
emissions. A few examples include:
–
Returnable packaging solutions being
implemented both with suppliers and
customers
–
Policies aimed at limiting the CO
2
emissions of company eet vehicles are
being deployed in various countries.
More than 1,800 Vesuvius employees
benet from bus or other forms of
collective transportation for their
commute to work
Scope 1, Scope 2 and Scope 3 emissions
Metric tonnes CO
2
e
2021
2020 2019
Metric tonnes
%
Metric tonnes
%
Metric tonnes
%
Scope 1 Process CO
2
e emissions
101,121
5.4%
88,516
5.9%
106,737
6.0%
Scope 1 Energy CO
2
e emissions*
209,592
11.2%
183,741
12.2%
215,836
12.0%
Scope 1 CO
2
e emissions
310,713
16.6%
272,257
18.0%
322,573
18.0%Scope 2 CO
2
e emissions (market based)
82,519
4.4%
92,145
6.1%
106,681
5.9%
Scope 3 CO
2
e emissions
1,483,438
79.0%
1,147,557
75.9%
1,363,709
76.1%
Total
1,876,670
100%
1,511,959
100%
1,792,963
100%* Includes fugitive emissions.
In 2021, Vesuvius’ total Scope 1, Scope 2 and Scope 3 CO
2
e emissions were 1,876,670 metric tonnes. This represented 1,140 metric
tonnes per million £ revenue.
Scope 3 emissions
Metric tonnes CO
2
e
2021
2020 2019
Metric tonnes
%
Metric tonnes
%
Metric tonnes
%
Purchased goods and services
1,159,810
78.2%
871,993
76.0%
1,039,766
76.3%Capital goods
62,004
4.2%
53,736
4.7%
68,461
5.0%
Fuel- and energy-related activities
(not included in Scope 1 or 2)
94,182
6.4%
86,493
7.5%
101,979
7.5%Upstream transportation and distribution
48,791
3.3%
30,762
2.7%
31,937
2.3%
Waste generated in operations
5,833
0.4%
5,660
0.5%
6,312
0.5%Business travel
15,488
1.0%
13,574
1.2% 31,373
2.3%
Employee commuting
20,400
1.4%
20,400
1.8%
20,4001.5%
Upstream leased assets
6,375
0.4%
6,375
0.6%
6,3750.5%
Downstream transportation and distribution
37,761
2.5%
25,770
2.2%
27,231
2.0%Processing of sold products
32,794
2.2%
32,794
2.9%
29,875
2.2%
Total Scope 3 CO
2
e emissions
1,483,438
100.0%
1,147,557
100.0%
1,363,709
100.0%Vesuvius plc statement of verication
Scope 1, Scope 2 and Scope 3 carbon
footprint reporting and supporting
evidence contained herein for the period
1 January 2019 to 31 December 2021
were veried by Carbon Footprint Ltd in
accordance with the ‘ISO 14064 Part 3
(2019): Greenhouse Gases: Specication
with guidance for the verication and
validation of greenhouse gas statements’.
A copy of the full assurance statement
can be found on our website:
www.vesuvius.com.
71
Our business Our performance
Sustainability
Governance Financial Statements
The drive to improve the sustainability
performance of Vesuvius and the
refractory industry’s products
was initiated many decades ago.
The continuous improvements both in
the durability of our products and in
their disposal after usage have led to
considerable reductions in both the
raw materials used and the quantity
of product shipped to landll.
As the amount of refractory material per
tonne of steel cast continues to level off,
the purpose and value of the use of
refractory materials will move from
delivering insulation to an even greater
emphasis on helping to improve steel
quality and process efciency.
Product durability
Our rst, and preferred, strategy to reduce
the depletion of resources is the extension
of product durability. The amount of
refractory material required per tonne of
steel cast has been reduced by 80% since
1960, and the average product lifetime
multiplied by as much. Approximately
10kg of refractory material are now
consumed per tonne of steel cast, with
some customers requiring as little as 7kg.
We are continuously working to extend
the lifetime of our consumable products.
Strategies include the development of
advanced materials, the design of shapes
that allow dual usage of products, and
product repair and remanufacture.
For mechanisms and equipment, we also
offer wear monitoring and maintenance
services to our customers to ensure their
optimum performance and extend their
lifetime. We have introduced innovative
refractory lining monitoring, to enable
repairs to be made only where needed.
Our i-GVARD* system automates the
monitoring of slide-gate wear, providing
decision-makers with critical data to
choose when to renew refractory plates.
We have developed longer life Duraex*
ladle shrouds, and methodologies to reuse
bottom slide-gate plates as top plates.
Each of these systems and processes
drives production efciency and reduces
refractory volumes.
Product recyclability
At the same time as reducing the quantity
of raw materials required for each casting,
technical solutions and economic cycles
have grown to enable the recycling of
refractory materials after usage in the
production of iron and steel. Whereas in
the early 1970s nearly all refractory
materials were disposed of after use,
it is estimated that more than half is now
recycled. In Europe, as little as 5% of
refractory materials now go to landll.
A large portion of this is open loop
recycling, with spent refractories used
in low value-adding applications such
as aggregates for roadbed materials.
Closed loop recycling will allow greater
substitution of virgin material by
secondary material, with a positive impact
on Scope 3 CO
2
emissions. It is estimated
that only 7% of spent refractories currently
enter closed loop recycling.
Many factors such as consistency of
material quality, cost of sorting and
mineral processing, transportation costs,
and the administrative burden associated
with the transportation of waste, have
prevented the wide adoption and
investment in closed loop recycling.
We therefore support initiatives being
pursued by authorities to improve the
regulatory framework for the circulation of
waste materials across borders, making
it easier for them to be recovered and
recycled in different countries.
Growing our engagement in the circular economy
Amount of refractory consumed per tonne of steel cast in Germany
0
10
20
30
40
50
60
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Year
Source:
Statistisches Jahrbuch der Stahlindustrie.
Specific consumption, kg/t crude steel
Oxygen steel making (beginning)
Slide gate
Continuous casting (beginning)
Use of water cooling in electric arc furnace (beginning)
End of Thomas process
End of open-hearth furnace
MgO-C bricks (beginning)
Reduction of FeO-content in slag by
bottom-blowing convertors
Basic ladle lining
Recycling of refractories
Fused MgO-C bricks
Clean Steel
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries,
used under licence.
72
Vesuvius plc
Annual Report and Financial Statements 2021
Distribution of refractory material after use in the steel industry in Europe
Destination of refractories
Share
steel or slags
33%
25%
37%
Landlling
5%
Source: A review of recycling of refractories for the iron and steel industry, Researchgate November 2017.
2021
2020 2019
Amount of recycled materials used in Vesuvius
products (metric tonnes)
75,516
56,599
67,90 0
Amount of recovered materials that are not
recycled used in Vesuvius products (metric tonnes)
0
0 0
Percentage of recycled materials in Vesuvius
products from total materials
6.2%
5.6%
5.9%
Percentage of revenue from products including
recycled materials
25.0%
23.3%
22.6%
All recovered materials undergo some processing before their usage in our products. Therefore, they are all
included in the recycled materials category, and the recovered materials category is empty.
Vesuvius’ use of recovered and
recycled materials
Vesuvius is determined to increase
the usage of recovered and recycled
materials in its product formulations.
A comprehensive quarterly reporting
system for the use of recovered and
recycled materials by all manufacturing
sites was launched in 2019. It includes
the reporting of recovered and recycled
materials from sources external to
Vesuvius and across Vesuvius facilities.
In 2020, the Board set a target for 7% of
the raw materials used by the Group in
production, to be recycled materials from
external sources by 2025 (measured by
weight of materials).
In 2021, 75,516 metric tonnes of recycled
materials were used in our products.
The percentage of recovered or recycled
materials from external sources used in
production was 6.2% (5.6% in 2020).
25.0% of our revenue was generated from
products that include recycled materials
(23.3% in 2020). We estimate that more
than 70,000 metric tonnes of Scope 3
CO
2
e emissions were avoided by
using recycled materials in lieu of
virgin materials.
Increasing the share of recovered and
recycled materials in product formulations
poses multiple challenges, in terms of
availability, consistency of quality,
competitiveness versus virgin material
whose prices uctuate, regulatory
frameworks for the transportation
of end-of-life waste materials, and
validations to ensure that product
performance and reliability remain
unaffected.
Cross-functional teams incorporating
experts from R&D, Purchasing, and
Manufacturing are working to identify
and analyse opportunities in order to
increase the share of recovered and
recycled materials.
We have implemented programmes with
some of our customers to recover and
recycle refractory products, with new
initiatives being discussed. We also offer
our customers various options with
regard to mechanisms and equipment,
including rental.
Material waste
Alongside the monitoring of recovered
and recycled materials, a quarterly
reporting system for material waste from
all manufacturing sites was implemented
in 2019. This was enhanced in 2020 by
introducing the separate reporting of
toxic and other hazardous waste.
Our system now includes the reporting
of waste to landll, toxic and other
hazardous waste, waste for recycling,
waste to sewers and by-products
(materials recovered and recycled outside
the site where they were generated).
100% of our manufacturing sites report
the various categories of waste and
by-products they generate.
The Board has set a target of a 25%
reduction of our solid waste (hazardous
and sent to landll) per metric tonne of
product packed for shipment by 2025
(vs the 2019 baseline).
Action plans were implemented at ten pilot
sites in 2020, with an increased sharing
of action plans and results. In 2021,
the programme was extended, and
manufacturing sites started building
action plans covering both hazardous
and non-hazardous waste to eliminate,
reduce and recycle waste.
Our plants in Mülheim and Třinec
received Circular Economy Awards from
the European Refractory Producers
Association (PRE) in recognition of the
success of their waste reduction and
recycling programmes.
Breakdown of 2021 solid waste
47.6%
45.6%
6.7%
0.1%
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Hazardous and toxic waste
We are committed to the reduction of
toxic and other hazardous waste. In 2021,
13.0% of our solid waste (excluding
recycled waste), was classied as
hazardous (2020: 14.7%), while toxic
waste represents 0.16% of solid waste
(excluding recycled waste).
Whenever relevant, action plans to reduce
hazardous waste are incorporated by
manufacturing sites into their solid waste
reduction action plans.
Manufacturing sites ensure that
hazardous and toxic materials, and waste,
are stored in protected containers and
kept in delineated storage areas, with
sufcient retention capability to prevent
any release in case of accidental spillage.
Out of our manufacturing sites and R&D
Centres of Excellence handling hazardous
and toxic waste, 89% have dened
emergency plans including provisions
relating to toxic and hazardous waste and
materials. Of these 72% have tested them
through simulation exercises in 2021.
Growing our engagement in the circular economy
continued
Raw materials and waste
Manufacturing site raw materials & waste/(metric tonnes)
2021
2020
Variation
Raw materials
Recycled materials used (from external sources)
75,516
56,599
33.4%
Recovered materials used (from external sources)
0
0
0.0%
Raw materials and intermediates used excluding recycled (from external sources)
1,133,807
949,615
19.4%
Total raw materials and intermediates used
1,209,323
1,006,214
20.2%
% Recycled materials (from external sources)
6.2%
5.6%
10.0%
% Recovered materials (from external sources)
0%
0%
0.0%
Waste (solid waste, by-products and wastewater)
Solid waste and by-products
56,755
58,524
-3.0%
Ratio of solid waste and by-products in metric tonnes per tonne of product packed
for shipment
0.058
0.071
-18.7%
Solid waste (hazardous and sent to landll)
29,747
26,607
11.8%
– Non-hazardous waste
25,894
22,695
14.1%
– Tailings waste
0
0 0
– Hazardous waste
3,853
3,912
-1.5%
– Toxic waste
48
28
72.6%
– Other hazardous waste
3,805
3,885
-2.0%
– Ratio of hazardous waste to total solid waste
13.0%
14.7%
-11.9%
Ratio of solid waste per tonne of product packed for shipment (in metric tonnes)
0.030
0.032
-6.3%
By-products (recycled waste)
27,0 08
31,917
-15.4%
Ratio of by-products per tonne of product packed for shipment (in metric tonnes)
0.023
0.036
-36.0%
Wastewater
*
165,965
131,366
26.3%
Ratio of wastewater per tonne of product packed for shipment (in metric tonnes)
0.168
0.159
5.9%
Total solid waste, by-products and wastewater
222,720
189,890
17.3%
* 1 m
3
wastewater = 1 metric tonne.
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Reducing consumption, waste and emissions
The Board has set a target for the Group
to reduce the amount of wastewater
per metric tonne of product packed
for shipment by 25% by 2025 (vs the
2019 baseline).
Water consumption
Out of 745,000 metric tonnes of fresh
water consumed in total, 728,000 metric
tonnes (97.7%) were consumed in our
manufacturing sites, the remaining
17,000 tonnes (2.3%) in our R&D centres
of excellence, ofces and warehouses.
28,326 metric tonnes were incorporated
into our nished products (3.8% of total
fresh water), the balance being consumed
as part of our manufacturing processes
and social water (96.2%). Our objective
is to reduce both the amount of water
consumed in our manufacturing process
and social water usage. The main area of
focus is the reduction of wastewater.
In 2021, our overall fresh water usage per
tonne of product packed for shipment
decreased by 16.4%. As with energy use,
normalised consumption of water varies
with product mix. This decrease was driven
by an evolution in our product mix towards
products that require less water in their
processing and was partly offset by the
increase in wastewater per tonne of
product packed for shipment (5.9%).
Vesuvius works to reduce the consumption
of water in its manufacturing operations
by recycling and improving water
management processes. No salt water
or cooling water is abstracted with no
related outow.
Water stress
An assessment of all Vesuvius
manufacturing sites was carried out using
the Aqueduct Water Risk Atlas. A small
number of the areas in which Vesuvius
operates are water stressed. In these
areas, we make strenuous efforts to
reclaim, recycle and minimise the overall
use of water.
Wastewater
Our sites with the highest level of
water consumption are equipped with
wastewater treatment plants. These
represent 47% of all manufacturing
sites and R&D centres of excellence.
Additionally, many types of activity are
routinely undertaken by our sites to control
and reduce their water consumption, and
we have action plans in place to reduce our
wastewater generation globally. Some of
the most signicant examples include:
–
Replacing wet scrubbing systems for
particulate removal with dry lter
systems
–
Optimising container cleaning processes
–
Installing high pressure stations to
improve efciency and speed of tool
cleaning
–
Optimising production schedules
to reduce the need for cleaning
between recipes
–
The provision of environmental
awareness training to employees
Water stress
Location of manufacturing sites
Number of main
manufacturing
sites
Percentage of revenue
Manufacturing site fresh water use (m
3
)
2021
2020 2019 2019
2021
2020Very high-water stress
4
4%
4% 4%
56,393
48,529
58,507
Moderate to high water stress
19
42%
41%
39%
262,836
280,314
289,120
Low to moderate water stress
31
54%
55%
56%
374,986
361,011
420,577
This data covers 100% of our manufacturing sites. Water stress classication based on World Resources Institute Aqueduct Water Risk Atlas.
5-year evolution of fresh water consumption
% change
2021/2019
2021
2020 2019 2018 2017
Water in m
3
-12.7%
745,369
747,439
853,381
896,785
864,996
Water in m
3
used per metric tonne of product
packed for shipment
-19.4%
0.757
0.905
0.939
0.866
0.859
Water in m
3
used per £million revenue
-9.1%
454
513
499 499
514
Emissions into the air
Some Vesuvius manufacturing processes
can lead to low levels of emissions into the
air. These include post thermal treatment
residual Volatile Organic Compounds
(from the curing and ring of products
including solvents and resin binders, or
pitch impregnation), residual GHGs
from the combustion of fuels and process
emissions, and residual dusts post capture
and ltration.
Vesuvius’ emissions of VOC, residual
GHGs, and residual dusts are at levels too
low to warrant any form of continuous
measurement and reporting of quantities
emitted, but all manufacturing plants
monitor their levels of emissions into the air
through regular sampling, and actively
work to reduce them.
Actions to reduce emissions
include the upgrade of equipment to
the best available technologies, and the
implementation of ltration, vapour
extraction and regenerative thermal
oxidiser systems.
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Protecting the environment
Vesuvius takes seriously its obligations to
its local communities and to ecological
preservation. Environmental compliance
at our sites, reduction in waste, increased
recycling and treatment of emissions
are key to Vesuvius’ operations, and
can be a signicant differentiator for
our business.
Environmental policy
All employees are expected to adhere to
the Group’s Environmental policy, which
is translated into local languages and
displayed prominently in all locations.
The policy is supported by standards
and procedures which are reviewed and
updated on an ongoing basis. A copy
is available to view on our website at:
www.vesuvius.com.
ISO 14001:2015 certications
Country
Company name
Site
Australia
Foseco Pty Ltd
Sydney
Belgium
Vesuvius Belgium N.V.
Ostend
Brazil
Foseco Industrial e Comercial Ltda
Sao Paulo
China
Vesuvius Advanced Ceramic (China) Co., Ltd
Suzhou
China
Vesuvius Advanced Ceramics (Anshan) Co., Ltd
Anshan
Czech Republic
Vesuvius Česká Republika, a.s.
Trinec
Germany
SIR Feuerfestprodukte GmbH
Siegen
Germany
SIR Feuerfestprodukte GmbH
Kreuztal
Germany
Vesuvius Europe GmbH & Co.KG., Vesuvius Mülheim GmbH & Co.KG.
Mülheim an der Ruhr
Germany
Vesuvius GmbH
Grossalmerode
Germany
Vesuvius GmbH
Borken India
Foseco India Limited
Puducherry
India
Foseco India Limited
Pune
Indonesia
P.T.Foseco Indonesia
Jakarta
Japan
Foseco Japan Limited
Toyokawa
Netherlands
Foseco Nederland BV
Hengelo
Poland
Vesuvius Poland Sp. z o.o.
Skawina South Africa
Vesuvius South Africa (Pty) Limited
Olifantsfontein
South Korea
Foseco Korea Limited
Gyeonggi-do
Sweden
Vesuvius Scandinavia AB
Amal
Taiwan
Foseco Golden Gate Co. Limited
Ping Tung
United Kingdom
Vesuvius UK Limited
Tamworth
Environmental monitoring and
environmental regulation
Vesuvius operates sites in some developing
markets where environmental concerns
have become politically signicant as
air quality deteriorates, and residential
expansion takes people closer to areas
historically reserved for manufacturing.
In addition, some of the sites Vesuvius
operates have known ecological sensitivities,
being in the vicinity of watercourses or
environmentally sensitive areas.
All our factory emissions to air, ground and
water, as well as waste are proactively
managed in accordance with local
regulations. All our manufacturing
operations monitor key environmental
indicators.
Regular analysis
Regular analysis enables us to act to
reduce our emissions where possible and
to operate more efciently. Environmental
performance records are kept for the
period of time required to comply with
local regulations.
Manufacturing plants maintain and test
emergency plans to ensure compliance with
local regulations and Vesuvius standards in
the event of an accidental release.
Reports from external inspections,
including those with ndings, are centrally
stored and shared internally with executive
and senior management. Where local
authorities carry out routine inspections,
observations, recommendations and
actions are recorded and acted upon
appropriately.
Local compliance
Vesuvius is committed to addressing
exceedances and complying with local
regulations. All exceedances are reported
in a central database. In 2021, Vesuvius
recorded 52 minor environmental incidents.
Of these, four related to emissions to air,
two to emissions to water and 46 to ground.
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Annual Report and Financial Statements 2021
Vesuvius employee photography competition
Michel Wissink – see inside back cover
Total environmental releases across the
Group in 2021 are estimated to have
totaled 10 metric tonnes (including 2.9
metric tonnes of water-based materials)
and 7.4 m
3
hydrocarbons. All releases to
water and to the ground were fully contained
apart from one incident in Ostend where
an intermediate bulk container leaked
c. 15 litres of hydrocarbons in water onto
the ground, this was remedied and the
result conrmed by analysis.
Where incidents occur, they are managed
via Vesuvius’ site environmental response
plans and reported through the Vesuvius
incident reporting system. We comply with
local reporting requirements in respect
of such incidents. In Germany a slightly
increased legionella contamination was
detected in showers and remedial action
taken. An existing earlier action in relation
to a disused US property for wastewater
exceedances remains open. Two regulatory
actions issued in 2021 against Vesuvius in
Belgium remain open. No other action was
taken by any authority in relation to an
environmental incident in 2021 which
resulted in nancial penalties against
Vesuvius. The Group does not operate
any mines and consequently the Group
generates zero tailings waste.
Environmental management/
certications
We have 20 manufacturing sites, one
customer location and one warehouse
certied to ISO 14001:2015, representing
37% of our 54 manufacturing sites. External
annual compliance audits are carried out
by the global assurance provider, LRQA.
100% of our ISO 14001:2015 certications
cover the handling of waste and hazardous
materials, including regular environmental
impact audits and implemented risk
prevention procedures (including emergency
planning and testing) relating to waste and
hazardous materials handling.
Where previously the decision to pursue
ISO 14001 certication was taken at a
local level, Group policy is now for all
production sites to seek ISO 14001
certication. A list of certied sites is
available above and may also be
viewed on the Vesuvius website:
www.vesuvius.com.
Biodiversity and greenery
Whilst risks to biodiversity were not
considered as material by the internal and
external stakeholders we engaged with,
we nonetheless initiated a survey of all
manufacturing sites. This did not highlight
any risks from our ongoing operations,
other than accidental environmental
releases and emissions into the air as
detailed elsewhere in this report.
The very limited footprint of Vesuvius’
sites contributes signicantly to limiting
our Company’s impact on biodiversity
and greenery.
Actions have been taken in various
manufacturing sites to improve greenery
and biodiversity on their grounds and
neighbouring communities, including
planting trees.
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Our core business is to help our
customers protect their employees and
improve their operational performance
and efciency. Customers rely on the
quality of our products, and their
structural integrity, to control the ow
of molten metal safely in their facilities.
The reliability and performance of our
products are critical to our customers in
terms of overall equipment effectiveness,
labour productivity and metal yield, and
their environmental impact (reducing
energy consumption, CO
2
emissions
and refractory material waste).
Many of our products allow our customers
to achieve improved metallurgical
properties in their products, thereby
allowing the production of wind turbine
components, the light weighting of
vehicles and other environmentally
friendly products that benet society.
Building safety into our products
At all times, our goal is to serve customers’
needs in the safest, most secure and
compliant manner possible.
Many of our products – robotics, systems
and consumables – are critical to the
safety of our customers’ operators.
Therefore, product safety is paramount to
us. We have implemented a wide range of
practices to optimise the performance of
our products, reduce failures and increase
their lifetime.
We follow a strict stage gate process
for the development of new products,
ensuring that safety performance
objectives are dened from the initial
stages and progressively completed up
to the product launch. Key deliverables
include risk assessments, preparation of
user and maintenance documentation,
manufacturing control plans, and
Vesuvius and customer operator training.
We undertake extensive testing through
rigorous alpha and beta trials with
systematic trial reports to conrm that
targeted performance and robustness
objectives are met and to allow for
ne-tuning before product launch.
Automated systems
Our automated and robotic systems are
fully customised and embedded into
our customers’ processes. Their design
and implementation require additional
precautions to ensure optimum safety
during the project and in operations.
Teams working on their development and
installation at customers therefore receive
targeted safety training focused on the
specic risks at various project stages.
Development projects follow the ISO
10218-2 norm (Safety requirements
for industrial robots). External expert
consultancy support is provided along with
regular audits, and all follow the rules
required for CE conformity or equivalent.
The development of these human-centred
robotic solutions for steel shops, reduces
the ergonomic strain on our customers’
operators together with their exposure
to high temperatures.
Compliance today and tomorrow
For the development and production of
consumable products, we have implemented
R&D screening of raw materials and
chemicals to avoid introducing unwanted
substances into the recipes and processes.
Where potentially hazardous substances
are nonetheless required, strict validation
checklists have been dened to ensure
adequate protection measures are taken
at every step of the process. We document
regulatory compliance through Safety
Data Sheets for all raw materials
consumed and all products manufactured,
and share these with customers.
REACH regulation
Our objective is to remain fully compliant
with our registration obligations under the
Registration, Evaluation, Authorization
and restriction of Chemicals (REACH)
regulation. Since 2007, Vesuvius has
appointed REACH managers for its Steel
and Foundry Divisions, implementing an
ongoing process to identify the REACH
impacted raw materials based on their
Safety Data Sheets. These substances are
then monitored throughout the production
process in Vesuvius. This also allows us to
track the quantities consumed and verify
that these remain within the limits of our
registrations. Results are documented in a
central database. We routinely organise
training sessions for employees in the R&D,
Sales, and Purchasing organisations to
ensure that any new substance included
in a new product recipe or otherwise
purchased will be incorporated into our
monitoring and registration process.
Updates to the lists of substances under
REACH regulation issued by the European
Chemicals Agency (ECHA) are continuously
reviewed and our internal monitoring
adapted whenever necessary. Vesuvius
also monitors projected changes to the list
of substances under REACH regulation,
to proactively take into account future
evolutions in our product development
processes. Whenever relevant, we also
participate in the consultations led by
ECHA to dene the most appropriate
status for substances.
Our customers
Our technology helps our customers improve their
processes and their environmental footprint.
Advancements in material science, pioneered by
Vesuvius, have helped to ensure that the amount of
refractory material required to cast one tonne of
steel has reduced by 80% in the past 60 years.
Product safety and quality
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Annual Report and Financial Statements 2021
In 2018, we launched a programme of
formal assessments of our suppliers, with
an objective to assess all relevant suppliers
of raw materials by the end of 2022.
Following the UK’s departure from the EU
in 2021, we adapted our registrations and
purchasing organisation and systems, to
ensure that we remain fully compliant
with our obligations both in the United
Kingdom and in the European Union.
A learning organisation
After product launch, whenever a
safety-related incident (an injury or
a dangerous occurrence) occurs at
one of our customers, that may have
involved a Vesuvius product or service,
it is systematically reported and
investigated. The outcome of the
investigation, including root causes and
corrective actions, is shared with the
customer. It is also presented to the Group
Executive Committee and the Board.
Each of our product managers is
tasked with responsibility for collecting
feedback on our products and managing
improvements. Routine debrieng is
organised after projects are completed.
Field trial reports and incident reports are
routinely reviewed to collect information
on failures and improvement opportunities.
Whenever relevant, subsequent changes
made to the design of products are
deployed to installations in service at
other customers and lessons learned are
incorporated into the design of following
generations of products. We monitor the
number of CCARs (Customer Corrective
Action Requests), severity 1 CCARs
(safety-related incidents or quality issues
affecting the customer of our customer),
and repeat CCARs.
In 2021, no product failures led to lost time
injuries at customers. Two minor injuries
(a shoulder strain and a minor nger cut)
did occur however, and the sources of
the injuries were fully investigated, and
corrective actions implemented.
Vesuvius places a high value on ISO
9001:2015 certication and the business
assurance that this quality management
system brings. We have 66 certied
Vesuvius and customer sites, employing
quality professionals to maintain and
develop quality systems under our quality
policy. 100% of the management systems
used to make our products are covered by
ISO 9001:2015. A list of certied sites is
available to view on the Vesuvius website:
www.vesuvius.com.
Reliability and performance
Our constant performance monitoring
develops deep and lasting relationships
with our customers. Issues are dealt with
through a rigorous problem-solving
methodology and in-depth investigation.
This ensures we learn from problems and
prevent them recurring, as well as enabling
us to constantly evolve and update our
services in line with changing customer
expectations and technological
developments.
All issues raised by the Vesuvius eld
teams or by customers are systematically
reported, documented and classied,
based on their nature and severity.
They are then investigated, with the
following objectives:
–
Implementing immediate containment
actions to protect customers
–
Identifying the root causes
–
Implementing corrective actions
–
Learning lessons and providing
feedback for the development of
future products
Regional business unit management
teams are responsible for organising
problem-solving teams to address issues
and lead routine reviews of ongoing
quality performance. Quality performance,
including the number of customer
complaints, the number of repeat
complaints for the same issue and their
severity is reported to the Board on a
regular basis, and reviewed during each
Group Executive Committee meeting.
The most serious issues and those that
affect, or could potentially affect, multiple
customers are reviewed in detail during
these meetings. Adverse trends result in
prompt, clearly dened initiatives to
permanently solve issues and prevent
repeats.
Along with our focus on the completeness
and quality of reporting, a strong emphasis
is placed on the effectiveness of our
problem-solving. Our cross-functional
teams involve sales, research and
development, and manufacturing experts,
who work collaboratively to address the
most challenging technical issues.
Problem-solving
We use the 8D practical problem-solving
methodology. In 2021, our teams
recorded, reported and investigated
2,756 issues.
In 2020, we undertook a thorough
assessment of the problem-solving
capabilities and practices in each of our
business units regionally, identifying the
gaps and required actions to reinforce
them where necessary, especially in
terms of stafng and training. In 2021,
we started implementing these plans
despite the difculties caused by the
COVID-19 pandemic.
The 8D methodology is implemented as
the primary problem-solving tool across
the Group. It is a consistent approach
designed to identify root causes and
ensure appropriate corrective action
is taken.
8D – The eight Disciplines of Practical
Problem Solving
Clarify the problem
Dene countermeasures
Contain & set target
Check results
Grasp the current situation
Execute & track progress
Analyse causes
Standardise & establish controls
D5
D3
D7
D2
D6
D4
D8
D1
Recognition
An annual 8D Awards Competition is
organised to recognise the best teams and
projects. This competition is organised
across all business units, in each region,
with a jury composed of senior managers
and sponsored by members of the Group
Executive Committee. In 2021, more
than 125 projects were presented in the
Regional 8D Competitions. In addition to
recognising the best problem-solving and
projects, these events are an opportunity
to recognise talent and disseminate
knowledge.
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Sustainability
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term, working on a range of initiatives
including the direct reduction of iron with
green hydrogen and the replacement of
carbon anodes in aluminium smelting.
We contribute to their efforts through
technology partnerships and developing
new products for the next generation
zero emissions aluminium, iron and
steel-making processes.
Assessing our product portfolio
We have created a comprehensive
scorecard to evaluate our products over
their full product life cycle. We rate our
products in comparison with the standard
offering in the market considering their
performance in terms of health and safety,
environmental impact, greenhouse gas
emissions, and end-of-life processing.
All criteria are assigned a weighting. In line
with our objectives to reduce both our own
CO
2
emissions and help our customers
reduce their CO
2
emissions, we give these
criteria a signicantly higher weighting.
Performing this analysis supports our
objective to develop and supply products
that provide our customers with a superior
overall sustainability performance against
the market standard.
In 2021, we commenced the roll-out of the
scorecard across our product portfolio
and assessed more than 90% of our
revenue. Of our 2021 sales 16% were
generated from market-leading
sustainable products. Our objective is
to continue growing their share of our
product portfolio year after year.
Sustainability in new product
development
Vesuvius invests signicantly in new
product development, working closely with
our customers to offer optimised solutions
for their specic needs. We have a unique
combination of expertise covering a wide
range of elds including metallurgy,
refractory ceramics, robotics and
mechatronics, and IT. This is combined
with close contact with customers through
our network of account managers and
service teams, and through regular
technical and R&D meetings with our
key customers to drive innovation.
Supporting our customers’ journey to net zero
Sustainable solutions
Vesuvius is committed to growing its
contribution to a sustainable world,
through products and services that
improve safety, maximise environmental
performance, reduce greenhouse
gas emissions, and contribute to the
circular economy.
Our products have the potential to help
customers reduce and avoid greenhouse
gas emissions when compared with their
current practices by amounts that far
exceed the emissions required to
manufacture and distribute them.
How our products help reduce and avoid
greenhouse gas emissions, they:
We actively cooperate with customers to
help them evaluate the CO
2
emissions
reduction our products bring to their
complete value chain.
Our customers in the iron, steel and
aluminium industries are embracing the
challenge of dramatically reducing their
CO
2
emissions. Many have pledged
to reach net zero by 2050. They are
investing signicantly to transform their
manufacturing technologies for the long
Market-leading sustainable products
Our Clean Steel submerged entry nozzle
(SEN) – a product that acts as a conduit
for molten metal from the tundish to the
mould in the continuous casting process
– minimises the formation of inclusion
clusters on the SEN wall that can detach
and cause defects in the nal cast steel
slab. The high-purity material of the SEN
does not react with the inclusions in the
steel to form these clusters. As a result,
our customers’ yield of high-quality steel
will increase.
Another recent innovation, Vesuvius
Air-Shield* technology, was developed
after requests from customers to
improve the seal between the surface
of our monoblock tundish shroud plate
(MTSP) plate surface and the bottom
plate of the tundish gate. The connection
between these two surfaces is the most
probable place for air ingress during
casting, which can cause quality
downgrades in the steel produced and
limits refractory life. This product has
improved steel quality signicantly for
several customers.
Increase metal yield in castings
Reduce downgrading, re-melting of scrap
and repair of defects
Minimise casting temperature
Reduce heat losses
Maximise casting speed and throughput
Extend production sequence length,
reduce downtime
Improve metal performance
Reduce and avoid greenhouse
gas emissions
* Trademark of the Vesuvius Group of companies, unregistered or registered in certain countries,
used under licence.
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Annual Report and Financial Statements 2021
% of sales generated by market-leading sustainable products*
14.8%
15.8%
2020
2021
2019
13.1%
R&D spend (£m)
28.6
26.7
30.3
2020
2021
2019
* Using Vesuvius’ internal scorecard.
Improves users’
comfort, health
and safety
Safety in manufacturing and transportation
Safety during usage
Exposure to health hazards
Limits our
impact on
natural
resources
Product weight
Product lifetime
Recycled materials
Minimises
energy
consumption
and emissions
Cradle to grave greenhouse gas emissions
Reduced and avoided CO
2
emissions for the customer
Volatile compounds emissions
Reduces waste,
avoids landll
and increases
recycling
Waste generation during manufacturing and usage
Recyclability after usage
Product sustainability benets scorecard
When designing new products, the
Marketing and Technology teams in our
six R&D centres of excellence listen to our
customers, closely observing their processes
to understand their current and future
challenges, needs and expectations.
We combine this learning with the
information we have collected from our
analysis of past issues, and seek to achieve
both incremental improvements and
breakthrough innovations in safety,
robustness, reliability and performance, to
steer the development of next-generation
products and services.
We have formally integrated sustainability
considerations into product R&D. Using
the same criteria and scorecard as we use
in the assessment of the existing product
portfolio, we have begun a complete
assessment of the pipeline of R&D and
new product development projects, to
check that their contribution is aligned
with our sustainability ambitions, adjust
priorities and allocation of resources, and
ne-tune the selection of new projects
entering the pipeline.
R&D covers a wide range of activities
ranging from fundamental research and
front end innovation to the evaluation of
alternative material sources and support
to operations. In 2021, our R&D spend was
£30.3m, of which c.£10.8m (36%) was
dedicated to the development of products
which outperformed existing marketed
products in terms of sustainability
outcomes.These constituted well over 80%
of our New Product Development projects.
Our objective is to reach 100% of such
products in the development pipeline.
In 2022, we plan to launch 40 new
products (2021: 27), of which 28 will
allow customers to achieve superior
sustainability performance (2021: 17).
The challenge of decarbonising iron
making or aluminium smelting requires
the development and industrialisation
of radically new technologies. We
complement our internal efforts with
partnerships with over a dozen research
institutions, universities and strategic
customers, working to develop the
refractory solutions that will support
these novel processes.
Vesuvius’ investment in innovation and sustainability
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Our strategic ambition is to provide
a safe working environment
for all our people and to deliver value
to them by providing development
opportunities. This section details
our performance and initiatives
in both Health and Safety and
Human Resources.
Safety is our top priority and our
overriding commitment to health and
safety is embedded throughout the
organisation. Our approach is to identify,
eliminate, reduce or control all workplace
risks, and an ongoing system of training,
assessment and improvement is in place
to focus on achieving this. We remain
fundamentally committed to protecting
the health and safety of employees,
contractors, visitors, customers and any
other persons affected by our activities.
We want to become a zero-accident
company and are striving to become a
best-in-class organisation for safety
performance and leadership.
Our principles
1
Good health and safety is
good business
2
Safety is everybody’s responsibility
3
Working safely is a condition
of employment
4
All work-related injuries and
work-related ill health are preventable
COVID
-19
In 2021, the ongoing COVID-19 pandemic
continued to affect Vesuvius in a wide
variety of ways. In 2021 we lost 11 colleagues
to this dreadful disease, and share the
grief of the families and friends of those
who passed away.
As many parts of the world were hit by
third and fourth waves of infection, we
continued to focus on protecting our
employees whilst at the same time
supporting our customers. Due to the
outstanding efforts of our colleagues
around the world we were able to maintain
our operations and supplies during these
difcult times.
With vaccines becoming widely available,
we encouraged our colleagues to protect
themselves and their families, whilst at the
same time acknowledging that this is a
matter of personal choice. In a number
of countries, including India, Poland and
South Africa, we were able to work with
local health authorities to offer free
vaccinations to our employees.
Safety leadership
Safety performance remains the priority
item on the agenda at all our Group
Executive Committee and management
meetings, and safety performance is
reported to the Board by the Chief
Executive as a matter of priority at each
Board meeting. In addition, as part of
management reporting, the Board
receives a detailed monthly update on
all Lost Time Injuries (LTIs). The Group
Executive Committee reviews all of the
more serious incidents, including all LTIs,
and the responses to these from local
management. The Group remains
fully committed to continuing safety
improvement with a Group Health and
Safety Policy stating a clear goal of:
–
No Lost Time Injuries
–
No repeat injuries
–
No harm to our people or
contractors
Health and safety governance
The Board has overall responsibility for
health and safety-related matters and
delegates authority for the management
of the health and safety performance
of the business to the Chief Executive.
The Health and Safety Policy is signed
by all members of the Group Executive
Committee and the business unit
Presidents are responsible for its
deployment, with the support of the
President of Operations.
The Board receives monthly information
on every Lost Time Injury and key safety
performance indicator. In addition, the
Board carries out a biannual review of
health and safety performance and
overall Company safety strategy. Annual
presentations of business unit strategy
also include health and safety strategy.
The results of our Group Safety Audits are
presented to the Board twice per year.
Our people
The safety, diversity, personal growth and
job satisfaction of our people are key to the
success and growth of our business.
Health, safety and well-being at work
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Business accountability
The Group VP Sustainability, HSE &
Quality is responsible for setting the
Group’s policies for health and safety
and controlling their application.
The business units are responsible for the
implementation of these policies and are
directly accountable for the health and
safety performance of their operations,
with each business unit determining its
own priorities and resource allocations,
aligned with Group-wide targets on
safety performance.
A majority of senior managers has a
portion of their variable compensation
tied to the achievement of safety
performance targets.
Executive Safety Tours
This tone from the top is also
demonstrated by the requirement for
all senior managers, irrespective of
discipline, to perform Executive Safety
Tours, report on their ndings to local
operations management and follow up
on improvement requirements. In this
structure, all employees understand that
they have a responsibility to take care of
themselves and others whilst at work.
Through this process, we expect everyone
to participate positively in the task of
preserving workplace health and safety.
The tours encourage dialogue with staff,
setting action points for discussion and
implementation. In this way, these tours
provide visible safety leadership on the
shop oor in our sites and at our customer
locations. Along with our daily safety
audits, they are a central pillar of our
Safety Breakthrough initiative.
In 2021, 80 Executive Safety Tours were
carried out by members of the Group
Executive Committee and their direct
reports. This represented a decline from
the 103 conducted in 2020, primarily
because of continuing travel restrictions
imposed by the COVID-19 pandemic.
Unfortunately, no Safety Tours were able
to be conducted at customer locations in
2021. Whilst COVID-19 travel restrictions
limited the number of Executive Safety
Tours conducted in 2021, the number
of Safety Tours conducted by middle
management increased, assisted by the
introduction of a mobile app to enhance
the process.
Review, assess and implement
Every business facility has an appointed
health and safety manager, who works
with management and all employees
to review site health and safety, assess
training needs and develop and implement
site safety improvement plans. These local
health and safety managers are assisted
by central experts who not only identify
adverse trends and respond to them, but
also enable the sharing of best practice
across Vesuvius.
We continue to work hard to reduce
incident severity and generate actionable
insights from the performance indicators
we capture. The LTI frequency charts
prepared monthly for each business unit
and site, show where injuries have been
reduced and where further effort is
required, through a combination of a
behaviour-based approach to safety
and the implementation of physical
safeguards. We focus on the safety of all
personnel, whether they are employees,
third-party contractors or visitors.
Based on the analysis of the kind of
accident, type of injury and parts of the
body affected, the businesses develop
risk-based action plans that consider
both the frequency and severity of
incidents and track progress. Every site
management team receives a monthly
dashboard of health and safety-related
performance indicators, covering both
lagging and leading metrics.
Safety leadership
All site management teams must develop
and implement site safety improvement
plans, incorporating the identication
and reduction of the site’s main risks,
compliance with the Group safety
standards, deployment of shop oor
safety leadership practices and resolution
of issues highlighted during Group safety
audits. Improvement plans are now in
place for all production sites, with
implementation being the direct
responsibility of local managers.
Any site experiencing a severe incident,
an LTI, a medically treated injury, or a
serious dangerous occurrence is required
to investigate the incident. Vesuvius’
investigation procedures are based on the
8D practical problem-solving tool, which
aims to identify the true root causes of
incidents to prevent a repeat. Results are
formally presented to management, with
details of the 8D-based root causes. The
site then incorporates the ndings into
their site safety improvement plans and
shares their incident investigation so that
improvement actions can be cascaded
throughout the organisation.
Our employees are highly supportive of
the Group’s efforts to improve workplace
safety and acknowledge how seriously
we take this issue. In the 2021 I-Engage
employee engagement survey, 83%
agreed that the Company will address
safety concerns if they are raised.
Health and Safety governance
The Board
Overall responsibility for health and
safety related matters, approves targets
Chief Executive
Takes responsibility and is accountable
for the safety performance of the
Company, sets targets
Business Unit Presidents
Are responsible for resources, training,
action plans and performance
Vice President Health and Safety
Denes standards, organises Group
safety audits and benchmarks and
guides strategy
83
Our business Our performance
Sustainability
Governance Financial Statements
Health and Safety Policy and
Standards
All employees are required to adhere to
the Group’s Health and Safety Policy and
Alcohol and Drug Policy. Copies of the
policies are translated into local languages
and displayed prominently in all locations.
The Health and Safety Policy is supported
with standards, procedures and ISO
certications, which are reviewed and
updated on an ongoing basis. The ndings
and lessons learned from incident
investigations are incorporated into
updates to prevent any recurrence and
new or improved standards are issued
for implementation across the Group.
Group Safety Standards
Over the years, Vesuvius has developed a
set of 28 Safety Policies and Standards.
These are regularly reviewed and
updated, based on the best practices
implemented in sites and learnings from
incidents in particular. The Group Safety
Audit checklist is designed to cover the
essential points of the Group Safety
Policies and Standards.
Vesuvius also maintains a working
hours policy and monthly reporting of
headcount and hours worked. This allows
us to identify if maximum working hours
are being exceeded which can then be
investigated by management.
Health and Safety Standards
Accident & Incident
Reporting
Reviewed 2021
5S Colour Standard
Issued 2021
Business Continuity
Control of Contractors
Customer Location
Reviewed 2021
Crisis Management &
Crisis Communication
Drug and Alcohol
Ergonomics
Executive Safety Tour
Gas Safety
High-Risk Activities
Inspection, Maintenance
and Testing of Fixed
Electrical Installations
Isolated and
Lone Working
Isostatic Presses
Legionella
Reviewed 2021
Lifting and Handling
Lock, Tag and Try
Machine Safety
Overtime Policy
Permit to Work
Personal Protective
Equipment
Reviewed 2021
Process Safety
On Site Vehicle
operations
Road Safety
Risk Assessment
Safe Storage of Bulk
Bags and Pallets of
25kg Bags
Warehousing Racking
Working Safely
with Fibres
Pillars of health and safety
Risk assessments
We routinely carry out risk assessments to
identify and rate hazards and implement
protective measures to minimise exposure.
These include:
–
Engineering solutions to eliminate or
minimise risks
–
Procedural measures, such as training
and auditing
–
Work instructions, written with the
involvement of the employees who carry
out the tasks, with illustrations and in
local languages
–
Providing personal protective equipment
to employees free of charge
Training employees to work safely
Our proprietary TurboS training pulls
together all of our safety management
practices. Using a train-the-trainer
approach, TurboS training sessions
are tailored to the audience and their
activities. For example, there is a special
training course developed for employees
at customer locations that focuses on the
specic risks faced by these individuals.
We conduct Permit to Work training in
all Group facilities, including customer
locations, which ensures that all non-
standard work conducted in our facilities,
whether by our employees or contractors,
is the subject of a pre-commencement risk
assessment and a formal permission to
commence the activity, with the safety
requirements set out. We have developed
machinery safety training with an outside
industry leader, Pilz GmbH & Co, a
company specialising in safe automation
technology. Recognised best practices are
extended throughout the Group through a
series of machinery assessments and
training programmes, with each site
identifying and addressing the top ve
issues by severity as a matter of priority.
TurboS is a part of the Group’s Safety
Breakthrough initiative, which was
instigated in 2008. It includes a strong
focus on the standardisation of all of our
repetitive activities. TurboS also integrates
good management practices in the
workplace, with a strong emphasis on
developing an organisation that enables
everybody to work to the same high
standards in safety performance.
Health, safety and well-being at work
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Annual Report and Financial Statements 2021
As part of the continuing TurboS initiative:
–
Senior executives regularly lead safety
tours at all locations
–
Severe accidents are formally reviewed
by the Group Executive Committee
–
Employees are routinely engaged in
safety audits
–
Employees receive regular
communication (toolbox talks at the
beginning of each shift, ‘town hall’
meetings, safety briengs after LTIs)
–
We invest signicantly in safety training
for all employees, irrespective of their
role and function within our business
–
All employees are expected to
routinely raise and implement safety
improvement opportunities; we focus
on the number of implemented ideas
–
Safety standards are continually
updated, translated and deployed
throughout the Group
–
All injuries and dangerous occurrences
are analysed locally, with a formal
presentation of ndings, root causes
and improvement actions cascaded
through management
Working in tidy plants – 5S
The continuing use of 5S, the workplace
organisation method, throughout the
Group has driven signicant improvements
in our workplace environment. Employees
are encouraged to develop ownership of
their working areas and take pride in their
cleanliness and organisation. The added
support of our lean specialists has been
key to improving plant safety by removing
hazards for employees and offering
a clean, bright and safe working
environment. Regular 5S audits led
by team leaders ensure continuous
improvement of working conditions
and promote a safer workplace.
Ta ke 2
Our Take 2 initiative ensures that
employees think again before performing
any unusual or non-standard activity.
Simply stated, the employees take two
minutes to discuss the task, any hazards
and how to prevent accidents before any
work is started. This process allows the
team to consider and reect on hazards
and the controls required before
work commences.
Contractor management
Contractor management is a particularly
important area of attention, as it involves
employees of third-party companies
working on our premises to perform
various types of project work. Vesuvius has
dened strict rules which are outlined in
the Control of Contractors standard.
These rules include a pre-screening for
safety performance and risks before a
contract is signed, a commitment to
respecting the same safety standards as
Vesuvius employees and a safety induction
for all contractor employees on Vesuvius
sites. All activities subject to a Permit to
Work are audited on a daily basis.
Contractor safety management and
performance is monitored. Safety
performance targets for contractors
are set at the same level as for Vesuvius
employees.
Investing in technology for safety
Safety can be improved through the
evolution of procedures and better
behaviours, but technology offers new
opportunities to continue to make our
workplaces safer. Vesuvius is therefore
investing in a range of technologies
with the goal to automate strenuous or
dangerous tasks and improve ergonomics.
We are also exploring a range of new
technologies including exoskeletons,
wearable sensors and autonomous
guided vehicles.
In 2021, we tested the Brightmile mobile
phone driver safe behaviour app.
We carried out pilot projects in four
countries recognised for the high level of
road trafc fatalities and with a large
number of Vesuvius employees (Brazil,
India, Mexico and South Africa).
Monitoring work conditions and
employee health
Vesuvius has developed and implemented
a variety of programmes to ensure that
we provide our employees with work
conditions that are not detrimental to
their health. These include the routine
monitoring of noise, dust levels, and
volatile organic compounds emissions.
Routine health check-ups are also
required for employees in positions
that could present certain specic risks
(e.g. forklift drivers).
85
Our business Our performance
Sustainability
Governance Financial Statements
Process Safety initiative
In 2020, Vesuvius launched a new Process
Safety initiative, starting with an analysis
of the high-risk processes in the Company,
the elaboration of a global process safety
framework and a rst technical standard
covering high-pressure isostatic presses.
In 2021, we developed our second process
safety standard, covering dust and
explosive powders.
The deployment plans for these standards
include training, the development
of a centralised database and the
implementation of a routine reporting
process.
Safety training
We regard the understanding and
application of the Group Safety Standards
by management and all employees
as essential to ensure their proper
implementation on the shop oor and
ongoing adherence. We therefore expect
our managers to carry out compliance
self-assessments for their sites based on
the Group Safety Audit checklist and invest
in the training of employees on the HSE
standards. In 2021, we delivered more
than 169,000 hours of training on safety
standards and safety leadership (TurboS),
to our employees in Manufacturing, R&D,
and Customer Locations representing on
average, more than 15 hours per person.
In addition to the training on Group Safety
Standards and TurboS, business units and
sites develop and offer programmes
addressing the specic processes and
risks. Communication and training on
hand safety and ergonomic practices
have been major areas of recent focus.
Health, safety and well-being at work
continued
1.
I always wear
mandated
personal
protective
equipment
2.
I only operate
equipment or
vehicles if trained
and authorised
3.
I do not remove,
bypass or tamper
with machine
guarding and
safety devices
4.
I lock, tag and
try before any
intervention on
a machine
5.
I make sure
all high-risk
activities
are covered
by a daily
Permit to Work
6.
I always ensure
my fall protection
is secure before
working at height
7.
Before entering a
conned space, I
check I will be able
to breathe and
escape
8.
I only perform
electrical work
if certied and
authorised
8 Core Safety Rules
Core Safety Rules
In 2019, we launched the Vesuvius 8 Core
Safety Rules that outline our colleagues’
basic safety responsibilities. These were
rolled out across the organisation as the
mandated practices for employee and
manager conduct. In conjunction with this,
the Group has implemented procedures
to ensure the rules are followed. The rules
were incorporated into the contractual
terms of all employees, and all employees
are expected to report breaches and
violations of the rules, with appropriate
sanctions imposed whenever required.
Failure to do so is a disciplinary issue.
Customer Location Standard
In line with our safety priority, we have
spent decades improving systems,
processes and technology at our sites to
protect our people at work. We also apply
the same safety standards for our teams
working at customer locations.
Our Customer Location Standard
addresses the specic risks faced by our
employees whilst operating in customer
locations and applies to approximately
2,500 Vesuvius employees worldwide.
The standard focuses on structuring
cooperation between our customers’
management teams and our own to
ensure health and safety issues are jointly
identied and addressed.
For new contracts in customer locations,
we use a formal risk assessment which
aims to identify signicant risks to our
employees and contractors. This enables
appropriate control measures to be
agreed and implemented with the support
of our customers in advance of work
commencing. These are then formally
included in the contractual conditions we
impose when working at a customer site.
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Health and safety auditing
Group safety audits
The Group operates a central safety
auditing team of three auditors, each
with more than 10 years’ experience, who
report to the VP Sustainability, HSE &
Quality. The team’s main purpose is to
verify the deployment and ongoing
application of the Group’s standards and
policies in our locations, including our
manufacturing sites, R&D facilities and the
customer locations in which a signicant
number of our employees operate daily.
Each audit also includes an assessment
of the site’s HSE leadership.
Following each audit, action plans are
created by the site management teams to
address any issues identied and work on
completing these is assessed on a regular
basis. The observations made during
audits have been used to improve the
Group’s training programmes and to
enhance the Group’s health and safety
standards. The results of the Group HSE
audits, as well as the progress of action
plans addressing the most critical issues,
are reported to the Board twice a year.
During 2021, the team conducted 22
audits, visiting manufacturing locations,
R&D centres of excellence and customer
locations with 40 employees or more, as
part of a programme of systematic audits
of all Group locations worldwide.
Travel restrictions due to the COVID-19
crisis prevented the team from completing
the full 2021 audit plan of inspection
visits. Instead, the remote assessment
programme developed in 2020 was used
to reach sites that could not be physically
audited. These assessments were carried
out via videoconferences, during which
the site management team presented the
progress made in the implementation of
Group safety standards, and improvement
plans for the coming months. In 2021,
we carried out 138 remote assessments.
Sites are encouraged to carry out
self-assessments, based on the Group
safety audit compliance checklist, to
monitor their progress.
Safety audits and improvement opportunities
In our plants in 2021, more than 78% of
our working population performed routine
safety audits every month. This generated
an average of more than seven implemented
safety improvement opportunities per
person from almost 10,000 employees,
resulting in an improvement in worker
safety. This audit programme involves
employees at all levels – from the Group
Executive Committee and safety specialists
through to local site management,
employees and directly supervised
contractors.
Health and safety certications
We have ve manufacturing sites
(representing 9% of our manufacturing
sites), one warehouse and three Vesuvius
operations in customers certied to ISO
45001:2018. Vesuvius sites choose to
certify based on local regulatory and
customer requirements. A list of certied
sites is available to view on our website:
www.vesuvius.com.
Unique Executive Safety Tours 2021
36
NAFTA
15
China
12
7
5
5
Training activities routinely undertaken for our
employees and contractors include:
Arc Flash Hazard
Bike Safety
Control of Contractors
Crane Operation
Defensive Driving
Electrical Testing
Environmental Waste Reporting
Ergonomics
Executive Safety Tour Leader
Exoskeleton
Fire Fighting
First Aid
Forklift Truck
Gas Safety
General Health & Safety and refresher
training
Hand Hazard and Protection
Hazard Perception
Hazardous Goods
Health and Safety Representatives
ISO 45001:2018
Legionella
Lock, Tag and Try
Incident and Performance reporting
Machine Safety
Permit to Work
PPE Safety
Practical Safety in Steel Customers
Radiation
Road Safety
Safe Stacking
Safety and Environmental Auditing
Steel Mill Orientation
TurboS Safety and Safety Leadership
Warehouse Material Stacking and
Handling
Welding Certication
Working at Height
87
Our business Our performance
Sustainability
Governance Financial Statements
Safety performance in 2021
0
50
100
150
200
250
300
202120202019201820172016201520142013201220112010200920082007
SeverityLTIFR
0
2
4
6
8
10
12
LTIFR 12 months rolling
LTI Severity Rate
12 months rolling
Lost Time Injuries
per million hours worked
Lost Time Injuries Severity Rate
in lost days
per million hours worked
Safety performance 5-year table with main performance indicators
Performance indicators
All employees, contractors and visitors
2021
2020 2019 2018 2017
Work Related Death
0
0 0 1 0
Severe Injuries
3
4 0 2 1
Lost Time Injuries (LTI)
29
28
40
39
46
LTI Frequency Rate (LTIFR) per million hours
1.06
1.16
1.54 1.42 1.66
Recordable Injuries
123
126
144
125147
RFR per million hours
4.51
5.20
5.53
4.54
5.31
Medically Treated Injuries (MTI)
201
164
198
202
214
MTIFR per million hours
7.38
6.77
7.60 7.34 7.73
Total Number of Injuries
627
419
520
492
563
Injury FR per million hours
23.01
17.31
19.96
17.8720.33
LTI Lost Days
1,851
2,094
1,811
1,824 1,738
LTI Severity Frequency Rate (Lost Days) per million hours
68
86
70
66
63
Dangerous Occurrences (DO)
1,180
779
736
649
409
DOFR
43.30
32.18
28.25
23.57
14.77
Safety Audits Number
108,895
95,290
113,428
121,117
120,266
Safety Audits per 20 Employees per month
14
14
16 16
15
Employees Participating in monthly Safety Audits
9,994
8,559
8,804
9,973
10,086
Employees Participating in monthly Safety Audits %
78%
73%
75%
80%
77%
Safety Improvement Opportunities with a Permanent Action (SIOPA)
95,322
81,075
92,038
91,72592,778
Other Improvement Opportunities with a Permanent Action (IOPA)
27,235
29,236
30,611
36,436
34,663
IOPA Total
122,557
110,311
122,649 129,214 126,388
SIOPA per Employee
7
7 8 7 7
Other IOPA per Employee
2
2 3 3 3
IOPA Total per Employee
10
9
10 10 10
Hours Worked (thousands)
27, 254
24,211
26,053
27,533 27,688
All frequency rates (FR) are per million hours worked.
Excludes Universal acquisition.
There were two minor injuries involving third-party truck drivers on Vesuvius’ operations in 2017, with none in 2018 to 2021.
Average third-party contractors and visitors in 2021: 414.
Health, safety and well-being at work
continued
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Annual Report and Financial Statements 2021
Safety performance in 2021 is detailed below:
Performance indicators
Employees
and directly
supervised
contractors
2021
Third-party
contractors
and visitors
2021
All employees,
contractors
and visitors
2021
Work Related Death
0 0 0
Severe Injuries
3 0 3
Lost Time Injuries (LTI)
26
3
29
LTI Frequency Rate (LTIFR) per million hours
0.99
2.94
1.06
Recordable Injuries
117
6
123
Recordable FR per million hours
4.46
5.89
4.51
Medically Treated Injuries (MTI)
195
6
201
MTIFR per million hours
7.43
5.89
7.38
Total Number of Injuries
618
9
627
Injury FR per million hours
23.56
8.83
23.01
LTI Lost Days
1,851
0
1,851LTI Severity FR (Lost Days) per million hours
71
0
68
Dangerous Occurrences (DO)
1,177
3
1,180DOFR
44.86
2.94
43.30
Safety Audits Number
108,895
n/a
108,895Safety Audits per 20 Employees per month
14
n/a
14Employees Participating in monthly Safety Audits
9,994
n/a
9,994Employees Participating in monthly Safety Audits %
78%
n/a
78%Safety Improvement Opportunities with Permanent Action (SIOPA)
95,322
n/a
95,322Other Improvement Opportunities with Permanent Action (IOPA)
27, 235
n/a
27,235IOPA Total
122,557
n/a
122,557SIOPA per Employee
7
n/a
7Other IOPA per Employee
2
n/a
2IOPA Total per Employee
10
n/a
10Hours Worked (thousands)
26,235
1,019
27, 254
2021 safety performance
With the aim of becoming ‘best in class’,
the Group has re-energised its safety
agenda to further enhance efforts to
achieve its safety goals.
With a Lost Time Injury Frequency Rate
(LTIFR) of 1.06 per million hours worked in
2021, we recorded our lowest frequency
rate ever. Excluding third-party contractors
the LTIFR was less than 1.0.
Fatalities and severe injuries
Sadly, in 2021, two of our colleagues were
killed in road trafc accidents while
commuting to work. Vesuvius is providing
nancial and social support to their
families and has actively taken steps
to reduce commuting related risks.
Regrettably, two of our colleagues and a
contractor also suffered severe injuries:
deep hand lacerations requiring
hospitalisation in Australia, an eye injury
while changing a bit on a pneumatic tool
in China, and a foot amputation after
being run over by a customer engine
in a customer location in Vietnam.
Following full root cause analyses, robust
preventative measures were implemented
across Vesuvius with changes made to our
HSE standards to reduce the risk of
recurrences.
Lost time and medically treated injuries
Vesuvius operates a robust and
comprehensive process for the timely
reporting of incidents. In our internal
standards, third-party contractors are
included, and we use more stringent
denitions for Lost Time Injuries (LTIs)
and ‘severe accidents’ than the denitions
used by many regulatory bodies. All sites
are required to report on all Medically
Treated Injuries (MTIs), broader than
recordables, to maintain the focus
on safety. As an illustration of the
precautionary preventative approach
taken by Vesuvius in accident investigation,
all LTIs and MTIs required a full 8D report.
In 2021, 29 LTIs were reported which
resulted in 1,851 lost days giving the LTI
frequency rate for the year of 1.06 per
million hours. This was a signicant
improvement versus the 1.16 recorded in
2020. 201 MTIs were reported in 2021
(versus 164 in 2020) out of a total of
627 injuries reported (versus 419 in 2020),
resulting in an MTI frequency rate of 7.38,
(versus 6.77 in 2020). Whilst both 2021
and 2020 were unusual years because of
the COVID-19 pandemic and associated
changes in working, we believe that the
signicant improvements in Lost Time
Injury rates reect a broader trend of
underlying improvement for the Group
and result from a strong management
commitment to change.
89
Our business Our performance
Sustainability
Governance Financial Statements
Main types of work-related injury
In 2021, the main causes of work-related
injuries were, in descending order of
frequency: handling, lifting or carrying;
being struck by moving objects; striking
against something xed or stationary;
and slips, trips and falls. The main injuries
suffered were contusions, lacerations,
sprains and strains, fractures and
abrasions to the eye. The main body parts
affected were hands, wrists and ngers,
backs, feet, knees and eyes. Based on this
incident data, targeted campaigns are
launched by the business units.
Dangerous Occurrences
Vesuvius Dangerous Occurrences include
all non-lost time and non-medically
treated injury incidents and incidents with
and without actual damage whether
work related or not). There was renewed
emphasis on the reporting of dangerous
occurrences and injuries in 2021 so that
root cause analysis could be undertaken,
and preventative action plans implemented
to prevent future occurrences. Consequently,
there was an increase in the number of
Dangerous Occurrences reported in 2021
to 1,180 (2020: 779). Out of the Dangerous
Occurrences occurring in 2021, the more
serious 27% that could have resulted in a
severe accident also required a full 8D
report, the remainder being dealt with
via line PPS (Practical Problem Solving).
WRA Safety awards
The Pune plant and JSW Vijaynagar
customer location, both located in India,
received safety awards from the World
Refractories Association and more than
50 Vesuvius locations (manufacturing
sites and customer locations) received
safety certicates.
ERPA Safety award
The Hengelo plant in the Netherlands
received a safety award from the
European Refractories Producers
Association.
TATA 4 -star rati ng s
Vesuvius teams in three TATA Steel
locations in Thailand achieved
a 4-star rating recognising their
excellence in contractor safety.
Ternium Safe Supplier
Vesuvius was recognised as a ‘Safe
Supplier’ by Ternium in Mexico and
received a Safety Award in Brazil.
Usiminas Safety
innovation award
We received the highest safety award
granted by Usiminas in the innovation
category for reducing the exposure of
people to hot metal.
Shougang Jingtang
Iron & Steel
Outstanding Supplier
Shougang Jingtang Iron & Steel
recognised Vesuvius as an
outstanding supplier.
Vesuvius Safety
Awards
Vesuvius has also created internal Safety
Awards, to recognise its best performing
locations. In 2021, we distributed Safety
Awards to 11 regions, as recognition
of their outstanding performance in
the previous year. These regions each
completed 2020 without recording
a Lost Time Injury, recorded a
participation of more than 80% of
employees in monthly Safety Audits
and implemented more than ten
improvement opportunities per
person per year.
Safety awards and recognition
In addition to our efforts to keep our employees and contractors safe, we take pride in
sharing our safety management practices with our customers. We are very proud of the
external recognition received by our teams for their safety leadership and achievements.
Some of the awards received in 2021 included:
Awards
Health, safety and well-being at work
continued
90
Vesuvius plc
Annual Report and Financial Statements 2021
We create this culture by building broad
organisational understanding of our
strategy, goals and accountability,
supported by our CORE Values and
positive management behaviours.
We seek to foster a working environment
that is inclusive and diverse, where people
can be themselves without fear of
harassment, bullying or discrimination.
True to our decentralised business model,
each of our business units has their own
strategic HR agenda supporting delivery
of their business strategies.
As a result of ongoing COVID-19
challenges in 2021, we continued to adapt
our working practices to ensure the safety
and well-being of all our employees.
In addition, our recruitment and talent
sourcing strategy was adjusted to
accommodate working remotely.
Currently 422 employees participate in
the global Annual Incentive Plan (AIP).
Eligibility for participation is based on
job grade and is subject to approval by
the Chief HR Ofcer. The AIP structure is
based 80% on Company performance
and 20% on performance against
employees’ personal objectives. In addition,
209 of these employees participate in
various forms of share-based incentives.
Another 57% of our permanent employees
worldwide, both salaried and hourly,
participate in various local incentive
schemes. The BU Presidents and Regional
VPs are responsible for the target setting
and the pay-out approval of these
local plans.
Non-compensation benets including
pension and retirement benets are
managed locally in accordance with
local laws.
Employee engagement
Companies with highly engaged staff
deliver better business outcomes.
They have lower absenteeism, lower staff
turnover, fewer safety incidents, better
product quality, and higher productivity,
sales and protability.
At Vesuvius, we regard engagement as
critical to our ongoing success and we
work hard to listen to our people and act
when issues impacting engagement
are identied.
Engagement is a collective responsibility,
particularly among our management
community. We conduct an annual
employee engagement survey to measure
our employees’ attitudes to Vesuvius and
their work. The survey generates reports of
team responses to the survey. Managers
then share the results openly with their
teams and, working together, develop
Action Plans to address issues.
The survey has been conducted since 2019
in partnership with Mercer. The results are
clustered in eight strategic categories and
benchmarked externally against global
and manufacturing industry results.
People and Culture Strategy
Permanent employee turnover per region
Region
2021 turnover (%)
2021 voluntary
turnover (%)
2020 turnover (%)
2020 voluntary
turnover (%)
Americas
20%
10%
18%
6%
Asia-Pacic
16%
14%
12%
10%
EMEA
12%
9%
14%
6%
Total
16%
11%
14%
7%
Distribution of Vesuvius employees by category
2021
2021 (%)
2020
2020 (%)
Direct employees
10,657
96%
10,016
97%
Agency employees
419
4%
338
3%
Total
11,076
100%
10,354 100%
1. Employee numbers exclude employees joining Vesuvius as a result of the acquisition of the Universal
Refractories business.
2. In addition to the headcount above, Vesuvius employed the services of 191 contractors and consultants
in 2020 and 134 in 2021, to work on specic short-term projects.
In 2021, the implementation of our People
and Culture Strategy which we launched
in 2020 continued. This aims to build an
outstanding business by ensuring we have
the people, skills and capabilities critical to
the delivery of our strategy.
We aim to grow outstanding people: we
ensure our people managers have what
they need to lead their diverse, engaged
and high-performing teams for business
and personal growth. These goals are
strongly underpinned by a values-driven,
winning culture that embraces diversity
of thinking and continuous innovation
to achieve high levels of performance
and growth.
Distribution of Vesuvius employees – full-time versus part- time
2021 Full-time
employees
2021 Full-time
employees (%)
2021 Part-time
employees
2021 Part-time
employees (%)
2020 Full-time
employees
2020 Full-time
employees (%)
2020 Part-time
employees
2020 Part-time
employees (%)
Permanent salaried
4,086
99.0%
43
1.0%
3,905
98.7%
53
1.3%
Permanent hourly
5,878
99.9%
6
0.1%
5,647
99.9%
7
0.1%
Temporary salaried
90
98.9%
1
1.1%
64
97.0%
2
3.0%
Temporary hourly
966
99.4%
6
0.6%
674
99.7%
2
0.3%
Total
11,020
99.5%
56
0.5%
10,290
99.4%
64
0.6%
Note: Employee numbers exclude employees joining Vesuvius as a result of the acquisition of the Universal Refractories business.
91
Our business Our performance
Sustainability
Governance Financial Statements
Employee engagement action plans
We focus action plans not on the pure
statistics, but on seeking to bring about
meaningful change in line with our CORE
Values of Courage, Ownership, Respect
and Energy. For example, much of the
action taken to date has resulted in
improved communications between
managers and their teams and on greater
cross-functional understanding and
collaboration, all of which are key to
the principles of our CORE Values.
In 2021, despite the ongoing challenges
caused by the COVID-19 pandemic, and
thanks to a tremendous effort by local
management, supported by an effective
communication campaign, we again
achieved a very high participation level in
our engagement survey with 92% of all
employees completing it, the same level
of participation as we achieved in 2020.
Following improvements across all
survey categories in 2020, the overall
engagement score remained stable, with
further improvement across six of the eight
categories of questions and no change in
the remaining two categories.
For the third consecutive year, safety
remained our top strength with employees
condent in the Company’s approach to
safety. Other highlights included positive
attitudes towards immediate managers
and employees feeling that they are
treated with respect.
While there was an increase in the belief
that action plans from the 2020 survey had
a positive impact, it continues to remain an
area for improvement.
Living The Values Awards 2021
Our CORE Values are central to the culture
we are building at Vesuvius. By living these
values, we will create a truly entrepreneurial
culture that focuses on the needs of our
customers. One of the ways we encourage
and recognise colleagues who display our
values is our annual regional and global
Living The Values Awards.
Winners of each of the categories of
these Awards were nominated for the
Global Awards, the results of which were
announced at a special online ceremony in
December 2021. Chief Executive Patrick
André paid tribute to all nalists, noting
that they each provide a remarkable
example of what can be achieved by
being true to the CORE Values.
Embracing diversity of thinking and continuous innovation
to achieve high levels of performance and growth
Winning culture
People and strategy
Global Living The Values Awards winner:
Courage
Audrey Pradhita
Commercial Sales Engineer, Advanced
Refractories, Pelabuhan Klang, Indonesia
Audrey works in Advanced Refractories sales
in South East Asia. Her hard work and
commitment to nding better ways of
working has enabled her to deliver huge
increases in sales volumes and earned her
the respect of everyone she works with.
Global Living The Values Awards winner:
Respect
Jhuma Chowdhury
Assistant HR Manager,
Flow Control, Kolkata
As part of her role, Jhuma manages the
administration of Vesuvius India’s travel
requirements, both domestic and
international. Jhuma treats everyone’s needs
with the utmost importance, acting with
universal dedication and seriousness.
Jhuma is a credit to our Company.
Global Living The Values Awards winner:
Ownership
Darla Coulter
Master Data Manager, Central Operations,
Champaign
In the highly diversied Vesuvius
environment, Darla demonstrated real
ownership in successfully establishing the
global Master Data Management practice.
She showed unbelievable drive to deliver
something she considers essential for
Vesuvius’ success.
Global Living The Values Awards winner:
Energy
Balla Murugesh
Assistant Manager – Mechatronics,
Advanced Refractories, Kolkata
After supporting the rst ever Tundish Spray
Robot installation in the region, Balla was
asked to support a second installation in
Vietnam. Balla lived in one room of a closed
hotel near the steel plant for ve months
relying on the help and cooperation of
the local Vesuvius team for food and travel.
The commissioning was successful and Balla
nally returned home to India at the end of
September 2021.
Outstanding business
Outstanding people
Outstanding function
Critical skills and capabilities to win
Capable managers leading diverse,
engaged and high-performing teams
Teaming up with the business to solve
their biggest people issues
People and Culture Strategy
continued
92
Vesuvius plc
Annual Report and Financial Statements 2021
Internal communications
In 2021, we continued to develop our
internal communications programme, to
ensure we have a strong mix of channels to
reach our diverse population. The Chief
Executive regularly addresses the whole
Group via Company-wide email and video
and strategic messages, and Company
news and announcements are regularly
shared on the Group intranet and staff
app. 2021 saw an active use of screen
savers to communicate major news,
and we continued to utilise posters and
site ‘town hall’ meetings for on-site
communications. Whenever possible,
face-to-face communication is conducted
at different levels of the organisation
providing the necessary opportunities
for interactive Q&A sessions with
business leaders.
During 2021, the Group Executive
Committee held 14 interactive virtual
sessions with the Senior Leadership Group
to share regular business updates and
answer questions. We also held our annual
leadership conference, SPARK. With
COVID-19 travel restrictions still in place
in some countries, the 2021 SPARK was a
hybrid event, with close to 100 colleagues
attending in person and 60 colleagues
attending online.
Growth opportunities with training
and career progression
Talent management
The Group Executive Committee holds
direct responsibility for the roles and
development of our senior leaders, jointly
reviewing capability needs and deciding
on succession and cross-organisational
moves for the leadership group. This
illustrates the strong commitment at
the highest level of our organisation
towards growing the Group using its
Company-wide resources.
We employ individuals with an
entrepreneurial mindset and an
international outlook. Whether they
are recent graduates or seasoned
professionals, everybody who wants to
leave their mark in a dynamic rapidly
developing business environment has a
chance to succeed. Special attention is
paid to building strong, diverse teams
that bring different backgrounds and
experiences to our daily work.
Leadership pipeline
Strengthening the leadership pipeline
and facilitating people development
throughout the organisation remain key
areas of focus for Vesuvius. We continue
to work hard to ensure that we have the
right capability in every part of the
organisation to drive our strategy and
realise market opportunities. As a result,
we have built high-calibre leadership
teams, many of whom are relatively new
to their roles and to Vesuvius. We empower
our people to drive the business with an
entrepreneurial spirit, and to develop a
performance-oriented culture.
In 2021, Vesuvius expanded its mentoring
programme focused on leadership and
talent development. There are currently
50 mentees taking part in the 12-month
programme. Mentees learn from the
experience and perspectives of a more
senior person in Vesuvius, creating an
individual personal development plan
to enhance their careers and leadership
capabilities. The programme ensures
internal knowledge transfer and builds
a broader, deeper and more ready
talent pool.
We aim to adopt an ideal balance
between external hires and internal
promotion, fuelled by a strong process
of backup and succession planning,
especially for management positions.
In 2021, for middle management and
Top Management roles, 72% of open
positions were lled by external
candidates, reecting a period of
transformation and capability building
from external hires. In 2021, the
percentage of Senior Management
(comprising the key leadership roles
reporting directly to members of the
Group Executive Committee) with more
than three years of service was 42%.
In 2021, Vesuvius launched a new
global onboarding framework, in order
to provide maximum support to new
joiners in their rst three months with the
Company. The new material includes a
comprehensive presentation about our
business, our history, CORE Values and
main processes and procedures, together
with technical training on Vesuvius’
products for all roles. It is designed to be
adapted to each employee, depending on
the responsibilities of the role and level in
the organisation. It supports the employee
in four main steps of the onboarding
phase: before arrival, rst day, rst
month and rst three months.
Vesuvius onboarding framework
Before arrival
First month
First three monthsFirst dayDocuments shared to be
signed on rst day
Equipment and systems accesses
Prepare the onboarding agenda
Line manager welcome email
Announcement preparation
Welcome package
Mandatory trainings
Announcement
Understanding the organisation
Vesuvius Foundations
Knowing the business
and our industry
Knowing the team
and shareholders
Knowledge transfer
Complete career information
registered on ‘myVesuvius’
Objectives setting
Meeting/Q&A session with
senior leaders
People leader training
Probation period feedback
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Our business Our performance
Sustainability
Governance Financial Statements
Mandatory online training courses
Number of
employees trained
% of targeted
audience
completing course
Total training
hours
Anti-Bribery and Corruption
4,388
100%
2,194
Gifts, Hospitality and Entertainment
929
98%
465
Modern Slavery
61
100%
20
Anti-Tax Evasion
749
100%
375
Data Protection
4,466
99%
2,233
Cyber Security
5,109
74%
1
5,962
1. Cyber security awareness training consists of ve modules. 74% of employees have already successfully completed all ve modules.
Training and development
Our leaders take responsibility for
managing and developing their teams.
They are provided with access to a
central resource, offering expertise in
Global Rewards and Mobility, Talent and
Performance Management, Culture and
Learning, and supported by Group-wide
processes and information systems.
We encourage and reward high
performance, foster talent and aim to
create an environment where all can
realise their individual potential. To meet
the demands of the business and add
rigour to our employee value proposition,
we have launched training programmes
to assist our employees to develop their
skills and progress their careers.
In 2021, the main training focus areas
included health and safety, compliance,
technical skills, and commercial excellence.
Some of the key initiatives are highlighted
below.
In Q4 2021, we implemented a new Learning
Management System (LMS) on ‘myVesuvius’,
our online people management platform, in
order to provide a global hub for Vesuvius
online training courses. Mandatory training
courses are automatically assigned to new
joiners and completion statistics are easily
reportable. Targeted training courses can
also be allocated to employees in specific
roles, e.g. Modern Slavery training for specific
people in purchasing. Compliance, Data
Protection and Cyber Security training are
all accessible via the LMS.
During the course of our activities, we may
collect, store and process personal data
about our staff, customers, suppliers and
other third parties and our Data Protection
Policy recognises our commitment to
treating this data in an appropriate
and compliant manner. Specic data
protection training through e-learning
is a mandatory training course for all
employees with email access. At the end
of 2021, the completion rate was 99%. It is
regularly audited for non-completion.
In 2021, further training was undertaken
relating to the Brazilian General Data
Protection Law and the Data Security
Law in China which came into force on
1 September 2021. Vesuvius continues to
develop information technology and the
use of apps, internet and other sites, in
particular relating to marketing. Specic
e-marketing training was prepared and
delivered to business unit marketing teams
in 2021.
Technical training
HeaTt training is aimed at the continuous
technical development of Vesuvius
employees. Courses range from entry
to expert levels and are continuously
updated to keep pace with developing
technology and delivery methods, thereby
guaranteeing that Vesuvius experts are
at the forefront of technical innovation.
They are a great way for our hugely
experienced technical experts to pass on
their knowledge to the next generation and
ensure the sustainability of our know-how.
The rst introductory module is mandatory
for all new employees and is available on
the LMS, allowing participants to access
learning at anytime, anywhere.
Expert levels of HeaTt training are still held
face-to-face, as the course content is not
suitable for web-based training. In 2021,
695 employees completed the rst module
online and 45 employees completed
face-to-face HeaTt training sessions.
In addition, in 2021 Vesuvius launched a
Commercial Excellence transformation
programme, known as ‘ComPro’, for
account managers in our steel business
units, addressing specic skills gaps.
222 employees have completed the
nine-month programme, which is a mix
of theory, e-learning, workshops, coaching
and on-job application to ensure new
habits are embedded and commercial
capability strengthened.
During the year, we continued to develop
our training programme on the principles
contained in the Vesuvius Code of Conduct
and associated anti-bribery, corruption and
other compliance policies and procedures.
Training gives our employees a clearer
understanding of the scope of risks that
exist as we conduct our business and gives
context to how the Group expects each
employee to respond to those risks.
Compliance training provided during
2021 included:
–
An annual mandatory e-learning
module for Anti-Bribery and Corruption,
available in 22 of our functional
languages.
–
Webinar and videoconference training
hosted by the Compliance team to staff
at several sites covering Anti-Bribery
and Corruption, Speak Up and trade
sanctions.
–
Updated face-to-face training for senior
management on the overall compliance
framework and process for policy
and procedure implementation
and monitoring.
–
New Senior Manager compliance
induction training – all new senior leaders
receive dedicated training from the
Compliance Director. This induction
contains training and guidance on
all relevant Compliance policies
and procedures.
The Board has set a target of at least
90% of targeted staff completing the
Anti-Bribery and Corruption training
annually. 100% of the targeted staff
(4,388 employees) completed the 2021
Anti-Bribery and Corruption training.
People and Culture Strategy
continued
94
Vesuvius plc
Annual Report and Financial Statements 2021
Workforce by gender
1
As at 31 December 2021
Women Men Women Men
Board
3 5
38%
62%
Group Executive Committee
2 6
25%
75%
Senior Management
2
10
39
20%
80%
Middle Managers
63
427
13%
87%
All other employees
1,540
8,989
15%
85%
All employees
1,615
9,461
15%
85%
1. Employee numbers exclude employees joining Vesuvius as a result of the acquisition of the Universal Refractories business.
2. Senior Management comprises key leadership roles reporting directly to members of the Group Executive Committee.
Women Men Women Men
Americas
517
2,721
16%
84%
Asia-Pacic
324
3,161
9%
91%
EMEA
774
3,579
18%
82%
Total
1,615
9,461
15%
85%
Diversity and inclusion
Vesuvius operates in 40 countries around
the world, employing people with 69
nationalities, making us a truly diverse
business. We regard this diversity as a critical
aspect of our success and future growth as it
allows us to access the widest range of skills
and experience. At the end of 2021, the
Senior Leadership team (comprising
c.160 senior managers) consisted of
21 nationalities located in 22 countries.
15% of our overall workforce were women,
which was an increase of 1% versus 2020.
Over the past three years we have made
visible progress in gender diversity. Females
now represent 21% in our top management
(members of the GEC and their Senior
Management direct reports), a level that we
consider is still too low, but which represents
a signicant improvement as compared
with the level of 12.5% in 2019. Our ambition
remains to reach 30% women in this tier by
the end of 2025.
Copies of the Board Diversity Policy and
Group Policy on Diversity and Equality are
available to view on the Vesuvius website:
www.vesuvius.com.
Employee consultation and
industrial relations
In all of the countries in which we operate,
the Group informs and consults local
works councils and trade unions in matters
concerning the Vesuvius business as
required. These processes and procedures
are regulated by local law and generate
constructive dialogue between employee
representatives and management, which
provides benet to our business. In 2021,
72% of permanent employees were
represented by local works councils,
trade unions or other bodies.
In addition to local employee representation,
the Group has operated a European Works
Council (EWC) containing representatives
from each of the EU countries in which
Vesuvius has employees. The existing EWC
Agreement terminated in 2020, following
notice given by management and the
departure of the UK from the European
Union. The Group is in the process of
negotiating the agreement for the
formation of a new EWC with a
Special Negotiating Body made up of
representatives from the 13 European
countries in which we operate. The new
EWC Agreement will be registered in
and operated under Polish law, as the
representative country of Vesuvius plc,
following the departure of the United
Kingdom from the European Union.
When a new EWC Agreement is signed,
and the Council constituted, European
management will expect to meet the
EWC formally at least once a year.
At this meeting, management will provide
an update on the performance of the
business, with a focus on the developments
likely to impact European employees.
Global reward
Reward and recognition are integral
components of our employee value
proposition, enabling us to attract, engage
and retain key talent and highly qualied
employees. Our reward systems are
designed to create a market-competitive
and fair pay environment for all our
employees and to reinforce the vision,
strategy and expectations set by
the Board.
We seek to create a culture that champions
performance, building a strong link
between individual performance and
pay. Supported by our online people
management platform, ‘myVesuvius’,
performance reviews and subsequent
reward decisions are based not only on
how employees have performed against
their individual objectives but also
on assessments of behaviour and
commitment to our CORE Values.
Our global job grading framework, based
on a structured assessment methodology,
enables us to compare roles and ensure
internal consistency throughout the
organisation. We are committed to
creating reward and performance
management systems which are
transparent and objective, where
employees receive equal pay for work
of equal value, regardless of their age,
race, disability, sexual orientation, gender,
marital, civil partnership or parental
status, religion or beliefs. Our management
Annual Incentive Plans are measured
against both Vesuvius’ nancial targets
and personal performance, an incentive
structure consistent with that of our
Executive Directors. The Vesuvius
Share Plan for Executive Directors and
Group Executive Committee members
encourages decisions based on long-term
goals rather than short-term gains and
works to align the interests of participants
and shareholders.
In 2021, 93% of our salaried permanent
employees undertook a performance
review with their line management.
This compared with 95% in 2020 and
92% in 2019.
95
Our business Our performance
Sustainability
Governance Financial Statements
Global mobility
Vesuvius operates worldwide. We believe
that our companies should be managed
and staffed by local personnel. However,
we also provide selected groups of
employees with a range of international
assignments. These assignments are
usually for a limited period, most often
three years.
Vesuvius expatriates do not come from
one or two countries alone. We have a truly
international mix of nationalities in our
expatriate population. Individuals move
not only within a region, but also between
regions, with existing assignments
including China to USA, France to Japan,
UK to USA, Japan to Thailand, Germany
to UK and Belgium to UK. Our mobility
programme shows that our expatriate
population is as diverse as our Group.
Vesuvius operates several international
assignment policies to provide for
the different circumstances of these
assignments – whether they be short-term,
longer-term or require extended
commuting. These policies are
supplemented with clearly identied
benets, delivering support appropriate to
the nature of the assignment. By accessing
this broad range of policies, we can
manage our international assignments
with greater exibility, thus catering for
changing expectations and demands
from employees, whilst at the same time
meeting the needs of the business.
Key rationale behind international assignments
Vesuvius considers individuals for
international assignment for three
primary reasons:
–
Providing Vesuvius companies with skills
that are not locally available and that
are required at short notice. This typically
occurs in countries where we are
establishing or developing our presence.
The number of expatriates working on
this basis diminishes over time as the
organisation matures and we recruit
and train local talent to take over.
–
Career development. We believe that
the personal development plan of any
employee being developed for a senior
management or senior expert position
should include a posting outside their
home country. This encourages them
to develop the skills necessary to
function successfully in an international
environment. These postings are tailored
to the needs of the organisation and the
needs of the individual.
–
Enhancing diversity. Management
teams benet from having a mix of
gender and cultures. In specic cases,
we use international assignments to
achieve this goal.
People and Culture Strategy
continued
96
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Vesuvius is committed to making a
positive contribution to society. As part
of this, we focus on operating an ethical
business with appropriate policies in
place to ensure compliance with the
regulations and laws in all our markets.
We are particularly conscious of the
need to support the communities in
which we operate.
Governance and policies
The Board is responsible for setting the
culture and values of the organisation. The
Group Executive Committee is responsible
for implementing the culture and values,
including ethics-related matters.
Vesuvius’ operating policies underpin the
principles set out in our Code of Conduct.
They are the practical representation of
our status as a good corporate citizen and
they assist employees to understand and
comply with our ethical standards and the
legal requirements of the jurisdictions in
which we conduct our business. They also
give practical guidance on how this can
be achieved.
Human rights
The Group Human Rights Policy reects
the principles contained within the UN
Universal Declaration of Human Rights,
the International Labour Organization’s
Fundamental Conventions on Labour
Standards and the UN Global Compact,
to which the Group is a signatory. The Policy
applies to all Group employees. It sets out
the principles for our actions and behaviour
in conducting our business and provides
guidance to those working for us on
how we approach human rights issues.
The Group commits not to discriminate in
any of our employment practices and to
offer equal opportunities to all. The Group
respects the principles of freedom of
association and the effective recognition
of the right to collective bargaining,
and opposes the use of, and will not
use, forced, compulsory or child labour.
These principles have been integrated
into the work of our procurement teams
as we assess our suppliers and their
business practices.
Prevention of slavery
and human trafcking
During 2021, we published our sixth
transparency statement outlining the
Group’s approach to the prevention of
slavery and human trafcking in our
business and supply chain. A copy of our
latest statement is available to view on
our website: www.vesuvius.com.
Since the publication of our rst statement
we have conducted a risk assessment
of our purchasing activities, seeking to
identify, by location and industry, where
the potential risks of modern slavery are
highest. Our assessment identied the
following four industries that pose a higher
risk of modern slavery for Vesuvius:
1. Mining and extractive industries
(raw materials)
2. Textiles (personal protective
equipment (PPE) and work clothing)
3.
Transport and packaging
4.
Maintenance, cleaning, agricultural
work and food preparation
(contracted workers)
Following our modern slavery risk
assessment, we provided webinar
training to our key purchasing staff and
we continue to use an online e-learning
module to upgrade the training given to
all supplier-facing staff. This provides
key guidance on the red ags associated
with modern slavery to assist them in
identifying these during supplier visits
and accreditation. Since the launch of
the Modern Slavery red ag training we
have trained 100% of the targeted staff.
Our communities
We seek to establish strong relationships
with all our key stakeholders, founded on
mutual benet and respect.
Our principles – a responsible company
97
Our business Our performance
Sustainability
Governance Financial Statements
Conict minerals
We actively and routinely review our
purchasing portfolio to check for conict
minerals. In 2021 we did not purchase any
conict minerals.
Mica and child labour
Vesuvius is committed to working only
with suppliers that respect the UN Global
Compact’s 10 principles, and in particular
do not employ child labour. As the mica
industry has been widely recognised as a
risk in this respect, we have engaged in
a process of verifying our supplier base.
In 2021, we contacted all our suppliers
of mica, asking for written conrmation
that they are not using child labour. Upon
analysis of their replies, we asked suppliers
to undergo sustainability assessments,
including a strong focus on human rights.
By year end, suppliers representing 96.6%
of our mica spend had already conrmed
not employing any child labour and had
completed or were in the process of
undergoing a Sustainability Assessment.
We have since exited our relationships with
those suppliers not willing to undergo a
Sustainability Assessment.
Working with trade associations, lobbying
and political expenses
Vesuvius and its employees on behalf of
Vesuvius, do not make contributions to
political candidates or political parties.
Similarly, Vesuvius does not make any
direct lobbying expenditure or spend any
corporate funds on political advocacy.
Around the world, we participate in
government and industry working groups,
are members of industry associations, and
engage in direct contact with independent
bodies on key business issues. This ensures
that we can help in shaping new policies,
regulations and standards, and ensure
compliance with existing requirements.
Vesuvius has established long-term
relationships, either directly, or through
some of its employees with several
national and international trade
associations directly related to our
activities and to those of our customers.
These trade associations advocate on
major public policy issues of importance to
Vesuvius, and are helpful for networking,
building industry skills, civic participation
and monitoring of industry policies and
trends. They also provide information
and perspectives on legislative matters
of signicance to the Group and our lines
of business. Vesuvius’ participation as a
member of these associations comes with
the understanding that we may not
always agree with all the positions of
an association or its other members.
Vesuvius is a member of the World
Refractory Association, CerameUnie,
the European Refractory Association, the
Association for Iron & Steel Technology,
the Confederation of Indian Industries,
and the British Ceramics Association.
These trade associations have all made
climate change a clear focus area,
with a variety of resulting actions
such as engaging with regulators and
policymakers, awareness and capability
building within the industry, promotion of
best available practices and technologies,
and management of collaborative
research projects.
Business ethics/anti-bribery and corruption
and working with third parties
Vesuvius’ Code of Conduct afrms our
commitment to competing vigorously,
but honestly, and not seeking competitive
advantage through unlawful means.
We conduct ourselves ethically in all public
affairs activities, in alignment with local
laws and regulations. We do not engage in
unfair competition, exchange commercially
sensitive information with competitors,
or acquire information regarding a
competitor by inappropriate means.
When received for business purposes,
we safeguard third-party condential
information and use it only for the purpose
for which it was provided.
We engage with various third-party
representatives and intermediaries in
our business. We recognise that they can
present an increased anti-bribery and
corruption risk. Our procedure on working
with third parties clearly outlines our
zero-tolerance approach to bribery
and provides practical guidance for our
employees in identifying concerns and
how to report them.
Vesuvius engages with third-party
sales agents, many of whom operate in
countries where we do not have a physical
presence. Our employees’ use of, and
interaction with, sales agents is supported
by an ongoing training programme for
those who have specic responsibility for
these relationships.
As part of communication around
anti-bribery and ethics, employees are
actively encouraged to consult on ethical
issues. They have open access to the
Compliance Director and Legal function
who provide support on a regular basis.
Working with third parties
During 2021, the Group continued the
due diligence review of our third-party
representatives and intermediaries.
Following the previous years’ enhanced
review of sales agents, custom clearance
agents, distributors and logistics providers,
we conducted repeat due diligence on
specic third parties operating in higher
risk jurisdictions or providing specic
services. This included a detailed review
of our due diligence activities on active
distributors across the Group. This process
covers public information searches,
regulatory searches and activity reviews.
During the year, we also continued our
ongoing monitoring of the sales agents
used across the Group.This included a
review of the agent reporting, invoice
data and commission calculation.
Our due diligence processes will continue
to be extended using a risk-based
approach during 2022 and beyond.
Supporting our communities
continued
4,388
employees received Anti-Bribery and
Corruption training in 2021
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Annual Report and Financial Statements 2021
Vesuvius wants to make a positive contribution to
the communities in which we work by supporting a
wide variety of fundraising and community-based
programmes around the world. Below are some examples
of the many community programmes and activities our
colleagues were involved in throughout 2021.
Community engagement
Contributing to Mülheim
disaster relief after
devastating oods
caused millions of Euros’
damage to homes and
businesses.
Germany
Raising funds for people with
disabilities by entering a team in the
Poland Business Run, the country’s
largest charity business run.
Poland
Helping local food banks
with nancial support
and clothing donations.
USA
Distributing ‘back to school’
kits containing uniforms, shoes,
school bags and stationery to
disadvantaged children.
Running internal campaigns to
raise funds for a range of
programmes including breast
cancer awareness, clothing
collections and elderly people
who are without care.
Brazil
Supporting Pune
University with a seminar
on leadership for more
than 300 students.
India
Supporting the Rotary
Club to provide Ramadan
food packages to 150
impoverished families.
Turkey
Opening up Vesuvius to colleagues of the future
Giving young and talented students opportunities
to see, experience and become interested in
manufacturing and engineering is important for
the future of our business. At the Wurtland plant
in Kentucky, USA, we welcome around 100
students from Marshall University and Ashland
Community and Technical College every year.
The visits last around two hours on-site, and the
students have an opportunity to speak to staff
from across the plant to learn more about the
types of career path available to them.
This builds on a long-established partnership
with Ashland Community and Technical
College, which allows us to offer internships and
hands-on experience working in manufacturing.
Students at Ashland are studying Advanced
Integration Technology, a two-year
manufacturing-based programme and
undergraduates at Marshall University are
on a Supply Chain Logistics programme.
Our Wurtland team also
attends job and career
fairs at the university
and the college, helping
make our team and the
manufacturing industry
more widely accessible
to students. By taking this
open and accessible
approach to welcoming students, the Wurtland
plant has beneted from some amazing success
stories. In 2021, nine students were hired from the
programmes and are now working in production
and maintenance roles.
Another benet of hiring local university
graduates is that talented young professionals
can stay local to the area and build successful
careers. This brings us closer to the wider
community and helps the area to prosper.
99
Our business Our performance
Sustainability
Governance Financial Statements
Supplier sustainability assessment criteria
Environment
Energy Consumption & GHGs
Water
Biodiversity
Local & Accidental Pollution
Materials, Chemicals & Waste
Product Use
Product End-of-Life
Customer Health & Safety
Environmental Services &
Advocacy
Labour & Human Rights
Employee Health & Safety
Working Conditions
Social Dialogue
Career Management &
Training
Child Labour, Forced Labour
& Human Trafcking
Diversity, Discrimination &
Harassment
External Stakeholder Human
Rights
Ethics
Corruption
Anticompetitive Practices
Responsible Information
Management
Sustainable Procurement
Supplier Environmental
Practices
Supplier Social Practices
Vesuvius recognizes the crucial role that
its Suppliers play in creating value in
the products and services that Vesuvius
ultimately provides to its customers.
In addition to the consistent and timely
supply of materials, products, and
services which are of the highest quality,
we expect our suppliers to operate in
a manner that is appropriate, in terms
of their ethical, legal, environmental,
and social responsibilities.
Principles
The satisfaction of our customers, the
safety and reliability of Vesuvius’ products,
and the efciency of Vesuvius’ internal
processes are dependent on the reliability
of its network of suppliers. Vesuvius is
committed to ensuring that we utilise
high-quality raw materials, secured
through reliable and well-developed
raw material suppliers. The principles of
sustainable procurement are prescribed
within the Vesuvius Sustainable
Procurement Policy and supported
by supplementary processes.
Long-term goals
Overall, our objective is to encourage
suppliers to implement a meaningful
sustainability programme, embrace
the UN Global Compact principles,
evaluate and reduce our upstream
CO
2
emissions and identify potential
risks (and if necessary, address them)
in our supply chain.
Sustainable Procurement Policy
During 2021, a specic Sustainability
Procurement Policy which outlines key
criteria for suppliers was approved and
deployed. The policy uses the Group
Procurement’s ‘Request for Quotation’
(RFQ) process to engage a signicant
number of Vesuvius suppliers, and is
provided in conjunction with the Vesuvius
Terms and Conditions of Purchase.
For suppliers to participate in the RFQ,
they are obliged to accept and agree
to the terms of the Sustainability
Procurement Policy, as it forms an
addendum to Vesuvius’ standard
contract clauses. This policy is available
on the Vesuvius website. 164 suppliers
representing a spend of £71.5m have
already formally agreed to comply with
the policy.
The policy applies to all suppliers of
goods and/or services either used in our
manufacturing processes and/or sold
directly by us to customers, including
Tolling and Resale suppliers. It applies
to suppliers, their agents and their
sub-contractors. Once accepted, it is the
responsibility of the supplier to verify and
monitor compliance against this policy
– both for their operations and those of
any sub-contractors. Compliance with
the requirements in the policy is a key
consideration in the selection of suppliers.
The major elements of the policy are:
–
Employees and human rights
–
Ethical and compliant business practices
–
Environment
–
Quality
–
Business continuity
–
Documentation and Verication
encompassing Supplier due diligence
and Supplier assessments
Supplier sustainability assessments
As part of our sustainability agenda,
Vesuvius has implemented a Supplier
Sustainability Assessment programme,
setting targets for the proportion of the
total raw material spend value covered by
the assessment.
Vesuvius has partnered with an
independent third-party service provider
– EcoVadis – to rate our raw materials
suppliers using a detailed set of criteria.
These cover four themes and 21 criteria
based on international standards: Labour
& Human Rights; Ethics; Environment;
and Sustainable Procurement.
Group procurement and regional
procurement teams are heavily involved
in the programme. 84 employees from
these teams have already received specic
training on supplier sustainability
assessments (72% of the target group).
21 criteria based on international standards
Responsible sourcing
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Vesuvius plc
Annual Report and Financial Statements 2021
We aim to assess at least 50% of our
raw material spend by the end of 2023 –
a target approved by the Board – using
criteria such as supplier size and risk
metrics (including country, category of
raw material, availability of alternative
sources, delivery and quality
performance) to identify participants.
Since its launch in January 2021, 131
suppliers have joined the programme,
representing a spend value of £188 million,
being approx. 52% of the Group’s raw
material spend. We have initiated a
process of corrective and preventative
actions to support our suppliers’ Corporate
Social Responsibility (CSR) capacity
building and assessment scores. Of the
rated suppliers, 16% did not meet the
minimum score dened by Vesuvius, and
were asked to implement improvement
actions within a three-year timeline.
Routine reviews and an annual reassessment
will enable progress to be measured. The
average overall score of Vesuvius suppliers
was 46.8 against an industry benchmark
of 43.8 across the critical themes.
Supplier sustainability programme
monitoring
The Vesuvius supplier sustainability
programme is coordinated and monitored
via an independent third-party platform
which consolidates information, manages
and tracks actions, and provides feedback
to our suppliers. We work closely with the
independent third-party service provider
through scheduled engagements fortnightly
and monthly. The Group Executive
Committee reviews updates on Procurement
Sustainability at its regular meetings.
Supplier CO
2
emissions
It was estimated that the CO
2
emissions
from purchased goods and services
represented 1,160 thousand metric tonnes
of CO
2
in 2021 (78.2% of Vesuvius Scope 3
emissions and 61.8% of Vesuvius’ total
CO
2
e emissions, see page 71). A more
precise knowledge of these emissions,
including data per raw material and
supplier, will be required to properly
establish and drive improvement plans.
As noted above, we are using our RFQ
process to gain a better understanding of
these upstream CO
2
emissions and collect
supporting data. This requires participating
raw material suppliers to provide
information on their energy sources,
CO
2
emissions and improvement plans.
Of the 138 suppliers (representing a total
spend of £71.5m) who responded to the
request for information on their energy
sources and CO
2
emissions, 50 (representing
a total spend of £48m) reported that they
had set emissions reductions targets and
established action plans.
Supplier quality development
Vesuvius is very proud of the close
relationships we have with our suppliers
around the world. We work with them to
ensure that the highest-quality materials
and products enter our supply chain.
The process entails an extremely
comprehensive review including research
and development to ascertain
compatibility of supplier products.
Supplier audits
Vesuvius also conducts an annual Supplier
Audit programme targeting product quality
and security of supply. The programme is
led by the Group’s Purchasing and Quality
teams, located across all regions. The goal
of the audits is to reduce the number of
quality issues that may affect our raw
materials, and consequently our operations
and those of our customers. As part of this,
we carry out on-site inspections, share
expectations with our suppliers, identify
risks, and adapt our internal controls
accordingly. We encourage our suppliers
to improve their own processes and help
them prioritise actions to achieve this.
Areas of focus include:
a)
Quality management rules: nal
inspection, controls at important
process steps, management of
incoming materials, data tracking,
customer feedback and communication.
b)
Management of non-conformities:
reaction to non-conformities, protection
of customer, problem resolution and
application of lessons learned.
c)
Sustainability criteria: this has been
newly introduced to align the supplier
audits as a second platform to drive
and visibly verify supplier sustainability
efforts and programmes, complementing
the assessments carried out by our
third-party partner. The main areas
of attention are environmental and
social practices. A particular emphasis
is being placed on child and forced
labour. Any observation of such practice
would be immediately escalated to the
Group’s senior management, and the
supplier barred from doing business
with Vesuvius.
In 2021, despite the impact of COVID-19
travel restrictions, 138 (2020: 98) audits
were conducted at 138 supplier facilities.
Seven suppliers (5% of suppliers audited)
received grades below threshold. Actions
were taken either to support them or to
terminate our relationship with them.
Supplier corrective actions requests
To ensure the integrity of our products,
we have a rigorous approach to issues
relating to the quality of raw materials
and other inputs to our processes.
When a supplier does not meet
expectations, we issue a formal Supplier
Corrective Action Request. Our proven 8D
methodology is then used to investigate
the root cause of the issues and dene
corrective actions. A web-based portal is
available for suppliers to document the
containment actions implemented and
outcome of the investigation, to enable
review by us.
In most cases, issues are identied and
resolved quickly. Suppliers with repeat
issues and poor problem-solving are
required to undergo a Supplier Quality
Audit. Whilst
COVID
-19 impacted on the ability to progress supplier audits during
2021, every effort has been made to
sustain our critical internal control
processes through virtual means.
The Strategic Report set out on pages 1–101 contains a fair review of our businesses,
strategy and business model, and the associated principal risks and uncertainties.
We also deliver a review of our 2021 performance and set out an overview of our
markets and our stakeholders. Details of our principles, and our people and
community engagement, together with our focus on safety, are also contained in
the Strategic Report.
Approved by the Board on 3 March 2022 and signed on its behalf by
Patrick André
Chief Executive
Guy Young
Chief Financial Ofcer
101
Our business Our performance
Sustainability
Governance Financial Statements
104
Board of Directors
106
Group Executive Committee
107
Corporate Governance Statement
107
Chairman’s governance letter
108
Board Report
117
Audit Committee
125
Nomination Committee
130
Directors’ Remuneration Report
130
Remuneration overview
134
2020 Remuneration Policy
142
Annual Report on
Directors’ Remuneration
154
Directors’ Report
160
Statement of Directors’ Responsibilities
161
Independent Auditors’ Report
Governance
We think beyond today’s
production outcomes
and shape the future
with sustainable solutions
Vesuvius plc
Annual Report and Financial Statements 2021
102
103
Our business Our performance Sustainability
Governance
Financial Statements
John McDonough CBE
Chairman
Appointed to the Board 31 October 2012
Nine years on the Board
–
Proven strategic and leadership skills gained
in a complex multinational business
–
Strong engineering background and global
commercial experience
–
Clear leadership understanding of safety
issues
–
Operational and strategic understanding of a
range of business environments gained from
working in Asia-Pacic, EMEA and the UK
–
Experience as CEO with an international
listed company
Current external appointments
John is Chairman of Sunbird Business Services
Limited and a Non-executive Director of
Cornerstone Property Assets Limited and
Inceptum2 Solutions Limited.
Career experience
John spent 11 years as Group Chief Executive
Ofcer of Carillion plc until he retired in 2011.
Prior to this, he spent nine years working for
Johnson Controls. He served as Chairman of
The Vitec Group plc for seven years, retiring
from the board in 2019. He has also previously
served as a Non-executive Director and
Chairman of the Remuneration Committee of
Tomkins plc, as a Non-executive Director of
Exel plc and as a Trustee of Team Rubicon UK.
John was awarded a CBE in 2011 for services
to industry.
Guy Young
Chief Financial Ofcer
Appointed to the Board 1 November 2015
Six years on the Board
–
Extensive international experience gained
in the mining and industrial sectors
–
Qualied Chartered Accountant, with
signicant nancial and business
development experience
–
Drive and energy in managing people
and teams
–
Focus on strategic execution and business
optimisation
Current external appointments
None
Career experience
Guy was Chief Financial Ofcer of Tarmac and
latterly Lafarge Tarmac, the British building
materials company, between 2011 and 2015.
Prior to this he spent 13 years working at Anglo
American plc in various senior nancial and
business development positions, including as
Chief Financial Ofcer of Scaw Metals Group,
the South African steel products manufacturer.
Guy is qualied with the South African Institute
of Chartered Accountants.
Patrick André
Chief Executive
Appointed to the Board 1 September 2017
Four years on the Board
–
Global career serving the steel industry
–
Strong background in strategic development
and implementation
–
Customer focus and proven record of delivery,
with strong commercial acumen
–
Drive and energy in promoting his strategic
vision
Current external appointments
None
Career experience
Patrick joined the Group as President of the
Vesuvius Flow Control business unit in 2016,
until his appointment as Chief Executive in
September 2017.
Before joining the Group, Patrick served as
Executive Vice President Strategic Growth,
CEO Europe and CEO for Asia, CIS and Africa
for Lhoist company, the world leader in lime
production. Prior to this, he was CEO of the
Nickel division, then CEO of the Manganese
division of ERAMET group, a global
manufacturer of nickel and special alloys.
N
Changes to the Board during the year
The Directors named were in ofce during
the year and up to the date of this Annual
Report, with the exception of Dinggui
Gao who was appointed to the Board
on 1 April 2021.
Hock Goh and Holly Koeppel stepped
down as Non-executive Directors at the
close of the 2021 AGM, held on 12 May
2021. Kath Durrant took over as Chair
of the Remuneration Committee when
Jane Hinkley stepped down from that
role at the close of the 2021 AGM.
Jane remains a Non-executive Director.
104
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Annual Report and Financial Statements 2021
Board of Directors
Kath Durrant
Non-executive Independent Director
Appointed to the Board 1 December 2020
One year on the Board
–
30 years’ experience of people management
–
Strong operational and strategic track
record, gained working at a number of large
global manufacturing companies
–
Experienced UK governance professional
Current external appointments
Non-executive Director and Chair of the
Remuneration Committee of SIG plc.
Career experience
Kath held various operational and specialist HR
roles at GlaxoSmithKline plc and AstraZeneca
plc and was Group HR Director of Rolls-Royce
plc. She was most recently Group HR Director of
Ferguson plc and Chief HR Ofcer of CRH plc.
Kath served as a Non-executive Director and
Chair of the Remuneration Committee of
Renishaw plc from 2015 to 2018 and as a
Non-executive Director and Chair of the
Remuneration Committee of Calisen plc from
2020 to 2021.
Friederike Helfer
Non-executive Director
Appointed to the Board 4 December 2019
Two years on the Board
–
An experienced strategist, with strong
analytic capability
–
Commercial acumen and a strong track
record of working with a portfolio of
companies to identify scope for operational
and strategic improvement
Current external appointments
Partner of Cevian Capital* and a Non-executive
director of the Supervisory Board of
thyssenkrupp AG.
Career experience
Friederike is a Partner of Cevian Capital. She
joined Cevian in 2008 and from 2013 to 2017,
served on the Board of Directors and the Audit
Committee of Valmet, a Finnish engineering
company, in which Cevian was also invested.
Prior to joining Cevian, Friederike worked
at McKinsey & Company. She is a CFA
Charterholder.
Dinggui Gao
Non-executive Independent Director
Appointed to the Board 1 April 2021
Eleven months on the Board
–
Strong operational experience driving
performance at a range of multinational
companies
–
Proven track record of leadership and
international commercial experience
–
Strong focus on technology and in-depth
knowledge of Asian markets
Current external appointments
Non-executive Director Intramco Europe B.V and
Operating Partner CITIC Capital Holdings Ltd.
Career experience
Dinggui has nearly 40 years of operational
experience having worked in a range of
multinational companies including Bosch,
Honeywell, Eagle Ottawa and Sandvik AB.
He latterly served as Managing Director, China
of Formel D Group, the German global service
provider to the automotive and components
supply industry, joining the company in 2017
and stepping down at the end of October 2021.
Douglas Hurt
Senior Independent Director (SID)
Appointed to the Board 2 April 2015
Six years on the Board
–
Qualied Chartered Accountant, with recent
and relevant nancial experience
–
Highly knowledgeable in operational and
corporate nancial matters, with signicant
US and European experience
–
Proven management and leadership skills
Current external appointments
SID and Chair of the Audit Committee of
Countryside Partnerships PLC, and a Non-
executive Director and Chair of the Audit
Committees of Hikma Pharmaceuticals PLC
and the British Standards Institution.
Career experience
Douglas was Finance Director of IMI plc, a UK
listed company, until 2015. He spent 23 years
at GlaxoSmithKline plc where he held senior
nance and general management positions.
Douglas served as SID and Chair of the Audit
Committee of Tate & Lyle plc until 2019.
Jane Hinkley
Non-executive Independent Director
Appointed to the Board 3 December 2012
Nine years on the Board
–
Proven track record of managing complex
global trading businesses
–
Qualied Chartered Accountant, with
signicant nancial and operational
experience in large multinational companies
–
Leadership and global management skills
Current external appointments
None
Career experience
Jane is a Chartered Accountant and was
Managing Director of Navion Shipping AS for
three years until 2001. Prior to this, she spent her
executive career as Chief Financial Ofcer and
Managing Director of Gotaas-Larsen Shipping
Corporation. She was previously Chairman of
Teekay GP LLC, a Non-executive Director and
Chairman of the Remuneration Committee of
Premier Oil plc, and a Non-executive Director
of Revus Energy ASA.
A
N
R
N
A
N
R
A
N
R
E
A
N
R
Key to Board Committee membership
A
N
R
N
Engagement with the workforce
E
Non-executive Director responsible
for overseeing engagement with
the workforce.
* Cevian Capital is a shareholder of Vesuvius plc
and, at 3 March 2022, held 21.11% of Vesuvius’
issued share capital.
105
Our business Our performance Sustainability
Governance Financial Statements
Group Executive Committee
Guy Young
Chief Financial Ofcer
Six years with the Group
For biographical details please
see the Board of Directors on
page 104.
Patrick André
Chief Executive
Six years with the Group
For biographical details, please
see the Board of Directors on
page 104.
Thiago Avelar
President, Advanced Refractories
Three years with the Group
Appointed President, Advanced
Refractories on 1 January 2020.
Thiago joined Vesuvius in February
2019 as Regional VP Steel, South
America, where he was responsible
for Vesuvius’ Steel Operations in
South America. Prior to joining
the Group, he worked for RHI
Magnesita and ArcelorMittal in
various technical and marketing
roles based in Europe and Brazil.
Thiago is based in London, UK.
Agnieszka Tomczak
Chief HR Ofcer
Three years with the Group
Appointed as Chief HR Ofcer in
October 2018. Agnieszka has
over 25 years of senior leadership
experience in multinational
companies spanning various
business sectors and industries.
Prior to joining Vesuvius, she spent
12 years at ICI, which was
subsequently acquired by
AkzoNobel, in regional and
global HR roles.
Agnieszka is based in London, UK.
Karena Cancilleri
President, Foundry
Two years with the Group
Appointed President, Foundry in
October 2019. Karena joined the
Group from Beaulieu International
Group, where she served for six
years as VP Engineered Products
and latterly President Engineered
Products. She has a broad
breadth of managerial experience
spanning various international
leadership roles in companies
such as FiberVisions, Kraton
Corporation and Shell.
Karena is based in London, UK.
Henry Knowles
General Counsel and
Company Secretary
Eight years with the Group
Appointed as General Counsel and
Company Secretary in September
2013. Prior to joining Vesuvius,
Henry spent eight years at Hikma
Pharmaceuticals PLC, a generic
pharmaceutical manufacturer
with signicant operations in the
Middle East, North Africa and
the US where he held the roles of
General Counsel and Company
Secretary. Henry is also responsible
for the Group’s Intellectual
Property function.
Henry is based in London, UK.
Pascal Genest
President, Flow Control
One year with the Group
Appointed President, Flow Control
in January 2021. Pascal joined the
Group from GFG Alliance where he
held the position of CEO Liberty
Ostrava in the Czech Republic.
Prior to this he was CEO of SULB
in Bahrain. Pascal has more than
15 years’ experience working in
the steel industry, mainly with
ArcelorMittal. He has also worked
in consulting, in private equity and
in the aluminium industry.
Pascal is based in London, UK.
Patrick Bikard
President, Operations
and Technology
14 years with the Group
Appointed President, Operations in
January 2014, with responsibility
for Technology since 2019.
He was previously Vice President
for Manufacturing, QHSE,
Engineering and Purchasing and,
prior to joining Vesuvius, he held
senior operational roles at Renault,
Alstom and Faurecia.
Patrick is based in Ghlin, Belgium.
106
Vesuvius plc
Annual Report and Financial Statements 2021
Dear Shareholder,
On behalf of the Board, I am delighted to present the 2021
Corporate Governance Statement. The Board of Vesuvius plc is
committed to maintaining high standards of governance and to
continuous improvement to reect best practice. This Statement
provides investors and other stakeholders with an annual insight
into the governance activities of the Board and its Committees.
It describes how the Group has complied with the Principles of the
UK Corporate Governance Code during 2021, except where we
considered it more natural for us to describe the application of
a Principle elsewhere in this Annual Report. The table on page 108
signposts where detailed information on each section of the
Code (and associated Principles) can be found.
During 2021, the Nomination Committee gave signicant focus to
Board succession planning, overseeing the further strengthening
of the Board with the appointment of Dinggui Gao as a new
Non-executive Director on 1 April 2021. In addition, and led by
the Senior Independent Director, Douglas Hurt, the Committee
commenced the process to identify my successor. I am pleased
to report that this process is progressing well.
During the year, the Nomination Committee also continued its
work reviewing the pipeline of talent below Board level, to ensure
that we maintain a pipeline of talented individuals to ll future
leadership positions.
In 2021, the Remuneration Committee welcomed Kath Durrant as
the new Chair, replacing Jane Hinkley who remains on the Board
as an independent Non-executive Director. Kath commenced
her tenure with a review of the Group’s executive remuneration
arrangements. She met with Board members as well as members
of the senior management team to gather their perspectives on
remuneration at Vesuvius. She undertook a detailed analysis of
whether pay and performance at Vesuvius have been aligned
over recent years and how executive pay levels compare to the
market. The ndings of this review will aid preparations for our
2023 Remuneration Policy submission. In the meantime, the
Remuneration Committee resolved to make modest changes to
the incentive structure in 2022, primarily focused on updating the
performance conditions for the Annual Incentive and Vesuvius
Share Plan. More details about these changes and the other
work undertaken by the Committee in 2021 can be found in the
Directors’ Remuneration Report.
After handing over her stewardship of the Remuneration
Committee, the Directors were very pleased that Jane Hinkley
undertook to remain on the Board. Given her tenure, the Board
considered whether she continued to display the independence
of thought and constructive challenge to management required
from her role. After careful review, we resolved that Jane
continues to satisfy the criteria for independence.
In light of the ongoing impact of the COVID-19 pandemic, the
Audit Committee continued to carefully monitor the Group’s
nancial situation throughout 2021, undertaking particularly
detailed analysis of the Group’s impairment assessments and
the going concern and viability statements. In addition, the
Committee again spent time focusing on the Group’s TCFD
compliance, and cyber security measures, as well as receiving
updates throughout the year on the implementation of changes
to the Group’s nance operating model and internal controls.
As detailed elsewhere in this report, the Directors take their
responsibility to engage with the workforce seriously as a key part
of their role. A number of site visits were conducted by the Board
during 2021, enabling the Board to meet management and staff
face-to-face, conduct ‘town hall’ meetings to receive direct
feedback from our people, and explain the alignment of executive
remuneration with wider Company pay policies. As
COVID
-19
travel restrictions hopefully recede further in 2022, the Board will
continue with this critical part of its role.
The Board’s formal evaluation process for 2021 was externally
facilitated by the corporate advisory rm, Lintstock. Overall,
the Board was considered to be diverse and seen to operate
effectively with an open culture. The Non-executive Directors
were deemed to have provided effective support and constructive
challenge in their interactions with management and Board
relationships were rated positively overall. The evaluation
highlighted a number of ongoing Board priorities, including a
continued focus on the development of the Group’s Sustainability
strategy and its integration into business planning, and ongoing
work to develop robust succession plans for the Executive
Directors and GEC members. The Board is progressing these
in 2022.
Yours sincerely
John McDonough CBE
Chairman
3 March 2022
Corporate Governance Statement
In this section
Board leadership and Company purpose on
p108
Division of responsibilities on
p112
Audit Committee report on
p117
Nomination Committee report on
p125
Directors’ Remuneration Report on
p130
Also see:
Group’s statement of purpose on
p1
Strategic Report on
p1–101
107
Our business Our performance Sustainability
Governance Financial Statements
Board Leadership and Company Purpose
The Board is responsible for leading the Group in an efcient and
entrepreneurial manner, establishing the Group’s purpose, values
and strategy and satisfying itself that these and the Group’s
culture are aligned. It focuses primarily on strategic and policy
issues and is responsible for ensuring the long-term sustainable
success of the Group. It sets the Group’s strategy, oversees the
allocation of resources and monitors the performance of the Group.
It is responsible for effective risk assessment and management.
In performance of these duties, the Board has regard to the
interests of the Group’s key stakeholders and is cognisant of the
potential impact of the decisions it makes on wider society.
Purpose
Vesuvius’ purpose is to be a global leader in molten metal ow
engineering and technology, servicing process industries
operating in challenging high-temperature conditions. We think
beyond today to create the innovative solutions that will shape the
future for everyone. We help our customers make their industrial
processes safer, more efcient and sustainable. The Group aims
to deliver sustainable, protable growth, providing its shareholders
with a superior return on their investment, whilst providing each of
its employees with a safe workplace where they are recognised,
developed and properly rewarded.
Corporate Governance Statement
continued
Board Report
2018 UK Corporate Governance Code – Information Availability
Board
Leadership
and Company
Purpose
The Corporate Governance statement (CG Statement) on pages 107–153 gives information on the Group’s
compliance with the Principles relating to the Board’s Leadership and Company Purpose. More detailed
information on:
–
the Group’s statement of purpose can be found on page 1
–
the Group’s strategy, resources and the indicators it uses to measure performance can be found on
pages 14 and 15, 20 and 21, and 38 and 39, respectively
–
the Group’s engagement with stakeholders and the Group’s Section 172(1) Statement is contained in the
Section 172(1) Statement and Stakeholder Engagement section on pages 22–28
–
the Group’s approach to workforce matters can be found in the ‘Our people’ section on pages 82–96,
with further details of the Group’s approach to employee involvement and engagement contained in the
Section 172(1) Statement on page 28
Details of the Group’s framework of controls is contained in the Audit Committee report on pages 120–122
of the CG Statement and in the Risk, viability and going concern section on pages 31 and 32.
Division of
Responsibilities
The CG Statement describes the structure and operation of the Board. The Nomination Committee report,
describes on pages 128 and 129, the process the Company conducts to evaluate the Board, to ensure that it
continues to operate effectively, that individual Directors’ contributions are appropriate and that the
oversight of the Chairman promotes a culture of openness and constructive yet challenging debate.
Composition,
Succession
and Evaluation
Details of the skills, experience and knowledge of the existing Board members can be found in the Board
biographies contained on pages 104 and 105. Information on the Board’s appointment process and
approach to succession planning and Board evaluation is contained in the Nomination Committee report
on pages 125–129 of the CG Statement.
Audit, Risk
and Internal
Control
Information on the policies and procedures the Group has in place to monitor the effectiveness of the Group’s
Internal and External Audit functions, and the integrity of the Group’s nancial statements is contained in the
Audit Committee report on pages 117–124 of the CG Statement, along with an overview of the procedures in
place to manage risk and oversee the internal control framework. Further information on the Group’s approach
to risk management is contained in the Risk, viability and going concern section of the Strategic Review
on pages 29–35. The Board believes the 2021 Annual Report to be a fair, balanced and understandable
assessment of the Company’s position and prospects. A description of the Audit Committee’s work in
enabling the Board to reach this conclusion is contained in the Audit Committee report on page 120.
Remuneration
The Directors’ Remuneration Report section of the CG Statement describes the Group’s approach to
Directors’ remuneration, including the procedure for developing policy and the Remuneration Committee’s
discretion for authorising remuneration outcomes. Details of linkage of the Directors’ Remuneration Policy
with long-term strategy is contained on pages 131 and 132 and also highlighted on pages 38 and 39 in the
section on Key Performance Indicators.
108
Vesuvius plc
Annual Report and Financial Statements 2021
The Board has identied seven Strategic Objectives for achieving
long-term sustainable success. It is currently pursuing ve
shorter-term key execution priorities, which encapsulate the
Group’s immediate aims, including its strategic focus on
sustainability. Further information on these can be found on
pages 14 and 15. The Board regularly reviews the Group’s
performance against a number of Key Performance Indicators
(KPIs) which provide information on key aspects of the Group’s
nancial and non-nancial performance. This information assists
the Board to assess progress with the execution of the Group’s
strategy and to determine any remedial action that needs to be
taken. Detailed information on the Group’s KPIs can be found
on pages 38 and 39.
The Group has established a framework of controls to enable risk
to be assessed and managed, and further information on this can
be found in the Audit, risk and internal control section on page 116
of this Board Report.
Sustainability
Vesuvius recognises that lasting business success is measured
not only in nancial performance but in the way in which the
Group deals with its customers, business associates, employees,
investors and local communities. Our Sustainability strategy
was launched in 2020. This supports the Group’s key Strategic
Objectives which are focused on creating a better tomorrow
in a protable and sustainable way. To drive change throughout
the Group, the Board has set specic targets focused on ways
in which the Group can improve its impact on our planet, our
communities, our people and our customers. The Board monitors
these and oversees the work of the Sustainability Council in
spearheading new activities to enhance our performance.
Further information can be found in the Sustainability section
on pages 52–101.
Culture
The Board takes seriously its responsibility for shaping and
monitoring the corporate culture of the Group. The Group’s
CORE Values – Courage, Ownership, Respect and Energy –
dene our behaviours across the business and are the practical
representation of the culture we seek to foster, aligning with
the Company’s purpose and strategy, and supporting our
governance and control processes. These Values are prominently
displayed at all sites. Our CORE Values are reinforced in our
performance management systems, which ensures that they
are rmly embedded in our day-to-day conversations and
behaviours. Further detail can be found on page 56.
The CORE Values are supported by the Group’s Code of Conduct
which sets out the standards of conduct expected, without
exception, of everyone who works for Vesuvius in any of its
worldwide operations. The Code of Conduct emphasises the
Group’s commitment to ethical behaviour and compliance with
the law. It also covers every aspect of Vesuvius’ approach to
business, from the way that the Group engages with customers,
employees, its markets and each of its other stakeholders,
to the safety of its employees and places of work. Everyone
within Vesuvius is individually accountable for upholding
these requirements.
The Board seeks to ensure that the Group’s workforce policies and
practices are consistent with the Group’s long-term sustainable
success. Further information about the Group’s remuneration
practices for senior managers can be found in the Directors’
Remuneration Report on pages 130–153, the Group’s approach
to diversity in the Nomination Committee report on page 127,
the Group’s approach to HR matters in the Our people section on
pages 82–96. Information on the Group’s Speak Up condential
employee concern helpline is set out below.
Whistleblowing policy
Speak Up
All Vesuvius employees can speak up
without fear of retaliation, either to Vesuvius
management or via independent channels.
We have implemented a Speak Up
whistleblowing policy, which is under the
responsibility of our Board, and included
in our Code of Conduct. It is available on the
internal Vesuvius website, and communicated
by local language posters in all our locations.
A third-party operated condential Speak
Up Helpline is available 365 days per year,
24 hours per day, to all employees wishing to
raise concerns anonymously or in situations
where they feel unable to report internally.
This independent facility supports online
reporting through a web portal or reporting
by phone or by voicemail. Ensuring global
accessibility, employees can speak with operators
in any of our 29 functional languages.
All reports received are reviewed and, where
appropriate, investigated and feedback is
provided to the reporter via the helpline portal.
Vesuvius’ Speak Up helpline is highlighted
during internal compliance training and new
joiner inductions.
No Vesuvius employee will ever be penalised
or disadvantaged for reporting a legitimate
concern in good faith.
Reports received via Speak Up channels
are managed by the General Counsel and
Compliance Director. When received,
reports are assessed for risk and category
of concern. All reports are considered in line
with a protocol for review, investigation,
action, closure and feedback, independent of
management where necessary, but involving
senior business unit or HR management as
appropriate. For complex issues, formal
investigation plans are drawn up, and support
from external experts is engaged where
necessary. Feedback is recognised as an
important element of the Speak Up process
and we aim to provide an update on all reports
within 28 days of receipt.
In line with good practice, details of the
Group’s Speak Up channels, and the Group’s
approach to addressing such issues, was
recommunicated in 2020. This relaunch
included a recommunication on the channels
available to employees including nominated
individuals at each site who received training in
relation to concerns raised in person at local
sites. We continue to monitor the volume,
geographic distribution and range of reports
made to the Speak Up facility to ascertain not
only whether there are signicant regional
compliance concerns, but also whether there
are countries where access to this facility is less
well understood or publicised. During 2021,
the Board monitored and oversaw the Group’s
procedures for reporting allegations of
improper behaviour, and throughout the year
received updates on the nature and volume of
reports received from the condential Speak
Up Helpline, key themes emerging from these
reports and the results of any investigations
undertaken. In 2021, we received 93 reports
(2020: 95) through the Speak Up facility and
94 walk-in reports (2020: 32). Each one of
these was reviewed and, where appropriate,
investigated. Similar to 2020, a substantial
majority of reports received in 2021 related
to HR issues which indicated no compliance
concerns, nor serious breaches of the Code
of Conduct. Of the small number of reports
received that contained allegations of
a breach of our Code of Conduct, thorough
investigations were performed and, where
appropriate, disciplinary action was taken,
including individuals leaving the Group as
a result.
109
Our business Our performance Sustainability
Governance Financial Statements
During the year, the Board’s assessment of the Group’s culture
focused on the Group’s:
(1) Adherence to the CORE Values –
The Board focused on
ensuring that there was a consistent culture across the Group,
underpinned by the CORE Values. The Board continued to receive
regular feedback on the Group’s response to the COVID-19
pandemic, and the efforts being made to support employees,
customers and communities throughout the Group. During site
visits, the Directors focused on the extent to which the Values are
published, understood and motivate employee behaviour, and
reported on their individual ndings to the Board. Towards the
end of the year, nominations were once again sought for the
Group’s Living The Values Awards. The Board was delighted that
there were almost 1,000 nominations, showcasing examples of
individuals and teams going the ‘extra mile’ to live the CORE
Values. Members of the Group Executive Committee presented
both regional and global awards as part of the process.
(2) Commitment to safety
–
At each meeting during the year,
the Board received an update on the health and well-being of
the Group’s employees. The Board received regular updates on
the Group’s performance against safety targets, and a thorough
analysis of all Lost Time Incidents – all of which were reported
in detail at the next Board meeting. In addition, the Board
received biannual reports on the progress of the Group’s
safety programmes. The Directors used individual site visits to
assess each site’s commitment to safety, and the Remuneration
Committee set the Chief Executive a specic safety target as
part of his personal objectives for the Annual Incentive Plan.
A core tenet of the Group’s Sustainability initiative is a focus on
ensuring the Group affords a safe working environment for all its
employees. A more challenging Group safety target of fewer than
one lost time injury per million hours worked was implemented for
2021. This is equivalent to an average of less than two lost time
work-related injuries or illnesses per month.
(3) Entrepreneurship
–
As part of the Board’s rolling agenda, the
Board received reports from each of the business unit Presidents
on their business’s strategy, new commercial initiatives and future
technology trends. These were complemented by a presentation
from the President, Operations and Technology on R&D activities
throughout the Group, including the process of new product
launches. The Board also received reports on the Group’s
progress on innovation as part of the quarterly reporting on
strategic progress.
(4) Transparency
–
During the early part of the year, the Board
was cognisant of the impact that severely reduced travel had on
opportunities in the organisation for face-to-face interactions,
with Board meetings again taking place online. As travel restrictions
eased, the Board was once again able to undertake individual
and collective site visits to meet employees face-to-face.
The engagement and openness of the employees the Board met,
both in person and virtually over the course of the year, was assessed
in terms of the Group’s culture. These rst-hand reviews were
supported by the Directors’ review of the output of the Group’s
Speak Up processes. The Audit Committee sought qualitative
feedback from External and Internal Audit on how transparent/
engaged managers had been during audit interactions.
(5) Customer focus
–
The Chief Executive undertook customer
visits where this was possible, and also held virtual meetings with
customers in 2021. As travel restrictions eased the Board was
able to incorporate a customer visit into its Vesuvius site visit
programme during the latter part of the year. A continued critical
focus of the Group’s response to the pandemic and associated
supply chain impacts, has been on continuity of supply to
customers. The Board received regular reports on the impact of
the pandemic on customer service and the state of the Group’s
markets. The Board also received regular updates on quality
performance; these were supported by a full annual presentation
on the Group’s ongoing initiatives on quality and a review at each
Board meeting of specic quality issues. At each Board meeting,
the Board also considered the state of the Group’s markets and
the associated customer developments.
(6) Diversity and respect for local cultures
–
During 2021, the
Board, through the work of the Nomination Committee, focused
on progress with the achievement of the Group’s gender diversity
target seeking 30% female representation in Top Management
(Group Executive Committee plus key direct reports) by 2025.
Going forward, the Board has resolved to expand the Group to
which the gender diversity target applies for 2022, to focus on
the Senior Leadership Group of the Company which comprises
c. 160 individuals.
In 2021, the Board also reviewed the results of the employee
engagement survey and subsequent management actions to
support its diversity initiatives.
Corporate Governance Statement
continued
110
Vesuvius plc
Annual Report and Financial Statements 2021
The usual extensive schedule of individual site visits undertaken by
the Executive and Non-executive Directors was again somewhat
curtailed in 2021 by COVID-19-related travel restrictions.
Towards the latter part of the year, the Chairman and each of
the Non-executive Directors were able to visit a number of sites
including Charlotte, Cleveland and Pittsburgh in the US, Krakow
and Skawina in Poland, Borken in Germany, Ghlin in Belgium
and Suzhou in China. The Non-executive Directors also held a
‘virtual’ Board visit with senior managers in China, India and the
US during the year to hear more about the activities of the Group
there. The visits and calls provided the Board with greater clarity
on local organisation and management, along with providing
updates on business performance. During the visits the Directors
were able to interact with a cross-section of employees, from
various functions and organisational levels. At most sites ‘town
hall’ meetings were held, providing the Non-executive Directors
with the opportunity to engage with the workforce to explain
the function of the Board and also to explain how executive
remuneration aligns with wider Company pay policies.
These meetings also gave the Non-executive Directors the
opportunity to hear the views of employees and answer their
questions about the Company. The Directors engaged in
rst-hand discussions on culture and purpose, providing direct
feedback to the Board on their perceptions of each site and
potential areas for improvement, alongside highlighting
examples of best practice that could be shared more widely.
Section 172 duties
The Directors are cognisant of the duty they have under Section
172 of the Companies Act 2006, to promote the success of the
Company over the long term for the benet of shareholders as
a whole, having regard to a range of other key stakeholders.
In performance of its duties throughout the year, the Board has
had regard to the interests of the Group’s key stakeholders and
remained cognisant of the potential impact on these stakeholders
of the Group’s activities. The effects of business decisions on the
broader stakeholder group continued to be brought into sharp
focus by the impact of the pandemic. Details of the Board and
the Company’s engagement with stakeholders during the year
can be found in the Section 172(1) Statement on pages 22–28.
The Board is committed to communicating with shareholders
and other stakeholders in a clear and open manner and seeks
to ensure effective engagement through the Company’s
regular activities.
The Company undertakes an ongoing programme of meetings
with investors, which is managed by the Investor Relations team.
The majority of meetings with investors are led by the Chief
Executive and the Chief Financial Ofcer. In advance of the
2021 AGM, we wrote to our largest shareholders inviting
discussion on any questions they might like to raise and making
the Chairs of the Board, the Audit Committee and the Remuneration
Committee available to meet them should they so wish. In
addition, the Chair of the Remuneration Committee wrote to
our largest shareholders and key governance agencies early
this year, to provide additional detail on the Group’s executive
remuneration proposals for 2022 and invite further engagement.
Responses were received from the majority of shareholders
and governance agencies, and further information provided
as requested. As a result of this dialogue, the Remuneration
Committee concluded that their proposals were well supported
and proceeded to implement them. Further detail is contained
in the Directors’ Remuneration Report on page 133.
Statement on compliance with the UK Corporate
Governance Code
Save as set out for Provisions 19 and 38 below, the Company was
fully compliant with the Principles and Provisions of the 2018 UK
Corporate Governance Code (the ‘Code’) for the year ended
31 December 2021. A copy of the Code can be found on the
FRC website at: https://www.frc.org.uk/directors/corporate-
governance-and-stewardship/uk-corporate-governance-code.
Provision 19:
John McDonough CBE completed nine years’
service as Chairman of the Board on 31 October 2021. During
the year the Nomination Committee commenced the process
to search for a new Chairman. The search is well advanced.
On appointment of a new Chair, John McDonough will step
down from the Board.
Provision 38:
The Company has implemented plans to align
the level of pension allowance for Executive Directors with that
applicable to the majority of the workforce. Our incumbent
Directors’ pension contributions were frozen at the 1 January
2020 amount and will be reduced to 17% at the end of 2022,
being the level of the majority of the workforce. Further details
can be found on page 145.
111
Our business Our performance Sustainability
Governance Financial Statements
Division of responsibilities
The Board currently comprises eight Directors – the Non-
executive Chairman, John McDonough CBE; the Chief Executive,
Patrick André; the Chief Financial Ofcer, Guy Young; and ve
Non-executive Directors, Kath Durrant, Dinggui Gao, Friederike
Helfer, Jane Hinkley and Douglas Hurt. Douglas Hurt is the
Senior Independent Director. Henry Knowles is the Company
Secretary. Dinggui Gao joined the Board on 1 April 2021.Holly
Koeppel and Hock Goh also served as Non-executive Directors
until they stepped down from the Board on 12 May 2021, at the
close of the AGM.
The Board considers that, for the purposes of the UK Corporate
Governance Code, 57% of the Board – four of the current
Non-executive Directors (excluding the Non-executive Chairman),
namely Kath Durrant, Dinggui Gao, Jane Hinkley and Douglas
Hurt, are independent of management and free from any
business or other relationship which could affect the exercise
of their independent judgement.Jane Hinkley continues to be
regarded as independent despite having completed nine years
of service on the Board on 3 December 2021, as she continues to
operate with an independent spirit and exhibits robust challenge
at Board and Committee meetings.
Friederike Helfer is a Partner of Cevian Capital, which continues
to hold 21.11% of Vesuvius’ issued ordinary share capital. As a
result Friederike Helfer is not considered to be independent.
The Chairman satised the independence criteria on his
appointment to the Board. The Board and its Committees have
a wide range of skills, experience and knowledge, and further
details of each Director’s individual contribution in this regard
can be found in their biographical details on pages 104 and 105.
The Chairman and Chief Executive
The division of responsibilities between the Chairman and the
Chief Executive is set out in writing. These were reviewed during
the year as part of the Company’s annual corporate governance
review. They are available to view on the Company’s website:
www.vesuvius.com.
Division of responsibilities
The Board
Responsible for Group strategy, risk
management, succession and policy
issues. Sets the purpose, Values and
culture for the Group. Monitors the
Group’s progress against the targets set
Chairman
Provides leadership and guidance for
the Board, promoting a high standard
of corporate governance. Sets the
Board agenda and chairs and
manages meetings. Independent on
appointment, he is the link between the
Executive and Non-executive Directors
Chief Executive
Develops strategy for review and
approval by the Board. Directs,
monitors and manages the operational
performance of the Company.
Responsible for the application of
Group policies, implementation of
Group strategy and the resources
for their delivery. Accountable to the
Board for Group performance
Non-executive Directors
Exercise a strong, independent voice,
constructively challenging and
supporting the Executive Directors.
Scrutinise performance against
objectives and monitor nancial
reporting. Monitor and oversee risks
and controls, determine Executive
Director remuneration and manage
Board succession through their
Committee responsibilities
The Non-executive Directors meet
at least twice a year without the
Executive Directors being present
Company Secretary
Advises the Chairman on governance,
together with updates on regulatory
and compliance matters. Supports the
Board agenda with clear information
ow. Acts as a link between the Board
and its Committees and between
Non-executive Directors and senior
management
Corporate Governance Statement
continued
Senior Independent Director
Acts as a sounding board for the
Chairman, an alternative contact for
shareholders and an intermediary
for other Non-executive Directors.
Leads the annual evaluation of the
Chairman and recruitment process
for the Chairman’s replacement,
when required
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Audit Committee
To monitor the integrity of
nancial reporting and to
assist the Board in its review
of the effectiveness of the
Group’s internal controls and
risk management systems
Chair
Douglas Hurt
Membership
All independent
Non-executive Directors
Remuneration Committee
To determine the remuneration
policy for the Executive
Directors and set the
appropriate remuneration
for the Chairman, Executive
Directors and senior
management
Chair
Kath Durrant
Membership
All independent
Non-executive Directors
Nomination Committee
To advise the Board on
appointments, retirements
and resignations from the
Board and its Committees and
to review succession planning
and talent development for
the Board and senior
management
Chair
John McDonough, Chairman
(except when considering his
own succession, in which case
the Committee is chaired by the
Senior Independent Director)
Membership
Chairman and the
Non-executive Directors
Governance Committees
Finance Committee
To approve specic funding
and treasury-related matters
in accordance with the Group’s
delegated authorities or as
delegated by the Board
Chair
John McDonough, Chairman
Membership
Chairman, Chief Executive,
Chief Financial Ofcer and
Group Head of Corporate
Finance
Administrative Committees
In addition, the Board delegates certain responsibilities to a Finance
Committee and Share Scheme Committee, which operate in
accordance with the delegated authority agreed by the Board
Share Scheme Committee
To facilitate the administration
of the Company’s share
schemes
Chair
Any Board member
Membership
Any two Directors or any two
Directors and the
Company Secretary
Board
The Board
The Board has a formal schedule of matters reserved to it and
delegates certain matters to its Committees. It is anticipated that
the Board will convene on seven occasions during 2022, holding
ad hoc meetings to consider non-scheduled business if required.
Board Committees
The principal governance Committees of the Board are the Audit,
Nomination and Remuneration Committees. Each Committee
has written terms of reference which were reviewed during the
year. These terms of reference are available to view on the
Company’s website: www.vesuvius.com.
Committee composition is set out in the relevant Committee
reports. No one, other than the Committee Chairman and
members of the Committee, is entitled to participate in meetings
of the Audit, Nomination and Remuneration Committees.
However, as detailed in the Committee reports, where the agenda
permits, other Directors and senior management regularly attend
by invitation, supporting the operation of each of the Committees
in an open and consensual manner.
The interactions in the governance process are shown in the
schematic below.
Group Executive Committee
The Group also operates a Group Executive Committee (GEC),
which is convened and chaired by the Chief Executive and assists
him in discharging his responsibilities. The GEC comprises the
Chief Executive, Chief Financial Ofcer, the business unit
Presidents, the Chief HR Ofcer, the President Operations and
Technology and the General Counsel/Company Secretary.
The GEC continued its formal schedule of ve meetings and two
R&D reviews during 2021, and also, in response to the demands
of the pandemic held weekly, or later in the year bi-weekly, virtual
meetings to discuss the Group’s business activities.
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Governance Financial Statements
2021 Board programme
The Board discharges its responsibilities through an annual
programme of meetings.
At each of the regularly scheduled meetings, a number of
standard items were considered.
These included:
–
Directors’ duties, including those in respect of s172, and
conicts of interest
–
Minutes of the previous meeting and matters arising
–
Reports from the Chief Executive, the Chief Financial Ofcer
and the General Counsel and Company Secretary on key
aspects of the business
In 2021, the Board focused on key areas of strategy, performance and governance, including the matters outlined below:
Strategy
–
Reviewing M&A opportunities and overseeing the negotiation of the acquisition terms for the assets of
Universal Refractories, Inc.
–
Receiving and reviewing reports on strategy from the Flow Control, Advanced Refractories, Sensors &
Probes and Foundry business units
–
Reviewing and approving signicant items of capital expenditure
–
Receiving and reviewing regular reports from the Chief Executive (CEO) on business highlights and the
implementation of the Group’s strategic objectives
–
Reviewing the progress of the Group’s Sustainability strategy, including receiving regular updates on the
Group’s quality, health, safety and environmental objectives and progress with the preparation of the
Group’s TCFD compliance
–
Participation in a two-day off-site review of strategy presented by the CEO, CFO and the three main
business unit Presidents and the Company’s key nancial advisers
–
Receiving and considering reports on the Group’s HR, Purchasing, IT, tax and treasury strategies, legal and
compliance activities and the management of the Group’s key pension liabilities
–
Receiving and considering a progress report on the Group’s R&D strategy and objectives
–
Reviewing the Group’s nancing structure
Performance
–
Receiving regular business reports from the CEO, including information on the ongoing impact of
COVID-19 on the Group, its employees and customers
–
Reviewing the measures being taken to mitigate the impact of raw material cost increases and supply
chain disruption
–
Receiving regular reports on the Group’s nancial performance against key indicators, including each of
the Group’s KPIs
–
Receiving regular reports on progress against the Group’s sustainability targets and regular updates from
the CEO on the performance of the Group’s businesses
–
Receiving regular safety reports setting out performance against key indicators and summaries of the
investigations conducted after any serious safety incident
–
Receiving regular reports on performance against product quality targets
–
Scrutinising the Group’s nancial performance and forecasts
–
Reviewing and agreeing the annual budget and nancial plans
–
Approving trading updates, and preliminary and half-year results
Governance
–
Receiving regular reports from the Board Committees
–
Approving the Annual Report and Notice of AGM
–
Approving the payment of the interim dividend, and approving the recommendation of the payment of the
nal dividend subject to shareholder approval
–
Approving the appointment of Dinggui Gao as a new Non-executive Director and overseeing the process
to identify a new Board chair
–
Completing an evaluation of the Board and Committees’ performance and regularly reviewing progress
against the improvement actions identied in the 2020 evaluation
–
Reviewing the Group’s internal controls, risk management practices and risk appetite, monitoring the
Group’s key risks and approving the Group’s risk register
–
Reviewing and approving the Group’s Modern Slavery Statement
–
Receiving regular updates on corporate governance and regulatory developments
–
Completing a formal annual review of the Group’s governance arrangements
–
Reviewing information received through the Group’s Speak Up reporting processes
–
Renewing the Group’s delegated authorities
–
Receiving reports from the Company’s brokers on market issues and from the CEO and CFO on all investor
meetings and feedback
Corporate Governance Statement
continued
114
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Annual Report and Financial Statements 2021
Information and support
The Board ensures that it receives, in a timely manner, information
of an appropriate quality to enable it adequately to discharge its
responsibilities. Papers are provided to the Directors in advance
of the relevant Board or Committee meeting to enable them to
make further enquiries about any matters prior to the meeting
should they so wish. This also allows Directors who are unable to
attend to submit views to the relevant Chairperson in advance of
the meeting.
In addition to the formal Board processes, the Chief Executive
provides written updates on important Company business issues
between meetings, and the Board is provided with a regular
monthly report of key nancial and management information,
including information on safety and quality performance.
Regular updates on shareholder matters are provided to the
Directors, who also receive copies of analysts’ notes issued on
the Company. For the distribution of all information, Directors
have access to a secure online portal, which contains a reference
section containing relevant background information.
All Directors have access to the advice and services of the
Company Secretary.
There is also an agreed procedure in place for Non-executive
Directors, in the furtherance of their duties, to take independent
legal advice at the Company’s expense. The procedure was not
utilised during the year under review.
Directors’ conicts of interest
The Board has established a formal system to authorise situations
where a Director has an interest that conicts, or may possibly
conict, with the interests of the Company (situational conicts).
Directors declare situational conicts so that they can be
considered for authorisation by the non-conicted Directors.
In considering a situational conict, these Directors act in the way
they consider would be most likely to promote the success of the
Company and may impose limits or conditions when giving
authorisation, or subsequently, if they think this is appropriate.
The Company Secretary records the consideration of any conict
and any authorisations granted. The Board believes that the
approach it has in place for reporting situational conicts continues
to operate effectively. No situational conicts were presented to
the Board for authorisation during the year under review.
Board and Committee attendance
The attendance of Directors at the Board meetings and at meetings of the principal Committees of which they are members held
during 2021 is shown in the table below. The maximum number of meetings in the period during which the individual was a Board or
Committee member is shown in brackets.
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
%
attendance
Chairman
John McDonough CBE
9 (9)
– –
5 (5)
100%
Executive Directors
Patrick André
9 (9)
– – –
100%
Guy Young
9 (9)
– – –
100%
Non-executive Directors
Kath Durrant
9 (9)
4 (5) 5 (5) 5 (5)
96%
Dinggui Gao
1
7 (7)
3 (3)
4 (4) 4 (4)
100%
Hock Goh
2
3 (3)
2 (2)
1 (1)
1 (2)88%
Friederike Helfer
9 (9)
– –
5 (5)
100%
Jane Hinkley
9 (9)
5 (5) 5 (5) 5 (5)
100%
Douglas Hurt
9 (9)
5 (5) 5 (5) 5 (5)
100%
Holly Koeppel
2
3 (3)
2 (2)
1 (1)
1 (2)88%
1. Dinggui Gao was appointed to the Board on 1 April 2021 and the table reects the number of Board and Committee meetings that he could attend following
his appointment.
2. Hock Goh and Holly Koeppel stood down from the Board at the close of the 2021 AGM on 12 May 2021. The table reects the number of Board and Committee
meetings that they could attend prior to their departures.
Kath Durrant was unable to attend one Audit Committee
meeting, and Hock Goh and Holly Koeppel one Nomination
Committee meeting during the year due to clashes with other
professional responsibilities that had been previously notied
to the Chairman. Dinggui Gao, Hock Goh and Holly Koeppel
attended meetings virtually as they were precluded from
participating in person due to travel restrictions between the UK
and their countries of residence, being China, Australia and the
US, respectively.
To the extent that Directors were unable to attend scheduled
meetings, they received the papers in advance and relayed
their comments to the Chairman of the relevant Committee for
communication at the meeting. The Committee Chairs followed
up after the meeting in relation to the decisions taken.
The Chairman and Non-executive Directors each have a letter
of appointment which sets out the terms and conditions of
their directorship.
An indication of the anticipated time commitment is provided
in recruitment role specications, and each Non-executive
Director’s letter of appointment provides details of the meetings
that they are expected to attend, along with the need to
accommodate travelling time. Non-executive Directors are
required to set aside sufcient time to prepare for meetings,
and regularly to refresh and update their skills and knowledge.
Copies of all contracts of service or, where applicable, letters of
appointment of the Directors are available for inspection during
business hours at the registered ofce of the Company and are
available for inspection at the location of the Annual General
Meeting (AGM) for 15 minutes prior to and during each AGM.
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Governance Financial Statements
All Non-executive Directors have agreed to commit sufcient
time for the proper performance of their responsibilities,
acknowledging that this will vary from year to year depending on
the Group’s activities, and will involve visiting operational and
customer sites around the Group. The Chairman in particular
dedicates a signicant amount of time to Vesuvius in discharging
his duties.
Directors are expected to attend all scheduled Board and
Committee meetings and any additional meetings as required.
Each Director’s other signicant commitments are disclosed to
the Board during the process prior to their appointment and they
are required to notify the Board of any subsequent changes.
The Company has reviewed the availability of the Chairman and
the Non-executive Directors to perform their duties and considers
that each of them can, and in practice does, devote the necessary
amount of time to the Company’s business.
Composition, evaluation and succession
Appointment and replacement of Directors
The Company’s Articles of Association specify that Board
membership should not be fewer than ve nor more than 15
Directors, save that the Company may, by ordinary resolution,
from time to time, vary this minimum and/or maximum number of
Directors. Directors may be appointed by ordinary resolution or
by the Board. The Board may appoint one or more Directors to
any executive ofce, on such terms and for such period as it thinks
t, and it can also terminate or vary such an appointment at any
time. The Articles specify that, at every AGM, any Director who
has been appointed by the Vesuvius Board since the last AGM
and any Director who held ofce at the time of the two preceding
AGMs, and who did not retire at either of them, shall retire from
ofce. However, in accordance with the requirements of the
Code, all the Directors who wish to continue to serve on the
Board, will offer themselves for re-election at the 2022 AGM.
The Board believes that each of the current Directors is effective
and demonstrates commitment to his or her respective role.
Accordingly, the Board recommends that shareholders approve
the resolutions to be proposed at the 2022 AGM relating to the
re-election of the Directors. The biographical details of the
Directors offering themselves for re-election, including details of
their other directorships and relevant skills and experience, will be
set out in the 2022 Notice of AGM. The biographical details of the
Directors are also set out on pages 104 and 105.
Recommendations for appointments to the Board and rotation
of the Board are made by the Nomination Committee. The
Nomination Committee is also responsible for overseeing the
maintenance of an effective succession plan for the Board and
senior management. Further information on the activities of the
Nomination Committee is set out in the Nomination Committee
report on pages 125–129.
A comprehensive induction programme is available to new Directors.
The induction programme is tailored to meet the requirements of
the individual appointee and explains the dynamics and operations
of the Group, and its markets and technology. The induction
includes, as a minimum, a series of meetings with key Group
executives and advisers, along with site visits to the Group’s key
strategic sites. During the COVID-19 travel restrictions, Dinggui
Gao’s induction has been limited to site visits in China, virtual
meetings with the Group’s executives and senior management,
and a ‘virtual’ site visit to Vesuvius India. A more comprehensive
plan of personal site visits is planned for 2022.
The Chairman, through the Company Secretary, continues to
ensure that there is an ongoing process to review training and
development needs. Directors are provided with details of
seminars and training courses relevant to their role and are
encouraged and supported by the Company to attend them.
In 2021, regulatory updates were provided as a standing item
at each Board meeting in a Secretary’s Report. External input
on legal and regulatory developments impacting the business
was also given, with specialist advisers invited to the Board
and Committee meetings to provide briengs on topics such as
the changing landscape of Corporate Governance, particularly
the latest FRC consultations and guidance, and material
developments in the legal environment, including trends in M&A,
changes in UK pension legislation and ESG disclosure requirements.
Performance evaluation
The Board carries out an evaluation of its performance and
that of its Committees and individual Directors, including the
Chairman, every year. Details of the evaluation conducted in
2021 can be found in the Nomination Committee report.
Audit, risk and internal control
The Board is responsible for ensuring that policies and procedures
are in place to ensure the independence and effectiveness of
the Internal and External Audit functions. The Audit Committee
assists the Board in reviewing the effectiveness of the Group’s
Internal and External Audit functions, in addition to monitoring
the integrity of the Group’s nancial and narrative statements.
Further information about the work of the Audit Committee
can be found in the Audit Committee report on pages 117–124.
The Board is also responsible for setting the Group’s risk appetite
and ensuring that appropriate risk management systems are in
place. The Audit Committee assists the Board in reviewing the
effectiveness of the system of internal control, including nancial,
operational and compliance controls, and risk management
systems. The Group’s approach to risk management and internal
control is discussed in greater detail on pages 29–33 and the
Group’s principal risks and how they are being managed or
mitigated are detailed on pages 34 and 35. The Viability
Statement which considers the Group’s future prospects is
included on page 33. Risk management and internal control are
also discussed in greater detail in the Audit Committee report.
All of the independent Non-executive Directors serve on both the
Audit and Remuneration Committees. They therefore bring their
experience and knowledge of the activities of each Committee to
bear when considering critical areas of judgement. This means
that, for example, the Directors are able to consider carefully the
impact of incentive arrangements on the Group’s risk prole and
to ensure that the Group’s Remuneration Policy and programme
are structured to align with the long-term objectives and risk
appetite of the Company.
Remuneration
The Directors’ Remuneration Report on pages 130–153 describes
the work of the Remuneration Committee in developing the
Group’s policy on executive remuneration, determining Director
and senior management remuneration, reviewing workforce
remuneration and related policies – including ensuring that these
align with the Group’s Strategic Objectives and culture, and
overseeing the operation of the executive share incentive plans.
Corporate Governance Statement
continued
116
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Annual Report and Financial Statements 2021
Dear Shareholder,
On behalf of the Audit Committee, I am pleased to present
the Audit Committee Report for 2021. The foundation of the
Committee’s work each year is a recurring and structured
programme of activities which are dened in an annual rolling
Audit Committee timetable. The Audit Committee then considers
additional items as matters arise and priorities change. During
2021, the Committee continued to monitor the impact of the
COVID-19 pandemic on the Group’s activities, undertaking
particularly detailed analysis of the Group’s impairment
assessments and the going concern and viability statements,
along with the Group’s TCFD reporting. In addition, the Committee
again spent some time focusing on the Group’s cyber security
measures, as well as receiving updates throughout the year
on the implementation of changes to the Group’s Finance
Operating Model.
The Audit Committee Report describes the work of the
Committee during the year, including its role in monitoring
the integrity of the Company’s nancial statements and the
effectiveness of the internal and external audit processes.
It provides an overview of the signicant issues the Committee
has considered during the year and its material judgements.
It also describes how the Committee fullled its responsibilities
to assist the Board in reviewing the effectiveness of the Group’s
system of internal nancial controls and its internal control and
risk management systems.
Yours sincerely
Douglas Hurt
Chairman, Audit Committee
3 March 2022
The Audit Committee
The Audit Committee comprises all the independent Non-executive
Directors of the Company, who bring a wide range of nancial
and commercial expertise to the Committee’s decision-making
processes. Douglas Hurt is the Senior Independent Director
and Chairman of the Audit Committee. He was the Finance
Director of IMI plc for nine years prior to his appointment and has
worked in various nancial roles throughout his career. Douglas
currently serves as the Chairman of the Audit Committees of
Countryside Partnerships PLC, Hikma Pharmaceuticals PLC and
the British Standards Institution. He is a Chartered Accountant.
This background provides him with the ‘recent and relevant
nancial experience’ required under the Code.
The Code and Financial Conduct Authority Disclosure Guidance
and Transparency Rules also contain requirements for the Audit
Committee as a whole to have competence relevant to the
sector in which the Company operates. Vesuvius’ Non-executive
Directors have signicant breadth of experience and depth of
knowledge on matters related to Vesuvius’ operations, both from
their previous roles and from their induction and other activities
since joining the Vesuvius Board. The Directors’ biographies
on pages 104 and 105 outline their range of multinational
business-to-business experience and expertise in elds such
as engineering, manufacturing, services, logistics and human
resources, as well as nancial and commercial acumen.
Biographies for Hock Goh and Holly Koeppel are available in
the Company’s 2020 Annual Report which can be viewed on our
website: www.vesuvius.com. The Board considers that the Audit
Committee as a whole has competence relevant to Vesuvius’
business sector.
Meetings
The Committee met ve times during 2021. The Committee
has also met twice since the end of the nancial year and prior
to the signing of this Annual Report. The Board Chairman,
the non-independent Non-executive Director, the Chief
Executive, the Chief Financial Ofcer, the Head of Finance,
the Group Head of Internal Audit and the External Auditors
were all invited to each meeting. Other management staff
were also invited to attend as appropriate.
Audit Committee meetings are conducted to promote an open
debate, they enable the Committee to provide constructive
challenge of signicant accounting judgements, and guidance
and oversight to management, to ensure that the business
maintains an appropriately robust control environment.
Between Audit Committee meetings, the Chairman of the
Audit Committee encourages open dialogue between the
External Auditors, the management team and the Group Head
of Internal Audit to ensure that emerging issues are addressed
in a timely manner.
Audit Committee
117
Our business Our performance Sustainability
Governance Financial Statements
Kath Durrant
Dinggui Gao
Joined the Committee on
his appointment to the
Board on 1 April 2021
Hock Goh
Served on the Committee
until his retirement from
the Board on 12 May 2021
Jane Hinkley
Holly Koeppel
Served on the Committee
until her retirement from
the Board on 12 May 2021
The Company Secretary
is Secretary to the
Committee
Douglas Hurt
– Committee Chairman
During the year, as is the Audit Committee’s established practice,
the Committee members met and discussed business and control
matters with senior management during Board presentations.
The Committee also met privately with the Group Head of Internal
Audit and the External Auditors without any executives present.
The outcomes of Audit Committee meetings were reported to
the Board, and all members of the Board received the agenda,
papers and minutes of the Committee.
Statement of compliance with the Competition and Markets
Authority (CMA) Order
The Committee considers that the Company has complied with
the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014 (Article 7.1),
published by the CMA on 26 September 2014, including with
respect to the Audit Committee’s responsibilities for agreeing
the audit scope and fees and authorising non-audit services.
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Annual Report and Financial Statements 2021
Audit Committee
continued
1. During 2021, the Committee’s activities were once again focused on
the impact of COVID-19 on the Group, as well as on the impact on
raw material and freight availability, and ination. The work of
Internal Audit was adapted to accommodate the travel restrictions,
and the Group’s liquidity and cash generation remained under
particular scrutiny. The Committee ensured that despite the
continued changes in working patterns, critical resources in internal
control and compliance functions worked effectively. The work of
the External Auditors was carefully monitored given the continued
use of virtual tools and where appropriate and possible, audit work
was accelerated to reect the potentially longer time frames
for completion.
2. The Committee’s agenda covered the usual standing items –
the review of nancial results, the effectiveness of the Group’s
internal nancial controls, and the review of the internal control
and risk management systems – as well as additional topics,
including updates on cyber security and an in-depth review of
the Group’s European Shared Services function.
3. The Committee continued to receive feedback throughout the
year on the implementation of the new nance operating model.
This continued the transition of the business unit nance functions
from purely accounting to forward-looking business support, with
clearer accountabilities for controlling functions and a focus on
further standardising core processes. The Committee monitored
changes to the structure of nance roles and the roll-out of the
new model.
4. The Audit Committee continued to devote time to ensure that
initiatives to mitigate potential risks and nancial exposure
remained robust and appropriate.
5. The Committee challenged the assumed growth rates and discount
rates used for asset impairment assessments.
6. The Committee considered the Company’s going concern statement
and challenged the nature, quantum and assessment of the signicant
risks to the business model, future performance, solvency and
liquidity of the Group that were modelled as part of the scenarios
and stress testing undertaken to support the viability statement
made by the Company in the Annual Report and Financial
Statements. In particular the Committee examined the criteria
selected for enhanced stress testing, which included an unplanned
drop in customer demand, debt recovery risk due to customer
default, business interruption due to unplanned closure of several
key plants and raw material cost ination. The Committee also
considered the potential effect of a combination of risk factors
occurring at the same time. At the half year the Committee
undertook another detailed look at the Company’s going concern
statement. The going concern and viability statements, which
were also critically reviewed, are contained within the Strategic
Report on page 33.
7. The Committee reviewed the resourcing and delivery of the 2021
Internal Audit plan, monitoring the effect of ongoing COVID-19
travel restrictions and approved the 2022 Internal Audit plan.
The Committee monitored both the responses from and follow-up
by management to Internal Audit recommendations arising during
the year. The Committee discussed at length the signicant issues
raised, the root causes for those issues and the actions being taken
to resolve the issues.
8. The Committee conducted regular, detailed reviews of provisions,
challenging the reasonableness of underlying assumptions and
estimates of costs and the quantum of any related insurance assets.
9. The Committee reviewed the accounting, disclosures and resulting
impacts of the nal buy-in for the UK pension plan. The buy-in did
not impact the underlying terms on which the remaining surplus
asset is deemed recoverable and recognised.
10. The Committee reviewed the accounting for the acquisition of the
business of Universal Refractories, Inc. including determining the
allocation of the purchase price and the identication and valuation
of intangible assets.
11. The Committee reviewed the Group’s work on TCFD reporting
and the assurance received regarding the sustainability KPI data.
12. The Committee reviewed the effectiveness of the Internal and
External Audit processes.
13. The Committee met with Internal and External Audit without
management present and received valuable feedback on a
range of topics.
14. The Committee reviewed the activities being undertaken to prepare
for ling the 2021 annual nancial report in European Single
Electronic Format (ESEF). A dry run tagging the 2020 Annual Report
was undertaken during the year to ensure the Company was ready
to comply with its obligation in 2022.
15. The Committee conducted an evaluation of its performance and
effectiveness, concluding that the Committee continued to work
effectively across all key areas, with meetings remaining well
managed and appropriately resourced.
16. The Committee reviewed and updated its terms of reference.
Activities in 2021
Role and responsibilities
During 2021, the main role and responsibilities of the Committee
continued to be to:
–
Monitor the integrity of the Financial Statements of the
Company and the Group, and any formal announcements
relating to the Group’s nancial performance, reviewing
signicant nancial reporting judgements contained in them
–
Provide advice, as requested by the Board, on whether the
Annual Report and Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for the shareholders to assess the
Group’s position and performance, business model and strategy
–
Review and monitor the effectiveness of the Company’s
internal nancial controls, and internal control and risk
management systems
–
Review procedures for detecting fraud, and systems and
controls for the prevention of bribery and ensure that a
thorough review is carried out of all alleged instances of
fraud notied to the Committee
–
Monitor and review the role and effectiveness of the
Company’s Internal Audit function and audit programme,
ensuring that the function is adequately resourced and
operates free from management or other restrictions
–
Make recommendations to the Board on the appointment,
reappointment and removal of the External Auditors and
negotiate and agree the fees and terms of engagement of
the External Auditors
–
Monitor and review with the External Auditors the ndings of
their work, including key accounting and audit judgements,
how any risks to audit quality were addressed and the External
Auditors’ views of their interactions with senior management
–
Review and monitor the External Auditors’ independence,
objectivity and effectiveness, taking into consideration relevant
law, regulation, the Ethical Standard, other professional
requirements and any FRC audit inspection ndings
–
Oversee the operation of the policy on the engagement of
the External Auditors to supply non-audit services
–
Report to the Board on how the Committee has discharged
its responsibilities
The Committee operates under formal terms of reference
approved by the Board. These were reviewed during the
year and a minor amendment made to update a legislative
reference. They are available to view in the Investors/Corporate
Governance/Board Committees section of the Company’s
website: www.vesuvius.com. Within these terms, the Committee
and its individual members are empowered to obtain outside
legal or other independent professional advice at the cost of
the Company. These powers were not utilised during the year.
The Committee may also secure the attendance at its meetings
of any employee or other parties with relevant experience and
expertise should it be considered necessary.
The Committee members believe that they received sufcient,
relevant and reliable information throughout the year from
management and the Internal and External Auditors to enable
the Committee to fully discharge its responsibilities. The work of
the Audit Committee is further elaborated in the remainder of
this report.
Financial reporting
The Committee fullled its primary responsibility to review the
integrity of the half year and annual Financial Statements and
recommended their approval to the Board.
In forming its views, the Committee assessed:
–
The quality, acceptability and consistency of the accounting
policies and practices
–
The clarity and consistency of the disclosures, including
compliance with relevant nancial reporting standards and
other reporting requirements
–
Signicant issues where management judgements and/or
estimates had been made that were material to the reporting
or where discussions had taken place with the External Auditors
in arriving at the judgement or estimate
–
In relation to the overall Annual Report, whether the Annual
Report and Financial Statements taken as a whole were fair,
balanced and understandable, taking into consideration all
the information available to the Committee
–
The Group’s compliance with the new requirements in respect
of TCFD Reporting, including the assurance received regarding
the sustainability KPI data. The Committee also reviewed and
approved the completed climate-related risk and opportunities
register and the work undertaken by the Group to formulate the
scenario analyses
–
The application of the FRC’s guidance on clear and concise
reporting and the key takeaways from the Thematic Reviews
issued by the FRC throughout the year on themes such as
Interim Results, Going Concern and Viability Statements,
Streamlined Energy and Carbon Reporting and IAS 37 –
Provisions, Contingent Liabilities and Contingent Assets
–
The disclosure and presentation of alternative performance
measures, in view of the guidelines issued by the FRC
The Committee actively deliberated and challenged reports
from the Chief Financial Ofcer and the Head of Finance.
These were well prepared and, for areas of judgement and/or
estimation, set out the rationale for the accounting treatment and
disclosures, and the pertinent assumptions and the sensitivities
of the estimates to changes in the assumptions. The External
Auditors also delivered memoranda for the half-year and
year-end, stating its views on the treatment of signicant issues.
The External Auditors provided a summary for each issue,
including its assessment of the appropriateness of management’s
judgements or estimates.
Signicant issues and material judgements
The Committee considered the following signicant issues in
the context of the 2021 Financial Statements. It identied these
areas to be signicant, taking into account the level of materiality
and the degree of judgement exercised by management.
The Committee resolved that the judgements and estimates
made on each of the signicant issues detailed below were
appropriate and acceptable.
Impairment of intangible assets
The 2021 year-end carrying value of goodwill of £614.2m was
tested against the current and planned performance of the
Steel Flow Control, Steel Advanced Refractories, Steel Sensors &
Probes and Foundry CGUs. The Committee considered the
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Governance Financial Statements
Board-approved medium-term business plans, medium-term
and terminal growth assumptions, as well as the discount
rates used in the assessments. Relevant sensitivities using
reasonably possible changes to key assumptions were evaluated.
The detailed assumptions are provided in Note 17 to the Group
Financial Statements.
Given that the models indicated, even with the application of
reasonable sensitivities to the assumptions, that there remains
signicant headroom between the value in use and the carrying
value, the Committee concurred that no goodwill impairment
charges were required.
Other provisions
The Committee continues to monitor the implications of a number
of potential exposures and claims arising from ongoing litigation,
product quality issues, employee disputes, restructuring, vacant
sites, environmental matters, legacy matter lawsuits, indirect tax
disputes and indemnities or warranties outstanding for disposed
businesses. Due to the long gestation period before settlement
for a number of these issues can be reached, provisioning for
these items requires careful judgement in order to establish a
reasonable estimate of future liabilities. The Committee also
assessed the strength of any insurance coverage for certain of
these liabilities and challenged the accounting treatment for any
amounts deemed to be recoverable from insurers. After due
consideration and challenge, and having considered legal advice
obtained by the Company, the Committee is satised that there
are appropriate levels of provisions set aside to settle third-party
claims and disputes (Note 30 to the Group Financial Statements)
and that adequate disclosure has been made. Where no reliable
estimate of the potential liability can be made for the outcome of
an existing issue, no provision has been made and appropriate
disclosure is included under contingent liabilities (Note 32 to the
Group Financial Statements).
Operating segments for continuing operations
The Committee considered the aggregation of the Steel Flow
Control, Steel Advanced Refractories, and Steel Sensors & Probes
operating segments into the Steel reportable segment, noting the
economic characteristics of these operating segments which
include a similar nature of products, customers, production
processes and margins. The Committee concluded that this
segmentation remained appropriate.
Impairment of investment in subsidiaries
The Committee has also reviewed management’s impairment
analysis of the parent company’s investment in subsidiaries.
Following this review it concurred that no impairment was required.
Dened benet pensions
The Committee carefully reviewed the accounting for, and valuation
of, the UK pension assets, following the purchase by the Trustees
of an insurance contract to match the remaining pension liabilities.
Fair, balanced and understandable reporting
The Committee considered all the information available to it in
reviewing the overall content of the Annual Report and Financial
Statements and the process by which it was compiled and
reviewed, to enable it to provide advice to the Board that the
Annual Report and Financial Statements are fair, balanced and
understandable. In doing so, the Committee ensured that time
was again dedicated to the drafting and review process so that
internal linkages were identied and consistency was tested.
Drafts of the Annual Report and Financial Statements were
also reviewed by a senior executive not directly involved in
the year-end process who reported to the Committee on his
impressions of their clarity, comprehensiveness, and the balance
of disclosure in the document. On completion of the process, the
Committee was satised that it could recommend to the Board
that the Annual Report and Financial Statements are fair,
balanced and understandable.
Risk management and internal controls
As highlighted in the reviews of strategy and principal risks in the
Strategic Report, risk management is inherent in management’s
thinking and is embedded in the business planning processes of
the Group. The Board has overall responsibility for establishing
and maintaining a system of risk management and internal
control, and for reviewing its effectiveness. The Audit Committee
assists the Board in reviewing the effectiveness of the Group’s
system of internal control, including nancial, operational
and compliance controls, and risk management systems.
This framework is consistent with the Code.
In 2021, Committee members fully participated in the Board
review of existing risks and ongoing mitigating actions, further
details of which are given on pages 34 and 35. The Committee
believes that the Group’s process for identifying and understanding
its principal risks and uncertainties remains robust and appropriate.
The Committee considered the Company’s going concern
statement and challenged the nature, quantum and effects of
the combination of the unlikely but signicant risks to the business
model, future performance, solvency and liquidity of the Group.
These were all modelled as part of the scenarios and stress testing
undertaken to support the viability statement. As part of this
review, the Committee considered the Group’s forecast funding
requirements over the next three years and analysed the impact
of key risks faced by the Group with reference to the Group’s debt
covenants; these included stress testing for an unplanned drop in
customer demand, debt recovery risk due to customer default,
business interruption due to unplanned closure of several key
plants and raw material cost ination. The scenarios considered
the impact of multiple risks occurring simultaneously and the
additional mitigating actions that the Group could take. The
Committee noted that the Group’s debt headroom was sufcient
to accommodate the modelled stress scenarios. As a result of
its review, the Committee was satised that the going concern
statement and viability statement had been prepared on an
appropriate basis. The 2021 going concern statement and the
2021 viability statement are contained within the Risk, viability
and going concern section on page 33.
The key features of the Group’s internal control system, which
provides assurance on the accuracy and reliability of the Group’s
nancial reporting, are detailed in the Risk, viability and going
concern section on pages 29–35. During 2021, the Committee
considered the process by which management evaluates internal
controls across the Group. The Group Head of Internal Audit
provided the Committee with a summary overview of the
assurance provided by the Group’s control framework and the
testing of these controls. PwC also reports if there are any signicant
control deciencies identied during the course of their audit.
The Group is made up of several large operating units, but
also many small units in geographically diverse locations.
Consequently, segregation of duties, overlapping access controls
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Annual Report and Financial Statements 2021
Audit Committee
continued
Cyber security
The Board places signicant emphasis on
operational security, of which Information and
Communication Technology and Cyber
awareness are a vital part. Cyber resilience
continues to be a signicant area of focus for
the Group.
Cyber risks are integrated into our wider
risk-management, including forming part
of the Business Continuity Plan (BCP) undertaken
to counteract business interruption – either
in loss of production capacity or supply
chain disruption due to physical site damage
(accidents, res, natural disasters, terrorism),
industrial action, cyber attack or global
health crises.
Integration between BCP and cyber security is
done in several areas. We constantly conduct
cyber security risk assessments, analysing
business impact to mitigate potential
downtime. We have an Incident Handling
and Response Policy, which sets out how we
improve visibility and monitoring of all network
infrastructure. These processes give us an
effective way to proactively manage risk
and mitigate business continuity concerns.
Furthermore, IT has developed a Disaster
Recovery Plan for inclusion in wider business
continuity plans to address network, data
centre and infrastructure issues.
Vesuvius has a multi-year strategy for
maintaining and developing cyber security
based on best practices and standards, and
monitoring trends and cyber threats against
appropriate indicators. This also encompasses
in-house vulnerability testing and analysis,
using external reports and benchmarks to
develop our processes. Our cyber security work
therefore supports and protects our production
capacity, and invests in appropriate resources
in this fast-changing environment. The Group’s
IT Security Strategy and Roadmap is based on
the ISO 27001 standard and NIST frameworks,
implementing best practices in the area, but
currently without ISO accreditation.
In 2021, against the increasing trend in phishing
emails and ransomware attacks affecting
operational capabilities, we carried out disaster
recovery tests to assess the resilience of our
systems and continuity both for suppliers and
customers. In 2021, Vesuvius experienced no
such interruptions or service denials.
During the year, the Group worked to
strengthen IT security, through the development
of operational technologies, the optimisation
of the Group’s overall IT procedures and
framework, and the continuation of regular
cyber security training programmes. We also
focused on staff development to increase
operational capacity. We continued to improve
our Incident Handling and Response Policy,
which was used successfully to handle minor
incidents as they occurred. This demonstrates
that we have the correct building blocks for
responding to cyber incidents.
on systems and remote management oversight can give rise to
control vulnerabilities and fraud opportunities. The Group has not
adopted a common Enterprise Resource Planning system as a
Group-wide standard. Over time, the Group is moving towards
a shared services model, enabled by control, process and
systems standardisation between businesses. This is expected to
enhance the overall internal control environment in the smaller
operating units.
The Group undertakes a range of activities to mitigate the risk of
fraud. This framework is regularly reviewed to determine areas
for improvement. Eliminating the risk of fraud remains one of the
key areas of focus for Internal Audit, forming a fundamental part
of ‘full scope’ and nancial audits. These assess the quality of the
balance sheet reconciliations, review key judgement matters,
consider ERP access rights, review tenders and quotations,
review the entity’s controls over master data changes, and review
controls over payments, journals and associated applications,
along with travel and expense reimbursements.
Any control issues identied by management locally or as a
result of the work performed by Internal Audit are escalated as
appropriate. Internal Audit rate all control issues they identify in
terms of their signicance and agree remediation plans with
the auditee and an action owner, establishing a target date for
remediation. For signicant issues, management at all levels
within the business are engaged to agree the actions and
remediation dates. The status of the remediation is monitored
and overdue issues are escalated appropriately with
management, and reported at Audit Committee meetings.
The Audit Committee continues to challenge management
on the root cause where issues arise on the progress of
remediation activities.
Cyber risks continue to be a signicant area of focus for the
Group, with Vesuvius like most other companies, receiving a
large number of ‘phishing’ emails presenting fake credentials
and subject to repeated attempts at social engineering fraud.
The Group has an IT Committee that meets on a regular basis to
review and progress the Group’s plans for tackling cyber issues,
and the Audit Committee receives regular updates on the Group’s
activities in this area.
During 2021, the Group continued to enhance its infrastructure
and networks to improve its IT security. A holistic approach is
taken to addressing cyber challenges, focusing on the improvement
of the Group’s overall IT procedures and framework. The Group
continues to run regular training programmes on cyber/IT security.
During 2021, the Group continued its review of third-party
representatives and intermediaries. This included detailed due
diligence for new third parties and ongoing monitoring of our
sales agents. The Committee also continued its assessment of
the Group’s potential exposure to bribery and corruption risks,
noting the ongoing work conducted by the Group in this context.
The face-to-face visits to operations usually conducted to assist
with the work were curtailed by the COVID-19 pandemic. In 2020
we undertook a detailed review of the existing compliance
programme and resources, and in 2021 the output of this review,
combined with previous risk assessments, was used to further
develop the Group’s framework, policies and procedures for the
management of anti-bribery and corruption risk, to ensure they
reect a continued appropriate level of control for the business.
In line with the requirements of the Code, responsibility for
the oversight and monitoring of the Group’s Speak Up helpline,
which collates allegations of improper behaviour and employee
concerns, has passed from the Audit Committee to the full Board.
The Committee is kept apprised of any complaints received by
the Company regarding fraud, accounting, internal accounting
controls and auditing matters. Further details of the operation
of the Group’s Speak Up policy and helpline can be found on
page 109.
Each year, the senior nancial, operational and functional
management of the businesses self-certify compliance with
Group policies and procedures for the areas of the business under
their responsibility and conrm the existence of adequate internal
control systems throughout the year. The Committee reviews any
exceptions noted in this bottom-up exercise.
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Governance Financial Statements
The work undertaken during the year indicated the existence of
an appropriate control environment, albeit with some areas for
improvement, for which clearly dened improvement actions
have been identied, particularly in respect of the Group’s cyber
risks. No signicant control issues were raised by our External
Auditors, PwC and Mazars, and no material issues were identied
in 2021. After considering these various inputs, the Committee
was able to provide assurance to the Board on the effectiveness
of internal nancial control within the Group, and on the
adequacy of the Group’s broader internal control systems.
Internal Audit
The Group’s Internal Audit function operates on a global basis
through professionally qualied and experienced individual
members located in the UK and Poland. They report to the Group
Head of Internal Audit, based in London, who in turn reports
directly to the Chairman of the Audit Committee.
Throughout 2021, Internal Audit continued to perform a
programme of audits focusing on internal nancial controls
and key Board compliance issues.
The Committee received, considered and approved the 2021
Internal Audit plan which was constructed using a risk-based
approach to cover the Group’s control environment. The plan was
based on the premise that all operating units are audited at least
once every three to four years, including the smaller operating
units. Internal Audit annually audits each of the large operating
entities located in Germany, the US, China, Mexico and Brazil.
Due to the travel restrictions arising from the COVID-19
pandemic, the 2021 plan focused on European nancial controls
audits and remote desktop audits in the rst half, with no long
haul international travel before June 2021. Some on-site long haul
audits were performed in the second half of the year but these
continued to be severely limited due to COVID-19 restrictions.
As a result, the remainder were performed remotely.
Whilst the scope of the audit work was modied to facilitate
remote testing, the entities tested remained aligned with the
original risk-based plan. On-site controls-based testing was
replaced with remote nancial controls health check audits
supplemented by the continued use of trial balance deep dive
testing which involved a detailed review of the trial balance and
its underlying transactions. The health check audits required
entities to submit evidence of the operation of key balance
sheet reconciliations and key nancial controls which were
then reviewed remotely. This approach continued to allow the
identication of areas for control improvement. The actions being
taken to address these issues have been discussed at length at the
Audit Committee with regular updates on the progress made.
Internal Audit reported signicant progress made against issues
reported in previous years.
In 2021, a total of 34 audit assignments were undertaken (27 in
2020). The Committee received a report from the Group Head of
Internal Audit at each of its meetings detailing progress against
the agreed plan. Key trends and ndings and an update on the
progress made towards resolving open issues was also given.
Common themes emerging from Internal Audit reports coupled
with Internal Audit and management’s assessment of risk have
informed the development of the 2022 Internal Audit plan.
When necessary, Internal Audit contracts auditors from other
audit rms to supplement internal resources on an ad hoc basis.
This process provides valuable learning opportunities and we
expect to continue to use external resources in specialist areas
and geographies in the future.
Control issues continue to be recorded in a live web-based
database into which management is required to report progress
towards addressing any open issues. Internal Audit monitors
the progress made and frequent meetings continue to be held
with each business unit President to ensure that engagement
on the resolution of issues is clearly understood at all levels
of the business and responsibility for remediation has been
appropriately assigned. The results are communicated to the
Audit Committee which also involves senior management as
necessary to provide an update against any high-priority actions.
Internal Audit undertakes follow-up reviews as required. In
situations where audit ndings require longer-term solutions,
the Committee oversees the process for ensuring that adequate
mitigating controls are in place.
An internal review was undertaken of the effectiveness of the
Internal Audit function in 2021, canvassing the views of the
divisional nance Vice Presidents, business unit Presidents and
other key stakeholders. This concluded that the function remains
effective in adding value to the organisation and provides
appropriate challenge to the Group’s businesses and functions.
Going forward the need for the more timely escalation and
reporting of ndings were noted as key areas for improvement.
Having considered the work of the Internal Audit function during
2021, including progress against the 2021 Internal Audit plan,
the quality of reports provided to the Committee, and the results
of the review of the function’s effectiveness, the Committee
concluded that the Internal Audit function operated effectively
during 2021.
External Audit
Auditors’ appointment
In 2017, the Company appointed PricewaterhouseCoopers LLP
(PwC) as External Auditors to the Company and the Group, and
Mazars LLP (Mazars) to audit the non-material entities within the
Group. PwC has nominated Darryl Phillips as the audit partner
responsible for the Group audit. Darryl assumed this role
following the completion of the 2020 half year review.
Under the Statutory Audit Services for Large Companies
Market Investigation (Mandatory Use of Competitive Tender
Processes and Audit Committee Responsibilities) Order, the Audit
Committee is required to report in which year the Company
proposes to complete a competitive tender process in respect of
the statutory external auditor, and the reasons why the proposed
year for the competitive tender process is in the best interests
of the shareholders. In compliance with the Order, the Audit
Committee conrms that a competitive tender process for the
appointment of a statutory auditor will, subject to satisfactory
annual reviews of the effectiveness of the External Auditors and
its costs in the intervening period, be conducted during 2026 with
a view to recommending the appointment of a new statutory
auditor or the reappointment of the incumbent auditor, for the
nancial year ending December 2027. The Audit Committee
believes that conducting a competitive tender process during
2026 for the appointment of a new statutory auditor for the
nancial year ending December 2027 is appropriate, and in
the best interests of the shareholders.
Audit Committee
continued
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Vesuvius plc
Annual Report and Financial Statements 2021
2021 Audit plan
PwC’s 2021 year-end audit plan was based on agreed objectives.
The audit focused on areas identied as representing signicant
risk and requiring signicant judgement. PwC maintained an
ongoing dialogue with the Audit Committee throughout the year
providing regular updates, including commentaries on signicant
issues and its assessment of consistency and appropriateness in
the judgements and estimates made by management. Private
sessions were held with PwC without management being present.
PwC conrmed that its work had not been constrained in any
way and that it was able to exercise appropriate professional
scepticism and challenge throughout the audit process.
The Chairman of the Audit Committee met on a number of
occasions with PwC to monitor the progress of the audit and
discuss questions as they arose.
The Independent Auditors’ Report provided by PwC on
pages 161–169 includes PwC’s assessment of the key audit
matters. These key audit matters are discussed in the signicant
issues and material judgements comments above. The report also
summarises the scope, coverage and materiality levels applied
by PwC in its audit. As part of the audit planning process and
based on a detailed risk assessment, the Committee agreed
a materiality gure of £6.3m for Group nancial reporting
purposes which is 10% lower than last year (£7.0m) and is set at
4.6% of headline prot before tax of £137.3m. Importantly, much
lower levels of materiality are used in the audit eldwork on the
individual businesses across the Group and these lower gures
drive the scope and depth of audit work. Any misstatement at or
above £0.35m was reported to the Committee.
There were no signicant changes this year to the coverage of the
audit which stood at 70% of the Group’s revenue, 67% of prot
before tax and 69% of headline prot before tax. This coverage
was considered to be sufcient by the Committee. The audit
coverage is reective of the long tail of smaller businesses within
the Group that individually are not ‘material’ to the Group result.
The Committee also received a report from Mazars during the
year which noted that there were no ndings or recommendations
in respect of its statutory audits of the non-material Group
subsidiaries for the year ended 31 December 2020, that Mazars
deemed sufciently material or signicant to bring to the
attention of the Audit Committee.
During the year the Committee evaluated the PwC Group audit
scope for 2021. This included additional components audited by
Mazars. Along with responsibility for the statutory audits of the
non-material Group subsidiaries for the year ended 31 December
2021 Mazars were also tasked with undertaking specic audit
procedures for certain component entities that were within PwC’s
Group audit scope. This latter work was directed, supervised
and reviewed by PwC. The PwC audit fee approved by the Audit
Committee was £1.8m. This was constructed bottom up on a
local currency basis and was assessed in light of the audit work
required by the agreed materiality level and scope. The fee
agreed with Mazars for the audit of the non-material entities and
three material entities was £0.8m, resulting in a combined audit
fee for 2021 of £2.6m, compared with £2.4m in 2020.
Independence and objectivity
The Committee is responsible for safeguarding the independence
and objectivity of the External Auditors in order to ensure the
integrity of the external audit process. In discharging this
responsibility during 2021, the Committee:
–
Sought regular conrmation from the incumbent External
Auditors that they considered themselves to be independent of
the Company in their own professional judgement, and within
the context of applicable professional standards
–
Assessed the work of the External Auditors and considered
whether they were exercising an appropriate level of
professional scepticism
–
Evaluated all the relationships between the External Auditors
and the Group, including compliance with the Group’s policy on
the employment of former employees of the External Auditors,
to determine whether these impaired, or appeared to impair,
the Auditors’ independence
–
Reviewed compliance against the policy on the provision of
non-audit services by the External Auditors
–
Reviewed details of the non-audit services provided by the
External Auditors and associated fees
As a result of its review, the Committee concluded that the
External Auditors remained appropriately independent.
Non-audit services
Vesuvius operates a policy for the approval of non-audit services.
A copy of the current policy is available to view in the Audit
Committee section of the ‘Investors/Corporate Governance’
pages of the Company’s website: www.vesuvius.com.
The use of the External Auditors for the provision of non-audit
services is strictly prohibited except for specic permitted audit
related services. These comprise: Category 1 services which the
External Auditors are obliged to perform due to law or regulation,
such as regulatory and solvency reports; and Category 2 services
which could be provided by others (albeit there are typically
signicant efciencies to be had when done in combination
with the audit such as interim reporting). An annual budget
for the additional Category 2 service fees proposed to be paid
to the External Auditors in the following year is presented
for pre-approval to the Audit Committee each year. Audit
Committee approval is required for expenditure in excess
of this approved budget.
All audit-related and permissible non-audit services proposed to
be carried out for any Group company worldwide by the External
Auditors must be pre-approved before an engagement is agreed.
Pre-approval must be obtained from the Head of Finance or the
Chief Financial Ofcer, who will conrm that the Audit Committee
has approved the engagement. Any assignment proposed to be
carried out by the External Auditors must also have been cleared
by the External Auditors’ own internal pre-approval process,
to assess the rm’s ethical ability to do the work.
In 2021, the fees for non-audit services payable to PwC amounted
to £0.1m (2020: £0.1m). The 2021 fees represent payment for
assurance services related to the review of the Group’s half-year
nancial statements, quarterly reviews and tax form audits in
India (as required by regulation), and assistance with an R&D
certicate in Italy. In each of the past four years the non-audit
related fees have represented <6% of the statutory audit fees.
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Effectiveness of the External Audit process
The Committee and the Board are committed to maintaining
the high quality of the external audit process. Each year the
Committee carries out a formal assessment of the performance
of the External Auditors in carrying out their work and of the audit
process in general. Input into the evaluation in 2021 was obtained
from management and other key Company personnel, members
of the Audit Committee and the External Audit team. The review
focused on the External Auditors’ mindset and culture, skills,
character and knowledge, and the quality of its controls, as set
out in the guidance for audit committees prepared by the FRC.
The evaluation of the External Auditors included the following
steps:
–
A survey of key nance and non-nance stakeholders in Head
Ofce and in-scope countries
–
A commentary-based survey of Audit Committee members
focused on their experience of working with PwC
–
Consideration of PwC’s approach to assessing the risks to its
audit quality and an evaluation of the actions it had taken to
mitigate these
–
A review of other external evidence on PwC audit quality
(e.g. report on PwC by the FRC)
–
An assessment against the objectives outlined in PwC’s
Audit Objectives report
–
Discussions with PwC and key nance and non-nance
personnel
The evaluation concluded that the audit process had been
suitably rigorous, with PwC providing an effective, objective
and challenging audit process for the 2020 nancial year.
The learnings from previous audits and the resultant actions
taken had had a positive impact on the overall efciency and
effectiveness of the audit. The continuity of PwC team members
had greatly enhanced the audit. PwC had further improved their
audit approach and communications, challenging the team in the
right areas and providing strong technical expertise. The PwC
team was also seen as independent by the Audit Committee and
management. To further improve the process it was agreed that
update meetings continue to be held in 2021. Debrief meetings
were held at a local level to discuss the 2020 audit and to
constructively share feedback that would facilitate further
improvements to the audit planning for the 2021 audit and an
improved understanding of the audit approach and requirements.
Reappointment of PwC for 2022
The Committee is responsible for making recommendations to
the Board in relation to the appointment, reappointment and
removal of the External Auditors. In undertaking this duty,
the Committee takes into consideration a number of factors
concerning the External Auditors and the Group’s current
activity, including:
–
The results of its most recent review of the effectiveness of
the Auditors
–
The results of its review of the independence and objectivity
of the Auditors, particularly in light of the provision of
non-audit services
–
Its ability to coordinate a global audit, working to tight
deadlines
–
The cost-competitiveness of the Auditors in relation to the audit
costs of comparable UK companies
–
The tenure of the incumbent Auditors
–
The periodic rotation of the senior audit management assigned
to the audit of the Company
–
External reviews of the performance and quality of the
Auditors, including:
–
The annual report issued by the Audit Quality Review team of
the Financial Reporting Council on the work of the Auditors
–
The Auditors’ own annual Transparency Report
Having considered the aforementioned factors, the Committee
recommended to the Board that PwC be reappointed for 2022.
It conrms that its recommendation is free from the inuence of
any third party and that there are no contractual restrictions on
the choice of auditor. A resolution proposing the reappointment
of PwC will be included in the notice of AGM for 2022.
The Committee has noted the ruling by the Securities Exchange
Board of India (SEBI) regarding the prohibition placed on PwC
network companies performing audits of listed entities in India
for two years from 1 January 2018. PwC subsequently won the
appeal at the Securities Appellate Tribunal (SAT) allowing PwC to
continue with existing audits of listed companies. SEBI appealed
against the SAT order in November 2019 and this was stayed by
the Supreme Court pending nal disposal of the appeal. For the
rest of the order, dealing with the ban, there has not been any
hearing and no date has been xed. The Committee continues to
monitor developments on this matter in the context of the Group’s
two listed Indian subsidiaries, Foseco India Limited and Vesuvius
India Limited.
Audit Committee evaluation
The Audit Committee’s performance was evaluated as part of the
overall externally facilitated Board and Committee performance
evaluation, which is described in depth on pages 128 and 129.
The review concluded that the Committee continued to function
well, with the Committee judged to effectively monitor the work
of the internal and external auditors. The level of engagement
between the Audit Committee and the Chief Financial Ofcer
and his team, the Head of Internal Audit and the External Audit
Partner was considered to be appropriate, open and candid.
The Committee noted that work continued to improve the
Group’s internal control systems through further standardisation
of processes.
A number of priorities were identied for the Audit Committee
over the coming year, including supporting the internal audit
function as it re-focused its work to align with the lifting of
Covid-19 travel restrictions, continuing the focus on the
implementation of the nancial operating model, maintaining
oversight of the Group’s cyber risk mitigation actions and
monitoring the outcome of the BEIS consultation and any
resultant actions that needed to be taken by the Group.
On behalf of the Audit Committee
Douglas Hurt
Chairman, Audit Committee
3 March 2022
Audit Committee
continued
124
Vesuvius plc
Annual Report and Financial Statements 2021
Dear Shareholder,
On behalf of the Nomination Committee, I am pleased to present
the Nomination Committee Report for 2021. The primary
responsibility of the Nomination Committee is to focus on Board
composition and succession planning, to ensure that the Board
is composed of individuals with the appropriate drive, abilities,
diversity and experience to lead the Company in the delivery of its
strategy. As part of this work, the Committee is also responsible
for overseeing succession plans for senior management to ensure
that the Group has a consistent pool and pipeline of diverse talent
for future potential progression to the Board.
In early 2021, the Committee progressed with the appointment of
new non-executive expertise on the Board, with the appointment
of Dinggui Gao to the Board on 1 April 2021. This followed the
announcement of the departures of Hock Goh and Holly
Koeppel, who stepped down at the close of the 2021 AGM.
Subsequently, the Committee, led by the Senior Independent
Director, Douglas Hurt, commenced the process for the
appointment of a new Chair. The Committee is well advanced
in this process.
Alongside this focus on Board recruitment, the Committee also
spent a considerable amount of time during the year reviewing
senior management succession. This included the recruitment
and development of additional talent in our business unit
executive committees, as well as further progress on the Group’s
diversity strategy.
Yours sincerely
John McDonough CBE
Chairman, Nomination Committee
3 March 2022
Meetings
The Committee met ve times during the year.
Key activities during the year
Board composition:
The Committee reviewed the structure, size
and composition of the Board, including the skills, knowledge
and experience required for the Board to continue to function
effectively and support the delivery of our strategy. This analysis
took into consideration the need to ensure an appropriate
balance of independence and diversity among Board members.
The Committee then evaluated the current Board composition
against an assessment of future business needs.
Board succession:
The Committee considered the anticipated
rotation of Directors from the Board and future requirements for
Board composition, with a focus on ensuring that the Board
continues to be resourced by a group of Directors with the
skills, diversity and experience necessary to support the future
accomplishment of the Group’s Strategic Objectives. As part of
this review the Committee considered the Company’s ongoing
compliance with the Board Diversity Policy. The Committee
engaged recruitment consultants to assist in the search for new
Board members and oversaw the successful recruitment process
to identify Dinggui Gao, as a Non-executive Director. During the
year Jane Hinkley succeeded Holly Koeppel as the designated
Non-executive Director responsible for overseeing engagement
with the workforce.
Senior management development and succession:
The Committee reviewed the Group’s succession processes
and candidates for the Group Executive Committee and the
management cadre below this level, focusing particularly on
the recruitment and retention of talent in the business unit
executive committees. It also examined how the Group’s talent
management processes were developing, how the senior
management cadre was performing and how the mentoring
programme established for the development of individuals
agged as ‘high potential’ was proceeding – all aimed at
providing a pipeline of experienced and talented managers to
succeed to roles at the highest level of the business. In this process,
the Committee focused both on the bench strength in key skills
and expertise as well as the talent pipeline in critical geographies.
Diversity:
The Committee reviewed the Group’s progress in
achieving its diversity targets, with a particular focus on the
recruitment of women to the senior management tiers.
Directors’ elections:
The Committee considered the Directors’
annual elections and re-elections at the AGM.
125
Our business Our performance Sustainability
Governance Financial Statements
Nomination Committee
Kath Durrant
Dinggui Gao
Joined the Committee on
his appointment to the
Board on 1 April 2021
Hock Goh
Served on the Committee
until his retirement from
the Board on 12 May 2021
Friederike Helfer
Jane Hinkley
Douglas Hurt
Holly Koeppel
Served on the Committee
until her retirement from
the Board on 12 May 2021
John McDonough CBE
– Committee Chairman
Committee evaluation:
The Committee reviewed its
performance and effectiveness during 2021, including evaluating
whether each Non-executive Director was spending sufcient
time fullling their duties.
Committee terms of reference:
The Committee reviewed its
terms of reference.
The Nomination Committee
The Nomination Committee is made up of me, as Chairman of
the Company, and the Non-executive Directors. During the
year, I was Chairman of the Committee, though I did not act as
Chairman when the Committee was discussing issues surrounding
my succession, in these instances Douglas Hurt our Senior
Independent Director served as Chairman in my place.
The Company Secretary is Secretary to the Committee.
Members’ biographies are set out on pages 104 and 105.
Role and responsibilities
The Nomination Committee’s foremost priorities are to ensure
that the Company has the best possible leadership, to oversee
the process for Board appointments, to ensure that plans are
in place for orderly succession to both the Board and Group
Executive Committee positions, and to oversee the development
of a diverse pipeline for succession. The Committee ensures that
the procedure for the selection of potential candidates for Board
appointments – either as an Executive Director or independent
Non-executive Director – is formal, rigorous and transparent
and undertaken in a manner consistent with best practice. It also
ensures that appointments to the Board are made on merit,
against objective criteria and with due regard for the benets of
diversity of gender, social and ethnic backgrounds, and cognitive
and personal strengths. The Nomination Committee advises the
Board on appointments, retirements and resignations from the
Board and its Committees.
The Committee operates under formal terms of reference. A copy
of these terms of reference, which were reviewed during the year,
is available on the Group’s website:www.vesuvius.com.
The Committee and its members are empowered to obtain
outside legal or other independent professional advice at the cost
of the Company in relation to its deliberations. These rights were
not exercised during the year. The Committee may also secure the
attendance at its meetings of any employee or other parties it
considers necessary.
Process for Board appointments
The Committee follows formal, rigorous and transparent
procedures for the appointment of new Directors. When
considering a Board appointment, the Nomination Committee
draws up a specication for the role, taking into consideration
the balance of skills, knowledge and experience of its existing
members, the diversity of the Board, the independence of
continuing Board members, and the ongoing requirements and
anticipated strategic developments of the Group. The search
process is then able to focus on appointing a candidate with
the necessary attributes to enhance the Board’s performance.
During 2021, the Committee oversaw the selection process to
identify and recruit a new independent Non-executive Director,
as part of the Group’s planned Director rotation and also
commenced the process to identify a new Chair for the Board.
The Senior Independent Director chaired the Committee for
all matters pertaining to the recruitment of the new Chair.
The Committee reviewed the skills and attributes required for the
roles and agreed individual job specications. The Committee
approached three agencies to submit applications to assist the
Company with the recruitment of a new Chair. After careful
consideration, the global specialist recruitment agency, Spencer
Stuart, was retained to undertake the brief, having also assisted
with the successful search for Dinggui Gao during the year.
Spencer Stuart has adopted the Voluntary Code of Conduct
addressing gender diversity and best practice in search
assignments. It does not have any other connection with the
Group, other than in respect of management recruitment work
undertaken during normal trading activities. It was selected for
these assignments following a review of potentially qualied
agencies, based on its skills and expertise.
The searches for these new Directors were conducted globally
and long-lists of potential appointees were produced by Spencer
Stuart. For each appointment, the Committee reviewed a long-list
of candidates, from which a short-list of candidates for interview
was drawn up, based upon the objective criteria identied at the
inception of each process.
In the case of the appointment of Dinggui Gao, members of the
Committee conducted initial interviews with the short-listed
candidates. He then met with all other Board members by
videoconference, given that travel restrictions from China
prohibited face-to-face meetings. Detailed external references
were taken up and, following this, the Committee made formal
recommendations to the Board for the appointment of Dinggui
Gao as a new Non-executive Director. Dinggui was required to
demonstrate that he had sufcient time available to devote to his
role and to identify any potential conicts of interest. No conicts
were identied.
A similar process is well advanced for the identication of a new
Chair under the guidance of Douglas Hurt our Senior
Independent Director.
A comprehensive induction programme was put in place for
Dinggui Gao, although the Committee’s desire that he should be
able to visit a selection of our global manufacturing sites has been
hampered by travel restrictions. Nonetheless, Dinggui has visited
several of the Group’s sites in China and he has visits planned to
many of our other global sites in 2022.
Board composition
On an ongoing basis, the Committee reviews the current and
future needs of the Board and its Committees – reecting on
the balance of skills, knowledge and experience of the current
Directors and comparing this against the Board’s list of key skills
needed to support the delivery of the Company’s strategy.
The independence and diversity of the Board and the balance
of skills, experience and development needs of Board members
are also examined as part of the Group’s annual corporate
governance review. The Committee’s key skills matrix is reviewed
annually and the Committee considers the existing tenure and the
prospective rotation and retirement of Board members, so that it
can plan succession accordingly. Alongside the recruitment of a
new Non-executive Director in 2021, and the progression of plans
for a new Chair, the Committee considered the tenure of all
members of the Board, noting that, on 3 December 2021, Jane
Hinkley had served nine years on the Board. Following detailed
126
Vesuvius plc
Annual Report and Financial Statements 2021
Nomination Committee
continued
discussions Jane has agreed to remain on the Board and has
undertaken to continue to support the Group, including acting as
the Board Non-executive Director responsible for overseeing
workforce engagement, until a successor is recruited following the
appointment of the new Chair, at which point she will step down
from the Board. In the meantime, the Board undertook a
thorough and robust review of Jane’s independence. It considered
her skills and contribution to the Board, noting that she now no
longer serves on any other external boards and does not have any
business or relationships that could materially inuence or
interfere with her ability to exercise objective or independent
judgement or her ability to act in the best interests of the Group.
The Board concluded that she continues to be independent of
management and a strong and valuable contributor to the
Board’s work.
Diversity
The Group Diversity and Equality Policy outlines Vesuvius’
commitment to encouraging a supportive and inclusive culture
among its global workforce, promoting diversity and eliminating
any potential discrimination in our work environment. Vesuvius’
Board Diversity Policy explains how this commitment manifests in
relation to the Board. Vesuvius recognises the value of a diverse
and skilled workforce and is committed to creating and
maintaining an inclusive and collaborative workplace culture that
will provide sustainability for the organisation into the future. We
believe that the dedication and professionalism of our people is
the most signicant contributor to our success. Having a balance
of cultures, ethnicities and genders helps to promote innovation,
creativity and engagement. The diversity of our employees is one
of the core strengths of the Group. Copies of the Group’s Diversity
policies can be found on the Group’s website: www.vesuvius.com.
As an organisation, Vesuvius has a global, multicultural
operational and customer base, which we wish to reect inside
our organisation with a multicultural, diverse community of
excellent professionals from all backgrounds. This starts by
focusing on broad diversity of gender and nationality, with an aim
to ensure that all employees and job applicants are given equal
opportunity and that our organisation is representative of all
sections of society where we operate. Each employee is respected
and valued and as a result they are all able to give their best.
All employees are given help, training and encouragement to
develop their full potential and utilise their unique talents.
In line with the Group’s global commitment to diversity, the
Nomination Committee focuses on ensuring that the Board and
its Committees also have the appropriate range of diversity, skills,
experience, independence and knowledge of the Company and
the markets in which it operates, to discharge their duties and
responsibilities effectively. We continue to look at diversity in its
broadest sense – reected in the range of backgrounds and
experience of Board members who are drawn from different
nationalities and have managed a variety of complex global
businesses. The Nomination Committee recognises that diversity
is a key ingredient in creating a balanced culture for open
discussions at Board level and in minimising ‘groupthink’.
The Board’s overall skills and experience, as well as the
Non-executive Directors’ independence, were reviewed during
the year. The Board’s composition also formed part of the Board
evaluation process. The Board considers its diversity, size and
composition to be appropriate for the requirements of the
business. In 2019, it achieved its target of at least 33% female
Board membership, and at the end of 2021, 38% of the Directors
were women. Three Directors are non-UK citizens and two of
the Directors (25%) identify as having BAME heritage.
The Board Diversity Policy conrms the Group’s commitment
to maintaining a Board comprising at least 33% female
membership, while continuing to appoint candidates based on
merit and recognising that over time the proportion of female
Directors will uctuate naturally as Board members retire and
new Directors are appointed.
In 2021, 14% (2020: 14%) of our workforce were women, which
was stable versus 2020. The Group previously set a target of
ensuring that 30% of the Top Management (members of the
Group Executive Committee plus their key direct reports) are
female by 2025. The number of women in the Top Management
team increased by 1 percentage point in 2021 to 21%. Looking
forward, the Board has resolved to expand the scope of this
gender diversity target to encompass the broader Senior
Leadership Group of the Company, which comprises c. 160
individuals. This KPI has also been incorporated into the long-
term incentives of our senior management. The Committee will
continue to monitor the Group’s ongoing progress towards
achieving its diversity targets. Each of the Group’s four business
units has put in place strategies to address gender diversity.
Further information on the Group’s approach to promoting
diversity can be found on page 95.
As at 31 December 2021, the gender balance of the Group’s employees was as follows:
Female
Male Total
Female
MaleGroup Executive Committee member
2 6 8
25%
75%
Senior Management
10
39
49
20%
80%
Top Management
1
12
45
57
21%
79%
Middle Management
63
427
490
13%
87%
All other employees
1,544
9,113
10,657
14%
86%
Grand total
1,619
9,585
11,204
14%
86%
Directors of subsidiaries included in consolidation
2
35 371
406
9%
91%
1. Top Management comprises key leadership roles reporting directly to members of the Group Executive Committee.
2. There are 406 directors of Group subsidiaries, 9% of whom are women. This disclosure is made to comply with regulatory requirements. It includes directors of
dormant companies. Some individuals hold multiple directorships.
127
Our business Our performance Sustainability
Governance Financial Statements
1
Austrian
5
British
1
French
1
South African
1
Chinese
Board evaluation
The Board carries out an evaluation of its performance and that
of its Committees every year. This year’s evaluation was again
externally facilitated by the corporate advisory rm, Lintstock.
The Group uses Lintstock’s Insider List database tool but has no
other connection with the organisation and Lintstock does not
have a connection with any of the Directors.
Each evaluation was conducted via a series of targeted
questionnaires. As with previous years, the evaluation process not
only covered the performance of the Board but also that of its
Committees, along with individual reviews of each Director and
an analysis of the performance of the Chairman. Narrative
reports were prepared for the Board, the Audit, Nomination
and Remuneration Committees, and in respect of the Chairman.
In 2021, rather than targeting a specic action or processes,
the Board evaluation was focused on providing an overall
‘health-check’ for the Board’s performance, so that this could act
as a baseline for an incoming Chair. Thus, the Board assessment
focused on seven core areas: Board composition, oversight of
stakeholders, Board dynamics, Board support and focus of
meetings, Board oversight, risk management, and priorities
for change. It also covered the conduct of the Board’s
strategy meetings.
Overall, the Board was seen to operate effectively with an
appropriate composition. It was noted that the recent Board
changes had affected the Board dynamics but that Board
relationships were rated positively overall. The Non-executive
Directors’ engagement with management in providing effective
support and constructive challenge also received high ratings.
Meetings were considered to be well managed and the use of
virtual meetings as appropriate, was considered benecial. The
balance of the Board’s focus was generally viewed favourably
although the continued tension between completing a broad
agenda and spending more time concentrating on key issues and
discussion, was highlighted. The Board’s understanding of the
views and requirements of stakeholders was rated highly with
regard to investors and positively with regard to customers and
employees, but scope for improving the Board’s understanding
of our supply chain was identied. The Board’s effectiveness in
setting and monitoring culture throughout the organisation was
rated positively, although the opportunities for engagement
with the workforce had been hampered in 2021 by the
COVID
-19 pandemic.
In terms of longer-term strategy, Vesuvius’ capacity to deliver on
this was rated highly overall, with emphasis placed on the need to
ensure that the Group continued to recruit and retain sufcient
high calibre talent to support such delivery in the future. This would
be an area of focus in 2022, along with the continued roll-out
of the Group’s Sustainability strategy agenda. In addition, the
Board resolved to again further its understanding of competitor
dynamics in 2022 and gain further insights on specic customer
and supplier dynamics. With the forthcoming changes in
Non-executive Directors, succession planning and induction
were again highlighted as an area of focus.
The Group’s off-site strategy session was positively regarded with
a high quality of debate and good level of participation. The top
priority for the Board’s next strategy session was identied as
sustainability and the continuing need to ensure this was fully
integrated into the business strategy and operations.
In addition to the primary focus on safety, and the issues
highlighted above, the top priorities for Vesuvius as a business
over the coming year were identied by the Board as being
improving margins, capturing organic and where possible
inorganic growth, and managing market volatility.
The individual assessment of Directors concluded that all of the
Directors continued to contribute effectively, providing expert
and strategic advice as appropriate and holding management
to account in an open and constructive manner. They were
considered to devote adequate time to their duties and to be
engaged and proactive in debate at all meetings. The Chairman
was viewed to operate with objective judgement, and his approach
to chairing meetings was deemed to be inclusive and to facilitate
debate. Each of the Committees was also considered to have
operated effectively during the year.
As in previous years, a set of action points was compiled from the
output of the evaluation to ensure that its ndings are included in
the Board’s activities. These will be implemented by the Board in
2022, with progress reviewed by the Board throughout the year.
Further information on the Group’s
approach to promoting diversity
95
Board nationalities Board composition
Female Directors
Independent Directors
Prior experience of serving
as a director of a listed plc
Experience managing a
finance function
International business
experience
8
3
3
4
4
128
Vesuvius plc
Annual Report and Financial Statements 2021
Nomination Committee
continued
The 2020 evaluation identied the following Board priorities for future Board attention; these were addressed during 2021 as follows:
Area
Issue
Action taken in 2021
Strategy
Oversee the implementation of
the Group’s sustainability initiative
ensuring it is fully embedded in
the Group’s strategy
Throughout the year the Board received briengs from the Chief
Executive and VP Sustainability on the activities of the Group’s
Sustainability Council, which is tasked with immediate oversight of the
Group’s sustainability activity. The Board monitored progress against
the Group’s targets and noted the more detailed work that had been
undertaken to identify and assess the implications of long-term
climate-related risks and opportunities, as well as the Group’s
assumptions on the potential impact of those changes.
Enhance the Board’s awareness
of competitors’ activities
More detailed information on the Group’s key global competitors,
Vesuvius’ differentiation and comparative strengths and weaknesses
was included during the Strategy meeting.
Maintain the Board’s
understanding of customers’
requirements
The Board received updates at each Board meeting on the issues
impacting our customers and Vesuvius’ response. A comprehensive
presentation covering long-term customer trends was presented at
the October Board meeting. The Board visited a customer of our
Steel business in 2021.
People and
organisation
Group Executive Committee
succession
Throughout the year the Nomination Committee received updates on
the actions being taken to recruit, develop and retain individuals in the
senior management cadres, and the impact of these actions on the
talent pipeline for Group Executive Committee roles in the Group.
Enhance the Board’s understanding
of senior talent throughout the
organisation
Although opportunities to visit the Group’s sites were curtailed by the
COVID
-19 pandemic in the rst half of 2021, during the latter part of
the year, the Chairman and Non-executive Directors were able to visit
eight Vesuvius sites in person along with a number of ‘virtual’ Board
visits. The visits enabled the Board to interact with senior managers
and ‘high potential’ staff at each of these sites, with social functions
arranged to provide the opportunity for informal discussions.
Senior management succession
The Committee’s succession planning activities do not exclusively
relate to the Board but encompass the senior management levels
immediately below the Board, aiming to support and encourage
the growth of a pool of talent able to step up to the top roles in
future years. The Committee considers succession plans for all
the senior functional and business unit positions, assessing
the availability of candidates who could cover the roles on a
short-term contingency basis should the need arise, along with the
pool of medium-term and long-term talent available for future
development into specic roles. The Committee continued to
focus on the Group’s talent development and succession planning
processes in 2021, with a continuing emphasis on the recruitment,
development and retention of candidates within this senior
management cadre. The Committee considered the activities
being undertaken to ll the gaps in this talent pool, and to develop
and recruit new executives.
Committee evaluation
The Committee’s activities were part of the externally facilitated
evaluation of Board effectiveness during the year, with
Committee members completing individual questionnaires.
The results of these submissions were collated and a written
report tabled and discussed by the Committee. The management
of Nomination Committee meetings was highly rated overall,
with the quality of information provided also rated positively.
The process for the recruitment of a new Non-executive Director
was considered to have been conducted appropriately with all
necessary rigour, despite the challenging circumstances posed by
international travel restrictions.
In 2021, the evaluation rated highly the information provided to
the Committee, noting a signicant improvement in the quality
of discussions and information on Executive Director and senior
management succession, with greater transparency on bench
strength and the activities under way to support further
development. The evaluation noted that the succession planning
process for the Non-executive Directors was functioning well but
that work was still needed to ensure that there were sufcient
internal candidates to adequately resource the pool of talent
needed to ensure internal succession for all Group Executive
Committee roles.
On behalf of the Nomination Committee
John McDonough CBE
Chairman, Nomination Committee
3 March 2022
129
Our business Our performance Sustainability
Governance Financial Statements
Dear Shareholder,
I was delighted to be appointed as Chair of the Remuneration
Committee following the 2021 AGM and I would like to express
my gratitude to my predecessor, Jane Hinkley, for her leadership
of the Committee over many years.
I am pleased to present our Directors’ Remuneration Report
(Remuneration Report) for 2021 which is divided into two sections:
–
Our Directors’ Remuneration Policy (Policy) which was
approved by shareholders at our 2020 AGM.
–
The Annual Report on Directors’ Remuneration. This outlines
how we implemented the Policy in 2021 and how we intend to
apply it in 2022.
The Remuneration Report (excluding the Policy) will be subject to
an advisory vote by shareholders at the 2022 AGM.
2021 saw a busy agenda for the Remuneration Committee.
Aside from fullling our statutory obligations, we have undertaken
a comprehensive review of executive remuneration to further
align it with our shareholders’ expectations. We also welcomed
Dinggui Gao to the Committee and thanked Hock Goh and
Holly Koeppel who stepped down at the 2021 AGM, for their
services to the Committee.
The key matters the Remuneration Committee considered during
its ve meetings in 2021 included:
Reviewing and approving achievement against performance
targets for the 2020 Annual Incentive arrangements
Setting performance targets and approving the structure
of the 2021 Annual Incentive arrangements
Reviewing and assessing the Company’s attainment of
performance conditions applicable to the Vesuvius
Performance Share awards made in 2018
Setting the performance measures and targets, and
authorising the grant of new awards in 2021 under the
Vesuvius Share Plan (VSP), the Deferred Share Bonus Plan
and the Medium-Term Incentive Plan
Considering the Company’s ongoing share sourcing
requirements to meet obligations under the Company’s share
plans, and funding of the Employee Benet Trust (EBT)
Reviewing the Annual Incentive Plan structure applicable
to the Group and approving changes to this structure
for executives below the Board to incorporate regional
trading performance at business unit level into the bonus
plan structure
Approving the 2020 Directors’ Remuneration Report
and reviewing the 2021 Directors’ Remuneration Report
Reviewing the Committee’s Terms of Reference
Reviewing the overall structure of annual incentive plans
and long-term incentive plans, and consulting with the
Company’s top 20 shareholders
Approving the 2022 salaries for the Chairman, Chief
Executive, Chief Financial Ofcer and senior management
130
Vesuvius plc
Annual Report and Financial Statements 2021
Directors’ Remuneration Report
Remuneration overview
Dinggui Gao
Joined the Committee on
his appointment to the
Board on 1 April 2021
Hock Goh
Served on the Committee
until his retirement from
the Board on 12 May 2021
Jane Hinkley
Douglas Hurt
Holly Koeppel
Served on the Committee
until her retirement from
the Board on 12 May 2021
Kath Durrant
– Committee Chair
Performance
Health & Safety
As the Chairman and Chief Executive outlined in their statements,
the Company again operated a range of safety protocols to
protect our teams against the transmission of COVID-19 in 2021,
as we continued to place the highest priority on health and
safety. We are pleased that our businesses continued to operate
effectively, serving our customers despite the continuing
pandemic. The Company received no nancial support from
the UK government during the year.
Operational
Revenue for the year increased to £1,642.9m (+18.1% on an
underlying basis vs 2020), marking the bounce back in key
markets. Trading prot at £142.4m was 50.4% greater than
2020 (on an underlying basis) and return on sales increased
by 190bps, on an underlying basis, to 8.7%. These results
exceeded expectations in what has been a challenging year
for Vesuvius and many industrial businesses. Extensive supply
chain disruptions for raw materials and logistics services,
added signicant challenge and complexity to each area of our
operations. The management of pricing and the ability to pass
on frequent price increases has been a critical area of focus both
centrally and in our decentralised operations requiring extensive
customer interaction.
The Flow Control, Foundry and Sensors & Probes business
units all outperformed their underlying markets and grew market
share. Deliberate decisions were taken in Advanced Refractories
to protect pricing over volumes, and as a result some market
share erosion occurred.
The continued focus on operational effectiveness enabled our
trade working capital to sales ratio to improve further to 20.9%,
an improvement of 230 bps vs 2020. These results demonstrate
disciplined leadership at multiple levels of the organisation.
Product quality metrics also continued to improve.
Strategic
The focus on R&D continued in the period with further investment
in mechatronics and product development, and a focus on
supporting our customers to reduce their CO
2
emissions. 27 new
products were launched in 2021, with revenue from new products
launched in the past ve years now at 15.3% (vs 12.4% in 2020).
Signicant focus on the Sustainability initiative launched in 2020
has enabled a continued improvement in Scope 1 & 2 emissions
reduction, with 2021 emissions 16.5% lower than the 2019 base
year, improvements in diversity with women now representing
21% of Top Management (vs 12.5% in 2019), and succession
candidates identied for the majority of critical roles. Health and
Safety performance improved further towards our zero accident
goal with a Lost Time Injury Frequency Rate (LTIFR) of 1.06 per
million hours worked, the best performance achieved to date.
The Chief Executive led the Board through extensive strategy
discussions exploring options for both organic and inorganic
growth. Signicant investments in both Poland and India were
approved in 2021 and at the end of the year the acquisition of the
business of Universal Refractories, Inc in the United States was
announced. The Company’s debt position remains well controlled
at 1.4x EBITDA.
Incentive outturns
In 2021, the Annual Incentive Plan (AIP) was based 60% on Group
headline earnings per share (EPS), 20% on the Group’s working
capital to sales ratio (based on the 12-month moving average)
and 20% on specied personal objectives. Performance against
these measures is illustrated below and full detail of the targets
are detailed on page 146.
Our adjusted headline earnings per share of 38.8 pence was
above the maximum annual incentive plan target of 36.9 pence
and above the 2020 outturn of 27.6 pence.
The Group’s working capital to sales ratio of 20.9% also exceeded
the maximum annual incentive plan target of 21.7%, and was
above the 2020 outturn of 23.2%.
The Committee agreed personal objectives for the Chief
Executive and CFO at the start of 2021 and assessed their
performance to merit 71% and 65% of maximum targets
respectively.
The overall formulaic outcome of the bonus scorecard was 94.2%
of maximum for the Chief Executive and 93.0% of maximum for
the CFO. The Committee gave careful consideration to these
outcomes and was satised that they were consistent with the
strong nancial and operational performance and strategic
progress outlined above. The Committee noted that similar
and complementary KPIs exist in the incentive programmes for
managers and employees and was mindful of the outturns for the
wider workforce in conrming its decisions for Executive Directors
and the Executive Committee. Consequently, the Committee
concluded that no discretionary adjustment was required.
Strategic
alignment
Deliver protable
growth
Generate value for
our shareholders
Maintain an efcient
capital structure
Always put safety
rst
Think beyond in
innovation
Run best-in-class
sustainable
operations
Foster talent,
skill and motivation
in our people
See more about
Our strategy
on
p14
and
p15
Personal objectives
2
Working capital/sales ratio
2
EPS
1
100%
100%
CEO 71%
CFO 65%
On-target
Threshold
Performance achieved
1. 60% weighting.
2. 20% weighting.
131
Our business Our performance Sustainability
Governance Financial Statements
Remuneration overview
continued
Reshaped 2022 performance measures
In light of these ndings, we have made some modest changes to the performance measures in our incentive structure for 2022 whilst
maintaining our focus on key nancial metrics.
1 The introduction
of a returns
measure
A returns measure has been introduced into the AIP and VSP in 2022. This change is in response to
shareholder feedback and is designed to provide fairer and better alignment between delivery of our
strategic and nancial goals, and the incentive outturns. Its introduction into the VSP in place of EPS
allows us to maintain focus on long-term protability whilst removing the historic difculty in setting
robust three-year EPS targets.
A range of returns measures were considered and post-tax ROIC was selected as the most complete
measure during both steady state and periods of inorganic growth. Post-tax ROIC targets will be set by
reference to a number of relevant factors including: our strategy, market conditions and anticipated cost
of capital, which is less volatile and easier to forecast than other nancial metrics. It is also consistent
with a philosophy of management being rewarded for value generating activity. As an important driver
of post-tax ROIC is the return generated on our capital base, delivering sustainable prots will continue
to be an important element in our remuneration arrangements.
2 The introduction
of ESG measures
of most
importance to
the Company
and aligned
with our
Sustainability
strategy
Energy:
Reduction in Scope 1 & 2 CO
2
e emissions per metric tonne of product packed and shipped.
Energy intensity is a key measure for the Group and validation of data over time provides condence to
set targets aligned with our goal to achieve net zero status at the latest by 2050.
Safety:
A reduction in the Lost Time Incident Frequency Rate. The industry in which we work poses
signicant risks, not least due to the large numbers of staff working at customer locations around
the world. Safety remains a priority and continued improvement towards zero accidents remains
management’s top operational priority.
Diversity:
An improvement in the gender representation in our senior management population; whilst
improvements have been made in the number of women serving amongst our Top Management of
c. 60 individuals in recent years, there remains a signicant task to continue this progress further down
the organisation.
The performance period for the awards made under the Vesuvius
Share Plan (VSP) in 2019 was completed at the end of 2021.
Performance was measured equally by reference to total
shareholder return (TSR) relative to the FTSE 250 (excluding
investment trusts) and headline EPS growth over the three-year
period. This has been a particularly challenging period for
the global economy and, by extension, a cyclical business like
Vesuvius. Consequently, relative TSR performance (measured
against the constituents of the FTSE 250 and so including
companies operating in many different sectors and impacted by
different macro-economic drivers to Vesuvius) was below median
and headline EPS growth was below the threshold target of
a range set prior to the COVID-19 pandemic. These results
mean that none of the shares potentially available to the Chief
Executive and CFO under this award will vest. The Committee
has not applied any discretion with respect to this nil vesting
of the 2019 VSP awards, mindful of the experience of
shareholders and other stakeholders in what has been a
difcult period for many.
Review of executive remuneration arrangements
Following my appointment as Committee Chair, the Committee
and I decided it was an opportune moment to undertake a review
of executive remuneration arrangements to understand our
competitive positioning, the alignment of pay and performance
over time, recent feedback from shareholders and the views of
all Board and Executive Committee members.
In relation to incentives, central themes emerging from the
review were:
–
The challenge of setting long-term EPS targets in a cyclical
business, as highlighted by the second consecutive cycle of
VSP awards delivering zero vesting as outlined above.
–
That alignment with strategy may be improved through the
selection of alternative KPIs; in this we noted the request from
several shareholders to consider a returns metric.
–
A desire to incorporate ESG KPIs more explicitly into incentive
arrangements. In this we noted the support of the executive
team and the broad investor sentiment expressed by a range
of shareholders regarding ESG and pay.
–
A desire to ensure both the incentivisation and retention of an
executive team that is now fully formed and focused.
132
Vesuvius plc
Annual Report and Financial Statements 2021
Other changes in 2022 executive remuneration
Another theme that emerged from our review was the importance
of retaining key senior executives and ensuring that their
remuneration appropriately reected their performance,
development in the role and importance to the business.
In that context, the Remuneration Committee has particularly
focused on the remuneration of our CFO, Guy Young. When Guy
joined Vesuvius in 2015, his salary was set well below that of his
predecessor given his then lack of experience as a Group CFO
and Executive Director. After six years in the role, he is now an
experienced FTSE plc CFO. The Committee believes that his current
remuneration package still positions him below market compared
to less experienced sector peers, and does not accurately reect
his value to the business. It is also inconsistent with his sustained
performance and role criticality. Accordingly, Guy’s salary has been
increased in 2022 by 9% to £420,000 which we believe more fairly
reects his level of experience and importance to the Group.
The Committee has also reviewed the salary of our Chief
Executive, Patrick André, and agreed an increase of 4% in 2022
to £643,000. This is a lower increase than our budgeted Group
global workforce salary increase for 2022 of 5.2%.
There will be no change in 2022 in AIP opportunity (150% of
salary) or VSP award level (CE: 200% of salary; CFO: 150% of
salary) for either Executive Director. As outlined in last year’s
Remuneration Report, these Directors’ pension allowances are
frozen at the 1 January 2020 amount and will be reduced to 17%
of salary from the end of 2022 in line with the average of that
received by the majority of the workforce.
Chairman and Non-Executive Directors’ fees
During the year, the Committee reviewed the Chairman’s annual fee,
taking account of factors including the time commitment associated
with the role and the need to continue to attract talented candidates
as the Board plans for an orderly succession once John completes
his term as Chairman. Following that review, the Committee set
the Chairman’s fee for 2022 at £240,000. Separately, the Board
considered Non-executive Director fees, taking into account similar
factors and made a number of consequent adjustments to the fee
structure that are detailed on page 145. Those adjustments include
the introduction of a new supplementary fee for the Non-executive
Director responsible for workforce engagement which reects the
signicant time commitment associated with this role. These are the
rst increases in fee levels since 2019.
Workforce remuneration and employee engagement
The Group’s operations are geographically diverse in nature.
The Group does not operate a central workforce engagement
mechanism. However, in spite of travel restrictions brought about
by COVID-19, visits to operations by the Non-executive Directors
enabled all Committee members to host discussions explaining
corporate governance and specically the area of executive
remuneration with large groups of employees in Poland,
Germany, India, China and Belgium. Copies of the Company’s
Annual Report detailing the Executive Directors’ remuneration
are also widely disseminated throughout the Group and available
for employees to view on the Company’s website.
In 2021, despite the ongoing challenges caused by the COVID-19
pandemic, and thanks to a tremendous effort by local management,
supported by an effective communication campaign, we again
achieved a very high participation level in the Company’s employee
engagement survey with 92% participation, the same participation
as in 2020. Following improvements across all survey categories in
2020, the overall engagement score remained stable.
Shareholder engagement
At the 2021 AGM, the Directors’ Remuneration Report was
supported by 99.32% of voting shareholders and I am very
grateful for this demonstration of broad-based support for
our executive remuneration arrangements.
The Company’s top 20 shareholders were consulted on the
changes to the KPIs for the AIP and VSP, and on the proposed
salary increase for our CFO. We are grateful for the responses
received and discussions had, and appreciate the support
expressed by many of our shareholders.
I welcome feedback at any point in time from our entire shareholder
base regarding our remuneration arrangements and I hope that
we will earn your support at the forthcoming AGM.
Kath Durrant
Chair of the Remuneration Committee
3 March 2022
The resulting structure of performance measures in 2022 is summarised in the table below.
KPI
2021
2022
Strategic rationale
Annual Incentive Plan: one-year performance
EPS
60%
40%
Consistent with our strategic aim of sustainable, protable growth.
Maintains the primary focus on a prot measure in short-term incentivisation
Working capital/sales
20%
20%
Consistent with our strategic aim of maintaining strong cash generation and an
efcient capital structure
Post-tax ROIC
–
20%
Consistent with our strategic aim of generating sustainable protability and
creating shareholder value
Personal measures
20%
20%
Enables a focus on specic personal deliverables, managed through the
performance management system
Vesuvius Share Plan: three-year performance
Relative TSR
50%
40%
Consistent with our strategic aim of delivering shareholders a superior return
on their investment
EPS
50%
–
Removal of EPS reects the difculty in setting long-term targets for a cyclical business
Post-tax ROIC
–
40%
Consistent with our strategic aim of generating sustainable protability and
creating shareholder value
ESG
–
20%
Provides a specic focus on the three priority long-term ESG measures for the
Group. CO
2
intensity (10%), Safety (5%) and Diversity (5%)
133
Our business Our performance Sustainability
Governance Financial Statements
Directors’ Remuneration Report
2020 Remuneration Policy
At the 2020 AGM, held on 13 May 2020, the Company obtained
shareholder support for a new Remuneration Policy which took
effect from the close of that meeting. The previous policy has
been applied in its entirety up until this date. A copy of it is
contained within the 2019 Annual Report which can be viewed in
the Investors section (Results, Reports and Presentations) of
the Vesuvius website: www.vesuvius.com. The elements of the
previous policy that relate to remuneration that remained extant
on this date (such as outstanding share awards) continue to apply
until these commitments cease. The Policy operated as intended
in 2021. For the benet of shareholders, we have reprinted the
Policy below.
To ensure that the Policy is relevant to the 2022 nancial year,
we have made minor textual changes to refer to the applicable
nancial year in the following sections: ‘Illustration of the
Application of the Remuneration Policy for 2022’ (which also
contains, as described, 2022 data); ‘Consideration of conditions
elsewhere in the Group in developing policy’; and ‘Consideration
of Shareholder Views’. The Policy notes that vesting of awards
under the Vesuvius Share Plan will be subject to performance
conditions as determined by the Remuneration Committee ahead
of each award. The performance conditions for awards made
in 2020 and 2021 were based on Group EPS and relative TSR.
In 2022 these are based on relative TSR, post-tax ROIC and ESG
measures. The ‘VSP section’ of the Policy table and the section
on ‘Performance measures’ note this application of the Policy
in 2022. Finally, the ‘Terms of service’ section refers to the dates
of appointment of the current Non-executive Directors.
The Remuneration Committee reserves the right to make
any remuneration payments and payments for loss of ofce
(including exercising any discretions available to it in connection
with such payments), notwithstanding that they are not in line
with the Policy set out here, where the terms of the payment were
agreed: (i) before the date the Company’s rst Remuneration
Policy approved by shareholders in accordance with Section 439A
of the Companies Act came into effect; (ii) before the Policy set
out here came into effect, provided that the terms of the payment
were consistent with the shareholder-approved Remuneration
Policy in force at the time they were agreed; or (iii) at a time when
the relevant individual was not a Director of the Company and,
in the opinion of the Remuneration Committee, the payment
was not in consideration for the individual becoming a Director
of the Company. For these purposes, ‘payments’ include the
Remuneration Committee satisfying awards of variable
remuneration and, in relation to an award over shares, the terms
of the payment are ‘agreed’ at the time the award is granted.
Remuneration Policy Table for Executive Directors
Alignment/purpose
Operation
Opportunity
Performance
Base salary
Helps to recruit
and retain key
employees. Reects
the individual’s
experience, role and
contribution within
the Company
Base salary is normally reviewed
annually, with changes effective from
1 January.
Base salary is positioned to be market
competitive when considered against
other global industrial companies,
and relevant international and
FTSE 250 companies (excluding
Investment Trusts).
Paid in cash, subject to local tax and
social security regulations.
Salary increases will normally be in line
with the average increase awarded to
other employees in the Group, although
increases may be made above this level at
the Committee’s discretion in appropriate
circumstances. In considering any
increase in base salary, the Committee
will also take into account:
(i) the role and value of the individual
(ii) changes in job scope or responsibility
(iii) progression in the role
(e.g. for a new appointee)
(iv)
a signicant increase in the scale of
role and/or size, value or complexity
of the Group
(v) the need to maintain market
competitiveness.
No absolute maximum has been set
for Executive Director base salaries.
Current Executive Directors’ salaries
are set out in the Annual Report on
Directors’ Remuneration section of
this Remuneration Report.
Any increase will take into account the
individual’s performance, contribution
and increasing experience.
Other benets
Provides normal
market practice
benets
A range of benets including, but
not limited to: car allowance, private
medical care (including spouse and
dependent children), life insurance,
disability and health insurance, expense
reimbursement (including costs if a
spouse accompanies an Executive
Director on Vesuvius business), together
with relocation allowances and
expatriate benets, in some instances
grossed up for tax, in accordance with
the Group’s policies, and participation in
any employee share scheme operated
by the Group.
There is no formal maximum as benet
costs can uctuate depending on
changes in provider, cost and individual
circumstances.
None.
134
Vesuvius plc
Annual Report and Financial Statements 2021
Alignment/purpose
Operation
Opportunity
Performance
Pension
Helps to recruit and
retain key employees.
Ensures income in
retirement
An allowance is given as a percentage
of base salary. This may be used
to participate in Vesuvius’ pension
arrangements, invested in own pension
arrangements or taken as a cash
supplement (or any combination of
the above options).
Maximum of 25% of base salary for
incumbent Executive Directors at the date
that this policy is adopted. This was frozen
at the 1 January 2020 amount and will be
reduced to 17% from the end of 2022 in
line with the average of that received by
the majority of the workforce.
The level of allowance for Executive
Directors appointed following the
adoption of this policy will be aligned with
the post-retirement benets applicable
to the majority of the workforce or,
where appropriate, to the majority of the
workforce of the relevant geography.
None.
Annual Incentive
Incentivises Executive
Directors to achieve
key short-term
nancial and strategic
targets of the Group
Additional alignment
with shareholders’
interests through the
operation of bonus
deferral
Normally 33% of any Annual Incentive
earned by Executive Directors will be
deferred into awards over shares under
the Vesuvius Deferred Share Bonus
Plan which normally vest after at least
three years, other than in specied
circumstances outlined elsewhere
in this Policy. These may be cash or
share settled.
The Committee has the discretion to
determine that actual incentive payments
should be lower than levels calculated by
reference to achievement against targets
if it considers this to be appropriate.
The Committee has the discretion to
award participants the equivalent value
of dividends accrued during the vesting
period on any shares that vest.
Subject to malus and clawback.
Below threshold: 0%.
On-target: 50% of the applicable
maximum opportunity in any year.
Maximum: Up to 150% of base salary.
The Remuneration Committee will set
the level of maximum bonus opportunity
for each Executive Director at the start
of each year, with 50% of the applicable
maximum payable for on-target
performance.
Payments start to accrue on meeting
the threshold level of performance,
with payments between threshold and
on-target and between on-target and
maximum made on a pro rata basis.
The Annual Incentive is measured on
targets set at the beginning of each year.
The Committee establishes threshold
and maximum performance targets
for each nancial year. The majority of
the Annual Incentive will be determined
by measure(s) of Group nancial
performance. The remainder of the
Annual Incentive will be based on
nancial, strategic or operational
measures appropriate to the individual
Director. Performance is measured
over a one-year period. Actual
performance targets will be disclosed
after the performance period has ended.
They are not disclosed in advance due
to their commercial sensitivity.
Vesuvius Share
Plan (VSP)
Aligns Executive
Directors’ interests with
those of shareholders
through the delivery
of shares. Rewards
Executive Directors for
achieving the strategic
objectives of growth in
shareholder value and
earnings
Assists retention of
Executive Directors
over a three-year
performance period
VSP awards to Executive Directors are
granted as Performance Share awards.
These may be cash or share settled.
Awards vest three years after their
award date, other than in specied
circumstances outlined elsewhere in
this Policy, subject to the achievement
of specied conditions. All vested
shares, net of any tax liabilities, are then
subject to a further two-year holding
period after the vesting date, which
will continue to apply notwithstanding
the termination of employment of the
participants during this holding period,
except at the Committee’s discretion in
exceptional circumstances, including
a change of control or where the
participant dies or has left employment
due to ill health, injury or disability.
The Committee has the discretion to
award participants the equivalent value
of dividends accrued during the vesting
period and further two-year holding
period on any shares that vest.
Subject to malus and clawback.
Executive Directors are eligible to receive
an annual award with a face value of up
to 200% of base salary in Performance
Share awards.
Vesting at threshold performance is at
25% of the award, rising to vesting of
the full award at maximum.
Vesting will be subject to performance
conditions as determined by the
Remuneration Committee ahead of
each award. Those conditions will
be disclosed in the Annual Report on
Directors’ Remuneration section of the
Remuneration Report. The performance
conditions for awards made in 2020 and
2021 were Group EPS and relative TSR,
and in 2022 will change to Relative TSR,
post-tax ROIC and ESG measures as
discussed elsewhere in this report. The
Remuneration Committee will retain
discretion for future awards to include
additional or alternative performance
conditions which are aligned with the
corporate strategy.
At its discretion, the Committee may
elect to add additional underpinning
performance conditions.
The Company reserves the right only to
disclose certain of the performance targets
after the performance period has ended,
due to their commercial sensitivity.
Prior to any vesting, the Remuneration
Committee reviews the underlying
nancial performance of the Group
over the performance period, and the
non-nancial performance of the Group
and participants, to ensure that the
vesting is justied. Following this review,
the Committee has the discretion to
amend the nal vesting level if it does
not consider that it is justied.
135
Our business Our performance Sustainability
Governance Financial Statements
2020 Remuneration Policy
continued
Malus/clawback arrangements
The Executive Directors’ variable remuneration is subject to
malus and clawback provisions. These provide the Committee
with the exibility, if required, to withhold or recover payments
made to Executive Directors under the Annual Incentive Plan
(including deferred awards) and/or to withhold or recover
share awards granted to Executive Directors under the Vesuvius
Share Plan, including any dividends granted on such awards.
The circumstances in which the Committee could potentially
elect to apply malus and clawback provisions include: a material
misstatement in the Group’s nancial results; an error in the
calculation of the extent of payment or vesting of an incentive;
gross misconduct by an individual; or signicant nancial loss or
serious reputational damage to Vesuvius plc resulting from an
individual’s conduct, a material failure of risk management or a
serious breach of health and safety. These malus and clawback
provisions apply for a period of up to three years after the end of
a performance period (or end of the deferral period in respect of
awards made under the Vesuvius Deferred Share Bonus Plan).
Performance measures
In selecting performance measures for the Annual Incentive,
the Committee seeks to reect key strategic aims and the need
for a rigorous focus on nancial performance. Each year,
the Committee agrees challenging targets to ensure that
underperformance is not rewarded. The Company will not be
disclosing the specic nancial or personal objectives set until
after the relevant performance period has ended because
of commercial sensitivities. The personal objectives are all
job-specic in nature and track performance against key
strategic, organisational and operational goals.
In selecting performance measures for the Vesuvius Share
Plan, the Committee seeks to focus Executive Directors on the
execution of long-term strategy and also align their rewards with
value created for shareholders. On this basis, the performance
conditions for the Vesuvius Performance Share awards initially
included measures based on TSR and EPS performance and for
2022 will include measures based on TSR and Return on Invested
Capital (post-tax ROIC) and ESG.
Remuneration Policy Design
The Committee is satised that the Remuneration Policy is designed to promote the long-term success of the Company in accordance
with the requirements of the Code with regard to:
Clarity
Simplicity
Risk
There is complete transparency on the
executive remuneration arrangements with full
disclosure in the Annual Report. The Annual
Incentive bonus structure for the Executive
Directors is based on the same structure
utilised for annual bonus arrangements for
senior executives throughout the Group.
The focus of incentive arrangements on
long-term sustainable growth clearly aligns the
interests of executives with those of the Group’s
shareholders. The Vesuvius Share Plan, with
its emphasis on the retention of shares for a
period of at least ve years, clearly aligns the
long-term objectives of the Directors with that
of its investors.
The new Policy with its focus on three core
elements: xed pay, Annual Incentive and
Long-Term Incentive is clear, simple and easy
to understand.
The Committee has carefully analysed the
range of possible outcomes of awards and
believes the Policy to be fair and proportionate,
with the clear linkage to Group protability
mitigating the potential for excessive rewards
and the reliance on audited prot numbers
and externally veried TSR targets serving to
mitigate behavioural risk. The Committee has
discretion under the Vesuvius Share Plan to
determine the vesting of awards in accordance
with the Code requirement and malus and
clawback provisions also apply.
Predictability
Proportionality
Alignment to culture
The charts on page 137 provide estimates
of the total remuneration for the Executive
Directors for 2022 for minimum, on-target
and maximum performance, showing the split
between xed and variable remuneration.
The charts also indicate the maximum
potential remuneration assuming 50% share
price appreciation. Prior to any vesting under
the Vesuvius Share Plan the Committee reviews
the underlying nancial performance of the
Company over the performance period, and
the non-nancial performance of the Group
and participants, to ensure that the vesting is
justied. Following this review, the Committee
has the discretion to amend the nal vesting
level if it does not consider that it is justied.
The Committee believes that the performance-
related elements of remuneration have
nancial targets which are transparent,
stretching and clearly align the Executive
Directors’ remuneration with the delivery of
the Group’s strategy. The Vesuvius Share Plan
rewards long-term performance directly linked
with the Group’s strategy and results, ensuring
that only strong performance is rewarded.
The Executive Directors’ incentive arrangements
are consistent with the Group’s core strategic
objective of delivering long-term sustainable
and protable growth and support our
performance-orientated culture. The inclusion
of personal objectives in the Annual Incentive
Plan affords the opportunity for attention
to be focused on key non-nancial strategic
objectives each year.
136
Vesuvius plc
Annual Report and Financial Statements 2021
Within the Policy period, the Committee will continually review
the performance measures used to ensure that awards are
made on the basis of challenging targets that clearly support
the achievement of the Group’s strategic aims.
The Committee may vary or waive any performance condition(s)
if circumstances occur which cause it to determine that the original
condition(s) have ceased to be appropriate, provided that any
such variation or waiver is fair, reasonable and not materially
less difcult to satisfy than the original condition (in its opinion).
In the event that the Committee were to make an adjustment
of this sort, a full explanation would be provided in the next
Remuneration Report.
The Committee may: (a) in the event of a variation of the
Company’s share capital, demerger, special dividend or any other
corporate event which it reasonably determines justies such an
adjustment, adjust; and (b) amend the terms of awards granted
under the share schemes referred to above in accordance with
the rules of the relevant plans.
Share awards may be settled by the issue of new shares or by the
transfer of existing shares. In line with prevailing best practice at
the time this Policy was approved, any issuance of new shares
is limited to 5% of share capital over a rolling ten-year period in
relation to discretionary employee share schemes and 10% of
share capital over a rolling ten-year period in relation to all
employee share schemes.
Illustration of the application of the Remuneration Policy
for 2022
The charts below show the total remuneration for Executive
Directors for 2022 for minimum, on-target and maximum
performance. The xed elements of remuneration comprise
base salary, pension and other benets, using 2022 salary data.
The assumptions on which they are calculated are as follows:
Minimum:
Fixed remuneration only.
On-target:
Fixed remuneration plus on-target Annual Incentive
(made at 75% of base salary for Patrick André and Guy Young);
and for the Performance Share awards (made at 200% of base
salary for Patrick André and 150% of base salary for Guy Young)
under the Vesuvius Share Plan, median performance for the TSR
element and the mid-point between threshold and maximum
performance for the post-tax ROIC and ESG performance
conditions. No share price appreciation is assumed.
Maximum:
Fixed remuneration plus maximum Annual Incentive
(being full achievement of nancial and personal targets, made
at 150% of base salary for Patrick André and Guy Young) and
100% vesting for Performance Share awards (made at 200%
of base salary for Patrick André and 150% of base salary for
Guy Young) under the Vesuvius Share Plan. No share price
appreciation is assumed.
Maximum including assumed 50% share price appreciation:
This shows the value of the maximum scenario if 50% share price
appreciation is assumed over the three-year performance period
of the Performance Share awards.
Note: In addition, the Committee retains the discretion to award dividends
(either shares or their cash equivalent) on any shares that vest.
Remuneration illustrations
£000
0
500 1000 1500 2000 2500 3000 3500 4000
0
500 1000 1500 2000 2500 3000
Patrick André, Chief Executive
Minimum
100%
£857k
46%
28%
23%
31%
26%
41%
51%
26%
28%
£1,854k
£3,108k
£3,751k
On-target
Maximum
Maximum including share price appreciation
Maximum including share price appreciation
Guy Young, Chief Financial Officer
Minimum
100%
£534k
48%
30%
25%
30%
45%35% 35%
£1,794k
£2,109k
23%
£1,101k
On-target
Maximum
Fixed elements
Annual variable elements
Long-term variable elements
Remuneration Illustrations
£000
29%
137
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Governance Financial Statements
Service contracts of Executive Directors
The Committee will periodically review the contractual terms for
new Executive Directors to ensure that these reect best practice.
Service contracts currently operate on a rolling basis and are
limited to a 12-month notice period.
Patrick André is employed as Chief Executive of Vesuvius plc
pursuant to the terms of a service agreement made with the
Company dated 17 July 2017. Guy Young is employed as Chief
Financial Ofcer pursuant to the terms of a service agreement
with Vesuvius plc dated 16 September 2015. Each Executive
Director’s appointment is terminable by Vesuvius on not less
than 12 months’ written notice, and by each Executive Director
on not less than six months’ written notice.
External appointments of Executive Directors
The Executive Directors do not currently serve as Non-executive
Directors of any other quoted company. Subject always to
consent being granted by the Company for them to take up such
an appointment were they to so serve, the Company would allow
them to retain any fees they received for the performance of
their duties.
Remuneration Policy for Non-executive Directors
The Company seeks to appoint Non-executive Directors
who have relevant professional knowledge and have gained
experience in a relevant industry and geographical sector,
to support diversity of expertise at the Board and match the
wide geographical spread of the Company’s activities.
Non-executive Directors attend Board, Committee and
other meetings, held mainly in the UK, together with an annual
strategy review to debate the Company’s strategic direction.
All Non-executive Directors are expected to familiarise
themselves with the scale and scope of the Company’s business
and to maintain their specic technical skills and knowledge.
The Board sets the level of fees paid to the Non-executive
Directors after considering the role and responsibilities of each
Director and the practice of other companies of a similar size
and international complexity. The Non-executive Directors do
not participate in Board discussions on their own remuneration.
Alignment/purpose
Operation
Opportunity
Performance
Fees
To attract and retain
Non-executive
Directors of the
necessary skill and
experience by offering
market-competitive
fees
Fees are usually reviewed every year by
the Board.
Non-executive Directors are paid a base fee
for the performance of their role plus additional
fees for roles that involve signicant additional
time commitment and/or responsibility.
Such roles could include, but are not limited
to, Committee chairmanship (and, where
appropriate, membership) or acting as the
Senior Independent Director. Fees are paid
in cash.
The Chairman is paid a single cash fee and
receives administrative support from
the Company.
Non-executive Directors and the Chairman will be
paid market-appropriate fees, with any increase
reecting changes in the market or adjustments
to a specic Non-executive Director’s role.
No eligibility for bonuses, retirement benets
or to participate in the Group’s employee
share plans.
Base fees paid to Non-executive Directors will
in aggregate remain within the aggregate limit
stated in our Articles, currently being £500,000.
None.
Benets and
expenses
To facilitate execution
of responsibilities and
duties required
by the role
All Non-executive Directors are reimbursed for
reasonable expenses incurred in carrying out
their duties (including any personal tax owing
on such expenses).
Non-executive Directors’ expenses are paid in
accordance with Vesuvius’ expense procedures.
None.
2020 Remuneration Policy
continued
138
Vesuvius plc
Annual Report and Financial Statements 2021
Terms of service of the Chairman and other Non-executive
Directors
The terms of service of the Chairman and the Non-executive
Directors are contained in letters of appointment. Each
Non-executive Director is appointed subject to their election
at the Company’s rst Annual General Meeting following their
appointment and re-election at subsequent Annual General
Meetings. During the rst year of his/her appointment, the
Chairman is entitled to 12 months’ notice from the Company;
thereafter, he/she is entitled to six months’ notice from the
Company. None of the other Non-executive Directors is
entitled to receive compensation for loss of ofce at any time.
All Non-executive Directors are subject to retirement, and election
or re-election, in accordance with the Company’s Articles of
Association. The current policy is for Non-executive Directors
to serve on the Board for a maximum of nine years, with review
at the end of three and six years, subject always to mutual
agreement and annual performance evaluation. The Board
retains discretion to extend the tenure of Non-executive Directors
beyond this time, subject to the requirements of Board balance
and independence being satised.
The table below shows the date of appointment for each of the Non-executive Directors:
Non-executive Director
Date of appointment
John McDonough CBE
31 October 2012
Kath Durrant
1 December 2020
Dinggui Gao
1 April 2021
Friederike Helfer
4 December 2019
Jane Hinkley
3 December 2012
Douglas Hurt
2 April 2015
Recruitment policy
On appointment or promotion of a new Executive Director, the
Committee will typically use the Remuneration Policy in force
at the time of the Committee’s decision to determine ongoing
remuneration.
Base salary levels will generally be set in accordance with the
Remuneration Policy current at the time of the Committee’s
decision, taking into account the experience and calibre of the
appointee. If it is appropriate to appoint an individual on a base
salary initially below what is adjudged to be market positioning,
contingent on individual performance, the Committee retains
the discretion to realign base salary over the one to three years
following appointment, which may result in a higher rate of
annualised increase than might otherwise be awarded under the
Policy. If the Committee intends to rely on this discretion, it will be
noted in the rst Remuneration Report following an individual’s
appointment. Other than in exceptional circumstances, other
elements of annual remuneration will, typically, be set in line with
the Remuneration Policy, including a limit on awards under the
Annual Incentive and Vesuvius Share Plan of 350% of salary in
aggregate. The Committee retains the discretion to make the
following further exceptions:
–
In the event that an internal appointment is made, or where
a Director is appointed as a result of transfer into the Group
on an acquisition of another Company, the Committee may
continue with existing remuneration provisions for this
individual, where appropriate
–
If necessary and appropriate to secure the appointment
of a candidate who has to move locations as a result of the
appointment, whether internal or external, the Committee may
make additional payments linked to relocation, above those
outlined in the policy table, and would authorise the payment
of a relocation allowance and repatriation, as well as other
associated international mobility terms. Such benets would
be set at a level which the Committee considers appropriate
for the role and the individual’s circumstances
–
If appropriate the Committee may apply different
performance measures and/or targets to a Director’s rst
incentive awards in his/her year of appointment
Service contracts will be entered into on terms similar to those
for the existing Executive Directors, summarised in the service
contracts of Executive Directors section above.
In addition to the annual remuneration elements noted above,
the Committee may consider buying out terms, incentives and
any other compensation arrangements forfeited on leaving
a previous employer that an individual forfeits in accepting
an appointment with Vesuvius. The Committee will have the
authority to rely on Listing Rule 9.4.2R(2) or to apply the existing
limits within the Vesuvius Share Plan to make Restricted Share
awards on recruitment. In making any such awards, the Committee
will review the terms of any forfeited awards, including, but not
limited to, vesting periods, the expected value of such awards on
vesting and the likelihood of the performance targets applicable
to such awards being met, while retaining the discretion to make
any buy-out award the Committee determines is necessary and
appropriate. The Committee may also require the appointee to
purchase shares in Vesuvius to a pre-agreed level prior to vesting
of any such awards. The value of any buy-out award will be
capped, to ensure its maximum value is no higher than the value
of the awards that the individual forfeited on joining Vesuvius.
Any such awards will be subject to malus and clawback.
With respect to the appointment of a new Chairman or
Non-executive Director, appointment terms will be consistent
with those applicable at the time the appointment is agreed.
Variable pay will not be considered. With respect to Non-executive
Directors, fees will be consistent with the Policy at the time the
appointment is agreed. If, in exceptional circumstances, a
Non-executive Director was asked to assume an interim executive
role, the Company retains the discretion to pay them appropriate
executive compensation, in line with the Policy.
139
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Governance Financial Statements
Exit payment policy
Vesuvius has the option to make a payment in lieu of part
or all of the required notice period for Executive Directors.
Any such payment in lieu will consist of the base salary, pension
contributions and value of benets to which the Director would
have been entitled for the duration of the remaining notice period,
net of statutory deductions in each case. Half of any payments
in lieu of notice would be made in a lump sum, the remainder in
equal monthly instalments commencing in the month in which the
midpoint of their foregone notice period falls (and are reduced or
extinguished by salary from any role undertaken by the departing
Executive in this time). Executive Directors are subject to certain
non-compete covenants for a period of nine months, and
non-solicitation covenants for a period of 12 months, following
the termination of their employment. Their service agreements
are governed by English law.
Executive Directors’ contracts do not contain any change of
control provisions; they do contain a duty to mitigate should
the Director nd an alternative paid occupation in any period
during which the Company must otherwise pay compensation
on early termination.
The table below summarises how the awards under the annual
bonus and Vesuvius Share Plan are typically treated in different
leaver scenarios and on a change of control.
Whilst the Committee retains overall discretion on determining
‘good leaver’ status, it typically denes a ‘good leaver’ in
circumstances such as retirement with agreement of the
Company, ill health, disability, death, redundancy, or part of
the business in which the individual is employed or engaged
ceasing to be part of the Group. Final treatment is subject to
the Committee’s discretion.
Event
Timing
Calculation of vesting/payment
Annual Incentive Plan – during period prior to payment
Good leaver
Paid at the same time as to
continuing employees.
Annual bonus is paid only to the extent that any performance conditions have
been satised and is pro-rated for the proportion of the nancial year worked
before cessation of employment. In determining the level of bonus to be paid,
the Committee may, at its discretion, take into account performance up to the
date of cessation or over the nancial year as a whole based on appropriate
performance measures as determined by the Committee. The bonus may,
at the Committee’s discretion, be paid entirely in cash.
Bad leaver
Not applicable.
Individuals lose the right to their annual bonus.
Change of control
Paid on the effective date of
change of control.
Annual bonus is paid only to the extent that any performance conditions have
been satised and is pro-rated for the proportion of the nancial year worked.
Annual Incentive Plan – in respect of any amount deferred into awards over shares under the Vesuvius Deferred Share Bonus Plan
Good leaver
On the date of the event. Deferred awards vest in full.
Bad leaver
On the date of the event. Other than dismissal for cause, deferred awards will vest in full.
Change of control
2
Within seven days of the event. Deferred awards vest in full.
Vesuvius Share Plan
Good leaver
1
On normal release date (or earlier
at the Committee’s discretion).
Unvested awards vest to the extent that any performance conditions have been
satised and a pro rata reduction applies to the value of the awards to take
into account the proportion of vesting period not served, unless the Committee
decides that the reduction in the number of vested shares is inappropriate.
Bad leaver
Unvested awards lapse.
Unvested awards lapse on cessation of employment.
Change of control
2
On the date of the event. Unvested awards vest to the extent that any performance conditions have been
satised and a pro rata reduction applies for the proportion of the vesting period
not served, unless the Committee decides that the reduction in the number of
vested shares is inappropriate.
1. Under the rules of the Vesuvius Share Plan, any vested shares, net of any tax liabilities, are subject to a further two-year holding period after the vesting date.
The holding period may be terminated early at the Committee’s discretion in exceptional circumstances, including a change of control or where the award
holder dies or leaves employment due to ill health, injury or disability.
2. In certain circumstances, the Committee may determine that unvested awards under the Vesuvius Deferred Bonus Plan and Vesuvius Share Plan will not vest
on a change of control but will instead be replaced by an equivalent grant of a new award, as determined by the Committee, in the new company.
2020 Remuneration Policy
continued
140
Vesuvius plc
Annual Report and Financial Statements 2021
Benets normally cease to be provided on the date employment
ends. However, the Committee has the discretion to allow
some minor benets (such as health insurance, tax advice and
repatriation expenses) to continue to be provided for a period
following cessation where this is considered fair and reasonable,
or appropriate on the basis of local market practice. In addition,
the Committee retains discretion to fund other expenses for the
Executive Director; for example, payments to meet legal fees
incurred in connection with termination of employment, or to
meet the costs of providing outplacement support, and de
minimis termination costs up to £5,000 to cover transfer of
mobile phone or other administrative expenses.
The Committee reserves the right to make any other payments in
connection with a Director’s cessation of ofce or employment
where the payments are made in good faith in discharge of an
existing legal obligation (or by way of damages for breach of
such an obligation) or by way of a compromise or settlement of
any claim arising in connection with the cessation of a Director’s
ofce or employment.
In certain circumstances, the Committee may approve new
contractual arrangements with departing Executive Directors,
including (but not limited to) settlement, condentiality, restrictive
covenants and/or consultancy arrangements. These would
be used only where the Committee believed it was in the best
interests of the Company to do so.
Comparison of Remuneration Policy for Executive Directors
with that for other employees
The Remuneration Policy for Executive Directors is designed in
line with the remuneration philosophy set out in this report – which
also underpins remuneration for the wider Group. Remuneration
arrangements for Executive Directors draw on the same elements
as those for other employees – base salary, xed benets and
retirement benets – with performance-related pay extending
to the management cadres and beyond. However, given that
remuneration structures for other employees need to reect both
seniority and local market practice, they differ from the policy for
Executive Directors. In particular, Executive Directors receive a
higher proportion of their remuneration in performance-related
pay and share-based payments. Individual percentages of
variable versus xed remuneration and participation in
share-based structures increase as seniority increases.
As for Executive Directors, all employees receive an annual
performance appraisal, and receive salary reviews on an annual
basis. Middle and senior managers participate in the Annual
Incentive Plan. For functional members of the Group Executive
Committee, the award is predominantly based on Group
performance, with the remainder focused upon the achievement
of personal objectives. For business unit Presidents and other
operational business unit employees, any potential award is
based upon four separate measures relating to Group performance,
business unit performance, regional performance, where
relevant, and achievement of personal objectives.
All members of the Group Executive Committee participate in the
Vesuvius Share Plan and receive awards of Performance Shares,
which vest on the basis of the same performance targets set for
the Executive Directors. The level of awards granted to members
of the Group Executive Committee who don’t serve on the Board
are lower than those payable to the Executive Directors.
For certain senior and middle managers, awards are made
under the Vesuvius Medium Term Plan (MTP).
These managers participate in the MTP at varying percentage
levels, and awards are based on the same measures and targets
as the Annual Incentive Plan. The senior management cadre
receives MTP awards made over Vesuvius shares, whilst other
managers who participate in the MTP receive their awards in
cash. In each case, awards are granted following the end of the
relevant nancial year. The MTP share awards vest on the second
anniversary of the date of grant, subject to continuing employment.
Consideration of conditions elsewhere in the Group in
developing policy
The Non-executive Directors participated in a number of ‘town
hall’ meetings during the year which provided the opportunity to
engage with the workforce to explain how executive remuneration
aligns with wider Company pay policies. The Remuneration
Committee takes into account the pay and employment
conditions of other Group employees when determining Executive
Directors’ remuneration, particularly when determining base
salary increases, when the Committee will consider the salary
increases for other Group employees in the same jurisdiction.
Consideration of shareholder views
Vesuvius is committed to open and transparent dialogue with
its shareholders on remuneration as well as other governance
matters. As Chair of the Committee, Kath Durrant welcomes
shareholder engagement and is available for any discussions
investors wish to have on remuneration matters. In early 2022,
the Committee wrote to the top 20 shareholders and key
governance agencies outlining its proposals for the 2022 incentive
structure for the Executive Directors. We have received responses
from around 80% of respondents and we responded to all
questions that were raised.
Shareholding guidelines
The Remuneration Committee encourages Executive Directors to
build and hold a shareholding in the Company equivalent in value
to at least 200% of base salary.
Compliance with the shareholding policy is tested at the end of
each year for application in the following year, with the valuation
of any holding being taken at the higher of: (1) the share price on
the date of vesting of any shares derived from a share award, in
respect of those shares only; and (2) the average of the closing
prices of a Vesuvius ordinary share for the trading days in
that December.
Unless exceptionally the Committee determines otherwise,
under the post-employment shareholding guideline the Executive
Directors will remain subject to their shareholding requirement in
the rst year after their cessation as an Executive Director and to
50% of the shares retained in the rst year during the second year
after such cessation, recognising that there is no requirement
to purchase additional shares if the shares held when they
cease to be an Executive Director are less than the applicable
shareholding guideline.
General
The Committee may make minor amendments to the Policy
set out in this Policy Report (for regulatory, exchange control,
tax or administrative purposes or to take account of a change
in legislation) without obtaining shareholder approval for
that amendment.
141
Our business Our performance Sustainability
Governance Financial Statements
Directors’ Remuneration Report
Annual Report on Directors’ Remuneration
Directors’ Remuneration at a glance
Our remuneration for Executive Directors
The table below sets out the phasing of receipt of the various elements of Executive Director remuneration for 2022.
2022
2023
2024
20252026
2027
Description and link to strategy
Base salary
Salaries are set at an appropriate level to enable
the Company to recruit and retain key employees,
and reect the individual’s experience, role and
contribution within the Company.
Benets
Provides normal market practice benets.
Pension
The pension benet helps to recruit and retain
key employees and ensures income in retirement.
Annual Incentive
The Annual Incentive incentivises the Executive
Directors to achieve key short-term nancial and
strategic targets of the Group.
Deferred Annual
Incentive
The deferral of a portion of the Annual Incentive
increases alignment with shareholders.
Vesuvius Share Plan
Holding
period
Awards under the Vesuvius Share Plan align
Executive Directors’ interests with those of
shareholders through the delivery of shares and
assist in the retention of the Executive Directors.
The VSP rewards the Executive Directors for
achieving the strategic objectives of growth in
shareholder value and earnings.
2022 Directors’ Remuneration
The table below sets out how the Remuneration Policy will be applied to the Executive Directors’ remuneration for 2022. Further details
about each of the elements of remuneration are set out in the Remuneration Policy and the Annual Report on Directors’ Remuneration.
Remuneration element Remuneration structure
Base salary
Current salaries as follows:
–
Patrick André – £643,000 (2021: £618,000)
–
Guy Young – £ 420,000 (2021: £385,000)
The CEO was awarded a 4% increase and the CFO a 9% increase, effective 1 January 2022.
Benets
Benets for Executive Directors include car allowance, private medical care, relocation expenses,
tax advice and tax reimbursement, commuting costs, school fees, Directors’ spouse’s travel and
administrative expenses.
Pension
Pension allowance is frozen at the 1 January 2020 amount (which amounts to 24% of salary for the
CEO and 23% of salary for the CFO) and will be reduced to 17% from the end of 2022 in line with
the average of that received by the majority of the workforce.
Annual Incentive
For 2022, the maximum Annual Incentive potential for the Executive Directors will be 150% of
base salary with target Annual Incentive potential being 75% of base salary. Their incentives are
based 40% on Group headline earnings per share, 20% on the Group’s working capital to sales
ratio (based on the 12-month moving average), 20% on post-tax Return on Invested Capital
(ROIC) and 20% on specied personal objectives. 33% of any Annual Incentive earned
will be deferred into awards over shares, which will vest after a holding period of three years.
Vesuvius Share Plan (VSP)
Performance Share awards with a maximum value of 200% of salary will be awarded to Patrick
André and 150% for Guy Young. Vesting of 40% of shares awarded will be based upon the
Company’s TSR performance relative to that of the constituent companies of the FTSE 250
(excluding investment trusts), and 40% on post-tax Return on Invested Capital (ROIC) and 20%
ESG. Performance will be measured over three years with awards vesting after three years.
There will then be a further two-year holding period applicable to the awards.
142
Vesuvius plc
Annual Report and Financial Statements 2021
Remuneration Committee structure
The current members of the Remuneration Committee are all
the independent Non-executive Directors of the Company.
The Committee Chair is Kath Durrant, who assumed the role
when Jane Hinkley stepped down from the position at the 2021
AGM. Kath Durrant, Jane Hinkley and Douglas Hurt have served
on the Committee throughout 2021. Hock Goh and Holly Koeppel
stepped down from the Committee at the 2021 AGM, the
Committee thanks each of them for their service. Dinggui Gao
was appointed as a member of the Remuneration Committee on
1 April 2021. The Committee complies with the requirements
of the UK Corporate Governance Code for the composition of
remuneration committees. Each of the members brings a broad
experience of international businesses and an understanding of
their challenges to the work of the Committee. The Company
Secretary is Secretary to the Committee. Members’ biographies
are on pages 104 and 105.
Meetings
The Committee met ve times during the year. The Group’s
Chairman, Chief Executive and Chief HR Ofcer were invited
to each meeting, together with Friederike Helfer, Vesuvius’
non-independent Non-executive Director, though none of them
participated in discussions regarding their own remuneration.
The Company’s Chief Financial Ofcer was invited as
appropriate. In addition, a representative from Deloitte, the
Remuneration Committee adviser, attended the meetings.
The attendees supported the work of the Committee, giving
critical insight into the operational demands of the business and
their application to the overall remuneration strategy within the
Group. In receiving views on remuneration matters from the
Executive Directors and senior management, the Committee
recognised the potential for conicts of interest to arise and
considered the advice accordingly. The Chair of the Committee
reported the outcomes of all meetings to the Board.
The Committee operates under formal terms of reference
which were reviewed during the year. The terms of reference
are available on the Group website: www.vesuvius.com.
The Committee members are permitted to obtain outside
legal advice at the Company’s expense in relation to their
deliberations. These powers were not exercised during the year.
The Committee may also secure the attendance at its meetings
of any employee or other parties it considers necessary.
Role and responsibilities
The Committee is responsible for:
–
Determining the overall remuneration policy for the Executive
Directors, including the terms of their service agreements,
pension rights and compensation payments
–
Setting the appropriate remuneration for the Chairman,
the Executive Directors and Senior Management (being the
Group Executive Committee)
–
Reviewing workforce remuneration and related policies, and
the alignment of incentives and rewards with culture, taking
these into account when setting the policy for Executive
Director remuneration
–
Overseeing the operation of the executive share incentive plans
Advice provided to the Remuneration Committee
Deloitte is appointed directly by the Remuneration Committee
to provide advice on executive remuneration matters, including
remuneration structure and policy, updates on market practice
and trends, and guidance on the implementation and operation
of share incentive plans. The Committee appointed Deloitte,
a signatory to the Remuneration Consultants Group Code of
Conduct in relation to Executive Remuneration Consulting in
the UK, following a formal tender process in 2014. Deloitte also
provides the Remuneration Committee with ongoing calculations
of total shareholder return (TSR) to enable the Committee to
monitor the performance of long-term share incentive plans.
Deloitte does not have any other connection with any
individual Director.
In addition, in 2021, Deloitte provided the Group with IFRS 2
calculations for the purposes of valuing the share plan grants and,
within the wider Group, was engaged in various jurisdictions to
provide tax and treasury advisory work, and some consultancy
services. During 2020, Deloitte’s fees for advice to the Remuneration
Committee, charged on a time spent basis, amounted to £138,110.
These were larger than in previous years reecting the work
Deloitte did to assist the remuneration review conducted during the
year. The Committee conducted a review of the performance of
Deloitte as remuneration adviser during the year and concluded
that Deloitte continued to provide effective, objective and
independent advice to the Committee. No conict of interest
arises as a result of other services provided by Deloitte to the Group.
Activities of the Remuneration Committee
In addition to the activities outlined within the Chair’s letter, the
Committee was the subject of an externally moderated
performance evaluation in 2021. The review noted that with
the appointment of the new Committee Chair there was an
opportunity to redene the support the Committee required from
internal and external sources. The management of the Committee
was rated highly with regard to the annual cycle of work, the
agenda for meetings and time management in meetings.
The Committee members were also positive about the remuneration
review undertaken by the new Chair.
Regulatory compliance
The Remuneration Policy, which is set out on pages 134–141,
was prepared in accordance with the Companies Act 2006 and
the Large and Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (as amended). It also meets the
requirements of the Financial Conduct Authority’s Listing Rules
and the Disclosure Guidance and Transparency Rules.
This Remuneration Report sets out how the principles of the
Code are applied by the Company in relation to matters of
remuneration. Save as set out below, the Company was compliant
with the provisions of the Code for the year under review in
relation to remuneration matters.
Provision 38:
The Company is progressing with its plans to align
the level of pension allowance for Executive Directors with that
applicable to the majority of the workforce. Our incumbent
Directors’ pension contributions were frozen at the 1 January
2020 amount and will be reduced to 17% at the end of 2022,
being the level of the majority of the workforce.
A statement of the Company’s compliance with the Code is set out
on page 111.
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Governance Financial Statements
Share usage
Under the rules of the VSP, the Company has the discretion to
satisfy awards either by the transfer of Treasury shares or other
existing shares, or by the allotment of newly issued shares. Awards
made under the Deferred Share Bonus Plan to satisfy shares
awarded to Directors in respect of their Annual Incentive, and
awards made to management of the Company over shares
pursuant to the Medium-Term Incentive Plan, must be satised
out of Vesuvius shares held for this purpose by the Company’s
Employee Benet Trust (EBT).
The decision on how to satisfy awards is taken by the
Remuneration Committee, which considers the most prudent
and appropriate sourcing arrangement for the Company.
At 31 December 2021, the Company held 7,271,174 ordinary
shares in Treasury and the EBT held 884,856 ordinary shares.
Following the EBT’s purchase of an additional 332,596 ordinary
shares in the market to satisfy future vestings, the EBT now
holds 1,217,452 ordinary shares as at the date of this report.
The EBT can be gifted Treasury shares by the Company,
can purchase shares in the open market or can subscribe for
newly issued shares, as required, to meet obligations to satisfy
options and awards that vest.
The VSP complies with the current Investment Association
guidelines on headroom which provide that overall dilution under
all plans over a rolling ten-year period should not exceed 10% of
the Company’s issued share capital, with a further limitation over
a rolling ten-year period of 5% for discretionary share schemes.
More than 9.9% of the 10% limit and more than 4.9% of the 5%
limit remains available as headroom for the issue of new shares
or the transfer of Treasury shares for the Company. No Treasury
shares were transferred, or newly issued shares allotted under
the VSP during the year under review.
Policy implementation
The following section provides details of how the Company’s
current Remuneration Policy was implemented during the
nancial year 2021 and how it will be implemented in the
nancial year 2022.
Directors’ Remuneration,single total gure table – audited
The table below sets out the total remuneration received by Executive Directors in the nancial year under review:
Patrick André
Guy Young
2021
(£000)
2020
(£000)
2021
(£000)
2020
(£000)
Total salary
1
618
556
385
347
Taxable benets
2
60
88
18
17
Pension
1,3
154
139
96
87
Total xed pay
4
832
783
499
451
Annual Incentive
5
874
153
537
99
Long-Term Incentives
6,7
0
0
00
Total variable pay
8
874
153
537
99
Total
9
1,706
936
1,036550
1. For 2020 this gure included a voluntary 20% reduction in salary and pension benets for six months due to the impact of COVID-19.
2. Standard benets for the Executive Directors include car allowance and private medical care. As an expatriate, Patrick André also receives relocation benets
under Vesuvius’ applicable expatriate localisation policy, as detailed in the 18 July 2017 RNS announcement of Mr André’s appointment. Those relocation
benets (totalling £27,782 in 2021) comprise housing costs, tax advice and school fees.
3. Patrick André and Guy Young currently receive a pension allowance of 25% of base salary capped at the January 2020 level. The gures for 2020 in the table
represent the value of all cash allowances and contributions received in respect of pension benets, at voluntarily reduced rates.
4. The sum of total salary, taxable benets and pension.
5. This gure includes the Annual Incentive payments to be made to the Executive Directors in relation to the year under review. 33% of these Annual Incentive
payments will be deferred into awards over shares, to be held for a period of three years. See pages 145 and 146 for more details.
6. The 2021 gures represent the Performance Share awards granted to Patrick André and Guy Young in 2019 under the VSP that will lapse in 2022.
7. The 2020 gures represent the Performance Share awards granted to Patrick André and Guy Young in 2018 under the VSP that lapsed in 2021.
8. The sum of the value of the Annual Incentive and the Long-Term Incentives where the performance period ended during the nancial year.
9. The sum of base salary, benets, pension, Annual Incentive and Long-Term Incentives where the performance period ended during the nancial year.
Annual Report on Directors’ Remuneration
continued
144
Vesuvius plc
Annual Report and Financial Statements 2021
Directors’ Remuneration – audited
The table below sets out the total remuneration received by Non-executive Directors in the nancial year under review:
2021
2020
Total fees
(£000)
Taxable
benets
2
(£000)
Total
(£000)
Total fees
1
(£000)
Taxable
benets
2
(£000)
Total
(£000)
John McDonough CBE
205
9
214
185
6
191
Kath Durrant
3
60
3
63
4 – 4
Dinggui Gao
4
38
0
38– – –
Hock Goh
5
18
0
1845
2
47
Friederike Helfer
50
3
53
45
0
45Jane Hinkley
56
2
58
59
1
60
Douglas Hurt
70
1
71
63
1
64
Holly Koeppel
5
18
0
1845
0
45Total 2021 Non-executive Director remuneration
515
18
533
446
10
456
Total 2021 Executive Director remuneration
2,742
Total 2021 Director remuneration
6
3,257
1. For 2020 this gure included a voluntary 20% reduction in fees for six months due to the impact of COVID-19.
2. The UK regulations require the inclusion of benets for Directors where these would be taxable in the UK on the assumption that the Director is tax resident
in the UK. The gures in the table therefore include expense reimbursement and associated tax relating to travel, accommodation and subsistence for the
Director (and, where appropriate, their spouse) in connection with attendance at Board meetings and other corporate business during the year, which are
considered by HMRC to be taxable in the UK.
3. Kath Durrant became Chair following the AGM in 2021 and therefore received additional fees for a proportion of the year.
4. Dinggui Gao joined the Board on 1 April 2021.
5. Hock Goh and Holly Koeppel retired from the Board following the 2021 AGM. The gures listed are the actual fees paid in 2021 until their retirement
Additional note:
6. Total 2020 Directors’ Remuneration for the Directors who served during 2020 was £1,942m.
Base salary and fees– audited
As outlined in the Chair’s letter and in line with the Group’s
Remuneration Policy, the base salaries for each of the Executive
Directors was reviewed in 2021. It was resolved the Chief
Executive’s salary would be increased to £643,000 and the
Chief Financial Ofcer’s salary would be increased to £420,000,
effective 1 January 2022.
The fee for the Chairman was also reviewed by the Committee
during the year and the fees for the Non-executive Directors by
the Board. Following an assessment of time commitment, roles
and responsibilities it was decided that the fees would increase
with effect from 1 January 2022. The Chairman’s fee was
increased to £240,000; the Non-executive Directors’ fees were
increased to £60,000. The supplementary fee for the Senior
Independent Director was increased to £10,000 and the
supplementary fee for the Chairs of the Audit and Remuneration
Committees remained unchanged at £15,000. The Board also
resolved to introduce a fee of £10,000 for the Non-executive
Director responsible for workforce engagement.
Pension arrangements – audited
In accordance with their service agreements, Patrick André and
Guy Young are entitled to pension allowances of 25% of base
salary. This allowance can be used to participate in Vesuvius’
pension arrangements, be invested in their own pension
arrangements or be taken as a cash supplement (or any
combination of these alternatives). The Remuneration Committee
has determined that this level of pension allowance be frozen at
the 1 January 2020 amount and will be reduced to 17% from
the end of 2022, in line with the average pension allowance
received by the majority of the workforce.
Annual Incentive – audited
The Executive Directors are eligible to receive an Annual Incentive
calculated as a percentage of base salary, based on achievement
against specied nancial targets and personal objectives.
Each year, the Remuneration Committee establishes the
performance criteria for the forthcoming year. The nancial
targets are set by reference to the Company’s nancial budget.
The target range is set to ensure that Annual Incentives are only
paid out at maximum for signicantly exceeding performance
expectations. The Remuneration Committee considers that the
setting and attainment of these targets is important in the context
of achievement of the Company’s longer-term strategic goals.
The Annual Incentive has a threshold level of performance
below which no award is paid, a target level at which 50% of the
maximum opportunity is payable, and a maximum performance
level at which 100% of the maximum opportunity is earned, on a
pro rata basis.
2021 Annual Incentive – audited
For 2021, the maximum Annual Incentive potential for the
Executive Directors was 150% of base salary and their target
Annual Incentive potential was 75% of base salary.
For the nancial year 2021, the Executive Directors’ Annual
Incentives were based 60% on Group headline EPS, 20% on the
Group’s working capital to sales ratio (based on the 12-month
moving average) and 20% on specied personal objectives.
145
Our business Our performance Sustainability
Governance Financial Statements
Financial targets in 2021
The 2021 Vesuvius Group headline EPS performance targets set
out below were set at the December 2020 full-year average
foreign exchange rates, being the rates used for the 2021
budget process:
Threshold:
26.4p
On-target:
31.6p
Maximum:
36.9p
The 2021 Group’s working capital to sales ratio targets were set
as follows:
Threshold:
23.7%
On-target:
22.7%
Maximum:
21.7%
In assessing the Group’s performance against these targets, the
Committee uses a constant currency approach. Thus, the 2021
full-year EPS performance was retranslated at December
2020 full-year average foreign exchange rates to establish
performance. This is consistent with practice in previous years.
In 2021, Vesuvius’ EPS performance at the December 2020
full-year average foreign exchange rates was 38.8 pence and
the working capital to sales ratio was 20.9%. Consequently, EPS
performance was above the maximum target, and the Group
working capital to sales ratio was above the maximum target.
As a result, in respect of the nancial performance metrics of the
2021 Annual Incentive, 100% is due on both the EPS and Working
Capital targets (related to a maximum bonus opportunity of 90%
and 30% of salary respectively).
Personal objectives
In 2021, a proportion (20%) of the Annual Incentive for Executive
Directors (representing 30% of salary) was based on the
achievement of personal objectives.
Patrick André
Summary of objective
Summary outcome
Drive performance and deliver results
–
Robust performance on quality, market share gains and R&D productivity measures
Reinforce talent management and
prepare succession plans
–
During 2021 there was a signicant increase in the identication of suitable successors
to key management positions and a further deepening of the talent pool throughout the
organisation’s leadership
Review and implement the Group strategy
–
Delivered a clear strategy to increase protability both organically and inorganically
(closed acquisition of the business of Universal Refractories, Inc)
Improve Vesuvius’ sustainability
performance
–
Delivered strong reductions of CO
2
energy emissions compared to 2019 levels;
improvement of gender diversity in Top Management
In summary, after considering performance as outlined above, the Committee approved an Annual Incentive pay-out of 21.36% of
contractual base salary, out of the maximum potential 30%, in respect of the personal objectives of Patrick André.
Guy Young
Summary of objective
Summary outcome
Optimise cash management
–
Signicant improvement in trade creditors and tax management
Optimise the Group’s liquidity position
–
Successfully concluded renegotiation of Group revolving credit facility and US private
debt placement
Drive IT performance
–
Signicant improvement in IT performance especially in the area of cyber security
Drive Opex reductions
–
Delivered reductions in line with the operating plan
Improve Vesuvius’ sustainability
performance
–
Delivered strong reductions of CO
2
energy emissions compared to 2019 levels;
improvement in gender diversity in Top Management
In summary, after considering performance as outlined above, the Committee approved an Annual Incentive pay-out of 19.5% of
contractual base salary, out of the maximum potential 30%, in respect of the personal objectives of Guy Young.
The total Annual Incentive awards payable to Patrick André and Guy Young in respect of their service as Directors during 2021 are
therefore 141.4% and 139.5% of salary, respectively. Of these Annual Incentive payments, 33% will be deferred into awards over shares,
to be held for a period of three years.
The Committee considered the appropriateness of these overall AIP payments in the context of the experience of our various
stakeholders during 2021 and was satised that no discretionary adjustments were required.
Annual Report on Directors’ Remuneration
continued
146
Vesuvius plc
Annual Report and Financial Statements 2021
2022 Annual Incentive
The Annual Incentive opportunity for the Executive Directors in 2022 will remain unchanged at 150 % of salary, with potential pay-outs
of 75% of base salary for the achievement of target performance in all elements. Pay-outs will commence and increase incrementally
from 0% once the threshold performance for any of the elements has been met. The structure of the Annual Incentive will change in
2022, with 40% of the Executive Directors’ Annual Incentives based on Group headline EPS, 20% on the Group’s working capital to sales
ratio (based on the 12-month moving average), 20% on post-tax Return on Invested Capital (ROIC) and 20% on the achievement of
personal objectives. The Company will not be disclosing the targets set until after the relevant performance period has ended because
of commercial sensitivities. The personal objectives for 2022 are focused on long-term strategic objectives, or are job-specic in nature
and track performance against the Group’s key strategic, organisational and operational goals with a specic focus on ESG outcomes.
33% of any Annual Incentive earned will be deferred into awards over shares, to be held for a period of three years.
Deferred Share Bonus Plan allocations – audited
33% of the Annual Incentives earned by Patrick André and Guy Young in respect of their periods of service as Directors of Vesuvius plc
during 2018, 2019 and 2020 were deferred into shares under the Company’s Deferred Share Bonus Plan. The following table sets out
details of these awards:
Grant and type of award
Total share
allocations
as at
1 Jan 2021
Additional
shares
allocated
during the
year
Allocations
lapsed
during
the year
Shares
vested
during
the year
Total share
allocations
as at
31 Dec 2021
Market price
of the
shares on
the day
before
award (p)
Earliest vesting/
release date
Patrick André
15 March 2018
1
Deferred Bonus Shares
10,128
– – (10,128)
0
605.5
15 Mar 2021
14 March 2019
2
Deferred Bonus Shares
29,646
14 Mar 2022– – –
29,646
608
12 March 2020
3
Deferred Bonus Shares
7,04 4
12 Mar 2023– – –
7,04 4
391.8
18 March 2021
4
Deferred Bonus Shares
– –
9,430
–9,430
538
18 Mar 2024
Total
46,818
9,430
– (10,128)
46,120
Guy Young
15 March 2018
1
Deferred Bonus Shares
18,118
– – (18,118)
0
605.5
15 Mar 2021
14 March 2019
2
Deferred Bonus Shares
19,028
14 Mar 2022– – –
19,028
608
12 March 2020
3
Deferred Bonus Shares
5,345
– – –
12 Mar 20235,345
391.8
18 March 2021
4
Deferred Bonus Shares
– –
18 Mar 20246,093
–6,093
538
Total
42,491
6,093
– (18,118)
30,466
1. In 2018, Patrick André and Guy Young received Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2017 of £185,544 and
£331,906 respectively. 33% of each bonus was awarded in deferred shares (conditional awards) under the Vesuvius Deferred Share Bonus Plan. The shares
vested on 15 March 2021.In addition, Messrs André and Young were given cash payments of £4,213 and £7,537 respectively, equivalent to the value of the
dividends that would have been paid on the number of shares that vested in respect of dividend record dates occurring during the period between the award
date and the date of vesting.
2. In 2019, Patrick André and Guy Young received Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2018 of £546,131 and
£350,525 respectively. 33% of each bonus was awarded in deferred shares (conditional awards) under the Vesuvius Deferred Share Bonus Plan. The allocations of
shares were made on 14 March 2019 and were calculated based upon the average closing mid-market price of Vesuvius’ shares on the ve dealing days before
the award was made, being £6.079. The total value of these awards based on this share price was £180,218 and £115,671, respectively. There are no additional
performance conditions applicable to these awards, therefore these shares will vest in full on the third anniversary of their award date.
3. In 2020, Patrick André and Guy Young were awarded Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2019 of £83,775 and
£63,569 respectively. 33% of each bonus was awarded in deferred shares (conditional awards). The allocations of shares were made on 12 March 2020 and
were calculated based upon the average closing mid-market price of Vesuvius’ shares on the ve dealing days before the award was made, being £3.9248.
The total value of these awards based on this share price was £27,646 and £20,978 respectively. There are no additional performance conditions applicable
to these awards, therefore these shares will vest in full on the third anniversary of their award date.
4. In 2021, Patrick André and Guy Young were awarded Annual Incentive bonuses in respect of their service as Directors of Vesuvius plc in 2020 of £153,419 and
£99,138 respectively. 33% of each bonus was awarded in deferred shares (conditional awards). The allocations of shares were made on 18 March 2021 and
were calculated based upon the average closing mid-market price of Vesuvius’ shares on the ve dealing days before the award was made, being £5.3690.
The total value of these awards based on this share price was £50,628 and £32,715 respectively. There are no additional performance conditions applicable
to these awards, therefore these shares will vest in full on the third anniversary of their award date.
Additional note:
5. The mid-market closing price of Vesuvius’ shares during 2021 ranged between 414 pence and 590 pence per share, and on 31 December 2021, the last dealing
day of the year, was 450.2 pence per share.
147
Our business Our performance Sustainability
Governance Financial Statements
Longer-term Pay (LTIPs) – audited
Performance Share awards are allocated to the Executive
Directors under the Vesuvius Share Plan (VSP). In accordance
with the Remuneration Policy and the rules of the VSP, they are
eligible to receive, on an annual basis, a Performance Share
award with a face value of up to 200% of salary. The vesting
of awards is subject to performance conditions determined by
the Remuneration Committee ahead of each award. For the
outstanding 2019, 2020 and 2021 awards, vesting of 50% of
shares awarded is based upon the Company’s three-year TSR
performance relative to that of the constituent companies of
the FTSE 250 (excluding investment trusts), and 50% on headline
EPS performance. For the 2022 awards, the Remuneration
Committee has decided to amend the performance conditions
with the introduction of a post-tax ROIC target along with ESG
targets. As a result vesting of 40% of shares awarded under the
2022 VSP will be based on post-tax ROIC performance, 40% on
the longstanding relative TSR targets, and the remaining 20% on
ESG targets.
Each of the VSP performance measures operates independently.
The use of these measures is intended to align Executive Director
remuneration with shareholders’ interests. Prior to the vesting
of Performance Shares, the Remuneration Committee reviews
the underlying nancial performance of the Company and
non- nancial performance of the Company and individuals over
the performance period to ensure that the vesting is justied, and
to consider whether to exercise its discretion including consideration
of any potential windfall gains. UK executives receive awards
in the form of nil-cost options with a exible exercise date and
non-UK executives receive conditional awards which are
exercised on the date of vesting. Performance Share awards
vest after three years and, commencing with awards made in
2019, are then subject to a further two-year holding period.
2022 Performance Share Award
The Remuneration Committee has determined that Patrick André
will again receive a Performance Share award in 2022 equivalent
in value to 200% of his base salary and Guy Young an award
equivalent in value to 150% of his base salary. The Committee
considered the risk of windfall gains in making the awards for
2022. The Committee resolved to use a share price for the
award which is the higher of:
–
the average closing price on the ve days prior to the date of
the Committee decision (£4.02)
–
the average closing price on the ve days prior to the grant
of the award
thereby mitigating the risk of windfall gains.
2021 Performance Share Award
In 2021, Patrick André and Guy Young received allocations
of Performance Shares worth 200% and 150% of their base
salaries, respectively.
2019 Performance Share Award (vesting in 2022)
The performance period applicable to the awards made in
2019 ended on 31 December 2021. These awardswill lapse as
the threshold performance level was not met for either the
TSR or EPS performance conditions.
Targets for the Performance Share Awards for the year 2022
– unaudited
TSR ranking relative to FTSE 250 excluding
investment trusts
Weighting 40%
Vesting percentage
(of total LTIP)
Below median
0%
Median
10%
Between median and upper quintile Pro rata between 10%
and 40%
Upper quintile and above
40%
Post-tax ROIC:
Weighting 40%
Vesting percentage
(of total LTIP)
1
Average ROIC over three
year performance period
Threshold and below
0%
7.5%
Maximum
40%
10.0%
1. Vesting between these points will be on a straight-line basis.
New post-tax ROIC target
Denitions
ROIC is dened as Net Operating Prot After Tax (NOPAT),
divided by invested capital (IC).
NOPAT is dened as Group trading prot, plus post-tax share of
JV results, less amortisation of intangible assets calculated as an
average over the target period. (The inclusion of amortisation
charges serves to reduce the calculation of ROIC returns though
we believe this to be the most appropriate denition.)
Invested capital is dened as total assets excluding cash and
non-interest bearing liabilities, calculated as the average of
IC at the start and the end of the target period.
ROIC target range
A 250bps spread is seen by the Remuneration Committee
as a reasonable range for the rst award using this metric.
The Committee will review targets annually for future awards.
The Committee has considered the Group strategy over the
period, market conditions, and historic and current estimates of
WACC provided by JP Morgan in determining the target range.
To achieve the maximum pay-out representing 40% of the award,
the Group would need to improve its ROIC performance over that
achieved in any of the prior ve years, and by a signicant margin
over the average achieved in the past ve years. Post-tax ROIC in
2021 was calculated as 7.5%, an improvement on 4.9% in 2020.
The target range starts at the ROIC achieved in 2021 and as a
result the Committee has determined that threshold payments will
change from a starting threshold payment of 25% used under the
previous EPS KPI to a 0% threshold payment using ROIC.
The Committee has satised itself by looking backwards that the
application of this ROIC range would not have resulted in more
generous pay-out levels overall, but that the vesting would have
been less volatile in nature.
Annual Report on Directors’ Remuneration
continued
148
Vesuvius plc
Annual Report and Financial Statements 2021
Adjustments to ROIC targets
Adjustments to the ROIC target range may be required should the
Board approve certain mergers, acquisitions or disposals. For any
such event that requires Board approval then management will
assess the potential impact on ROIC as part of their broader
submission, and the Committee will determine whether any
adjustment to targets should be made. In general, the Committee
will have regard to the materiality of the event and the timing in
the life of the award cycle. The intention will be to maintain fair,
stretching but achievable targets, whilst not providing a disincentive
to management to bring forward proposals for mergers,
acquisitions or disposals that are in the Company’s interest.
Environment, Social, Governance: Weighting: 20%
Safety: Average Lost Time Injury
Frequency Rate (LTIFR)
1
2022–2024
Vesting percentage
(of total LTIP)
2
Range
Threshold and below
0%
1.1
Maximum
5%
0.9
Energy: CO
2
e: Reduction Scope 1
and 2 energy CO
2
e emissions/tonne
(vs 2019 baseline) in 2024
3
Vesting percentage
(of total LTIP)
2
Range
4
Threshold and below
0%
-14%
Maximum
10%
-20%
Diversity: Gender diversity in senior
leadership group
5
on 31 Dec 2024
Vesting percentage
(of total LTIP)
2
Range
Threshold and below
0%
20%
Maximum
5%
26%
1. LTIFR is the Lost Time Injury Frequency Rate, the number of lost time injuries
that occur during the performance period. The calculation rate is LTIFR per
million hours worked.
2. Straight line vesting between threshold and maximum.
3. Reduction of energy CO
2
e emissions per metric tonne of product packed
for shipment.
4. The target range has been determined using a re-stated level of current
performance (-13% vs -16.5% in the sustainability report) and has factored
in investments approved that will come on stream during the life of the
award that have a negative effect on achievements to date.
5. Senior Leadership Group is dened as the Group Executive Committee plus
the most senior Vesuvius managers worldwide, in terms of their contribution
to the Group’s overall results and to the execution of the Group’s strategy.
This group comprises between 150 and 160 members (number may slightly
uctuate from one year to the next based on organisational changes).
The Environment, Social and Governance targets for the 2022
awards represent key strategic priorities for the management
team as well as the Board.
Safety is culturally important and progressive improvement has
been made in recent years. The targets are considered stretching
in the context of an operationally challenging environment with
many employees working remotely at customer sites. Lost Time
Injury Frequency Rate is a recognised metric, and is measured per
million hours worked.
Energy, the reduction in Scope 1 and 2 emissions is a key feature
of the Company’s sustainability strategy (see pages 52–77) and a
measure of energy intensity is used – CO
2
e emissions per tonne
of product shipped. Baseline and current emissions have been
validated with the assistance of Carbon Footprint Ltd. Vesuvius
has committed to achieve a net zero status by 2050 at the latest,
and work continues to understand how this can be achieved, and
the type of technological advances that will be required. Restated
performance of -13% vs the 2019 baseline has been considered
reasonable by the Committee in setting the forward target
range. This restatement takes into account expansion projects in
Skawina, Poland and Kolkata, India which will have a deleterious
effect on the -16.5% (vs 2019 baseline) reported elsewhere.
Diversity, a focus on gender diversity has seen improvements in
the Top Management of c. 50–60 individuals in recent years.
Mindful of the need and desire to develop a diverse pipeline the
targets have been extended to cover the top 150–160 leaders in
Vesuvius.
Targets for the Performance Share awards for the years
2019 and 2020 – audited
TSR ranking relative to FTSE 250
excluding investment trusts Vesting percentage
Below median
0%
Median
12.50%
Between median and
upper quintile
Pro rata between 12.50% and 50%
Upper quintile and above
50%
Annual compound
headline EPS growth Vesting percentage
Less than 3%
0%
3%
12.50%
Between 3% and 6%
Pro rata between 12.50% and 25%
6%
25%
Between 6% and 15%
Pro rata between 25% and 50%
15% or more
50%
Targets for the Performance Share awards for 2021– audited
TSR ranking relative to FTSE 250
excluding investment trusts Vesting percentage
Below median
0%
Median
12.50%
Between median and
upper quintile
Pro rata between 12.50% and 50%
Upper quintile and above
50%
Headline EPS for the Financial
Year 2023
Vesting percentage
Less than 35 pence
0%
35 pence
12.50%
Between 35 pence and
47.5 pence
Pro rata between 12.50% and 25%
47.5 pence
25%
Between 47.5 pence
and 60 pence
Pro rata between 25% and 50%
60 pence or more
50%
The Committee is mindful of the present geopolitical environment
and the existing energy crisis. In this context it reserves its
discretion to amend targets for both the AIP and VSP should
major industrial market disruption prevail.
149
Our business Our performance Sustainability
Governance Financial Statements
Vesuvius Performance Share award allocations – audited
The following table sets out the Performance Share awards that were allocated in 2018, 2019, 2020 and 2021 under the VSP:
Grant and type of award
Total share
allocations
as at
1 Jan 2021
Additional
shares
allocated
during
the year
Allocations
lapsed
during
the year
Shares
vested
during
the year
Total share
allocations
as at
31 Dec 2021
Market price
of the shares
on the day
before
award (p)
Performance
period
Earliest
vesting
date
End of
holding
period
1
Patrick André
15 March 2018
2
Performance Shares
173,697
– (173,697) –
0
605.5
1 Jan 18–
31 Dec 20
15 Mar
2021
n/a
14 March 2019
3
Performance Shares
197,400
– – –
197,400
608
1 Jan 19–
31 Dec 21
14 Mar
2022
14 Mar
2024
12 March 2020
4
Performance Shares
282,772
– – –
282,772
391.8
1 Jan 20–
31 Dec 22
12 Mar
2023
12 Mar
2025
18 March 2021
5
Performance Shares
– –
230,210
–230,210
538
1 Jan 21–
31 Dec 23
18 Mar
2024
18 Mar
2026
Total
653,869
230,210
(173,697) 0
710,382
Guy Young
15 March 2018
2
Performance Shares
86,848
– (86,848) –
0
605.5
1 Jan 18–
31 Dec 20
15 Mar
2021
n/a
14 March 2019
3
Performance Shares
86,362
– – –
86,362
608
1 Jan 19–
31 Dec 21
14 Mar
2022
14 Mar
2024
12 March 2020
4
Performance Shares
132,120
– – –
132,120
391.8
1 Jan 20–
31 Dec 22
12 Mar
2023
12 Mar
2025
18 March 2021
5
Performance Shares
– –
107,562
–107,562
538
1 Jan 21–
31 Dec 23
18 Mar
2024
18 Mar
2026
Total
305,330
107,562
(86,848) 0
326,044
1. Performance shares granted from 2019 onwards are subject to a further two-year holding period.
2. In 2018, Patrick André and Guy Young received allocations of Performance Shares worth 200% and 150% of their base salaries. Following an assessment of
the performance conditions, these awards lapsed in full during 2021.
3. In 2019, Patrick André and Guy Young received allocations of Performance Shares worth 200% and 150% of their base salaries. These allocations were
calculated based upon the average closing mid-market price of Vesuvius’ shares on the ve dealing days before the award was made, being £6.079. The total
value of these awards based on this share price was £1,199,994 and £524,994 respectively. Following an assessment of the performance conditions, these
awards will lapse in full during 2022.
4. In 2020, Patrick André and Guy Young were entitled to receive allocations of Performance Shares worth 200% and 150% of their base salaries respectively.
In light of the volatile share price, the Committee applied its discretion so that the number of shares in these allocations were capped at a level based upon the
average closing mid-market price of Vesuvius’ shares on the ve dealing days before the February 2020 Remuneration Committee meeting of £4.371. As a
result, Patrick André received an award of 282,772 shares which, at grant, was equivalent in value to 180% of his base salary (£1,109,823*) and Guy Young
received an award of 132,120 shares which, at grant, was equivalent in value to 135% of his base salary (£518,544*).
5. In 2021, Patrick André and Guy Young were entitled to receive allocations of Performance Shares worth 200% and 150% of their base salaries respectively.
These allocations were calculated based upon the average closing mid-market price of Vesuvius’ shares on the ve dealing days before the award was made,
being £5.3690. The total value of these awards based on this share price was £1,235,997 and £577,500 respectively.
Additional notes:
6. If the respective performance conditions for Patrick André’s and Guy Young’s awards are not met, then the awards will lapse. If the threshold level of either of
the two performance conditions applicable to the awards is met, then 12.50% of the awards will vest.
7. The Remuneration Committee also has the discretion to award cash or shares equivalent in value to the dividend that would have been paid during the vesting
period on the number of shares that vest.
8. The mid-market closing prices of Vesuvius’ shares during 2021 ranged between 414 pence and 590 pence per share, and on 31 December 2021, the last dealing
day of the year, was 450.2 pence per share.
Malus/clawback arrangements in 2022
Vesuvius has malus and clawback arrangements in respect of Executive Directors’ variable remuneration. The structure of those
arrangements is outlined in our Remuneration Policy.
Annual Report on Directors’ Remuneration
continued
150
Vesuvius plc
Annual Report and Financial Statements 2021
Statement of Directors’ shareholding – audited
The interests of Directors and their closely associated persons in ordinary shares as at 31 December 2021, including any interests in
share options and shares provisionally awarded under the VSP, are set out below:
Outstanding share
incentive awards
Benecial
holding in
shares
Benecial
holding
%
With
performance
conditions
1
Without
performance
conditions
2
Executive Directors
Patrick André
111,160
0.04
710,382
46,120
Guy Young
134,802
0.05
326,044
30,466
Non-executive Directors
John McDonough CBE (Chairman)
120,000 0.04
– –
Kath Durrant
– –
0.00
–Friederike Helfer
3
– –
0.00
–Dinggui Gao
– –
0.00
–Hock Goh
4
5,000
<0.01
– –
Jane Hinkley
12,000
<0.01
– –
Douglas Hurt
18,000
0.01
– –
Holly Koeppel
5
27,500
0.01
–
1. These are Performance Shares granted under the VSP. The awards were all granted subject to performance conditions.
2. These are awards granted under the Deferred Share Bonus Plan. These awards are not subject to any additional performance conditions.
3. Friederike Helfer is a Partner of, and has a nancial interest in, Cevian Capital which held 21.11% of Vesuvius’ issued share capital as at 31 December 2021
and at the date of this report.
4. Hock Goh stepped down from the Board following the 2021 AGM and this was his shareholding at the time of stepping down.
5. Holly Koeppel stepped down from the Board following the 2021 AGM and this was her shareholding at the time of stepping down.
Additional notes:
6. None of the other Directors, nor their spouses, nor their minor children, held non-benecial interests in the ordinary shares of the Company during the year.
7. There were no changes in the interests of the Directors in the ordinary shares of the Company in the period from 1 January 2022 to the date of this Report.
8. All awards under the VSP are subject to performance conditions and continued employment until the relevant vesting date as set out on pages 148 and 149.
9. Full details of Directors’ shareholdings and incentive awards are given in the Company’s Register of Directors’ Interests, which is open to inspection at the
Company’s registered ofce during normal business hours.
Payments to past Directors and loss of ofce payments – audited
There were no payments made to any Director for loss of ofce during the year ended 31 December 2021, and no payments were
made to any other past Directors of the Company during the year ended 31 December 2021.
Shareholding guidelines
The Remuneration Committee encourages Executive Directors to build and hold a shareholding in the Company. Under the 2020
Remuneration Policy, the required holding is 200% of salary for all Executive Directors. Executive Directors are required to retain at
least 50% (measured as the value after tax) of any shares received through the operation of share schemes; in addition, permission to
sell shares held – whether acquired through the operation of share schemes or otherwise – will not be given, other than in exceptional
circumstances, if, following the disposal, the shareholding requirement is not achieved or is not maintained.
Compliance with the shareholding policy is tested at the end of each year for application in the following year. Under the 2020
Remuneration Policy, the valuation of any holding is taken at the higher of: (1) the share price on the date of vesting of any shares
derived from a share award, in respect of those shares only; and (2) the average of the closing prices of a Vesuvius ordinary share for
the trading days in that December.
Executive Directors’ shareholdings – audited
As at 31 December 2021, the Executive Directors’ shareholdings against the shareholding guidelines contained in the Directors’
Remuneration Policy in force on that date (using the Company’s share price averaged over the trading days of the period 1 December
to 31 December 2021, of 432.59 pence per share) were as follows:
Director
Actual share ownership
as a percentage of
salary at 31 Dec 2021
Policy share ownership
as a percentage
of salary
Policy met?
Patrick André
78%
200%
In the build-up period
Guy Young
151%
200%
In the build-up period
151
Our business Our performance Sustainability
Governance Financial Statements
Annual changes in Executive Directors pay versus employee pay
Executive Directors’ pay comparison
The London headquartered salaried employee workforce is presented as a voluntary disclosure of the representative comparator
group for the Vesuvius Group parent company as there are only two non-Director employees in the parent company.
Year-on-year change in pay for Directors compared to the London headquartered employee average
2021
2020
Salary
2,3
Bonus
3
Benets
4
Salary
2,3
Bonus
3
Benets
4
London headquartered employee average
1
19%
236%
120%
0%
165%
18%
Executive Directors
Patrick André
11%
469%
6%
(7%)
183%
(25%)
Guy Young
11%
442%
9%
(1%)
155%
(14%)Non-executive Directors
9
John McDonough CBE
11%
–
(35%)
(10%) – (46%)
Kath Durrant
5
19%
–
100%
n/a
–
n/aFriederike Helfer
11%
–
502%
(10%) – (60%)
Dinggui Gao
6
n/a
–
n/an/a
–
n/aJane Hinkley
7
(5%)
–
(56%)(10%) – (60%)
Douglas Hurt
11%
–
(22%)
(10%) – –
Hock Goh
8
(60%)
–
(100%)(10%) – (60%)
Holly Koeppel
8
(60%)
–
(100%)(10%) – (100%)
1. This is the average change calculated by dividing the staff cost related to salaries, median bonus and benets by the average number of full-time equivalent
employees in the Vesuvius headquarters in London, excluding the Executive Directors. Salaries, bonus and benets relate to the relevant nancial reporting year.
2. During 2020 all Executive and Non-executive Directors took a voluntary 20% pay reduction for six months. Other senior employees in London headquarters
also took between a 10-20% pay reduction, depending on their level of seniority. Therefore, the total percentage increase for the Executive Directors between
2021 and 2022 will be higher than their agreed salary increases as these increases are based on the salary as at 31 December 2021.
3. Calculated using data from the single gure table in the Annual Report.
4. Calculated using data from the audited Directors’ Emoluments. Benets relate to taxable travel benets and is calculated as the percentage increase or decrease
on the actual gures year-on-year and not annualised or pro-rated for any new starters. Travel was restricted during 2020 due to the COVID-19 pandemic.
5. Kath Durrant joined on 1 December 2020 and then became the Remuneration Committee Chair following the 2021 AGM, it is this change that accounts for the
proportionally higher increase on her salary.
6. Dinggui Gao joined on 1 April 2021.
7. Jane Hinkley stood down as the Remuneration Committee Chair following the 2021 AGM, which accounts for her net reduction in year-on-year change.
8. Hock Goh and Holly Koeppel stepped down from the Committee at the 2021 AGM, their salaries have been calculated based on actual earnings in 2020 and 2021.
9. The Non-executive Directors’ fees were reviewed and increased in 2015, 2019 and 2022.
CEO pay ratio
The UK salaried employee workforce is the representative comparator group to the Chief Executive, Patrick André, who is based in the UK
(albeit with a global role and responsibilities). Levels of pay vary widely across the Group depending on geography and local market conditions.
Year
Method
25th
percentile
pay ratio
50th percentile
(median)
pay ratio
75th
percentile
pay ratio
2019
Option A
35:1
28:1
17:1
2020
Option A
32:1 24:1
13:1
2021
Option A
53:1
41:1 21:1
2021
Total pay and benets (£)
33,216
43,233
82,829
2021
Salary (£)
29,018
40,363
73,000
The table above shows the Chief Executive pay ratios versus our UK employees for 2019, 2020 and 2021. The pay ratios compare amounts
disclosed in the single total gure table for the Group Chief Executive to the annual full-time equivalent remuneration of our UK employees for
2019, 2020 and 2021. The data has been calculated in accordance with ‘Option’ A in The Companies (Miscellaneous Reporting) Regulations
2018, because it allows the Company to show the total annualised full-time equivalent remuneration (salary, incentives, allowances, fees,
taxable benefits) and percentiles across the financial year as at 31 December 2019, 2020 and 2021.
Amounts have been annualised for those who joined part way through the year or who are on part-time arrangements and exclude those
who left the organisation during the reporting period.
The approach to calculating the pay ratios is consistent with the prior year and there have not been any changes to the compensation models
in the reporting period.
The Committee is comfortable that the principles applied and the quantum of compensation are appropriate across the Group’s employee
base. These are regularly benchmarked to ensure market competitiveness. There is a consistent approach of measuring against both
business and personal performance for all those who participate in incentive programmes. The Group continues to monitor the effectiveness
of all compensation practices to identify future opportunities to ensure they remain fair, consistent and in line with best practice.
Annual Report on Directors’ Remuneration
continued
152
Vesuvius plc
Annual Report and Financial Statements 2021
Annual spend on employee pay
1
versus shareholder distributions
2
The charts below show the annual spend on all employees (including Executive Directors) compared with distributions made and
proposed to be made to shareholders for 2020 and 2021:
TSR performance and Chief Executive pay
The TSR performance graph compares Vesuvius’ TSR performance with that of the same investment in the FTSE 250 Index (excluding
investment trusts). This index has been chosen as the comparator index to reect the size, international scope and diversity of the
Company. TSR is the measure of the returns that a company has provided for its shareholders, reecting share price movements and
assuming reinvestment of dividends. The demerger of Vesuvius plc was effective on 19 December 2012 and therefore the graph shows
the period from 19 December 2012 to 31 December 2021.
Vesuvius’ total
shareholder return
compared against
total shareholder
return of the FTSE
250 (excluding
investment trusts)
index since demerger
Chief Executive pay –
nancial year ended
François Wanecq
1
Patrick André
2
31/12/12 31/12/13
31/12/14
31/12/15
31/12/16 31/12/17 31/12/18 31/12/19
31/12/20
31/12/21
Total remuneration
(single gure (£000))
£1,227
£2,447
£1,519
£752
£1,173
£1,675
1
£465
2
£2,022
£1,220
£936
£1,706
Annual variable pay
(% of maximum)
0%
100%
0%64%
50%
81%
1
85%
2
83%
11%
20%94%
Long-term variable pay
(% of maximum)
67%
28%
27%
0% 0%
43.7%
1
n/a
2
100%
63%
0%
0%
1. Amounts shown in respect of François Wanecq for 2017 reect payments in respect of his service as Chief Executive from 1 January 2017 to 31 August 2017
and the full value of his VSP award in relation to the performance period 2015–2017.
2. Amounts shown in respect of Patrick André for 2017 reect payments in respect of his service as Chief Executive from 1 September 2017 to 31 December 2017.
Shareholder voting on remuneration resolutions
Votes for Votes against
Votes withheld
Approval of the Directors’ Remuneration Policy 2020 AGM
244,618,671 (97.2%)
7,105,663 (2.8%)
3,640
Approval of the Annual Report on Remuneration 2021 AGM
244,223,260 (99.32%)
1,673,458 (0.68%)
11,480
The Directors’ Remuneration Report has been approved by the Board and is signed on its behalf by
Kath Durrant
Chair of the Remuneration Committee
3 March 2022
FTSE 250 Index (excluding Investment Trusts)Vesuvius plc
19/12/12
250
200
150
100
50
Relative importance of spend on
pay (2020)
£m
£47.0m
£366.0m
88.6%
Remuneration
11.4%
Dividend
2021
(£m)
2020
(£m)
Change
Employee pay
1
396.8
366.0
8.5%
Dividends
2
(based on nal
proposed dividend)
57.3
47.0
22.0%
1. Employee pay includes wages and salaries, social security, share-based
payments and pension costs, and other post-retirement benets.
See Note 8 to the Group Financial Statements.
2. Shareholder distributions/dividends includes interim and nal
dividends paid in respect of each nancial year. See Note 24 of the
Group Financial Statements.
Relative importance of spend on
pay (2021)
£m
£57.3m
£396.8m
87.4%
Remuneration
12.6%
Dividend
153
Our business Our performance Sustainability
Governance Financial Statements
Directors’ Report
Going concern
Information on the business environment in which the Group operates, including the factors
that are likely to impact the future prospects of the Group, is included in the Strategic Report.
The principal risks and uncertainties that the Group faces throughout its global operations are
shown on pages 34 and 35. The nancial position of the Group, its cash ows, liquidity position
and debt facilities are also described in the Strategic Report. In addition, the Group’s viability
statement is set out within the Strategic Report on page 33. Note 25 to the Group Financial
Statements sets out the Group’s objectives, policies and processes for managing its capital;
nancial risks; nancial instruments and hedging activities; and its exposures to credit, market
(both currency and interest rate related) and liquidity risk. Further details of the Group’s cash
balances and borrowings are included in Notes 13, 14 and 25 to the Group Financial Statements.
The Directors have prepared prot and loss, balance sheet and cash ow forecasts for the Group
for a period in excess of 12 months from the date of approval of the 2021 nancial statements.
On the basis of the exercise described above, the Directors have prepared a going concern
statement which can be found on page 33.
Events since the
balance sheet
Since 31 December 2021, there have been no material items to report.
Future developments
A full description of the activities of the Group, including performance, signicant events
affecting the Group in the year and indicative information in respect of the likely future
developments in the Group’s business, can be found in the Strategic Report.
Financial instruments
Information on Vesuvius’ nancial risk management objectives and policies can be found in
Note 25 to the Group Financial Statements.
Research and development
The Group’s investment in research and development (R&D) during the year under review
amounted to £30.3m (representing approximately 1.8% (2020: 1.9%) of Group revenue).
Further details of the Group’s R&D activities can be found in the Operating Reviews and
Sustainability section of the Strategic Report.
Political and charitable
donations
In accordance with Vesuvius policy, the Group did not make any political donations or incur any
political expenditure in relation to any UK or non-UK political parties during 2021 (2020: nil).
The Company made no charitable donations of more than £2,000 in the UK in 2021.
Task Force on
Climate-Related Financial
Disclosures (TCFD)
The Group has reported its climate-related information in accordance with the TCFD disclosure
framework. The majority of this information is included in the Sustainability section of the
Strategic Report. A schedule of disclosure is included on page 58.
The Directors submit their Annual Report together with the audited nancial statements of the Group and of the Company,
Vesuvius plc, registered in England and Wales No. 8217766, for the year ended 31 December 2021.
The Companies Act 2006 requires the Company to provide a Directors’ Report for Vesuvius plc for the year ended 31 December 2021.
Information incorporated by reference
The information that fulls this requirement and which is incorporated by reference into, and forms part of, this report is included in the
following sections of the Annual Report:
–
The Section 172(1) statement
–
The Non-nancial information statement (the Sustainability section)
–
The Governance section, including the Corporate Governance Statement
–
Financial instruments: the information on nancial risk management objectives and policies contained in Note 25
to the Group Financial Statements
This Directors’ Report and the Strategic Report contained on pages 1 to 101 together represent the management report for the
purpose of compliance with DTR 4.1.8R of the Financial Conduct Authority’s Disclosure and Transparency Rules.
154
Vesuvius plc
Annual Report and Financial Statements 2021
Energy consumption and
efciency/greenhouse
gas emissions
Information on our reporting of greenhouse gas emissions, and the methodology used to record
these, is set out on page 69 of the Strategic Report. Details of the Group’s energy usage for
2021, and the efciency initiatives currently being undertaken, can be found in the Sustainability
section on pages 68–73.
Branches
A number of the Group’s subsidiary undertakings maintain branches; further details of these can
be found in Note 33.1 to the Group Financial Statements.
Dividends
An interim dividend of 6.2 pence (2020: 3.1 pence) per Vesuvius ordinary share was paid on
17 September 2021 to shareholders on the register at the close of business on 6 August 2021.
The Board is recommending a nal dividend in respect of 2021 of 15.0 pence (2020:
14.30 pence) per ordinary share which, if approved, will be paid on 27 May 2022 to
shareholders on the register at 19 April 2022.
Accountability and audit
A responsibility statement of the Directors and a statement by the auditor about its reporting
responsibilities can be found on pages 160, and 161–169, respectively. The Directors full the
responsibilities set out in their statement within the context of an overall control environment of
central strategic direction and delegated operating responsibility. As at the date of this report,
so far as each Director of the Company is aware, there is no relevant audit information of which
the Company’s auditors are unaware and each Director hereby conrms that they have taken
all the steps that they ought to have taken as a Director in order to make themselves aware
of any relevant audit information and to establish that the Company’s auditor is aware of
that information.
Auditors’ reappointment
PricewaterhouseCoopers LLP (PwC) were reappointed as External Auditors for Vesuvius plc for
the year ended 31 December 2021, at the 2021 AGM. PwC have been Vesuvius’ External Auditors
since 2017 and have expressed their willingness to continue in ofce as Auditors of the Company
for the year ending 31 December 2022. Consequently, resolutions for the reappointment of
PwC as External Auditors of the Company and to authorise the Directors to determine their
remuneration are to be proposed at the 2022 AGM.
Directors
The current Directors of the Company are Patrick André, Kath Durrant, Dinggui Gao, Friederike
Helfer, Jane Hinkley, Douglas Hurt, John McDonough CBE and Guy Young. Dinggui Gao joined
the Board on 1 April 2021 and Hock Goh and Holly Koeppel served on the Board until they
stepped down at close of the AGM on 12 May 2021. All the current Directors will retire at the
2022 AGM and offer themselves for re-election. Biographical information for the Directors is
given on pages 104 and 105. Further information on the remuneration of, and contractual
arrangements for, the Executive and Non-executive Directors is given on pages 130–153 in the
Directors’ Remuneration Report. The Non-executive Directors do not have service agreements.
Directors’ indemnities
The Directors have been granted qualifying third-party indemnity provisions by the Company
and the Directors of the Group’s UK Pension Plans Trustee Board (none of whom is a Director of
Vesuvius plc) have been granted qualifying pension scheme indemnity provisions by Vesuvius
Pension Plans Trustees Limited. The indemnities for Directors of Vesuvius plc have been in force
since the date of their appointments. The Pension Trustee indemnities were in force throughout
the last nancial year and remain in force.
155
Our business Our performance Sustainability
Governance Financial Statements
Directors’ Report
continued
Annual General Meeting
The Annual General Meeting of the Company will be held at the ofces of Linklaters LLP,
One Silk Street, London EC2Y 8HQ on Wednesday 18 May 2022 at 11.00 am.
Amendments of Articles
of Association
The Company may make amendments to the Articles by way of special resolution in accordance
with the Companies Act. The Articles were amended at the 2021 AGM, to reect changes in the
law and developments in market practice and technology since the previous Articles had been
adopted in November 2012.
Share capital
As at the date of this report, the Company had an issued share capital of 278,485,071 ordinary
shares of 10 pence each; 7,271,174 of these ordinary shares are held in Treasury. Therefore, the
total number of Vesuvius plc shares with voting rights is 271,213,897.
Further information relating to the Company’s issued share capital can be found in Note 9 to the
Company Financial Statements.
The Company’s Articles specify that, subject to the authorisation of an appropriate resolution
passed at a General Meeting of the Company, Directors can allot relevant securities under
Section 551 of the Companies Act up to the aggregate nominal amount specied by the relevant
resolution. In addition, the Articles state that the Directors can seek the authority of shareholders
in a General Meeting to allot equity securities for cash, without rst being required to offer such
shares to existing ordinary shareholders in proportion to their existing holdings under Section 561
of the Companies Act, in connection with a rights issue and in other circumstances up to the
aggregate nominal amount specied by the relevant resolution.
At the AGM on 12 May 2021, the Directors were authorised to issue relevant securities up to an
aggregate nominal amount of £9,040,463, and, in connection with a rights issue, to issue relevant
securities up to a further nominal value of £9,040,463. In addition, the Directors were empowered
to allot equity securities, or sell Treasury Shares, for cash on a non pre-emptive basis up to an
aggregate nominal amount of £1,356,069, and for the purposes of nancing (or renancing,
if the authority is to be used within six months after the original transaction) a transaction which
the Board of the Company determines to be an acquisition or other capital investment, to allot
equity securities, or sell Treasury Shares, for cash on a non pre-emptive basis up to an additional
nominal amount of £1,356,069. Each of the authorities given in these resolutions expires on
30 June 2022 or the date of the AGM to be held in 2022, whichever is the earlier. The resolutions
were all tabled in accordance with the terms of the Pre-Emption Group’s Statement of Principles.
The Directors propose to renew these authorities at the 2022 AGM for a further year. In the year
ahead, other than potentially in respect of Vesuvius’ ability to satisfy rights granted to employees
under its various share-based incentive arrangements, the Directors have no present intention of
issuing any share capital of Vesuvius plc.
Authority for purchase
of own shares
Subject to the provisions of company law and any other applicable regulations, the Company
may purchase its own shares. At the AGM on 12 May 2021, Vesuvius shareholders gave authority
to the Company to make market purchases of up to 27,121,389 Vesuvius ordinary shares,
representing 10% of the Company’s issued ordinary share capital as at the latest practicable day
prior to the publication of the Notice of AGM. This authority expires on 30 June 2022 or the date
of the AGM to be held in 2022, whichever is the earlier. The Directors will seek renewal of this
authority at the 2022 AGM.
In 2013, the Company acquired 7,271,174 ordinary shares, representing a nominal value of
£727,117 and 2.6% of the entire called-up share capital of the Company prior to the purchase.
These shares were purchased pursuant to the Board’s commitment to return the majority of the
net proceeds of the disposal of the Precious Metals Processing Division to shareholders. These
shares are currently held as Treasury shares. The Company has not subsequently disposed of any
of the repurchased shares. During the year, the Company did not make any further acquisitions
of shares nor did it dispose of any shares previously acquired. The Company does not have a lien
over any of its shares.
156
Vesuvius plc
Annual Report and Financial Statements 2021
Share plans
Vesuvius operates a number of share-based incentive plans. Under these plans, the Group can
satisfy entitlements by the acquisition of existing shares, the transfer of Treasury shares or by the
issue of new shares. Existing shares are held in an employee benet trust (EBT). The Trustee of the
EBT purchases shares in the open market as required to enable the Group to meet liabilities for
the issue of shares to satisfy awards that vest. The Trustee does not register votes in respect of these
shares at the Company’s Annual General Meetings and has waived the right to receive any dividends.
At 31 December 2020, the EBT held 1,093,098 ordinary shares of 10p each in the Company.
During the year, the EBT sold/transferred 475,646 shares to satisfy the vesting of awards under the
Company’s share-based incentive plans. It also purchased 267,404 ordinary shares in Vesuvius with a
nominal value of £26,740 at a total cost, including transaction costs, of approximately £1.14m, to hold
to satisfy the future vesting of awards under the Company’s share incentive plans. As at 31 December
2021, the EBT held 884,856 ordinary shares. The total purchases during the year represented <0.5%
of the Company’s called-up share capital. Since the year end the EBT has purchased an additional
332,596 ordinary shares (<0.2% of called up share capital), with a nominal value of £33,260 at a total
cost of £1,587,367. As at the date of this report the EBT held 1,217,452 ordinary shares.
Restrictions on transfer
of shares and voting
The Company’s Articles do not contain any specic restrictions on the size of a holding or on
the transfer of shares. The Directors are not aware of any agreements between holders of the
Company’s shares that may result in restrictions on the transfer of securities or voting rights.
No person has any special rights with regard to the control of the Company’s share capital and
all issued shares are fully paid. This is a summary only and the relevant provisions of the Articles
should be consulted if further information is required.
Change of control
provisions
The terms of the Group’s committed bank facility and US Private Placement Loan Notes contain
provisions entitling the counterparties to exercise termination or other rights in the event of a
change of control on takeover of the Company. A number of the arrangements to which the
Company and its subsidiaries are party, such as other debt arrangements and share incentive
plans, may also alter or terminate on a change of control in the event of a takeover. In the context
of the Group as a whole, these other arrangements are not considered to be signicant.
Interests in the
Company’s shares
The Company has been notied in accordance with DTR 5 of the Disclosure and Transparency
Rules of the following interests of 3%, or more, of its issued ordinary shares:
As at
31 Dec 2021
As at
3 Mar 2022
Cevian Capital
21.11%
21.11%
abrdn
9.81%
9.81%
Martin Currie
below 5%
5.33%
Franklin Templeton
5.10%
below 5%
Aberforth Partners
4.93%
4.93%
The interests of Directors and their connected persons in the ordinary shares of the Company as
disclosed in accordance with the Listing Rules of the Financial Conduct Authority are as set out
on page 151 of the Directors’ Remuneration Report and details of the Directors’ Deferred Share
Bonus Plan and Long-Term Incentive awards are set out on pages 147 and 150.
Suppliers, customers
and others
Information summarising how the Directors have regard to the need to foster the Company’s
business relationships with suppliers, customers and others is included in the Group’s Section
172(1) Statement on pages 22–27. This also details how that regard impacted the principal
decisions taken by the Directors during the year.
Our approach to business places a signicant number of Vesuvius Steel employees at customer
sites on a permanent basis. In the Foundry Division, our success is built on our deep understanding
of customer processes and technical requirements, and our ability to assist them in delivering the
greatest efciency from their operations.
During the year, our supplier audit programme covered the operations of 138 suppliers.
This approach allows Vesuvius to gain a deep understanding of our suppliers’ operations to
ensure sustainability and quality of supply.
Vesuvius agrees payment terms with its suppliers and seeks to pay in accordance with those terms.
157
Our business Our performance Sustainability
Governance Financial Statements
Equal opportunities
employment
Vesuvius is an equal opportunities employer, and decisions on recruitment, development,
training and promotion, and other employment-related issues are made solely on the grounds
of individual ability, achievement, expertise and conduct. These principles are operated on a
non-discriminatory basis, without regard to race, colour, nationality, culture, ethnic origin,
religion, belief, gender, sexual orientation, age, disability or any other reason not related to job
performance or prohibited by applicable law. In cases where employees are injured or disabled
during employment with the Group, support, including appropriate training, is provided to those
employees and workplace adjustments are made as appropriate in respect of their duties and
working environment, supporting recovery and continued employment.
Employee engagement
Information on the mechanisms through which Vesuvius engages with its workforce is included in
the Section 172(1) Statement on pages 22–28 and in the Sustainability section on pages 91–93.
Pensions
In each country in which the Group operates, the pension arrangements in place are considered
to be consistent with good employment practice in that particular area. Independent advisers
are used to ensure that the plans are operated in accordance with local legislation and the rules
of each plan. Group policy prohibits direct investment of pension fund assets in the shares of
Vesuvius plc. Outside the UK, the US, Germany and Belgium, the majority of pension plans in
the Group are of a dened contribution nature.
In 2016, the main German dened benet plan was closed for new entrants and existing
members were offered a buy-out of their benets under this plan. Those who accepted this
buy-out then joined the new dened contribution plan. The Group’s UK dened benets plan
(the ‘UK Plan’) and the main US dened benets plans are closed to new entrants and have
ceased providing future benets accrual, with all eligible employees instead being provided
with benets through dened contribution arrangements.
For the Group’s closed UK Plan, a Trustee Board exists comprising employees, former employees
and an independent trustee. The Board currently comprises six trustee Directors, of whom
two are member-nominated. The administration of the UK Plan is outsourced. The Company
is mindful of its obligations under the Pensions Act 2004 and of the need to comply with the
guidance issued by the Pensions Regulator. Regular dialogue is maintained between the
Company and the Trustee Board of the UK Plan to ensure that both the Company and Trustee
Board are apprised of the same nancial and other information about the Group and the UK
Plan. This is pertinent to each being able to contribute to the effective functioning of the UK Plan.
Vesuvius continues to seek ways to de-risk its existing pension plans through a combination of
asset matching, buy-in opportunities and, where prudent, voluntary cash contributions.
The total gross dened benet obligations at 31 December 2021 were £565.9m funded (2020:
£610.0m funded) and £77.2m unfunded (2020: £88.3m unfunded). After asset funding there was
a net decit of £77.0m (2020: £2.1m) representing an increase of £74.9m. The increase is largely
due to a reduction in surplus on the UK pension plan as a result of the nal pension insurance
buy-in agreement with Pension Insurance Corporation plc (PIC). This buy-in secures an insurance
asset from PIC that matches the remaining pension liabilities of the UK Plan, with the result that
the Company no longer bears any investment, longevity, interest rate or ination risks in respect
of the UK Plan. The decrease in surplus on the UK plan has been partially offset by a decrease
in liabilities due to an increase in bond yields resulting in a reduction in the value of German and
US liabilities.
The majority of the ongoing pension plans are dened contribution plans, where our only
obligation is to make contributions, with no further commitments on the level of post-retirement
benets. During 2021, cash contributions of £10.2m (2020: £9.7m) were made into the dened
contribution plans and charged to trading prot.
Directors’ Report
continued
158
Vesuvius plc
Annual Report and Financial Statements 2021
Listing Rule 9.8.4C R
Disclosures
The following disclosures are made in compliance with the Financial Conduct Authority’s Listing
Rule 9.8.4C R:
Disclosure requirement under LR 9.8.4R
Reference/Location
(1) Interest capitalised by the Group during the year
None
(2) Publication of unaudited nancial information
Not applicable
(3) Details of any Long-Term Incentive schemes
Pages 148–150
(4) Director waiver of emoluments
Not applicable
(5) Director waiver of future emoluments
Not applicable
(6) Allotment for cash of equity securities made during
the year
Not applicable
(7) Allotment for cash of equity securities made by
a major unlisted subsidiary during the year
Not applicable
(8) Details of participation of parent undertaking in
any placing made during the year
Not applicable
(9) Details of relevant material contracts in which a
Director or controlling shareholder was interested
during the year
Not applicable
(10) Contracts for the provision of services by a
controlling shareholder during the year
Not applicable
(11) Details of any arrangement under which a
shareholder has waived or agreed to waive
any dividends
Vesuvius plc holds 7,271,174 of its
10 pence ordinary shares as Treasury
shares. No dividends are payable
on these shares. The Trustee of the
Company’s EBT, has agreed to
waive, on an ongoing basis, any
dividends payable on shares it holds
in trust for use under the Company’s
Employee Share Plans, details of
which can be found on pages
144,147, 148,149, 150 and 157
(12) Details of where a shareholder has agreed to
waive future dividends
See above
(13) Statements relating to controlling shareholders
and ensuring company independence
Not applicable
The Directors’ Report has been approved by the Board and is signed, by order of the Board, by the Secretary of the Company.
Henry Knowles
Company Secretary
3 March 2022
159
Our business Our performance Sustainability
Governance Financial Statements
Statement of Directors’ Responsibilities in respect of the
Financial Statements
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare nancial statements
for each nancial year. Under that law, the Directors have
prepared the Group nancial statements in accordance with
UK-adopted international accounting standards and the
Company nancial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 ‘Reduced Disclosure
Framework’, and applicable law).
Under company law, the Directors must not approve the nancial
statements unless they are satised that they give a true and
fair view of the state of affairs of the Group and Company and
of the prot or loss of the Group for that period. In preparing the
nancial statements, the Directors are required to:
–
Select suitable accounting policies and then apply them
consistently
–
State whether applicable UK-adopted international accounting
standards have been followed for the Group nancial
statements and United Kingdom Accounting Standards,
comprising FRS 101 have been followed for the Company
nancial statements, subject to any material departures
disclosed and explained in the nancial statements
–
Make judgements and accounting estimates that are
reasonable and prudent
–
Prepare the nancial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business
The Directors are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufcient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the nancial position of the Group and Company
and enable them to ensure that the nancial statements and the
Directors’ Remuneration Report comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of nancial
statements may differ from legislation in other jurisdictions.
Directors’ conrmations
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to
assess the Group and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are listed
below, conrm that, to the best of their knowledge:
–
The Company nancial statements, which have been prepared
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 Reduced Disclosure Framework, and
applicable law), give a true and fair view of the assets, liabilities
and nancial position of the Company
–
The Group nancial statements, which have been prepared
in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities,
nancial position and prot of the Group
–
The Strategic Report includes a fair review of the development
and performance of the business and the position of the Group
and Company, together with a description of the principal risks
and uncertainties that the Group faces
The names and functions of the Directors of Vesuvius plc who
were in ofce during the year and at the signing of these nancial
statements were:
John McDonough CBE
Chairman
Patrick André
Chief Executive
Guy Young Chief Financial Ofcer
Kath Durrant Non-executive Director and Chair
of the Remuneration Committee
Dinggui Gao
Non-executive Director
Friederike Helfer
Non-executive Director
Jane Hinkley
Non-executive Director
Douglas Hurt
Non-executive Director,
Senior Independent Director and
Chair of the Audit Committee
On behalf of the Board
Guy Young
Chief Financial Ofcer
3 March 2022
160
Vesuvius plc
Annual Report and Financial Statements 2021
In our opinion:
–
Vesuvius plc’s Group nancial statements and Company
nancial statements (the “nancial statements”) give a true
and fair view of the state of the Group’s and of the Company’s
affairs as at 31 December 2021 and of the Group’s prot and
the Group’s cash ows for the year then ended;
–
the Group nancial statements have been properly prepared
in accordance with UK-adopted international accounting
standards;
–
the Company nancial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law); and
–
the nancial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the nancial statements, included within the
Annual Report, which comprise: the Group and Company
Balance Sheets as at 31 December 2021; the Group Income
Statement and the Group Statement of Comprehensive Income,
the Group Statement of Cash Flows and the Group and Company
Statements of Changes in Equity for the year then ended; and the
notes to the nancial statements, which include a description of
the signicant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the nancial statements
section of our report. We believe that the audit evidence we
have obtained is sufcient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the Group in accordance with
the ethical requirements that are relevant to our audit of the
nancial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and we
have fullled our other ethical responsibilities in accordance with
these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in Note 6.2 of the Group Financial
Statements, we have provided no non-audit services to the
Company or its controlled undertakings in the period under audit.
Report on the audit of the nancial statements
Opinion
Basis for opinion
161
Our business Our performance Sustainability
Governance Financial Statements
Independent auditors’ report
to the members of Vesuvius plc
Context
The Vesuvius Group (Vesuvius plc together with its subsidiaries) has operations in 40 countries, including 75 sales ofces and has
54 production sites. In 2021, as set out in the Chairman’s statement, despite some recovery across the majority of the Group’s end
markets, the COVID-19 pandemic continued to result in operational restrictions and promoted wide-spread global supply chain
and freight disruption which led to some costs increasing, not all of which were passed on to end customers. The sustainability
strategy is important for the Group and includes plans to achieve a net zero carbon footprint by 2050 at the latest.
Overview
Audit scope
–
Our audit included full scope audits
of 18 components and specic audit
procedures on certain balances
and transactions for 15 additional
components.
–
Taken together, the components at
which either full scope audit work or
specied audit procedures were
performed enabled us to get coverage
on 70% of revenue, 67% of prot
before tax and 69% of prot before
tax and separately reported items
(Headline prot before tax).
Key audit matters
–
Impairment of goodwill and other
non-nancial assets (Group).
–
Provisions for exposures (Group).
–
Impairment of investment in
subsidiaries (Company).
Materiality
–
Overall Group materiality:
£6,300,000 (2020: £7,000,000)
based on approximately 4.6% of prot
before tax and separately reported
items (‘Headline prot before tax’).
–
Overall Company materiality:
£6,300,000 (2020: £7,000,000) based
on 1.0% of total assets, capped at the
level of overall Group materiality.
–
Performance materiality:
£4,730,000 (2020: £5,250,000)
(Group) and £4,730,000 (2020:
£5,250,000) (Company).
Independent auditors’ report to the members of Vesuvius plc
continued
The scope of our audit
As part of designing our audit, we determined materiality and
assessed the risks of material misstatement in the nancial
statements. In particular, we looked at where the directors made
subjective judgements, for example in respect of signicant
accounting estimates that involved making assumptions and
considering future events that are inherently uncertain.
This year we also specically considered the impacts of climate
change on the audit. The ‘Sustainability’ section of the Strategic
report sets out the Group’s climate change risk assessment, the
climate related targets set and an evaluation of the potential
nancial impacts. In planning and executing our audit we
considered this risk assessment and management’s analysis
of impacts to the nancial statements. These, together with
discussions with our own climate change experts, provided us
with an understanding of the potential impacts of climate change
on the nancial statements. Based on this we understood the
key impacts on the Group could include potential increases in
costs from carbon pricing mechanisms, costs and benets
of technology transition in Iron and Steelmaking and the
conversion of manufacturing processes to clean energy.
This would most likely impact the nancial statement line items
and estimates associated with future cash ows because the
impact of climate change for Vesuvius is expected to become
more notable in the medium to long term. The key areas impacted
include valuation of goodwill and other non-nancial assets,
and useful lives applied to tangible and intangible assets.
Management’s assessment is that the current impact on Vesuvius
is not material. Nevertheless, in our audit of the forecasts used
in the valuation, we challenged management on signicant
assumptions in the cash ows that might be impacted by climate
change, including the potential impact of any climate change
related commitments. For further details see our Key Audit
Matter on impairment of goodwill and other non nancial assets.
We have not noted any issues as part of this work which contradict
the disclosures in the Annual Report or materially impact the
nancial statements.
Our audit approach
162
Vesuvius plc
Annual Report and Financial Statements 2021
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most signicance in the audit
of the nancial statements of the current period and include
the most signicant assessed risks of material misstatement
(whether or not due to fraud) identied by the auditors, including
those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in
the context of our audit of the nancial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identied by our audit.
The impact of COVID-19 (Group and Company), which was a key
audit matter last year, is no longer included because of in the case
of COVID-19, whilst there are continued operating environment
disruptions such as to the supply chain, there is improved nancial
position and performance in 2021. This has mitigated some of the
nancial statement risks and we are not aware of any signicant
control deciencies after another year of working under a hybrid
working environment. Otherwise, the key audit matters below are
consistent with last year.
Key audit matter How our audit addressed the key audit matter
Impairment of goodwill and other non-nancial
assets (Group)
At 31 December 2021, the carrying value of goodwill is £614.2 million
(2020: £617.6 million). Goodwill arising from acquisitions has an
indenite expected useful life and so is not amortised but rather is tested
for impairment at least annually at the cash-generating unit (“CGU”)
level. Management has determined its CGUs to align with the operating
segments, which are Steel Advanced Refractories, Steel Flow Control
and Foundry. Steel Sensors and Probes goodwill was previously impaired
and is fully written down.
The Group also carries Property, Plant and Equipment assets of
£352.5 million (2020: £337.5 million) and other intangible assets of
£82.6 million (2020: £78.5 million). The carrying value of these assets was
assessed for impairment as a part of the impairment test performed in
respect of the CGUs, and also separately for indicators of impairment.
Management prepares a Value in Use (VIU) model (discounted cash
ow) to test for impairment of the carrying value of the above CGUs.
This is based on a Board approved 3 year forecast, on which a terminal
value is calculated based on long term growth rates. The VIU model
requires estimation of projected future cash ows and involves making
key assumptions of revenue growth rates, an appropriate discount
rate and long term growth rates for each of the CGUs. In making such
future assumptions there is an inherent level of estimation uncertainty to
consider.
We focused on the valuation of the CGUs due to the material carrying
value of goodwill and other non-nancial assets, and with regard to the
estimation uncertainties arising from the factors set out above.
Refer to Property, Plant and Equipment (Note 15), Intangible Assets
(Note 16), Impairment of Tangible and Intangible Assets (Note 17),
Critical Accounting Judgements and Estimates (Note 3) and Signicant
issues and material judgements in the Audit Committee report.
Our audit procedures included:
–
For each CGU we obtained management’s Value in Use model.
We ensured the calculations were mathematically accurate and that
the valuation methodology conformed with the requirements of
IAS 36 ‘Impairment of Assets’.
–
For key assumptions made by management in respect of forecast
revenue and cash ow growth:
–
We obtained management’s supporting evidence such as the
Board approved budget and 3 year strategic plan and agreed
the forecast cash ows and underlying assumptions to these,
and assessed historical evidence of CGU growth rates.
–
We also obtained evidence through our own independent research.
This included evidence supporting forecast production levels for
the CGUs end customer markets, historical evidence of Vesuvius
growth rates and of recoveries in cyclical end markets.
–
We further considered market valuation evidence such as current
and target share price and understood any material differences.
–
Our audit evidence corroborated trends in the cash ows
modelled, although in year 3 and into perpetuity estimation
uncertainty increases (see our sensitivities below).
–
We utilised internal valuations experts to support our audit procedures
over the discount rate and long term growth rate assumptions used in
the impairment model and sensitised the impacts of changes in the
discount rate within our view of a reasonable range.
–
We remained professionally sceptical of the impacts of forecasting
uncertainty, particularly where evidence in later years is more judgemental
as set out above. We determined alternative sensitivity scenarios to
ascertain the extent of changes in projections that would be required
for the goodwill and other non-nancial assets to be impaired.
These included scaling back year 3 forecasts and factoring in
historical levels of forecasting inaccuracy. We also evaluated the
sensitivity of impairment model cash ows to the impacts of climate
change set out in the ‘Sustainability’ section of the Strategic report,
including identied costs of working to ‘net zero’ and the potential
nancial impacts of the scenarios for temperature change. We did not
identify reasonable sensitivities that would result in impairment of any
of the CGUs being tested.
In addition to the above procedures (which comprised our area of
focus), we instructed our component audit teams to evaluate the
appropriateness of management impairment indicator assessments
performed within territory components and to also assess any material
impacts of climate change. These assessments focused on individual or
groups of assets below the levels of the CGUs. Our component teams,
under our supervision, did not identify any additional impairments
required or inconsistent ndings to our Group level assessment in respect
of climate change. From our procedures we concluded that estimates
and key assumptions made by management in performing impairment
testing, including reasonably possible downside sensitivities which
showed no scenarios of impairment, were supported. Appropriate
disclosures have been included within the Annual Report. Critical
Accounting Judgements and Estimates (Note 3) accordingly highlights
this area as a critical accounting estimate although it is not expected to
materially impact the nancial statements in the next 12 months.
Our ndings were discussed with the Audit Committee.
163
Our business Our performance Sustainability
Governance Financial Statements
Independent auditors’ report to the members of Vesuvius plc
continued
Key audit matter How our audit addressed the key audit matter
Provisions for exposures (Group)
The Group holds a provision for ‘Disposal, closure and environmental
costs’ (which includes provisions relating to legacy legal matters for
closed businesses) amounting to £41.8 million (2020: £42.2 million).
Determining the quantum of this provision involves modelling and
estimation of expected future legal claim volumes and amounts. It also
requires the directors to use judgement to determine whether associated
insurance recoverable amounts should be recognised within assets.
We focused on this area due to the material quantum of the provision
and associated insurance asset, and the judgement and estimates
involved in determining its valuation.
Refer to Critical Accounting Judgements and Estimates (Note 3), Trade
and Other Receivables (Note 18), Provisions (Note 30), Contingent
Liabilities (Note 32) and Signicant issues and material judgements in
the Audit Committee report.
Our audit procedures included:
–
Obtaining management’s model of the estimated legal costs,
associated insurance recoverable and testing the mathematical
accuracy and integrity of this model.
–
We discussed claims arising, settlements made and expected
trends with management’s in-house and external legal experts.
–
We tested the accuracy of historical source data which is used to
determine estimates of future trends of volumes and amounts of
claims, to supporting claim documentation.
–
We utilised our own auditor’s expert to support our audit of the key
assumptions and to provide a view of a range of potential outcomes
due to the estimation uncertainty involved. We independently
sensitised the model for changes in the average cost of claims,
increase in the level of larger value claims and duration over which
claims are expected to be received.
–
We inspected evidence of available insurance cover, the routine and
consistent collection of this and considered the nancial condition
of insurance providers to gain evidence over the recognition and
recoverability of the insurance asset. We also veried that this was
appropriately presented as gross of the associated provisions
(within ‘Other receivables’).
From our procedures, we concluded the amount of the provision held
was within our acceptable range, albeit towards the optimistic end of the
range. We evaluated the level of disclosures and that these adequately
explain estimation uncertainty of key assumptions including over the
long term. Critical Accounting Judgements and Estimates (Note 3)
highlights this area as a critical accounting estimate although it is not
expected to materially impact the nancial statements in the next
12 months. Our ndings were discussed with the Audit Committee.
Impairment of investment in subsidiaries (Company)
The Company holds investments in subsidiaries with a total carrying
amount of £1,778.0 million at 31 December 2021 (2020: £1,778.0
million) in addition to amounts owed to Subsidiary undertakings of
£977.4 million (2020: £953.5 million). IAS 36 ‘Impairment of assets’
requires management to consider whether there are any indicators of
impairment in respect of non-nancial assets. Due to the quantum of the
carrying amount and levels of estimation uncertainty that exist similar
to assumptions used in testing for impairment of goodwill and other
non-nancial assets (Group) this was an area of focus for the audit of
the Company. Consistent with the prior year management performed
an impairment test at 31 October 2021. This utilises cash ow forecasts
used for testing for impairment of the Group’s goodwill together with
additional considerations of cash ows relevant to the subsidiaries that
the Company owns.
The judgements and estimates required to determine the cash ow
forecasts are aligned with those set out in ‘Impairment of goodwill and
other non-nancial assets (Group)’ above.
Refer to Investments (Note 7), Other Creditors including Taxation and
Social Security (Note 8), Critical Accounting Judgements and Estimates
(Note 3) in the Company nancial statements and Signicant issues and
material judgements in the Audit Committee report.
Our audit procedures included:
–
We assessed the results of the Value in Use model used for the
impairment test for goodwill and other non-nancial assets, together
with adjustments made to reect cash inows to subsidiaries due from
the Company.
–
Our testing of the Group Value in Use model, including procedures
performed over management’s model and evidence obtained in
respect of key assumptions made is set out in Key audit matter
‘Impairment of goodwill and other non-nancial assets’. We also
compared the carrying value of the investment in subsidiaries and
the Group Value in Use to the market capitalisation and market
valuation expectations.
–
We performed sensitivity analyses including consideration of
historical forecasting inaccuracies which showed there was no
reasonably possible scenarios of impairment when taking account
of estimation uncertainty in key assumptions.
–
This indicated headroom in the determined Value in Use and that the
investment in subsidiaries balance was not impaired.
We reviewed nancial statement disclosures and these are consistent
with the results of management’s testing and our audit evidence Critical
Accounting Judgements and Estimates (Note 3) in the Company nancial
statements highlights this area as a critical accounting estimate although
it is not expected to materially impact the nancial statements in the next
12 months. Our ndings were discussed with the Audit Committee.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the nancial
statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Vesuvius Group (Vesuvius plc together with its subsidiaries)
has operations in 40 countries, including 75 sales ofces and has
54 production sites. The Group consolidates nancial information
through reporting from its components which include divisions
and functions at these sites.
Our audit scope was determined by considering the signicance
of the component’s contribution to prot before tax and
separately reported items (Headline prot before tax). We also
evaluated contribution to revenue and to other individual nancial
statement line items, with specic consideration to obtaining
sufcient coverage over areas of heightened risk and locations.
164
Vesuvius plc
Annual Report and Financial Statements 2021
Due to the geographically dispersed nature of the Group’s
activities we determined there were no nancially signicant
components. The audit scope comprised 18 components for
which we determined that full scope audits would need to
be performed and 15 components for which specic audit
procedures on certain balances and transactions were performed
by either component teams or the Group team. This collectively
provided audit coverage of 70% of the Group’s revenue, 67% of
the Group’s prot before tax and 69% of the Group’s Headline
prot before tax. This, together with the additional procedures
performed at the Group level, including testing the consolidation
process, gave us the evidence we needed for our opinion on the
nancial statements as a whole.
In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed by us,
as the Group audit team, or by component auditors in both
PwC network rms and other audit rms. Where the work was
performed by component auditors, we determined the level of
involvement and oversight we needed to have in the audit work
at those reporting units to be able to conclude whether sufcient
appropriate audit evidence had been obtained as a basis for
our opinion on the nancial statements as a whole. This was
achieved through:
–
Issuance of formal instructions and regular communications
with the component auditors throughout the audit;
–
Attendance at audit clearance meetings by Group audit senior
team members;
–
Interactions with local management;
–
Our direction and supervision of the audit approach and review
of audit ndings; and
–
For material components, meetings with the Group audit
quality review partner and our review of selected audit
workpapers of the component auditors’.
The Group audit team also performed the audit of the Company
and other procedures over those components of the Group not
subject to full scope audits.
Materiality
The scope of our audit was inuenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual nancial
statement line items and disclosures and in evaluating the effect
of misstatements, both individually and in aggregate on the
nancial statements as a whole.
Based on our professional judgement, we determined materiality for the nancial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall
materiality
£6,300,000 (2020: £7,000,000). £6,300,000 (2020: £7,000,000).
How we
determined it
Approximately 4.6% of prot before tax and
separately reported items (‘Headline prot
before tax’).
1.0% of total assets, capped at the level of overall
Group materiality.
Rationale for
benchmark
applied
We believe that prot before tax and separately
reported items (‘Headline prot before tax’)
provides us with an appropriate basis for
determining our overall Group audit materiality
given our understanding that it is a key measure for
users of the nancial statements both internally
and externally. Headline prot before tax is an
Alternative Performance Measure presented
and dened in the Annual Report and Financial
Statements. (2020: In the prior year, due to the
signicant volatility caused in the results by
COVID-19, a 3 year average of the Headline prot
before tax was used as a benchmark to provide
a more normalised threshold for determining
materiality. In the current year, we reverted to
determining materiality based only on the
2021 performance.)
We believe that total assets is an appropriate basis
for determining materiality for the Company, given
this entity is an investment holding company and this
is an accepted auditing benchmark. The materiality
was capped to the level of Group overall materiality.
The Company is not an in-scope component for our
Group audit. (2020: 1% of total assets, capped at the
level of overall Group materiality.)
165
Our business Our performance Sustainability
Governance Financial Statements
Independent auditors’ report to the members of Vesuvius plc
continued
For each component in the scope of our Group audit, we allocated
a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was
£400,000 and £3,900,000. Certain components were audited
to a local statutory audit materiality that was also less than our
overall Group materiality.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75% (2020: 75%) of overall materiality,
amounting to £4,730,000 (2020: £5,250,000) for the Group
nancial statements and £4,730,000 (2020: £5,250,000)
for the Company nancial statements.
In determining the performance materiality, we considered a
number of factors – the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls – and
concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit Committee that we would report to
them misstatements identied during our audit above £350,000
(Group audit) (2020: £350,000) and £350,000 (Company audit)
(2020: £350,000) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
Our evaluation of the directors’ assessment of the Group’s and the
Company’s ability to continue to adopt the going concern basis of
accounting included:
–
Evaluating management’s base case and severe but plausible
downside case for liquidity and available nancial resources
and obtaining supporting evidence for key assumptions.
This included agreeing the underlying cash ow projections to
the Board approved forecast, assessing how these forecasts
were compiled and assessing the historical accuracy of the
forecasts. We also evaluated current performance and
available nancing facilities and related liquidity headroom.
–
Testing the accuracy of cash ow models used to assess
available liquidity during the going concern periods disclosed.
–
Inspected facility agreements to ensure key terms were
considered including covenants, and evaluated covenant
compliance during the year.
–
Determining alternative sensitivity scenarios to ascertain the
impact of changes in assumptions. These included scaling back
forecasts and increasing working capital as a percentage of
forecast revenue.
–
Reading management’s disclosures in the nancial statements
and relevant ‘other information’ in the Annual Report, and
assessing consistency with the nancial statements and our
knowledge based on our audit.
Based on the work we have performed, we have not identied
any material uncertainties relating to events or conditions that,
individually or collectively, may cast signicant doubt on the
Group’s and the Company’s ability to continue as a going concern
for a period of at least twelve months from when the nancial
statements are authorised for issue.
In auditing the nancial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the nancial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the Group’s
and the Company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the
UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in
the nancial statements about whether the directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
this report.
Conclusions relating to going concern
166
Vesuvius plc
Annual Report and Financial Statements 2021
The other information comprises all of the information in the
Annual Report other than the nancial statements and our
auditors’ report thereon. The directors are responsible for
the other information, which includes reporting based on the
Task Force on Climate-related Financial Disclosures (TCFD)
recommendations. Our opinion on the nancial statements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the nancial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the nancial statements or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.
If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the nancial
statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there
is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors’ Report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
Report for the year ended 31 December 2021 is consistent with
the nancial statements and has been prepared in accordance
with applicable legal requirements.
In light of the knowledge and understanding of the Group and
Company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
The Listing Rules require us to review the directors’ statements in
relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the Company’s
compliance with the provisions of the UK Corporate Governance
Code specied for our review. Our additional responsibilities
with respect to the corporate governance statement as other
information are described in the Reporting on other information
section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the nancial
statements and our knowledge obtained during the audit, and we
have nothing material to add or draw attention to in relation to:
–
The directors’ conrmation that they have carried out a robust
assessment of the emerging and principal risks;
–
The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
–
The directors’ statement in the nancial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identication of any material uncertainties to the Group’s
and Company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the
nancial statements;
–
The directors’ explanation as to their assessment of the Group’s
and Company’s prospects, the period this assessment covers
and why the period is appropriate; and
–
The directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of its assessment, including any related disclosures drawing
attention to any necessary qualications or assumptions.
Reporting on other information
Corporate governance statement
167
Our business Our performance Sustainability
Governance Financial Statements
Independent auditors’ report to the members of Vesuvius plc
continued
Our review of the directors’ statement regarding the longer-term
viability of the Group was substantially less in scope than an
audit and only consisted of making inquiries and considering the
directors’ process supporting their statement; checking that the
statement is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether the
statement is consistent with the nancial statements and our
knowledge and understanding of the Group and Company
and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the nancial statements and our knowledge obtained during
the audit:
–
The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the Group’s and Company’s position, performance, business
model and strategy;
–
The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
–
The section of the Annual Report describing the work of the
Audit Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the Company’s
compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specied under the Listing
Rules for review by the auditors.
Responsibilities of the directors for the nancial statements
As explained more fully in the Statement of Directors’ Responsibilities
in respect of the Financial Statements, the directors are responsible
for the preparation of the nancial statements in accordance with
the applicable framework and for being satised that they give
a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the
preparation of nancial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the nancial statements, the directors are responsible
for assessing the Group’s and the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or the
Company or to cease operations, or have no realistic alternative
but to do so.
Auditors’ responsibilities for the audit of the nancial
statements
Our objectives are to obtain reasonable assurance about whether
the nancial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to inuence
the economic decisions of users taken on the basis of these
nancial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including
fraud, is detailed below.
Based on our understanding of the Group and industry, we
identied that the principal risks of non-compliance with laws and
regulations related to income and other tax, international trade
restrictions, health and safety, environmental and anti-bribery,
and we considered the extent to which non-compliance might
have a material effect on the nancial statements. We also
considered those laws and regulations that have a direct impact
on the nancial statements such as the Companies Act 2006
and Listing Rules of the Financial Conduct Authority (FCA).
We evaluated management’s incentives and opportunities for
fraudulent manipulation of the nancial statements (including
the risk of override of controls), and determined that the principal
risks were related to posting inappropriate journal entries
and management bias in accounting estimates. The Group
engagement team shared this risk assessment with the
component auditors so that they could include appropriate
audit procedures in response to such risks in their work.
Responsibilities for the nancial
statements and the audit
168
Vesuvius plc
Annual Report and Financial Statements 2021
Audit procedures performed by the Group engagement team
and/or component auditors included:
–
Enquiries of Group and local management, those charged
with governance, internal audit and the Group’s legal counsel
(internal and, where relevant, external), including consideration
of known or suspected instances of non-compliance with laws
and regulations and fraud;
–
Understanding and evaluation of the design and implementation
of management’s controls designed to prevent and detect
irregularities, including compliance, whistle-blowing arrangements
and the results of management’s investigation of such matters;
–
Inspecting management reports and Board minutes in relation
to health and safety and other compliance matters;
–
Reading key correspondence with regulatory authorities,
including in respect of uncertain tax positions;
–
Testing assumptions and judgements made by management
in their critical accounting estimates, in particular relating to
impairment of goodwill and non-nancial assets and provisions
for exposures (see related key audit matters section of this report);
–
Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations including in
respect of journals posted to revenue, cash and other credits to
non-revenue accounts in the Group Income Statement; and
–
Obtained an understanding of the nature of any trade
restrictions and our component auditors tested relevant
supporting evidence that exists locally.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely
related to events and transactions reected in the nancial
statements. Also, the risk of not detecting a material misstatement
due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit
of the nancial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
–
we have not obtained all the information and explanations
we require for our audit; or
–
adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
–
certain disclosures of directors’ remuneration specied by
law are not made; or
–
the Company nancial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee,
we were appointed by the members on 10 May 2017 to audit the
nancial statements for the year ended 31 December 2017 and
subsequent nancial periods. The period of total uninterrupted
engagement is 5 years, covering the years ended 31 December
2017 to 31 December 2021.
Other matter
In due course, as required by the Financial Conduct Authority
Disclosure Guidance and Transparency Rule 4.1.14R, these
nancial statements will form part of the ESEF-prepared annual
nancial report led on the National Storage Mechanism of
the Financial Conduct Authority in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report
provides no assurance over whether the annual nancial report
will be prepared using the single electronic format specied in
the ESEF RTS.
Darryl Phillips (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
3 March 2022
169
Our business Our performance Sustainability
Governance Financial Statements
We think beyond today’s
industrial processes
and shape the future
through mechatronics
171
Group Income Statement
172
Group Statement of
Comprehensive Income
173
Group Statement of Cash Flows
174
Group Balance Sheet
175
Group Statement of Changes
in Equity
176
Notes to the Group
Financial Statements
229
Company Balance Sheet
230
Company Statement of
Changes in Equity
231
Notes to the Company
Financial Statements
237
Five-Year Summary:
Divisional Results from
Continuing Operations
238
Shareholder Information
(Unaudited)
240
Glossary
Financial Statements
Vesuvius plc
Annual Report and Financial Statements 2021
170
Group Income Statement
For the year ended 31 December 2021
Notes
2021
2020
Headline
performance
1
£m
Separately
reported
items
1
£m
Total
£m
Headline
performance
1
£m
Separately
reported
items
1
£m
Total
£m
Continuing operations
Revenue 1,642.9 – 1,642.9 1,458.3 – 1,458.3
4, 5
Manufacturing costs
(1,222.8 ) – (1,222.8 )
(1,084.7 ) – (1,084.7 )
Administration, selling and distribution costs
(277.7 ) – (277.7 )
(272.2 ) – (272.2 )
Trading prot
2
5 142.4 – 142.4 101.4 – 101.4
Amortisation of acquired intangible assets
16 – (9.7 ) (9.7 ) – (9.9 ) (9.9 )
Restructuring charges
7 – – – – (6.1 ) (6.1 )
Vacant site remediation costs
7 – – – – (10.3 ) (10.3 )
GMP equalisation charge
26 – – – – (0.8 ) (0.8 )
Operating prot 142.4 (9.7 ) 132.7 101.4 (27.1 ) 74.3
6
Finance expense
(13.7 ) – (13.7 )
(18.9 ) – (18.9 )
Finance income 7.3 – 7.3 8.0 – 8.0
Net nance costs
9 10.9 ) – (10.9 )
(6.4 ) – (6.4 )
(Share of post-tax prot of joint ventures
and associates
33 1.3 – 1.3 1.1 – 1.1
Prot before tax 137.3 (9.7 ) 127.6 91.6 (27.1 ) 64.5
Income tax charge
10 24.4 ) 5.7 (18.7 )
(35.9 ) 16.2 (19.7 )
(Prot 101.4 6.5 107.9 67.2 (21.4 ) 45.8
Prot attributable to:
Owners of the Parent
11 95.6 6.5 102.1 62.7 (21.4 ) 41.3
Non-controlling interests 5.8 – 5.8 4.5 – 4.5
Prot 101.4 6.5 107.9 67.2 (21.4 ) 45.8
Earnings per share – pence
11
Total operations – basic 37.7 15.3
1. Headline performance and Separately reported items are non-GAAP measures. Headline performance is dened in Note 4.1 and Separately reported items is
dened in Note 2.5.
2. Trading prot is a non-GAAP measure and is dened in Note 4.4.
The above results were derived from continuing operations. The separately reported items would form part of Administration, selling
and distribution costs if classied within Headline performance, which including these amounts would total £287.4 m (2020: £299.3 m).
171
Our business Our performance Sustainability Governance
Financial Statements
Group Statement of Comprehensive Income
For the year ended 31 December 2021
Notes
2021
£m
2020
£m
Prot 107.9 45.8
Items that will not subsequently be reclassied to Income Statement
Remeasurement of dened benet liabilities/assets
26.6 7.7
(80.6 )
Income tax relating to items not reclassied
10.4 12.5 (3.2 )
Items that may subsequently be reclassied to Income Statement
Exchange differences on translation of the net assets of foreign operations
(31.4 )
(14.9 )
Exchange differences on translation of net investment hedges
23 14.4 (9.7 )
Net change in costs of hedging
(1.2 ) 0.4
Change in the fair value of the hedging instrument 2.2
(8.1 )
Amounts reclassied from the income statement
(0.7 ) 6.3
Other comprehensive loss, net of income tax
(84.8 )
(21.5 )
Total comprehensive income 23.1 24.3
Total comprehensive income attributable to:
Owners of the Parent 17.7 22.0
Non-controlling interests 5.4 2.3
Total comprehensive income 23.1 24.3
The above results were derived from continuing operations.
172
Vesuvius plc
Annual Report and Financial Statements 2
021
Group Statement of Cash Flows
For the year ended 31 December 2021
Notes
2021
£m
2020
£m
Cash ows from operating activities
Cash generated from operations
12 82.9 193.7
Interest paid
(11.9 )
(18.9 )
Interest received 4.3 5.2
Income taxes paid
(30.1 )
(27.5 )
Net cash inow from operating activities 45.2 152.5
Cash ows from investing activities
Capital expenditure
(45.5 )
(40.5 )
Proceeds from the sale of property, plant and equipment 1.2 1.1
Acquisition of subsidiaries and joint ventures, net of cash acquired
20 1.4 )
(43.7 )
(Dividends received from joint ventures 1.0 2.3
Net cash outow from investing activities
(87.0 )
(38.5 )
Net cash (outow)/inow before nancing activities
(41.8 ) 114.0
Cash ows from nancing activities
Proceeds from borrowings
14 89.4 320.4
Repayment of borrowings
14 438.6 )
(31.4 )
(Settlement of derivatives
25 – 1.4
Purchase of ESOP shares
22 –
(1.1 )
Dividends paid to equity shareholders
24 8.4 )
(55.5 )
(Dividends paid to non-controlling shareholders
(2.2 )
(1.9 )
Net cash outow from nancing activities
(0.8 )
(127.1 )
Net decrease in cash and cash equivalents
14
(42.6 )
(13.1 )
Cash and cash equivalents at 1 January 206.8 222.1
Effect of exchange rate uctuations on cash and cash equivalents
14 2.2 )
(1.8 )
(Cash and cash equivalents at 31 December 162.4 206.8
13
Alternative performance measure (non-statutory):
Notes
2021
£m
2020
£m
Free cash ow
4.11
Net cash inow from operating activities 45.2 152.5
Capital expenditure
(45.5 )
(40.5 )
Proceeds from the sale of property, plant and equipment 1.2 1.1
Dividends received from joint ventures 1.0 2.3
Dividends paid to non-controlling shareholders
(2.2 )
(1.9 )
Free cash ow
4.11
(0.3 ) 113.5
173
Our business Our performance Sustainability Governance
Financial Statements
Group Balance Sheet
As at 31 December 2021
Notes
2021
£m
2020
£m
Assets
Property, plant and equipment
15 352.5 337.5
Intangible assets
16 696.8 696.1
Employee benets – surpluses
26 25.1 117.1
Interests in joint ventures and associates
33 12.8 12.1
Investments 0.5 0.7
Deferred tax assets
10 104.2 96.1
Other receivables
18 16.2 18.6
Total non-current assets 1,208.1 1,278.2
Cash and short-term deposits
13 169.1 209.7
Inventories
19 299.4 187.3
Trade and other receivables
18 445.2 369.9
Income tax receivable
10 7.6 3.7
Derivative nancial instruments
25 0.1 0.2
Assets classied as held for sale – 0.9
Total current assets 921.4 771.7
Total assets 2,129.5 2,049.9
Equity
Issued share capital
21 27.8 27.8
Retained earnings
22 2,483.4 2,502.9
Other reserves
23 1,451.3 )
(1,467.6 )
(Equity attributable to the owners of the Parent 1,043.6 1,079.4
Non-controlling interests 54.6 51.4
Total equity 1,098.2 1,130.8
Liabilities
Interest-bearing borrowings
25 329.9 333.1
Employee benets – liabilities
26 102.1 119.2
Other payables
28 11.6 13.2
Provisions
30 32.6 34.0
Deferred tax liabilities
10 29.6 43.9
Derivative nancial instruments
25 2.5 7.0
Total non-current liabilities 508.3 550.4
Interest-bearing borrowings
25 113.8 45.0
Trade and other payables
28 372.9 288.7
Income tax payable
10 18.1 12.2
Provisions
30 18.1 22.8
Derivative nancial instruments
25 0.1 –
Total current liabilities 523.0 368.7
Total liabilities 1,031.3 919.1
Total equity and liabilities 2,129.5 2,049.9
Company numb
7766er 821
The nancial statements on page
171 s
to 228 were approved and authorised for issue by the Directors on 3 March 2022 and signed on their behalf by:
Patrick André Guy Young
Chief Executive Chief Financial Ofcer
174
Vesuvius plc
Annual Report and Financial Statemen
21ts 20
Group Statement of Changes in Equity
For the year ended 31 December 2021
Issued
share
capital
£m
Other
reserves
£m
Retained
earnings
£m
Owners of
the Parent
£m
Non-
controlling
interests
£m
Total
equity
£m
As at 1 January 2020 27.8 (1,427.5 ) 2,463.1 1,063.4 51.0 1,114.4
Prot – – 41.3 41.3 4.5 45.8
Remeasurement of dened benet liabilities/assets – – 7.7 7.7 – 7.7
Income tax relating to items not reclassied – – (3.2 ) (3.2 ) – (3.2 )
Exchange differences on translation of the net assets
of foreign operations – (12.7 ) – (12.7 ) (2.2 ) (14.9 )
Exchange differences on translation of net investment hedges – (9.7 ) – (9.7 ) – (9.7 )
Net change in costs of hedging – 0.4 – 0.4 – 0.4
Change in the fair value of the hedging instrument – (8.1 ) – (8.1 ) – (8.1 )
Amounts reclassied from the income statement – 6.3 – 6.3 – 6.3
Income tax relating to items that may be reclassied – – – – – –
Other comprehensive income/(loss) net of income tax – (23.8 ) 4.5 (19.3 ) (2.2 ) (21.5 )
Total comprehensive income/(loss) – (23.8 ) 45.8 22.0 2.3 24.3
Recognition of share-based payments – – 2.4 2.4 – 2.4
Dividends paid (Note 24) – – (8.4 ) (8.4 ) (1.9 ) (10.3 )
Total transactions with owners – – (6.0 ) (6.0 ) (1.9 ) (7.9 )
As at 31 December 2020 27.8 (1,451.3 ) 2,502.9 1,079.4 51.4 1,130.8
As at 1 January 2021 27.8 (1,451.3 ) 2,502.9 1,079.4 51.4 1,130.8
Prot – – 102.1 102.1 5.8 107.9
Remeasurement of dened benet liabilities/assets – – (80.6 ) (80.6 ) – (80.6 )
Income tax relating to items not reclassied – – 12.5 12.5 – 12.5
Exchange differences on translation of the net assets
of foreign operations – (31.0 ) – (31.0 ) (0.4 ) (31.4 )
Exchange differences on translation of net investment hedges – 14.4 – 14.4 – 14.4
Net change in costs of hedging – (1.2 ) – (1.2 ) – (1.2 )
Change in the fair value of the hedging instrument – 2.2 – 2.2 – 2.2
Amounts reclassied from the income statement – (0.7 ) – (0.7 ) – (0.7 )
Income tax relating to items that may be reclassied – – – – – –
Other comprehensive (loss) net of income tax – (16.3 ) (68.1 ) (84.4 ) (0.4 ) (84.8 )
Total comprehensive income/(loss) – (16.3 ) 34.0 17.7 5.4 23.1
Recognition of share-based payments – – 3.1 3.1 – 3.1
Purchase of ESOP shares – – (1.1 ) (1.1 ) – (1.1 )
Dividends paid (Note 24) – – (55.5 ) (55.5 ) (2.2 ) (57.7 )
Total transactions with owners – – (53.5 ) (53.5 ) (2.2 ) (55.7 )
As at 31 December 2021 27.8 (1,467.6 ) 2,483.4 1,043.6 54.6 1,098.2
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Financial Statements
176
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Annual Report and Financial Statements 2021
1. General Information
the Company and its subsidiary and joint venture companies (‘the Group’) is set out in the Strategic Report on pages 1 to 101.
The address of its registered ofce is 165 Fleet Street, London EC4A 2AE .
2. Basis of Preparation
2.1 Basis of accounting
The Group nancial statements have been prepared in accordance with UK-adopted international accounting standards (IFRS)
and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The nancial
statements have been prepared under the historical cost convention, with the exception of fair value measurement applied to
dened benet pension plans, investments and derivative nancial instruments.
2.2 Basis of consolidation
The Group nancial statements incorporate the nancial statements of the Company and entities controlled directly and
indirectly by the Company (its ‘subsidiaries’). Control exists when the Company has the power to direct the relevant activities of an
entity that signicantly affect the entity’s return so as to have rights to the variable return from its activities. In assessing whether
control exists, potential voting rights that are currently exercisable are taken into account. The results of subsidiaries acquired
or disposed of during the year are included in the Group Income Statement from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
The principal accounting policies applied in the preparation of these Group nancial statements are set out in the Notes.
These policies have been consistently applied to all of the years presented, unless otherwise stated. Where necessary, adjustments
are made to the nancial statements of subsidiaries to bring their accounting policies into line with those detailed herein to ensure
that the Group nancial statements are prepared on a consistent basis. All intra-Group transactions, balances, income and
expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identied separately from the Group’s interest therein.
Non-controlling interests consist of the amount of those interests at the date of the original business combination together with
the non-controlling interests’ share of prot or loss, each component of other comprehensive income, less dividends paid since
the date of the combination. Total comprehensive income is attributed to the non-controlling interests, even if this results in the
non-controlling interests having a decit balance.
2.3 Going concern
The Group’s available committed liquidity stood at £456m at year-end 2021, up from £437m at year-end 2020, as a result of an
increase in the Group’s committed facilities partially offset by additional borrowings under these facilities. The Directors have
prepared cash ow forecasts for the Group for a period in excess of 12 months from the date of approval of the nancial
statements. These forecasts reect an assessment of current and future end-market conditions and their impact on the Group’s
future trading performance.
The analysis undertaken includes a plausible but severe downside scenario, based on an assumed protracted
COVID
-19 related demand impact, despite emerging condence that the worst of the pandemic may be behind us. This downside scenario assumes
a decline in business activity and protability in 2022 and 2023 to the level achieved in H2 2020, the period half-year most severely
impacted by COVID-19. On a full-year basis relative to 2021, this implies a c.14% decline in sales and a c.34% decline in trading
prot. Even in this downside scenario, the forecasts show that the Group’s maximum net debt/EBITDA (pre-IFRS 16 in line with
the covenant calculation) does not exceed 1.3x, compared to a leverage covenant of 3.25x.
The forecasts show that the Group will be able to operate within the current committed debt facilities and show continued compliance
with the Company’s nancial covenants. On the basis of the exercise described above and the Group’s available committed debt
facilities, the Directors consider that the Group and the Company have adequate resources to continue in operational existence
for a period of at least 12 months from the date of signing of these nancial statements. Accordingly, they continue to adopt a
going concern basis in preparing the nancial statements of the Group and the Company.
Notes to the Group Financial Statements
2. Basis of Preparation
continued
2.4 Functional and presentation currency
The nancial statements are presented in millions of pounds sterling, which is the functional currency of the Company, and
rounded to one decimal place. Foreign operations are included in accordance with the policies set out in Note 25.1.
2.5 Disclosure of ‘separately reported items’
The Group has adopted a columnar presentation for its Group Income Statement, to separately identify headline performance
results, as the Directors consider that this gives a useful view of the core results of the ongoing business. As part of this presentation
format, the Group has adopted a policy of disclosing separately on the face of its Group Income Statement, within the column
entitled ‘Separately reported items’, the effect of any components of nancial performance for which the Directors consider
separate disclosure would assist users both in a useful understanding of the nancial performance achieved for a given year and
in making projections of future results.
Both materiality and the nature of the components of income and expense are considered in deciding upon such presentation.
Such items may include, inter alia, the nancial effect of exceptional items which occur infrequently, such as major restructuring
activity (which may require more than one year to complete), signicant movement in the Group’s deferred tax balances such as
was, for example, caused by the impact of US tax reform in 2017, items reported separately for consistency, such as amortisation
charges relating to acquired intangible assets, prots or losses arising on the disposal of continuing or discontinued operations
and the taxation impact of the aforementioned items reported separately.
The amortisation charge in respect of intangible assets recognised on business combinations is excluded from the trading results
of the Group since they are non-cash charges and are not considered reective of the core trading performance of the Group.
In its adoption of this policy, the Company applies an even-handed approach to both gains and losses and aims to be both
consistent and clear in its accounting and disclosure of such items.
2.6 Consideration of climate change
In preparing the nancial statements, we have considered the impact of climate change, particularly in the context of the
disclosures included in the Strategic Report this year. There has not been a material impact on the nancial reporting judgements
and estimates arising from our considerations, consistent with our assessment that climate change is not expected to have a
meaningful impact on the viability of the Group in the medium term. Specically, we note that we have considered the impact
of climate change on the carrying value and the estimation of useful lives of property, plant and equipment (see Note 15) and
goodwill and intangibles (see Note 16).
2.7 Changes in accounting policies
There have been no changes in accounting policies during the year.
2.8 New and revised IFRS
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards
and interpretations is that they are not expected to have a signicant impact on the Group’s nancial position, performance,
cash ows and disclosures.
The replacement of Libor with alternative interest rate benchmarks is now well progressed and the Group has reviewed the
impact of this on its nancial statements.
The £385m central bank facility signed on 5 July 2021 provides for the use of SONIA and EURIBOR for GBP and EUR drawdowns
respectively. USD Libor remains quoted until June 2023; a replacement reference rate for USD drawdowns will be agreed by that
date as provided for within the terms of the facility.
The Group’s US private placement notes and cross-currency interest rate swaps are not exposed to Libor rates and as a result
are unaffected by the benchmark reform. The Group’s £19m bilateral loan agreement was amended in October 2021 with
GBP Libor replaced by SONIA.
The Group concludes that benchmark reform has no material impact on its nancial statements. The Group also conrms it has
made no changes to its risk management strategy as a result of benchmark reform.
177
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Financial Statements
Notes to the Group Financial Statements
continued
3. Critical Accounting Judgements and Estimates
Determining the carrying amount of some assets and liabilities and amounts recognised as reported prot requires judgement
and/or estimation of the effect of uncertain future events. The major sources of judgement and estimation uncertainty that have
a signicant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities and amounts recognised
as reported prot are noted below. As part of the evaluation of critical accounting judgements and key sources of estimation
uncertainty, the Group has considered the implications of climate change on its operations and activities. All other accounting
policies are included within the respective Notes to the Financial Statements.
3.1 Separately reported items (judgement)
In accordance with IAS 1, the Group has adopted a policy of disclosing separately on the face of its Group Income Statement,
within the column entitled ‘Separately reported items’, the effect of any components of nancial performance for which the
Directors consider separate disclosure would assist both in a useful understanding of the nancial performance achieved for a
given year and in making projections of future results. Both materiality and the nature of the components of income and expense
are considered in deciding upon such presentation. Such items may include, inter alia, the nancial effect of exceptional items
which occur infrequently, such as major restructuring activity, and items reported separately for consistency, such as amortisation
charges relating to acquired intangible assets, prots or losses arising on the disposal of continuing or discontinued operations
and the taxation impact of the aforementioned exceptional items and other items reported separately.
3.2 Deferred tax asset recognition (judgement)
The Directors apply judgement in determining whether temporary differences, including historical tax losses, should be
recognised as deferred tax assets. The judgement considers the time horizon of expected utilisation and the history of taxable
prots generated. See Note 10.4.
3.3 Operating segments for continuing operations (judgement)
The Group’s operating segments are determined taking into consideration how the Group’s components are reported to the
Group’s Chief Executive, who makes the key operating decisions and is responsible for allocating resources and assessing
performance of the component. Taking into account the Group’s management and internal reporting structure, the operating
segments are Steel Flow Control, Steel Advanced Refractories, Steel Sensors & Probes, and the Foundry Division. The principal
activities of each of these segments are described in the Strategic Report.
Steel Flow Control, Steel Advanced Refractories, and Steel Sensors & Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments, which include a similar nature of products, customers, production
processes and margins.
3.4 Employeebenets(estimate)
The Group’s nancial statements include the costs and obligations associated with the provision of pension and other post-
retirement benets to current and former employees. It is the Directors’ responsibility to set the assumptions used in determining
the key elements of the costs of meeting such future obligations. These assumptions are set after consultation with the Group’s
actuaries and include those used to determine regular service costs and the nancing elements related to the plans’ assets and
liabilities. Whilst the Directors believe that the assumptions used are appropriate, a change in the assumptions could affect the
Group’s prot and nancial position. The pension obligations are most sensitive to a change in the discount rate and therefore
could materially change in the next nancial year if the discount rate changes signicantly. Sensitivity disclosures are included
in Note 26.3.
For the estimates below, the Group does not have any key assumptions concerning the future or other key sources of estimation
uncertainty in the reporting period that are reasonably expected to have a signicant risk of causing a material adjustment to the
carrying amounts of assets/liabilities within the next nancial year. Nonetheless, these estimates have the potential to materially
vary over time and are therefore highlighted.
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Annual Report and Financial Statements 2021
3. Critical Accounting Judgements and Estimates
continued
3.5 Impairment testing of intangible assets (estimate)
Determining whether intangible assets are impaired requires an estimation of the recoverable amount, which is the higher of
Value in Use and fair value less cost to sell, of the cash-generating units to which these assets have been allocated. The Value in
Use calculation requires estimation of future cash ows expected to arise for the cash-generating unit, the selection of suitable
discount rates and the estimation of long-term growth rates. As determining such assumptions is inherently uncertain and subject
to future factors, there is the potential these may differ in subsequent periods and therefore materially change the conclusions
reached. In light of this, consideration is made each year as to whether sensitivity disclosures are required for reasonably possible
changes to assumptions. Sensitivity disclosures are included in Note 17.2.
3.6 Provisions (judgement and estimate)
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters. Some of the Group’s subsidiaries are parties to legacy matter and other lawsuits, certain
of which are insured claims, which have arisen in the ordinary course of the operations of the company involved. Some of these
provisions relate to businesses that are closed or have been disposed of. Provisions are made for the expected amounts payable in
respect of known or probable costs resulting both from these third-party lawsuits or other regulatory requirements. To the extent
insurance is in place, an asset is recognised in other receivables in respect of associated insurance reimbursements.
As the resolution of many of the potential obligations for which provision is made is subject to legal or other regulatory process,
it requires estimation of the timing, quantum and amount of associated outows, which are subject to some uncertainty. The
Directors use their judgement, using historical evidence, current information and expert experience, to determine whether to
recognise a provision, and make appropriate estimates of provisions in the nancial statements for amounts relating to such
matters. Associated assets for insurance recoverable are recognised, which involves assessing the likelihood of insurance being
paid, which is a critical judgement. The Directors have considered the available cover and the historical evidence to determine
that this is virtually certain. Estimating the amount of provisions and insurance receivable is subject to estimation uncertainty.
See Note 30 for further information.
4. Alternative Performance Measures
The Company uses a number of alternative performance measures (APMs) in addition to those reported in accordance with
IFRS. The Directors believe that these APMs, listed below, are important when assessing the underlying nancial and operating
performance of the Group and its divisions, providing management with key insights and metrics in support of the ongoing
management of the Group’s performance and cash ow. A number of these align with Key Performance Indicators (KPIs) and
other key metrics used in the business and therefore are considered useful to also disclose to the users of the nancial statements.
The following APMs do not have a standard denition prescribed by IFRS and therefore may not be directly comparable with
similar measures presented by other companies.
4.1 Headline performance
Headline performance, reported separately on the face of the Group Income Statement, is from continuing operations and
before items reported separately on the face of the Group Income Statement.
4.2 Underlyingrevenue,underlyingtradingprotandunderlyingreturnonsales
Underlying revenue, underlying trading prot and underlying return on sales are the headline equivalents of these measures
after adjustments to exclude the effects of changes in exchange rates, business acquisitions and disposals. Reconciliations of
underlying revenue and underlying trading prot can be found in the Financial review. Underlying revenue growth is one of
the Group’s KPIs and provides an important measure of organic growth of Group businesses between reporting periods by
eliminating the impact of exchange rates, acquisitions and disposals.
4.3 Return on sales (ROS)
ROS is calculated as trading prot divided by revenue. It is one of the Group’s KPIs and is used to assess the trading performance
of Group businesses. A reconciliation of ROS is included in Note 5.3.
4.4 Tradingprot/adjustedEBITA
Trading prot/adjusted EBITA is dened as operating prot before separately reported items. It is one of the Group’s KPIs and is
used to assess the trading performance of Group businesses. It is also used as one of the targets against which the annual bonuses
of certain employees are measured.
4.5 Headlineprotbeforetax
Headline prot before tax, reported separately on the face of the Group Income Statement, is calculated as the net total of
trading prot, plus the Group’s share of post-tax prot of joint ventures and total net nance costs associated with headline
performance. It is one of the Group’s KPIs and is used to assess the nancial performance of the Group as a whole.
179
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Financial Statements
Notes to the Group Financial Statements
continued
4. Alternative Performance Measures
continued
4.6 Headline effective tax rate (ETR)
The Group’s headline ETR is calculated on the income tax costs associated with headline performance, divided by headline prot
before tax and before the Group’s share of post-tax prot of joint ventures and associates.
4.7 Headline earnings
Headline earnings is prot after tax before separately reported items attributable to owners of the Parent.
4.8 Headline earnings per share
Headline earnings per share is calculated by dividing headline prot before tax less associated income tax costs, attributable
to owners of the Parent by the weighted average number of ordinary shares in issue during the year. It is one of the Group’s KPIs
and is used to assess the earnings performance of the Group as a whole. It is also used as one of the targets against which the
annual bonuses of certain employees are measured. Headline earnings per share is disclosed in Note 11.
4.9 Adjustedoperatingcashow
Adjusted operating cash ow is cash generated from operations before restructuring and vacant site remediation costs but after
deducting capital expenditure net of asset disposals. It is used in calculating the Group’s cash conversion. In the prior year, net
retirement benet obligations were added back in this calculation; this has been discontinued as the management believes that
these represent core cash ows of the Group.
Notes
2021
£m
2020
£m
restated
Cash generated from operations
12
82.9
193.7Add: Outows relating to restructuring charges
4.0
16.7
Less: Capital expenditure
(45.5)
(40.5)Add: Vacant site remediation costs
3.0
1.9Add: Proceeds from the sale of property, plant and equipment
1.2
1.1
Adjusted operating cash ow
45.6
172.9Trading prot
142.4
101.4Cash conversion
32%
171%
4.10 Cash conversion
Cash conversion is calculated as adjusted operating cash ow from continuing operations divided by trading prot. It is useful for
measuring the rate at which cash is generated from trading prot. It is also used as one of the targets against which the annual
bonuses of certain employees are measured. The calculation of cash conversion is detailed in Note 4.9 above.
4.11 Freecashow
Free cash ow is dened as net cash ow from operating activities after net outlays for the purchase and sale of property, plant
and equipment, dividends from joint ventures and dividends paid to non-controlling shareholders. It is one of the Group’s KPIs and
is used to assess the underlying cash generation of the Group and is one of the measures used in monitoring the Group’s capital.
A reconciliation of free cash ow is included underneath the Group Statement of Cash Flows.
4.12 Average trade working capital to sales ratio
The average trade working capital to sales ratio is calculated as the percentage of average trade working capital balances to
the total revenue for the previous 12 months, at constant currency. Average trade working capital (comprising inventories, trade
receivables and trade payables) is calculated as the average of the 13 previous month-end balances. It is one of the Group’s KPIs
and is useful for measuring the level of working capital used in the business and is one of the measures used in monitoring the
Group’s capital.
2021
£m
2020
£m
Average trade working capital
344.2
337.8Total revenue
1,642.9
1,458.3
Average trade working capital to sales ratio
21.0%
23.2%4.13 Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA)
Adjusted EBITDA is calculated as the total of trading prot before depreciation and amortisation of non-acquired intangible
assets. It is used in the calculation of the Group’s interest cover and net debt to adjusted EBITDA ratios. A reconciliation of adjusted
EBITDA is included in Note 5.
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Annual Report and Financial Statements 2021
4. Alternative Performance Measures
continued
4.14 Net interest payable on borrowings
Net interest payable on borrowings is calculated as total interest payable on borrowings less nance income, excluding interest on
net retirement benet obligations, adjustments to discounts and any item separately reported. It is used in the calculation of the
Group’s interest cover ratio.
Notes
2021
£m
2020
£m
Total interest payable on borrowings 9
13.0
17.9Finance income 9
(6.7)
(7.4)Net interest payable on borrowings
6.3
10.54.15 Interest cover
Interest cover is the ratio of adjusted EBITDA for the last 12 months to net interest payable on borrowings for the last 12 months.
It is one of the Group’s KPIs and is used to assess the nancial position of the Group and its ability to fund future growth.
Notes
2021
£m
2020
£m
Adjusted EBITDA 5
192.2
152.0Net interest payable on borrowings
6.3
10.5Interest cover
30.5x
14.5x
4.16 Net debt
Net debt comprises the net total of current and non-current interest-bearing borrowings (including IFRS 16 lease liabilities), cash
and short-term deposits and derivative nancial instruments. Net debt is a measure of the Group’s net indebtedness to banks and
other external nancial institutions. A reconciliation of the movement in net debt is included in Note 14.
4.17 Net debt to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net debt at the year-end to adjusted EBITDA for that year. It is one of the Group’s KPIs
and is used to assess the nancial position of the Group and its ability to fund future growth and is one of the measures used in
monitoring the Group’s capital.
Notes
2021
£m
2020
£m
Net debt 14
277.1
175.1Adjusted EBITDA 5
192.2
152.0Net debt to adjusted EBITDA
1.4x
1.2x4.18 Return on invested capital (ROIC)
From 2022 onwards, the Group intends to use ROIC as its key measure of return from the Group’s invested capital. The RONA
performance measure will be replaced with ROIC, which provides a more complete measure of Vesuvius’ returns. ROIC is
calculated as trading prot less amortisation of acquired intangibles plus share of post-tax prot of joint ventures and associates
for the previous 12 months after tax, divided by the average invested capital (total assets excluding cash plus non-interest-bearing
liabilities), at constant currency (being the average over December and the previous year-end invested capital).
2021
£m
2020
£m
Average invested capital
1,329.1
1,300.3Trading prot (Note 4.4)
142.4
94.8Amortisation of acquired intangible assets
(9.7)
(9.9)Share of post-tax prot from joint ventures and associates
1.3
1.1
Tax on trading prot and amortisation of acquired intangible assets
(35.1)
(22.8)98.9
63.2
ROIC
7.5%
4.9%
4.19 Constant currency
Figures presented at constant currency represent 2020 amounts retranslated at average 2021 exchange rates.
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Financial Statements
Notes to the Group Financial Statements
continued
4. Alternative Performance Measures
continued
4.20 Liquidity
Liquidity is the Group’s cash and short-term deposits plus undrawn committed debt facilities less cash used as collateral on loans
and any gross up of cash in notional cash pools.
2021
£m
2020
£m
Cash and short-term deposits
169.1
209.7Undrawn committed debt facilities
308.1
246.6Cash used as collateral on loans
(21.0)
(19.0)
Gross up of cash in notional pools
(0.5)
–
Liquidity
455.7
437.34.21 Last twelve months (LTM)
Some results are presented or calculated using data from the last 12 months from the reference date.
5. Segment Information
The segment information contained in this Note refers to several alternative performance measures, denitions of which can
be found in Note 4. The Group has considered climate change in making segmental and revenue disclosures. Opportunities and
risks for the reported segments are further explained in the Sustainability section.
5.1 Business segments
The Group’s operating segments are determined taking into consideration how the Group’s components are reported to the
Group’s Chief Executive, who makes the key operating decisions and is responsible for allocating resources and assessing
performance of the component. Taking into account the Group’s management and internal reporting structure, the operating
segments are Steel Flow Control, Steel Advanced Refractories, Steel Sensors & Probes, and the Foundry Division. The principal
activities of each of these segments are described in the Strategic Report.
Steel Flow Control, Steel Advanced Refractories, and Steel Sensors & Probes operating segments are aggregated into the
Steel reportable segment. In determining that aggregation is appropriate, judgement is applied which takes into account the
economic characteristics of these operating segments which include a similar nature of products, customers, production
processes and margins.
Segment revenue represents revenue from external customers (inter-segment revenue is not material). Trading prot includes
items directly attributable to a segment as well as those items that can be allocated on a reasonable basis.
5.2 Accounting policy – revenue recognition
The Group derives all of its revenue from contracts with customers. The Group enters into contracts to provide one or multiple
products to customers in the steel and foundry industries globally.
Where the Group provides consumable products only, one performance obligation is present. The performance obligation is
to deliver consumables to the customer and is satised upon delivery of these items. Similarly, where a contract is for the supply
of standard equipment, there is one performance obligation and revenue is primarily recognised at a point in time, being upon
delivery of these items. The form of a contract is typically a purchase order from a customer.
The Group also enters into some contracts with customers in the steel industry under which they primarily provide consumable
items, but also supply equipment and/or technical assistance (‘service contracts’) to facilitate these customers’ steel production
processes. The Group applies judgement in assessing whether the performance obligations (i.e. provision of consumables,
equipment and technical assistance) are distinct performance obligations or if these may be bundled when assessing the point
at which the customer obtains control of or consumes the benet of promised goods or services. The judgement takes into
account that:
–
The equipment provided in these contracts remains the property of Vesuvius and is used by Vesuvius technicians at customer sites
–
The customer benets from the combined output of the contract, being the use of Vesuvius consumables, equipment and
technicians to support the customer’s production of steel
–
The value of the equipment and technician support is minimal relative to the total value of the contract to the customer being
the benet from use of Vesuvius consumables.
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Annual Report and Financial Statements 2021
5. Segment Information
continued
5.2 Accounting policy – revenue recognition
continued
continued
Based on the above, the individual elements of the contract are not considered distinct and therefore the performance obligations
are deemed to be bundled into a single performance obligation. Revenue is therefore recognised at a point in time, every time
the customers purchase and consume materials as they produce steel. In the event this judgement was not applied and the
performance obligations were not bundled, this would likely result in minor amounts of revenue being recognised earlier primarily
in respect of the technician support.
Approximately 89% (2020: 87%) of the aforementioned revenue relates to the sale of consumables and equipment only.
Approximately 11% (2020: 13%) of revenue relates to contracts that contain multiple performance obligations, which in the
majority of cases are deemed to be bundled into a single performance obligation and revenue recognised over the course of the
contract as the customer consumes and benets from Vesuvius products.
The Group enters into bespoke equipment design and build (and installation in some cases) contracts with customers.
Performance obligations are usually dened by milestones agreed with the customers in the contract. The customer usually does
not have a right to a refund as work progresses towards achieving the milestones in the contract. Revenue is recognised over time
by measuring the progress of completion or achievement of a milestone for each performance obligation identied within the
contract, usually with reference to cost inputs incurred against overall estimated costs for the contract. This does not typically
entail signicant estimation or judgements as the contracts are usually not material in isolation and do not span more than
12 months. This approach to revenue recognition is considered to reect faithfully the value and timing of goods or services
transferred and the rights of Vesuvius to revenue.
For revenue recognised at a point in time, the transaction price is determined and allocated with reference to the individual prices
of consumables or equipment specied in the contract or customer purchase order. If a standalone selling price is not available,
the Group will estimate the selling price with reference to the price that would be charged for the goods or services if they were sold
separately. This estimate is not considered complex.
For service contracts the bundled performance obligation is deemed to be the provision of consumables and, in some cases,
labour to facilitate production of customer steel. The transaction price is determined and allocated with reference to either an
agreed price list for each of the consumables input or, for some contracts, the transaction price is determined and allocated as
an amount per unit of customer steel output.
For revenue recognised over time, the transaction price is determined with reference to the prices set out in the contract.
For bespoke equipment builds, the transaction price is allocated to performance obligations (milestones) within the contract
and the payment schedules agreed with the customer that align to these milestones. For installations, the transaction price is
allocated with reference to the progress of completion. Where payment schedules include customer advance payments
(i.e. not aligned with a milestone/performance obligation), the amounts received are included within contract liabilities until
the performance obligation to which they relate is satised.
Contracts are to be settled in cash. They do not typically contain any variable consideration, discounts, refunds, rebates,
warranties or signicant nancing components.
The duration of the Group’s contracts with customers is typically less than one year and accordingly the Group has taken the
practical expedient within IFRS 15 to not disclose the transaction price allocated to unsatised (whole or partially) performance
obligations as of the end of the reporting period. Service contracts may span over more than one year as they remain in effect up
to a specied level of customer production of steel. However, the choice to purchase from Vesuvius under the contract remains
with the customer and therefore there is no commitment for the customer/Vesuvius to purchase/produce up to the specied level.
Costs of obtaining contracts are not considered signicant and these are expensed as incurred.
The Group assesses customer credit risk and recognises revenue when such risk is considered low and the consideration cash ows
due are reasonably expected to ow to the Group. Typically, the Group will not transact with customers where credit risk concerns
are identied and therefore there is no material unrecognised revenue as a result of credit risk. For trade receivables and contract
assets in respect of revenue recognised, an expected credit loss allowance is determined.
Customer payment terms are set out in revenue contracts and do not exceed one year. Customer payments typically follow the
satisfaction of performance obligations at which point revenue is recognised and invoiced. Accordingly, trade receivables and
contract assets are expected to derive cash inows for the Group within less than 12 months.
183
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
5. Segment Information
continued
5.2 Accounting policy – revenue recognition
continued
A contract asset is recorded when revenue is recognised but an invoice has not been raised to the customer. Contract assets are
short term and typically are invoiced in the following month.
Customer advance payments are included in contract liabilities. These are typically not material and relate to over time revenue
projects as set out further above.
Uncertainties
There are no uncertainties involving economic factors, signicant estimation or judgements (other than as disclosed above)
in respect of revenue recognition. Credit risk relating to the collection of cash inows from revenue recognised is addressed
through an allowance for expected credit losses, as set out in the trade and other receivables accounting policy.
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.
2021
£m
2020
£m
Receivables, which are included in ‘Trade and other receivables’
352.2
302.0Contract assets, which are included in ‘Trade and other receivables’
1.9
1.3Contract liabilities, which are included in ‘Trade and other payables’
3.3
1.5Contract liabilities of £3.3m (2020: £1.5m) include advances received from a customer that precede the satisfaction of performance
obligations by the Group. £1.5m of the contract liabilities recognised in the prior year was recognised as revenue in 2021.
5.3 Segmental analysis
The reportable segment results from continuing operations for 2021 and 2020 are presented below.
Notes
2021
Flow
Control
£m
Advanced
Refractories
£m
Sensors
& Probes
£m
Total Steel
£m
Foundry
£m
Total
£m
Segment revenue
648.7 489.1 33.7 1,171.5 471.4 1,642.9
– at a point in time
1,169.9 471.4 1,641.3
– over time
1.6 – 1.6
Segment adjusted EBITDA
135.9 56.3 192.2
Segment depreciation
(33.9) (15.9) (49.8)
Segmenttradingprot
102.0 40.4 142.4
Return on sales margin
8.7% 8.6% 8.7%
Amortisation of acquired intangible
assets
(9.7)
Operatingprot
132.7
Net nance costs
(6.4)
Share of post-tax prot of joint ventures
1.3
Protbeforetax
127.6
Capital expenditure additions
47.2 20.2 67.4
Inventory
19 248.1 51.3 299.4
Trade debtors
18 267.5 84.7 352.2
Trade payables
28 (191.3) (62.5) (253.8)
184
Vesuvius plc
Annual Report and Financial Statements 2021
5. Segment Information
continued
5.3 Segmental analysis
continued
2020
Flow
Control
£m
Advanced
Refractories
£m
Sensors
& Probes
£m
Total Steel
£m
Foundry
£m
Total
£m
Segment revenue
561.3 458.6 25.5 1,045.4 412.9 1,458.3
– at a point in time
1,035.7 412.9 1,448.6
– over time
9.7 9.7
Segment adjusted EBITDA
110.6 41.4 152.0
Segment depreciation
(34.2) (16.4) (50.6)
Segmenttradingprot
76.4 25.0 101.4
Return on sales margin
7.3% 6.1% 7.0%
Amortisation of acquired intangible assets
(9.9)
Restructuring charges
(6.1)
Vacant site remediation costs
(10.3)
Guaranteed minimum pensions (GMP)
equalisation charge
(0.8)
Operatingprot
74.3
Net nance costs
(10.9)
Share of post-tax prot of joint ventures
1.1
Protbeforetax
64.5
Capital expenditure additions
45.9 13.1 59.0
Inventory
151.0 36.3 187.3
Trade debtors
225.6 76.4 302.0
Trade creditors
(131.1) (54.6) (185.7)
The Chief Operating Decision Maker does not review non-current assets at a segmental level so these disclosures are
not included.
5.4 Geographical analysis
External revenue
Non-current assets
2021
£m
2020
£m
2021
£m
2020
£m
EMEA
644.8
578.5452.1
474.2Asia
492.2
442.0223.8
225.5North America
377.7
346.8367.0
328.6South America
128.2
91.035.9
36.7Continuing operations
1,642.9
1,458.3
1,078.81,065.0
External revenue disclosed in the table above is based upon the geographical location of where products and services are
delivered from. Non-current assets exclude employee benets net surpluses and deferred tax assets. Information relating to the
Group’s products and services is given in the Strategic Report. The Group is not dependent on any single customer for its revenue
and no single customer, for either of the years presented in the table above, accounts for more than 10% of the Group’s total
external revenue. £57.6m (2020: £56.2m) of revenue was generated from the UK, and total non-current assets in the UK
amounted to £94.9m (2020: £97.1m).
185
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
6. OperatingProt
6.1 Operatingprotisstatedaftercharging
Notes
2021
£m
2020
£m
Cost of inventories recognised as an expense
19
658.6
533.5Research and development
30.3
27.9
Employee expenses
8
396.8
366.0Depreciation 15
49.8
50.6Amortisation
16
9.910.1
Operating lease charges
29
2.9
4.26.2 Amounts payable to PricewaterhouseCoopers LLP and their associates
2021
£m
2020
£m
Fees payable to the Company’s auditors and their associates for the audit of the Parent Company
and Consolidated Financial Statements
0.7
0.7
Fees payable to the Company’s auditors and their associates for other services:
Audit of the Company’s subsidiaries
1.0
1.0
Audit-related assurance services
0.1
0.1
Total auditors’ remuneration
1.8
1.8
Total auditors’ remuneration of £1.8m in 2021 all related to continuing operations, of which £1.7m related to audit fees and
£0.1m of non-audit fees, in respect of the Group’s half-year nancial statements, quarterly reviews and tax form audits in India
(as required by regulation) along with review of an R&D claim in Italy (2020: £1.8m, including £1.7m of audit fees and £0.1m of
non-audit fees, the latter in respect of the Group’s half-year review fee and quarterly reviews and tax form audits in India). It is the
Group’s policy not to use the Group’s auditors for non-audit services other than for audit-related services that are required to be
performed by an auditor.
6.3 Amounts payable to Mazars LLP
Mazars LLP acts as external auditor of the non-material entities and three material entities within the Group. Total remuneration
for the audit of these entities was £0.8m (2020: £0.6m). This amount is not included in the table above.
7. Restructuring Charges and Vacant Site Remediation Costs
As explained in the Financial review on page 43, there were no restructuring charges in 2021. Restructuring charges of £6.1m
in 2020 related to the completion of the programme rst announced in March 2018, which was predominantly focused on
rationalising our manufacturing footprint, consolidating production and streamlining various back ofce functions. The charges
reected redundancy costs of £2.7m, plant closure costs of £1.8m, asset write-offs of £1.5m and consultancy fees and travel
of £0.1m. The utilisation of costs continues in line with the phased timings for the programmes to be completed.
The net tax credit attributable to the total restructuring charges in 2020 was £1.1m.
Cash costs of £4.0m (2020: £16.7m) (Note 12) were incurred in the year in respect of previously announced restructuring
programmes, leaving provisions made but unspent of £5.0m (Note 30) as at 31 December 2021 (2020: £9.2m).
The Group owns a number of disused properties in the US, which do not form part of our trading operations. In 2020, costs of
£10.3m (2021: nil) were incurred at one of these sites to address the signicant increase in the volume of water run-off occurring in
recent years. We engaged waste management specialists and have taken actions to reduce the level of water. We are in contact
with the relevant regulatory authorities and are currently implementing remediation solutions, including the installation of a
treatment facility. These non-recurring costs were treated as a separately reported item in 2020. There was no impact upon
headline performance.
186
Vesuvius plc
Annual Report and Financial Statements 2021
8. Employees
8.1 Employee expenses
Notes
2021
£m
2020
£m
Wages and salaries
329.1
302.9
Social security costs
48.0
43.5
Share-based payments 27
3.1
2.4Pension costs – dened contribution pension plans 26
10.2
9.76.0
7.1
Other post-retirement benets 26
0.4
0.4Total employee expenses
396.8
366.0
Included within wages and salaries is income from governments of £0.4m (2020: £3.0m) in respect of staff who have been
furloughed due to the COVID-19 pandemic. This income falls within IAS 20 Government grants as the Group receives income
in return for meeting the conditions included within each of the relevant government schemes. The income approach has
been applied and therefore the income is recognised when the salary and wages expenses which the schemes are intended to
compensate are incurred. There are no unfullled conditions or other contingencies that have been recognised in respect of
these schemes.
8.2 Monthly average number of employees
2021
no.
2020
no.
Steel
7,997
7,613
Foundry
2,856
2,710Total monthly average number of employees
10,853
10,323
As at 31 December 2021, the Group had 11,204 employees (2020: 10,354).
8.3 Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of
the categories specied in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is
provided in the audited part of the Directors’ Remuneration Report on pages 142 to 153.
2021
£m
2020
£m
Short-term employee benets
2.5
1.4Post-employment benets
0.3
0.2Share-based payments
–
1.2Total remuneration of key management personnel
2.8
2.8
9. Net Finance Costs
2021
£m
2020
£m
Interest payable on borrowings
Loans and overdrafts
10.7
15.6
Interest on lease liabilities
1.5
1.8
Amortisation of capitalised arrangement fees
0.8
0.5Total interest payable on borrowings
13.0
17.9
Interest on net retirement benet obligations
(0.3)
(0.1)
Adjustment to discounts on provisions and other liabilities
0.7
1.0
Adjustment to discounts on receivables
(0.3)
(0.5)Finance income
(6.7)
(7.4)Totalnetnancecosts
6.4
10.9
Within the table above, total nance costs are £13.7m (2020: £18.9m) and total nance income is £7.3m (2020: £8.0m).
187
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
10. Income Tax
10.1 Accounting policy
Tax expense represents the sum of current tax and deferred tax. Current and deferred tax are recognised in prot or loss except
to the extent that they relate to items charged or credited in the Group Statement of Comprehensive Income or Group Statement
of Changes in Equity, in which case the associated tax is also recognised in those statements.
Current tax is based on taxable prot for the year. Taxable prot differs from prot before tax as reported in the Group Income
Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates and laws that have
been enacted, or substantively enacted, by the balance sheet date.
A provision is recognised when the Group considers it has a present tax obligation as the result of a past event and it is probable
that the Group will be required to settle that obligation. Provisions established for such uncertain tax positions are made using
a best estimate of the tax expected to be paid, based on a qualitative and quantitative assessment of all relevant information.
Such a provision is typically required where the underlying tax issue is subject to interpretation and remains to be agreed,
and therefore is uncertain as to outcome. Principally, the uncertain tax positions for which a provision is made relate to the
interpretation of tax legislation and guidance regarding transfer pricing arrangements that have been entered into in the
normal course of business. In accordance with IAS 12, tax provisions are included as income tax payable on the face of the Group
Balance Sheet, and movements in tax provisions are included within income tax charges or credits in the Group Income Statement.
In assessing any appropriate provision requirements for uncertain tax items, the Group considers progress made in discussions
with the tax authorities, expert advice on the likely outcome and any recent developments in case law. Due to the uncertainty
associated with such tax items, it is possible that at a future date, on conclusion of the open matters, the nal outcome may
vary materially. Any such variations will affect the nancial results in the year in which such a determination is made.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the nancial statements
and the corresponding tax bases used in the computation of taxable prot, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable prots will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that
affects neither the taxable prot nor the accounting prot. Deferred tax is calculated at the tax rates that are expected to apply in
the period when the liability is settled or the asset is realised, based on tax rates and laws that have been enacted, or substantively
enacted, by the balance sheet date.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and interests in joint
ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufcient taxable prots will be available to allow all or part of the
asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
188
Vesuvius plc
Annual Report and Financial Statements 2021
10. Income Tax
continued
10.2 Income tax charge
2021
£m
2020
£m
Current tax
Overseas taxation
34.0
28.1
Adjustments in respect of prior years
(1.5)
(3.0)Total current tax, continuing operations
32.5
25.1
Deferred tax
Origination and reversal of temporary taxable differences
(11.6)
(7.8)
Adjustments in respect of prior years
(1.2)
1.4Total deferred tax, continuing operations
(12.8)
(6.4)
Total income tax charge
19.7
18.7
Total income tax charge attributable to:
Continuing operations – headline performance
35.9
24.4
– separately reported
(16.2)
(5.7)
Total income tax charge
19.7
18.7
Included in the Group’s total income tax charge are charges and credits meeting the criteria set out in Note 2.5 to be treated as
separately reported items, as analysed in the following table:
Separately reported items
2021
£m
2020
£m
Restructuring charges
–
(1.1)
Amortisation and utilisation of acquired intangibles
(0.2)
(2.3)Additional recognition of US deferred tax asset
(16.0)
–
Vacant site remediation costs
–
(2.3)
Totaltaxcharge/(credit)separatelyreported
(16.2)
(5.7)
As a result of the consistent protability of the US business, including during the current pandemic, the Group has decided to
reverse a valuation allowance of (£16.0m) held against US deferred tax assets that have no expiry date. In recognising these
assets, the Group has considered the future protability of the US business from approved budgets and business plans and an
extrapolation from them assuming that prots continue to grow at a rate consistent with those plans. These assets are available
for carry-forward indenitely and can be offset against any taxable income generated in the US.
The net tax debit reected in the Group Statement of Comprehensive Income in the year amounted to £13.0m credit (2020: £3.2m
debit), comprising a £12.5m credit (2020: £2.8m debit) related to tax on net actuarial gains and losses on the employee benets
plan, a £0.5m credit (2020: £nil) related to exchange adjustments and £nil (2020: £0.4m debit) relating to other temporary
timing differences.
The Group operates in a number of countries that have differing tax rates, laws and practices. Changes in any of these areas could,
adversely or positively, impact the Group’s tax charge in the future. Continuing losses, or insufciency of taxable prot to absorb
all expenses, in any subsidiary, could have the effect of increasing tax charges in the future as headline effective tax relief may not
be available for those losses or expenses. Other signicant factors affecting the tax charge are described in Notes 10.1 and 10.6.
10.3 Reconciliationofincometaxchargetoprotbeforetax
2021
£m
2020
£m
Protbeforetax
127.6
64.5
Tax at the UK corporation tax rate of 19.0% (2020: 19.0%)
24.2
12.3
Overseas tax rate differences
8.7
2.7
Withholding taxes
3.9
7.2
Expenses not deductible for tax purposes
0.3
2.3
Income taxed in advance
–
(4.2)
Deferred tax assets not recognised
0.3
1.3Utilisation of previously unrecognised tax losses
(0.3)
(1.3)
US deferred tax not previously recognised
(16.0)
–
Deferred tax rate changes
1.3
–
Adjustments in respect of prior years
(2.7)
(1.6)
Total income tax charge
19.7
18.7
189
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
10. Income Tax
continued
10.4 Deferred tax
Interest
£m
Other
operating
losses
£m
Pension
costs
£m
Intangible
assets
£m
Other
temporary
differences
£m
Total
£m
As at 1 January 2020
23.9 18.8 3.5 (22.4) 27.5 51.3
Exchange adjustments/other 0.4
(0.6)
(2.2)0.1 –
(2.3)Other net charge to Group Statement of Comprehensive
Income – –
(2.8)
–(0.4) (3.2)
Other net (charge)/credit to Group Income Statement 2.3 3.1 3.9
(0.1) (1.6)
0.2Other net (charge)/credit to Group Income Statement US (1.2) 3.9 (0.5) (0.3)
0.6
2.5As at 1 January 2021
22.0 18.9 0.8 (20.3) 30.8 52.2
Exchange adjustments/other
0.4 (0.1) (0.8) (0.3) 0.3 (0.5)
Acquisition
– – – (2.9) – (2.9)
Other net credit to Group Statement of Comprehensive
Income
– – 12.5 0.5 – 13.0
Other net credit/(charge) to Group Income Statement
0.8 0.7 1.0 (0.6) 1.5 3.4
Other net credit/(charge) to Group Income Statement US
11.2 (4.0) (0.1) (0.2) 2.5 9.4
As at 31 December 2021
34.4 15.5 13.4 (23.8) 35.1 74.6
2021
£m
2020
£m
Recognised in the Group Balance Sheet as:
Non-current deferred tax assets
104.2
96.1Non-current deferred tax liabilities
(29.6)
(43.9)Net total deferred tax assets
74.6
52.2
Included in these deferred tax assets and liabilities are amounts expected to be utilised in 2022 as follows:
2021
£m
2020
£m
Deferred tax assets
9.6
8.4Deferred tax liabilities
(2.3)
(2.3)As a result of the consistent protability of the US business, the Group has decided to recognise certain US deferred tax assets
that have no expiry date. Included in non-current deferred tax assets is £70.8m (2020: £61.8m) in respect of the partial recognition
of temporary differences arising in the US computed in accordance with the policy set out in Note 10.1 above. The Group remains
condent of the recovery of these assets. £3.0m (2020: £19.3m) remains unrecognised as detailed in the tables below.
Tax loss carry-forwards and other temporary differences with a tax value of £15.5m (2020: £17.7m) were recognised by
subsidiaries reporting a loss. Based on approved business plans of these subsidiaries, the Directors consider it probable that
the tax loss carry-forwards and temporary differences can be offset against future taxable prots of these subsidiaries.
The total deferred tax assets not recognised as at 31 December 2021 were £209.6m (2020: £182.5m), as analysed below.
In accordance with the accounting policy in Note 10.1, these items have not been recognised as deferred tax assets on the
basis that their future economic benet is not probable. In total, there was an increase of £27.1m (2020: £14.7m increase) in
net unrecognised deferred tax assets during the year, primarily driven by the increase in the UK corporation tax rate from 19%
to 25%. All UK unrecognised deferred tax assets are now reported at the 25% rate.
2021
£m
2020
£m
Operating losses (further described below)
135.2
109.3 Unrelieved US interest (may be carried forward indenitely)
0.7
17.9 Capital losses available to offset future UK capital gains (may be carried forward indenitely)
46.2
35.1 UK ACT credits (may be carried forward indenitely)
19.3
14.6 US tax credits
2.2
1.4
Other temporary differences
6.0
4.2
Total deferred tax assets not recognised
209.6
182.5
190
Vesuvius plc
Annual Report and Financial Statements 2021
10. Income Tax
continued
10.4 Deferred tax
continued
The Group has signicant net operating losses with a tax value of £150.7m (2020: £128.2m), only £15.5m (2020: £18.9m) of which
meet the criteria set out in Note 10.1 to be recognised on the Group Balance Sheet.
Operating
losses
recognised
2021
£m
Operating
losses not
recognised
2021
£m
Total
2021
£m
Operating
losses
recognised
2020
£m
Operating
losses not
recognised
2020
£m
Total
2020
£m
UK (may be carried forward indenitely) 87.9
– 116.9 116.9
–
87.9US (due to expire 2024–2031)
9.1 0.1 9.2
13.1–
13.1ROW (may be carried forward indenitely) 21.4 27.0
6.4 18.2 24.6
5.6ROW (due to expire within 5 years)
– – –
0.2–
0.215.5 135.2 150.7
18.9 109.3 128.2
The £24.6m (2020: £27.0m) operating losses available to set against future income in the rest of the world arise in a number of
countries, reecting the spread of the Group’s operations.
A liability of £1.0m (2020: £0.9m) has been recognised in respect of withholding taxes that will be due on a repatriation of funds
from the Group’s Chinese subsidiaries.
Deferred tax is not recognised in respect of the value of the Group’s investments in subsidiaries and interests in joint ventures
where we are able to control the timing of the reversal of the temporary differences and it is probable that such differences will
not reverse in the foreseeable future. The amount of these temporary differences for which deferred tax liabilities have not been
recognised was £14.6m (2020: £12.7m).
10.5 Income tax payable and recoverable
2021
£m
2020
£m
Liabilities for income tax payable
11.2
3.7
Provisions for uncertain tax positions
6.9
8.518.1
12.2
Less: Income tax recoverable within one year
7.6
3.7Net liability
10.5
8.5
Provisions for uncertain tax positions are calculated in accordance with the policy outlined in Note 10.1, and are treated as income
tax payable in accordance with IAS 12.
These provisions cover litigated tax matters as well as provisions for other risks where the Group believes it is more likely than not
that there would be a successful challenge by a tax authority to positions it has taken in its tax lings. By its nature, litigation can
result in sharp uctuations in cash ow, both in and out, relating to taxes. Currently, management does not expect any material
adjustments to these provisions in 2021.
During the year the provisions for uncertain tax positions have reduced to £6.9m (2020: £8.5m). The decrease of £1.6m (2020:
£3.3m) can be explained by the partial settlement of a tax audit in Spain, £0.2m (2020: £nil), reassessment of potential uncertain
tax positions following a lack of previously expected challenges by the tax authorities, £nil (2020: £2.0m credit), the expiration of
the statute of limitations on certain other exposures, £1.2m (2020: £1.6m), and foreign exchange movements on the remaining
balances, £0.2m credit (2020: £0.3m charge).
191
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
10. Income Tax
continued
10.6 Key factors impacting the sustainability of the headline effective tax rate are as follows:
Materialchangesinthegeographicmixofprots
The Group’s headline effective tax rate is sensitive to changes in the geographic mix of prots and level of prots and reects a
combination of higher rates in certain jurisdictions such as Brazil, China, Germany, India, Mexico and the US, a nil headline
effective tax rate in the UK due to the availability of unutilised tax losses, and rates that lie somewhere in between.
Changes in tax rates and laws in the jurisdictions in which the Group operates could have a material effect on the Group’s headline
effective tax rate.
Vesuvius in China qualies for a tax advantaged rate of 15% (rather than the headline rate of 25%) on part of its prots due to the
high technology nature of its business. Eligibility for this rate is reviewed on a regular basis by the Chinese tax authority and was
worth approximately £0.7m in 2021 (2020: £1.1m). Without that benet, the Group’s headline effective tax rate on headline
performance would have been 0.5% higher in 2021 (2020: 1.2%).
At any one time, the Group can be subject to a number of challenges by tax authorities in the jurisdictions in which it operates.
The outcome of these challenges is inherently uncertain, potentially resulting in a different tax charge from the amounts
initially provided.
Following Brexit, the EU Parent Subsidiary and Interest and Royalty directives no longer apply to dividend, interest and other
payments to Vesuvius in the UK. Additional withholding taxes will therefore become payable subject to reliefs available under
applicable tax treaties. The Group does not expect the impact of the changes to be material to its tax position.
11. Earnings per Share (EPS)
11.1 Earnings for EPS
Basic and diluted EPS from continuing operations are based upon the prot attributable to owners of the Parent, as reported
in the Group Income Statement. The table below reconciles these different prot measures.
2021
£m
2020
£m
ProtattributabletoownersoftheParent
102.1
41.3
Adjustments for separately reported items:
Amortisation of acquired intangible assets
9.7
9.9Restructuring charges
–
6.1
Vacant site remediation costs
–
10.3
Guaranteed minimum pensions (GMP) equalisation charge
–
0.8Income tax (credit)/charge
(16.2)
(5.7)HeadlineprotattributabletoownersoftheParent
95.6
62.7
11.2 Weighted average number of shares
2021
millions
2020
millions
For calculating basic and headline EPS
270.5
269.9Adjustment for potentially dilutive ordinary shares
1.8
1.7
For calculating diluted and diluted headline EPS
272.3
271.6For the purposes of calculating diluted and diluted headline EPS, the weighted average number of ordinary shares is adjusted to
include the weighted average number of ordinary shares that would be issued on the conversion of all potentially dilutive ordinary
shares expected to vest, relating to the Company’s share-based payment plans. Potential ordinary shares are only treated as
dilutive when their conversion to ordinary shares would decrease EPS or increase loss per share.
192
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Annual Report and Financial Statements 2021
11. Earnings per Share (EPS)
continued
11.3 Per share amounts
2021
pence
2020
pence
Earnings per share
– basic
37.7
15.3
– diluted
37.5
15.2
– headline
35.3
23.2
– diluted headline
35.1
23.1
12. Cash Generated from Operations
Notes
2021
£m
2020
£m
Operatingprot
132.7
74.3
Adjustments for:
Amortisation of acquired intangible assets
16
9.99.7
Restructuring charges
–
6.1
Vacant site remediation costs
–
10.3
Guaranteed minimum pensions (GMP) equalisation charge
–
0.8Tradingprot
142.4
101.4
Loss on disposal of non-current assets
0.4
1.3Depreciation
49.8
50.6Dened benet retirement plans net charge
6.4
6.7
Net (increase)/decrease in inventories
(113.5)
21.7Net (increase)/decrease in trade receivables
(53.5)
3.4Net increase/(decrease) in trade payables
70.6
12.4Net decrease/(increase) in other working capital
(5.5)
23.8Outow related to restructuring charges
(4.0)
(16.7)
Dened benet retirement plans cash outows
(7.2)
(9.0)Vacant site remediation costs paid
(3.0)
(1.9)
Cash generated from operations
82.9
193.7
13. Cash and Cash Equivalents
13.1 Accounting policy
Cash and short-term deposits in the Group balance sheet consist of cash at bank and in hand, and short-term deposits with
original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s
cash management are included as a component of cash and cash equivalents for the purpose of the Group Statement of
Cash Flows.
2021
£m
2020
£m
Cash at bank and in hand
169.1
169.7
Short-term deposits
–
40.0Cash and short-term deposits
169.1
209.7
Bank overdrafts
(6.7)
(2.9)Cash and cash equivalents in the Group Statement of Cash Flows
162.4
206.8
193
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
14. Reconciliation of Movement in Net Debt
Balance
as at
1 January
2021
£m
Foreign
exchange
adjustments
£m
Fair value
gains
£m
Non-cash
movements*
£m
Cash ow
£m
Balance
as at
31 December
2021
£m
Cash and cash equivalents
Cash at bank and in hand
169.7 (1.9) – – 1.3 169.1
Short-term deposits
40.0 – – – (40.0) _
Bank overdrafts
(2.9) 0.1 – – (3.9) (6.7)
206.8 (1.8) – – (42.6) 162.4
Borrowings, excluding bank overdrafts
(376.5) 11.3 – (17.1) (58.0) (440.3)
Capitalised arrangement fees
1.4 – – 1.9 – 3.3
Derivative nancial instruments
(6.8) – 4.3 – – (2.5)
Net debt
(175.1) 9.5 4.3 (15.2) (100.6) (277.1)
Balance
as at
1 January
2020
£m
Foreign
exchange
adjustments
£m
Fair value
losses
£m
Non-cash
movements*
£m
Cash ow
£m
Balance
as at
31 December
2020
£m
Cash and cash equivalents
Cash at bank and in hand
229.2 (2.2) – – (57.3) 169.7
Short-term deposits
– – – – 40.0 40.0
Bank overdrafts
(7.1) – – – 4.2 (2.9)
222.1 (2.2) – – (13.1) 206.8
Borrowings, excluding bank overdrafts
(469.0) (10.0) – (15.7) 118.2 (376.5)
Capitalised arrangement fees
1.2 – – 0.2 – 1.4
Derivative nancial instruments
(0.1) – (5.3) – (1.4) (6.8)
Net debt
(245.8) (12.2) (5.3) (15.5) 103.7 (175.1)
* £17.1m (2020: £15.7m) of new leases were entered into during the year.
Net debt is a measure of the Group’s net indebtedness to banks and other external nancial institutions and comprises the total
of cash and short-term deposits, current and non-current interest-bearing borrowings and derivative nancial instruments.
£89.4m proceeds from borrowings, shown in the Group Statement of Cash Flows, includes £28.0m and £28.4m (€33.0m)
US Private Placement Notes (‘USPP’), £31.0m of sterling drawings under the UK syndicated bank facility and £2.0m of sterling
drawings under the collateralised bilateral loan facility (see Note 25).
£31.4m repayment of borrowings, shown in the Group Statement of Cash Flows, includes £12.9m ($15.0m) of USPP repayments,
£6.0m (€7.0m) of euro drawings repaid under the UK syndicated bank facility and net lease repayments of £12.5m.
15. Property, Plant and Equipment
15.1 Accounting policy
Freehold land and construction in progress are carried at cost less accumulated impairment losses. Other items of property, plant
and equipment are carried at cost less accumulated depreciation and accumulated impairment losses. Costs are capitalised only
when it is probable that they will result in future economic benets owing to the Group and when they can be measured reliably.
Costs are capitalised to construction in progress where an asset is being developed. This is then transferred to the relevant asset
class and depreciated when the asset is ready for use. All other repairs and maintenance expenditures are charged to the Group
Income Statement in the period in which they are incurred.
Freehold land is not depreciated as it has an innite life. Depreciation on other items of property, plant and equipment begins
when the asset is available for use and is charged to the Group Income Statement on a straight-line basis so as to write off the
cost less the estimated residual value of the asset over its estimated useful life as follows:
194
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Annual Report and Financial Statements 2021
15. Property, Plant and Equipment
continued
15.1 Accounting policy
continued
Asset category Estimated useful life
Freehold property between 10 and 50 years
Leasehold property
the term of the lease
Right-of-use assets shorter of the asset’s useful life and lease term
Plant and equipment – motor vehicles and information technology equipment between 1 and 5 years
between 3 and 15 years
The depreciation method used, residual values and estimated useful lives are reviewed annually and changed, if appropriate.
As described in Note 17.1, an asset’s carrying amount is immediately written down to its recoverable amount if its carrying amount
is greater than its estimated recoverable amount. Gains and losses arising on disposals are determined by comparing sales
proceeds with carrying amount and are recognised in the Group Income Statement.
15.2 Movement in net book value
Freehold
property
£m
Leasehold
property
£m
Right-of-use
assets – land
& buildings
(Note 29.2)
£m
Right-of-use
assets – plant
& equipment
(Note 29.2)
£m
Plant and
equipment
£m
Construction
in progress
£m
Total
£m
Cost
As at 1 January 2020
221.1 2.4 24.6 22.6 554.6 57.7 883.0
Exchange adjustments
(0.2) – (0.3) – (6.3) (0.7) (7.5)
Capital expenditure additions
1.9 – 8.4 7.3 19.6 21.8 59.0
Acquisitions through business combinations
– – – – – – –
Disposals (0.1) (1.5) (1.9) (3.2) (8.1) – (14.8)
Assets classied as held for sale
(1.0) – – – – – (1.0)
Reclassications
19.0 – – – 26.5 (45.5) –
As at 31 December 2020 and 1 January 2021
240.7 0.9 30.8 26.7 586.3 33.3 918.7
Exchange adjustments
(5.4) – (0.9) (1.0) (14.0) (1.1) (22.4)
Capital expenditure additions
2.3 – 9.9 7.2 17.0 29.1 65.5
Acquisitions through business combinations
6.6 – – – 4.3 0.5 11.4
Disposals
(4.5) (0.1) (0.7) (3.3) (31.9) (0.7) (41.2)
Assets reclassied from held for sale
0.9 – – – – – 0.9
Reclassications
4.0 (0.1) – (0.6) 11.0 (19.2) (4.9)
As at 31 December 2021
244.6 0.7 39.1 29.0 572.7 41.9 928.0
Accumulated depreciation and impairment losses
As at 1 January 2020
109.5 1.7 3.9 8.9 421.3 – 545.3
Exchange adjustments
0.4 – (0.1) – (5.2) – (4.9)
Depreciation charge
6.8 0.1 4.0 6.8 32.9 – 50.6
Impairment 1.0 – – – 0.5 – 1.5
Disposals – (1.0) (1.2) (2.5) (6.7) – (11.4)
Assets classied as held for sale
0.1 – – – – – 0.1
As at 31 December 2020 and 1 January 2021
117.8 0.8 6.6 13.2 442.8 – 581.2
Exchange adjustments
(2.8) – (0.4) (0.7) (9.3) – (13.2)
Depreciation charge
6.4 – 4.6 6.2 32.6 – 49.8
Impairment
(2.9) – – – – – (2.9)
Disposals
(1.6) – (0.7) (2.6) (31.8) – (36.7)
Assets reclassied from held for sale
0.1 – – – – – 0.1)
Reclassications
0.1 (0.1) – – (2.8) – (2.8)
As at 31 December 2021
117.1 0.7 10.1 16.1 431.5 – 575.5
Net book value as at 31 December 2021
127.5 – 29.0 12.9 141.2 41.9 352.5
Net book value as at 31 December 2020
122.9 0.1 24.2 13.5 143.5 33.3 337.5
Net book value as at 1 January 2020
111.6 0.7 20.7 13.7 133.3 57.7 337.7
195
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
15. Property, Plant and Equipment
continued
15.2 Movement in net book value
continued
Capital expenditure on customer-installation assets was £5.7m (2020: £8.7m).
Capital commitments as at 31 December 2021 were £nil (31 December 2020: £nil).
The impact of climate change has been considered in the review of carrying values to consider whether there are indications of
material impairment arising from the potential physical risks arising from climate change. We have not impaired any assets this
year as a result of this exercise. We have also considered the impact of climate change on the estimation of useful lives and no
material impacts were noted.
As at 1 January, £2.1m net book value of Enterprise Resource Planning tools in use were reclassied from Construction in progress
within Property, Plant and Equipment to Software within Intangible Assets (Note 16).
16. Intangible Assets
Intangible assets comprise goodwill, other intangible assets that have been acquired through business combinations, and
software costs.
16.1 Accounting policy
Goodwill arising in a business combination is initially recognised as an asset at cost, measured as the excess of the aggregate
of the acquisition-date fair value of the consideration transferred and the amount of any non-controlling interest acquired over
the net of the acquisition-date fair value amounts of the identiable assets acquired and liabilities assumed. When the excess
is negative, a bargain purchase gain is recognised immediately in prot or loss. Goodwill is subsequently measured at cost less
accumulated impairment losses, with impairment testing carried out annually, or more frequently when there is an indication
that the cash-generating unit (CGU) to which the goodwill has been allocated may be impaired. On disposal of a business,
the attributable amount of goodwill is included in the calculation of the prot or loss on disposal.
Intangible assets other than goodwill are recognised on business combinations if they are separable, or if they arise from
contractual or other legal rights, and their value can be measured reliably. They are initially measured at cost, which is equal to
the acquisition-date fair value, and subsequently measured at cost less accumulated amortisation charges and accumulated
impairment losses. Other intangible assets are subject to impairment testing when there is an indication that an impairment loss
may have been incurred and are amortised over their estimated useful lives.
The Group’s research activity involves long-range, ‘blue sky’ investigation, the ndings from which may be used in the future to
develop new or substantially improved products. Expenditure on research activities is recognised in the Group Income Statement
as an expense in the year in which it is incurred.
Development is the application of research ndings for the production of new or substantially improved products, processes
and services before the start of commercial production. Development expenditure is capitalised only if the expenditure can be
measured reliably, the product or process is technically and commercially feasible, future economic benets are probable and the
Group intends to and has sufcient resources to complete development and to use or sell the asset. Otherwise, it is recognised in
the Group Income Statement as an expense in the year in which it is incurred. Capitalised development expenditure, where there
is any, is stated at cost less accumulated amortisation and impairment losses.
In determining whether development expenditure is capitalised as an intangible asset, management considers whether the strict
intangible asset recognition criteria set out in IAS 38 Intangible Assets have been met at the time the expenditure is incurred.
In making this determination, management recognises that a signicant amount of the development expenditure undertaken
by the Group is focused on dealing with local customer technical support issues and incremental developments to existing
products as opposed to new or substantially improved products, and that at the time the feasibility of the project is determined,
a signicant proportion of the development expenditure for that project has already been incurred. In 2021 and 2020 no projects
met the criteria for IAS 38 capitalisation.
The costs of ERP system implementations, including the purchase cost of the software and the time costs of employees directly
involved in the implementation work is capitalised and amortised over a period of no more than ten years.
196
Vesuvius plc
Annual Report and Financial Statements 2021
16. Intangible Assets
continued
16.2 Movement in net book value
Notes
Goodwill
£m
Other
acquired
intangible
assets
£m
Software
£m
2021
total
£m
Goodwill
£m
Other
acquired
intangible
assets
£m
2020
total
£m
Cost
As at 1 January
617.6 279.4 – 897.0
620.2 279.2 899.4
Exchange adjustments
(16.7) (5.9) (0.1) (22.7)
(2.6) 0.2 (2.4)
Capital expenditure additions
– – 1.9 1.9
– – –
Business combinations
20 – –
13.3 12.2 – 25.5
–Reclassications
– – 4.9 4.9
– – –
As at 31 December
614.2 285.7 6.7 906.6
617.6 279.4 897.0
Accumulated amortisation and
impairment losses
As at 1 January
– 200.9 – 200.9
– 190.9 190.9
Exchange adjustments
– (3.9) (0.1) (4.0)
– 0.1 0.1
Amortisation charge for the year
– 9.7 0.4 10.1
– 9.9 9.9
Reclassications
– – 2.8 2.8
– – –
As at 31 December
– 206.7 3.1 209.8
– 200.9 200.9
Net book value as at 31 December
614.2 79.0 3.6 696.8
617.6 78.5 696.1
Amortisation charge of £9.7m (2020: £9.9m) in respect of other acquired intangible assets includes £5.4m (2020: £5.6m)
recognised in respect of Foseco customer relationships, £3.6m (2020: £3.6m) in respect of Foseco trade name and £0.7m (2020:
£0.7m) in respect of CCPI customer relationships.
The impact of climate change has been considered in the review of carrying values to consider whether there are indications of
material impairment arising from risks arising from climate change. We have not impaired any intangible assets this year as a
result of this exercise. We have also considered the impact of climate change on the estimation of useful lives and no material
impacts were noted.
As at 1 January, £2.1m net book value of ERP system implementations was reclassied from Construction in progress within
Property, Plant and Equipment (Note 15) to Software within Intangible Assets.
16.3 Analysis of goodwill by cash-generating unit (CGU)
Goodwill acquired in a business combination is allocated to each of the Group’s CGUs expected to benet from the synergies of
the combination. For the purposes of impairment testing, the Directors consider that the Group has four CGUs: Steel Advanced
Refractories, Steel Flow Control, Steel Sensors & Probes, and the Foundry Division. These CGUs represent the lowest level within
the Group at which goodwill is monitored (Note 17.2).
2021
£m
2020
£m
Steel Flow Control
269.0
276.5
Steel Advanced Refractories
140.2
130.3
Foundry
205.0
210.8
Total goodwill
614.2
617.6
197
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
16. Intangible Assets
continued
16.4 Analysis of other acquired intangible assets
Other acquired intangible assets are amortised on a straight-line basis over their estimated useful lives. The assets acquired and
their remaining useful lives are shown below.
Remaining
useful life
years
Net book
value as at
31 Dec 2021
£m
Net book
value as at
31 Dec 2020
£m
Foseco
– customer relationships (useful life: 20 years)
6.3
32.9
40.2– trade name (useful life: 20 years)
6.3
22.6
26.3Universal Refractories, Inc. (URI)
– customer relationships (useful life: 20 years)*
20.0
6.2
–– know-how (useful life: 20 years)*
20.0
5.0
–– non-compete agreements (useful life: 5 years)*
5.0
0.8
–CCPI
– customer relationships (useful life: 20 years)
17.2
11.5
12.0Total 79.0
78.5
* The values and useful lives of URI intangibles are provisional.
16.5 Analysis of software
Software comprises Enterprise Resource Planning tools in use and being developed. The software is installed on Vesuvius’ servers
and the Group has complete ownership of the assets.
17. Impairment of Tangible and Intangible Assets
17.1 Accounting policy
The Directors regularly review the performance of the business and the external business environment to determine whether there
is any indication that the Group’s tangible and intangible assets have suffered an impairment loss. If such indication exists, the
higher of the Value in Use and the fair value less costs to sell off the asset is estimated and compared with the carrying value in
order to determine the extent, if any, of the impairment loss. Where it is not feasible to estimate the recoverable amount of an
individual asset, the Directors estimate the recoverable amount of the CGU to which the asset belongs. In addition, goodwill is
tested for impairment on an annual basis. Goodwill acquired in a business combination is allocated to each of the Group’s CGUs
expected to benet from the synergies of the combination and the Directors carry out annual impairment testing of the carrying
value of each CGU, to assess the need for any impairment of the carrying value of the associated goodwill and other intangible
and tangible assets.
For the purpose of impairment testing, the recoverable amount of an asset or CGU is the higher of (i) its fair value less costs to
sell and (ii) its Value in Use. If the recoverable amount of a CGU is less than its carrying amount, the resulting impairment loss is
allocated rst to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU pro
rata on the basis of the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in
a subsequent period. An impairment loss recognised in a prior year for an asset other than goodwill may be reversed where there
has been a change in the estimates used to measure the asset’s recoverable amount since the impairment loss was recognised.
17.2 Key assumptions and methodology
The key assumptions in determining Value in Use are projected cash ows, growth rates and discount rates. These are disclosed
as critical accounting estimates in Note 3.5.
Projected cash ows for the next three years have been based on the latest Board-approved budgets and strategic plans.
They reect management’s expectations of revenue, EBITDA growth, capital expenditure, working capital and adjusted
operating cash ows, based on past experience and future expectations of business performance, and take into account the
cyclicality of the business in which the CGU operates. Cash ows beyond the period of the strategic plans have been extrapolated
using a perpetuity growth rate of 2.5% (2020: 2.5%). The growth rate has been calculated using GDP growth forecasts published
by the International Monetary Fund for the Group’s end-markets. These GDP growth forecasts have been weighted to reect the
Group’s weighted average sales in each end-market during 2021.
198
Vesuvius plc
Annual Report and Financial Statements 2021
17. Impairment of Tangible and Intangible Assets
continued
17.2 Key assumptions and methodology
continued
The cash ows have been discounted to their current value using pre-tax discount rates, which represent each CGU’s weighted
average cost of capital (WACC). The assumptions used in the calculation of the WACC for each CGU have been benchmarked
to externally available data. These are industry-specic beta coefcients, risk-free rates and equity risk premiums. The pre-tax
discount rate used for the Steel Flow Control, Steel Advanced Refractories and Steel Sensors & Probes CGUs was 12.4%
(2020: 13.7%) and for the Foundry CGU was 11.6% (2020: 15.0%). The decrease in the pre-tax discount rates has been driven by
a decrease in the equity risk premiums partially offset by an increase in risk-free rates – these changes are not specic to Vesuvius.
The Group carried out its annual goodwill impairment test as at 31 October 2021 (2020: 31 October 2020). The recoverable
amount of each CGU signicantly exceeded its carrying value, therefore no impairment charges have been recognised.
The recoverable amount of each CGU was also checked against its carrying value as at 31 December 2021 and no impairment
triggers were identied.
The Directors have considered the impact of climate change on the cash ows and other assumptions used for goodwill
impairment testing and no material impacts were noted.
Steel Flow Control (FC), Steel Advanced Refractories (AR) and the Foundry Division are the key CGUs. There were no intangible
assets in the Steel Sensors & Probes CGU. The recoverable amount of all CGUs exceeded their carrying value on the basis of the
assumptions set out above and any reasonably possible changes thereof. A sensitivity analysis was carried out using reasonably
possible changes to the key assumptions as set out in the table below. The following decreases to the recoverable amount of the
Group’s goodwill and intangible assets were observed:
Key assumption Relevant CGUs Assumption Sensitivity
Decrease in
recoverable
value, £m
Impairment
arising
Free cash ow average annual
growth rate FC, AR, Foundry 12.9% – 25.6% Decrease cash ows by 20%
(472.0) None
Pre-tax discount rate FC, AR 12.4% Increase by 1%
(140.2) None
Pre-tax discount rate Foundry 11.6% Increase by 1%
(78.5) None
Long-term growth rate FC, AR, Foundry 2.5% Decrease by 1.5%
(274.9) None
18. Trade and Other Receivables
18.1 Accounting policy
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost, using the effective
interest method, less impairment losses. Details on impairment of nancial assets are disclosed in Note 25.
18.2 Analysis of trade and other receivables (current)
2021
2020
Gross
£m
ECL
provision
£m
Net
£m
ECL
provision
coverage
1
Gross
£m
ECL
provision
£m
Net
£m
ECL
provision
coverage
1
Trade receivables
– current
292.1 (0.4) 291.7 0.1%
250.6 (0.5) 250.1
0.2%– 1 to 30 days past due
38.5 (0.1) 38.4 0.3%
35.6 (0.3) 35.3
0.8%– 31 to 60 days past due
10.5 (0.1) 10.4 1.0%
9.1 (0.1) 9.0
1.1%– 61 to 90 days past due
4.6 – 4.6 0.0%
3.0 (0.2) 2.8
6.7%– over 90 days past due
29.2 (22.1) 7.1 75.7%
27.7 (22.9) 4.8
82.7%Trade receivables
374.9 (22.7) 352.2
326.0 (24.0) 302.0
Other receivables
65.4
49.1
Prepayments
27.6
18.8
Total trade and other receivables
445.2
369.9
1. ECL provision coverage is expected credit loss provision divided by gross trade receivables.
199
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
18. Trade and Other Receivables
continued
18.2 Analysis of trade and other receivables (current)
continued
There is no signicant difference between the fair value of the Group’s trade and other receivables balances and the amount at
which they are reported in the Group Balance Sheet.
Historical experience has shown that the Group’s trade receivable provisions are maintained at levels that are sufcient to absorb
actual bad debt write-offs, without being excessive. The Group considers the credit quality of nancial assets that are neither past
due nor impaired as good.
Included within Other receivables are promissory notes of £22.0m (2020: £20.4m). The majority of these notes relate to customers
in China and have typical maturities of six months from the issuing date. The full amount of revenue is recognised from the
customer when performance obligations are satised in accordance with IFRS 15. Other receivables also include VAT receivables
of £32.5m (2020: £18.6m) and insurance reimbursements (see Note 30.2) of £2.0m (2020: £2.0m).
18.3 Other receivables (non-current)
Non-current other receivables of £16.2m (2020: £18.6m) include insurance reimbursements (see Note 30.2) of £12.4m
(2020: £10.4m) and prepaid taxes of £1.6m (2020: £4.1m).
The Group applies the expected credit loss model under IFRS 9 to these other receivables. The expected credit loss for other
receivables is immaterial.
The maximum exposure to credit risk at the end of the reporting period is the net carrying amount of these trade and other receivables.
18.4 Impairment of trade and other receivables
Details relating to the impairment of trade receivables are disclosed in Note 25.
19. Inventories
19.1 Accounting policy
Inventories are stated at the lower of cost (using the rst in, rst out method) and net realisable value. Cost comprises expenditure
incurred in purchasing or manufacturing inventories together with all other costs directly incurred in bringing the inventory to its
present location and condition and, where appropriate, attributable production overheads based on normal activity levels.
Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution. The amount of any write-down of inventories to net realisable value is recognised as an
expense in the year in which the write-down occurs.
19.2 Analysis of inventories
2021
£m
2020
£m
Raw materials
118.8
62.3
Work-in-progress
19.6
16.9
Finished goods
161.0
108.1
Total inventories
299.4
187.3
The cost of inventories recognised as an expense and included in manufacturing costs of continuing operations in the Group
Income Statement during the year was £658.6m (2020: £533.5m).
The net inventories of £299.4m include a provision for obsolete stock of £12.5m (2020: £12.8m). There were inventory write-downs
of £0.9m (2020: write-down reversals of £1.5m).
20. Acquisitions and Divestments
20.1 Universal Refractories
On 6 December 2021, Vesuvius plc acquired the trade and assets of Universal Refractories, Inc. (URI), a specialty refractory
producer based in Pennsylvania, USA, which is focused on tundish (steel continuous casting) applications as well as consumable
products for the foundry industry. It has become part of the Group’s Steel Advanced Refractories business unit, with the exception
of the ladle liners business, which has been absorbed by our Foundry Division (<10% of sales). The transaction valued URI at an
enterprise value of $57.1m (£42.6m) on a cash and debt-free basis and was funded from Vesuvius’ internal resources.
200
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Annual Report and Financial Statements 2021
20. Acquisitions and Divestments
continued
20.1 Universal Refractories
continued
Given the timing of the acquisition, nal valuations have not all been completed, but the provisional fair values of the assets and
liabilities recognised as a result of the acquisition are as follows:
Book
value
£m
Fair value
adjustments
£m
Adjusted
value
£m
Property, plant and equipment
4.5 6.9 11.4
Intangible assets (customer relationships, know-how and non-compete agreements)
– 12.2 12.2
Inventories 5.0 1.1 6.1
Receivables
5.5 – 5.5
Payables
(1.9) – (1.9)
Borrowings
(5.4) – (5.4)
Deferred tax
– (3.0) (3.0)
Net identiable assets acquired
7.7 17.2 24.9
Goodwill
13.3
Consideration 38.2
The goodwill is attributable to URI’s reputation in the marketplace and the synergies that Vesuvius expects to gain from its
integration. It is expected to be tax deductible.
The decision to acquire URI was driven by its long-standing customer relationships and know-how. The identiable intangible
assets acquired are customer relationships, know-how and non-compete agreements. The fair value of these intangibles is
provisional pending nal valuations. A deferred tax liability of £3.0m has been provided in relation to these fair value adjustments.
In the period since acquisition, URI has contributed £2.1m to revenue and £(0.2)m to operating prot. In accordance with IFRS 3,
the acquired inventory was revalued to fair value less costs to sell, resulting in a reduction to operating prot of £0.6m. If the
acquisition had occurred on the rst day of the nancial year, it is estimated that the revenue and operating prot from the
acquisition would have been £31.2m and £6.8m respectively. On acquisition, URI was subsumed into the Steel Advanced
Refractories activities business unit and the Foundry Division and goodwill is monitored at the level of the Steel Advanced
Refractories operating segment.
The net cash outow on acquisition was £43.6m, including related excess working capital payment; the business was acquired on
a cash and debt-free basis. In accordance with IFRS 3, we disclose above consideration of £38.2m and borrowings repaid
immediately prior to acquisition of £5.4m. Receivables of £5.5m are expected to be collected. Acquisition-related costs of £1.3m
were included in administrative expenses in the Income Statement.
20.2 Other acquisitions
The Group did not acquire any material interests in any companies other than URI during the year ended 31 December 2021;
however, contingent consideration of £0.1m was paid during 2021 in respect of the previous acquisition of Ecil Met Tec.
The Group did not acquire any material interests in any companies in the year ended 31 December 2020; however, contingent
consideration of £1.4m was paid during 2020 in respect of the previous acquisition of Ecil Met Tec.
21. Issued Share Capital
21.1 Accounting policy
Equity instruments issued by the Company are recorded as the proceeds received, net of direct issue costs.
21.2 Analysis of issued share capital
The allotted, issued and fully paid ordinary share capital of the Company as at 1 January 2021 and 31 December 2021 was
278,485,071 shares of 10 pence each. Further information relating to the Company’s share capital is given in Note 9 to the
Company’s Financial Statements.
201
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
22. Retained Earnings
Notes
Reserve
for own
shares
£m
Share
option
reserve
£m
Other
retained
earnings
£m
Total
retained
earnings
£m
As at 1 January 2020 2,463.1
(39.3) 4.5
2,497.9Prot for the year
– – 41.3 41.3
Remeasurement of dened benet liabilities/assets
– – 7.7 7.7
Recognition of share-based payments
– 2.4 – 2.4
Release of share option reserve on exercised and lapsed options
3.4 (3.4) – –
Income tax on items recognised in other comprehensive income
– – (3.2)
(3.2)
Dividends paid
24 – – (8.4) (8.4)
As at 31 December 2020 and 1 January 2021
(35.9) 3.5
2,535.3 2,502.9
Prot for the year
– – 102.1 102.1
Remeasurement of dened benet liabilities/assets
– – (80.6) (80.6)
Recognition of share-based payments
– 3.1 – 3.1
Release of share option reserve on exercised and lapsed options
2.5 (2.5) – –
Income tax on items recognised in other comprehensive income
– – 12.5 12.5
Purchase of ESOP shares
(1.1) – – (1.1)
Dividends paid
24
– – (55.5) (55.5)
As at 31 December 2021
(34.5) 4.1
2,513.8 2,483.4
23. Other Reserves
Other
reserves
£m
Cash ow
hedge
reserve
£m
Translation
reserve
£m
Total other
reserves
£m
As at 1 January 2020 (1,499.3)
– 71.8
(1,427.5)Exchange differences on translation of the net assets of foreign operations
– – (12.7) (12.7)
Exchange differences on translation of net investment hedges
– – (9.7) (9.7)
Net change in costs of hedging
– 0.4 – 0.4
Change in the fair value of the hedging instrument
– (8.1) – (8.1)
Amounts reclassied from the income statement
– 6.3 – 6.3
As at 31 December 2020 and 1 January 2021
(1,499.3)
(1.4) 49.4
(1,451.3)Exchange differences on translation of the net assets of foreign operations
– – (31.0) (31.0)
Exchange differences on translation of net investment hedges
– – 14.4 14.4
Net change in costs of hedging
– (1.2) – (1.2)
Change in the fair value of the hedging instrument
– 2.2 – 2.2
Amounts reclassied from the income statement
– (0.7) – (0.7)
As at 31 December 2021
(1,499.3)
(1.1) 32.8
(1,467.6)Within other reserves as at 31 December 2021 is £1,499.0m (2020: £1,499.0m) arising from the demerger of Cookson Group plc,
being the excess of the Vesuvius plc share capital of £1,777.9m over the total share capital and share premium of Cookson Group
plc as at 14 December 2012 of £278.9m.
The translation reserve in the table above comprises foreign exchange differences attributable to the owners of the Parent.
These exchange differences arise from the translation of the nancial statements of foreign operations and from the translation
of nancial instruments that hedge the Group’s net investment in foreign operations. In addition to foreign exchange differences
attributable to the owners of the Parent, the Group Statement of Comprehensive Income includes foreign exchange differences
attributable to non-controlling interests.
Of the closing balance in the translation reserve, a £3.0m debit relates to net investment hedging arrangements put in place on or
after 1 January 2018 but discontinued as at 31 December 2021. The full closing balance in the cash ow hedge reserve relates to
continuing hedges.
Cash ow hedge reserve balance includes cost of hedging balance of £0.8m debit (2020: £0.4m credit).
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Annual Report and Financial Statements 2021
24. Dividends
2021
£m
2020
£m
Amounts recognised as dividends and paid to equity shareholders during the year
Interim dividend for the year ended 31 December 2020 of 3.1p per ordinary share
–
8.4
Final dividend for the year ended 31 December 2020 of 14.3p per ordinary share
38.7
–
Interim dividend for the year ended 31 December 2021 of 6.2p per ordinary share
16.8
–
55.5
8.4
A proposed nal dividend for the year ended 31 December 2021 of £40.5m (2020: £38.7m), equivalent to 15.0 pence (2020: 14.3
pence) per ordinary share, is subject to approval by shareholders at the Company’s Annual General Meeting on 18 May 2022
and has not been included as a liability in these nancial statements. If approved by shareholders, the dividend will be paid on
27 May 2022 to holders of ordinary shares on the register on 19 April 2022.
25. Financial Risk Management
25.1 Accounting policy
(a)Valuationofnancialassetsandliabilities
The Group’s nancial assets and liabilities are measured as appropriate either at amortised cost or at fair value through other
comprehensive income or at fair value through prot and loss.
IFRS 13 Fair Value Measurement requires classication of nancial instruments within a hierarchy that prioritises the inputs
to fair value measurement. The three levels of the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3 – Inputs that are not based on observable market data.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
Trade receivables are recognised initially at their fair value, which is the amount of consideration that is unconditional. The Group
holds the trade receivables with the objective of collecting the contractual cash ows (held to collect) and therefore measures
them subsequently at amortised cost using the effective interest method.
Derivatives which do not meet the hedge accounting criteria are classied as fair value through prot and loss (held for trading).
The cross-currency interest rate swaps (see Note 25.2) which meet the hedging criteria are measured at fair value through other
comprehensive income.
Loans and borrowings are initially recognised at fair value net of directly attributable transaction costs. After initial recognition,
they are measured at amortised cost, using the effective interest method.
(b)Foreigncurrencies
The individual nancial statements of each Group entity are prepared in their functional currency, which is the currency of the
primary economic environment in which that entity operates. For the purpose of the Group Financial Statements, the results
and nancial position of each entity are translated into pounds sterling, which is the presentational currency of the Group.
Transactions in currencies other than the entity’s functional currency are initially recorded at the rates of exchange prevailing
at the end of the preceding month or on the date of the transaction itself. At each subsequent balance sheet date:
(i) Foreign currency monetary items are retranslated at the rates prevailing at the balance sheet date. Exchange differences
arising on the settlement or retranslation of monetary items are recognised either in the Group Income Statement or the
Group Statement of Comprehensive Income
(ii) Non-monetary items measured at historical cost in a foreign currency are not retranslated.
When the functional currency of a Group entity is different from the Group’s presentational currency (pounds sterling), its results
and nancial position are translated into the presentational currency as follows:
(i) Assets and liabilities are translated using exchange rates prevailing at the balance sheet date
(ii) Income and expense items are translated at average exchange rates for the year, except where the use of such average rates
does not approximate the exchange rate at the date of a specic transaction, in which case the transaction rate is used
(iii) All resulting exchange differences are recognised in other comprehensive income and presented in the translation reserve
in equity and are reclassied to prot or loss in the period in which the foreign operation is disposed of.
203
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
25. Financial Risk Management
continued
25.1 Accounting policy
continued
Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation
are initially recognised in other comprehensive income and presented in the translation reserve in equity and reclassied to
prot or loss on disposal of the net investment.
(c)Derivativenancialinstruments
The Group uses derivative nancial instruments (‘derivatives’) to manage the nancial risks associated with its underlying
activities and the nancing of those activities. Derivatives are measured at fair value using market prices at the balance sheet
date. Any derivatives which form part of a hedge accounting relationship are designated as such on the date on which they
are executed. Any derivatives which do not form part of a designated hedge accounting relationship are classied as ‘held for
trading’ for accounting purposes and are accounted for at fair value through prot or loss. They are presented as current assets
or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
(d)Cashowhedges
Changes in the fair value of derivatives designated as cash ow hedges are recognised in other comprehensive income to the
extent that the hedges are effective. Any ineffective portion would immediately be recognised in net nance costs in the prot or
loss. If a forecast transaction is no longer expected to occur, the amounts previously recognised in other comprehensive income
would be transferred to net nance costs in the prot or loss.
The Group designates certain of its borrowings and derivatives as net investment hedges of its foreign operations. As with cash
ow hedges, the effective portion of the gain or loss on hedging instruments is recognised in other comprehensive income whilst
any ineffective portion would immediately be recognised in net nance costs in the prot or loss. In the event a foreign operation
is disposed of or liquidated, amounts recognised in other comprehensive income are reclassied from equity to prot or loss.
25.2 Financial risk factors
The Group’s Treasury department, acting in accordance with policies approved by the Board, is principally responsible for
managing the nancial risks faced by the Group. The Group’s activities expose it to a variety of nancial risks, the most signicant
of which are market risk and liquidity risk.
Analysisofnancialinstruments
The following table summarises Vesuvius’ nancial instruments measured at fair value and shows the level within the fair value
hierarchy in which the nancial instruments have been classied.
2021
2020
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Investments (Level 2)
0.5 –
0.7–
Derivatives not designated for hedge accounting purposes (Level 2)
0.1 (0.3)
0.2 –
Derivatives designated for hedge accounting purposes (Level 2)
– (2.3)
–
(7.0) (a)Derivativenancialinstruments
The Group uses derivatives in the form of forward foreign currency contracts to manage the effects of its exposure to foreign
exchange risk on trade receivables, trade payables and cash. Derivatives are only used for economic hedging purposes and not
as speculative investments.
In June 2020, the Group executed a US$86m cross-currency interest rate swap (CCIRS). The effect of this is to convert the $86m
Private Placement Notes issued in June 2020 into €76.6m. The timing and amount of the US dollar cash ows under the CCIRS
exactly mirror those of the Private Placement Notes and the maturity date of the CCIRS also matches the repayment date of
the Notes. The CCIRS would by default be revalued through the Income Statement; however, as it is in a designated hedging
relationship, it is instead revalued through other comprehensive income. More specically, the US dollar exposure is designated
as a cash ow hedge of the underlying Private Placement Notes and the euro exposure is designated as a net investment hedge
of part of the Group’s foreign operations. The CCIRS is presented as a non-current asset or liability as it is expected to be settled
more than 12 months after the end of the reporting period.
With the exception of the CCIRS, the fair value of derivatives outstanding at the year-end has been booked through the Income
Statement in 2021. All of the fair values shown in the table above are classied under IFRS 13 as Level 2 measurements which
have been calculated using quoted prices from active markets, where similar contracts are traded and the quotes reect actual
transactions in similar instruments. All of the derivative assets and liabilities not designated for hedge accounting purposes
reported in the table above will mature within a year of the balance sheet date.
Derivative nancial instruments are subject to International Swaps and Derivatives Association (ISDA) agreements. Derivatives
designated for hedge accounting purposes are presented net £2.3m, of which gross assets are £3.7m and gross liabilities £6.0m
(2020: gross assets £1.1m and gross liabilities £8.1m).
204
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Annual Report and Financial Statements 2021
25. Financial Risk Management
continued
25.2 Financial risk factors
continued
(b)Marketrisk
Market risk is the risk that either the fair values or the cash ows of the Group’s nancial instruments may uctuate because
of changes in market prices. The Group is principally exposed to market risk through uctuations in exchange rates and
interest rates.
The Group Income Statement is exposed to currency risk on monetary items that are denominated in currencies other than the
functional currency of the companies in which they are held. The currency prole of these nancial assets and nancial liabilities
is shown in the table below.
2021
2020
Euro
£m
US dollar
£m
Other
£m
Euro
£m
US dollar
£m
Other
£m
Trade receivables
70.7 38.7 28.3
31.3 34.8
30.5
Cash at bank 5.3
5.2 8.3 15.7
9.816.1
Trade payables
(40.4) (36.8) (19.9)
(18.7) (21.8) (27.5)
Private Placement Notes (106.8)
(166.4) (107.9) –
(160.8)–
Bank loans and overdrafts (0.1)
(23.1) – –
(29.6)–
Finance leases
(0.6) – (0.9)
(0.5)
–
(1.1)Cross-currency interest rate swaps 62.9
(64.4) 63.6 –
(68.4)–
Foreign currency forward contracts
– Buy foreign currency
0.9 5.5 –
1.1 1.2 –
– Sell foreign currency (23.5)
(20.1) (21.2) (0.6)
(17.7)–
(238.2) (49.8) 22.6
(253.5) (48.0)
18.0
The Group has £(1.8)m (2020: £(1.3)m) of exchange differences recognised in the Income Statement of which £(0.9)m arose on
the revaluation of derivatives (2020: £(0.7)m).
The tables below show the net unhedged monetary assets and liabilities of Group companies that are not denominated in their
functional currency and which could give rise to exchange gains and losses in the Group Income Statement.
Netunhedgedmonetary(liabilities)/assets
Euro
£m
US dollar
£m
Other
£m
Total
£m
Functional currency
Sterling
(252.3) (42.3) 5.2 (289.4)
Other
14.1 (7.5) 17.4 24.0
Asat31December2021
(238.2) (49.8) 22.6 (265.4)
Net unhedged monetary (liabilities)/assets
Euro
£m
US dollar
£m
Other
£m
Total
£m
Functional currency
Sterling (253.6) (44.1)
–
(297.7)Other 0.1 14.2
(3.9)
18.0Asat31December2020
(253.5) (48.0)
18.0
(283.5)The Group nances its operations partly by obtaining funding through external borrowings. Where these borrowings are not in
sterling, they may be designated as net investment hedges. This enables gains and losses arising on retranslation to be charged
to other comprehensive income, providing a partial offset in equity against the gains and losses arising on translation of overseas
net assets.
As at 31 December 2021, €224m and $60m of borrowings were designated as hedges of net investments in €224m and $60m
worth of overseas foreign operations. In addition, the €76.6m CCIRS liability has been designated as a net investment hedge of
a further €76.6m worth of overseas foreign operations.
205
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
25. Financial Risk Management
continued
25.2 Financial risk factors
continued
As the value of the borrowings and the CCIRS liability exactly matches the designated hedged portion of the net investments,
the relevant hedge ratio is 1:1. The net investment hedges are therefore 100% effective with no ineffectiveness. It is noted that
hedge ineffectiveness would arise in the event there were insufcient euro-denominated overseas foreign operations to be
matched against the €76.6m CCIRS liability.
The total retranslation impact of the borrowings and CCIRS designated as net investment hedges was £14.4m (2020: £9.7m).
The $86m CCIRS asset has been designated as a cash ow hedge of the $86m USPP Notes issued in 2020. As all principal and
interest cash ows under the CCIRS exactly mirror those under the USPP Notes, the cash ow hedge is 100% effective with no
ineffectiveness. It is noted that hedge ineffectiveness would arise in the event there was a change in the contractual terms of
either the USPP Notes or the CCIRS.
Hedge effectiveness is determined at inception of the hedge relationship and through periodic effectiveness assessments,
to ensure that an economic relationship exists between the hedged item and hedging instrument.
The Group’s interest rate risk principally arises in relation to its borrowings. Where borrowings are held at oating rates of interest,
uctuations in interest rates expose the Group to variability in the cash ows associated with its interest payments, and where
borrowings are held at xed rates of interest, uctuations in interest rates expose the Group to changes in the fair value of its
borrowings. The Group’s policy is to maintain an appropriate mix of xed and oating rate borrowings based on the Vesuvius
trading environment, market conditions and other economic factors.
As at 31 December 2021, the Group had $146m, €198m and £28m (£302.3m in total) of USPP Notes outstanding, which carry a
xed rate of interest, representing 75% of the Group’s total borrowings outstanding at that date. The interest rate prole of the
Group’s borrowings is detailed in the tables below.
Financialliabilities(grossborrowings)
Fixed
rate
£m
Floating
rate
£m
Total
£m
Sterling
28.0 76.4 104.4
US dollar
107.9 1.2 109.1
Euro
166.4 27.2 193.6
Capitalised arrangement fees
(1.2) (2.1) (3.3)
Asat31December2021
301.1 102.7 403.8
Financial liabilities (gross borrowings)
Fixed
rate
£m
Floating
rate
£m
Total
£m
Sterling
– 43.3 43.3
US dollar
106.8 0.3
107.1
Euro 192.3
160.8
31.5Other –
0.5 0.5
Capitalised arrangement fees (1.3) (0.1) (1.4)
Asat31December2020
266.3
75.5
341.8Information in respect of the currency risk management of $86m of US dollar-denominated xed rate nancial liabilities is
provided above.
The oating rate nancial liabilities shown in the tables above typically bear interest at the inter-bank offered rate of the
appropriate currency, plus a margin. The xed rate nancial liabilities of £302.3m (2020: £267.6m) have a weighted average
interest rate of 3.2% (2020: 3.4%) and a weighted average period for which the rate is xed of 6.2 years (2020: 6.2 years).
The nancial assets attract oating rate interest.
Based upon the interest rate prole of the Group’s nancial liabilities shown in the tables above, a 1% increase in market interest
rates would increase both the nance costs charged in the Group Income Statement and the interest paid in the Group Statement
of Cash Flows by £1.0m (2020: £0.8m), and a 1% reduction in market interest rates would decrease both the nance costs charged
in the Group Income Statement and the interest paid in the Group Statement of Cash Flows by £1.0m (2020: £0.8m).
206
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Annual Report and Financial Statements 2021
25. Financial Risk Management
continued
25.2 Financial risk factors
continued
Credit risk arises from cash and cash equivalents, derivative nancial assets and deposits with banks and nancial institutions,
as well as credit exposures to customers, including outstanding receivables.
For banks and nancial institutions, apart from certain limited circumstances, Group policy is that only independently rated
entities with a minimum rating of ‘A-’ are accepted as counterparties. In addition, the Group’s operating companies have policies
and procedures in place to assess the creditworthiness of the customers with whom they do business.
(ii)Impairmentofnancialassets
The Group subjects trade receivables for sales of inventory and from the provision of services to the expected credit loss model.
Whilst cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identied impairment loss
was immaterial.
The Group applies the IFRS 9 simplied approach to measuring expected credit losses, which uses a lifetime expected loss
allowance for all trade receivables and contract assets. The expected loss rates are based on the payment proles of sales over
a period of 60 months before 31 December 2021 and the corresponding historical credit losses experienced within this period.
The historical loss rates are adjusted to reect current and forward-looking information on macro-economic factors affecting
the ability of the customers to settle the receivables. The Group has identied the current state of the economy (such as market
interest rates or growth rates) and particular industry issues in the countries in which it sells its goods and services to be the most
relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
Regardless of the analysis above, a signicant increase in credit risk is presumed if a debtor is more than 30 days past due in
making a contractual payment. Where objective evidence exists that a trade receivable balance may be impaired, provision is
made for the difference between its carrying amount and the present value of the estimated cash that will be recovered.
Evidence of impairment may include such factors as a change in credit risk prole of the customer, the customer being in default
on a contract, or the customer entering bankruptcy or nancial reorganisation proceedings. All signicant balances are reviewed
individually for evidence of impairment.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there
is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the
Group, and a failure to make contractual payments for a period of greater than 120 days past due. Where loans or receivables
have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivable due.
Where recoveries are made, these are recognised within the Income Statement.
The closing expected credit loss allowance for trade receivables as at 31 December 2021 reconciles to the opening loss
allowances as follows:
2021
£m
2020
£m
As at 1 January
24.0
26.6
(Decrease)/increase in expected credit loss allowance recognised in prot or loss during the year
(0.5)
(0.3)Receivables written off during the year as uncollectable
(0.3)
(2.2)Exchange adjustments
(0.5)
(0.1)Asat31December
22.7
24.0
The credit for the year shown in the table above is recorded within administration, selling and distribution costs in the Group
Income Statement.
Historical experience has shown that the Group’s trade receivable provisions are maintained at levels that are sufcient to absorb
actual bad debt write-offs, without being excessive. The Group considers the credit quality of nancial assets that are neither past
due nor impaired as good.
The Group also applies the expected credit loss model under IFRS 9 to other receivables. If, at the reporting date, the credit risk
of the receivables has not increased signicantly since initial recognition, the Group measures the loss allowance at an amount
equal to 12-month expected credit losses. If the credit risk on that receivable has increased signicantly since initial recognition,
the Group measures the loss allowance at an amount equal to the lifetime expected credit losses. The expected credit loss on
other receivables is not material.
207
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
25. Financial Risk Management
continued
25.2 Financial risk factors
continued
Liquidity risk is the risk that the Group might have difculties in meeting its nancial obligations. The Group manages this risk by
ensuring that it maintains sufcient levels of committed borrowing facilities and cash and cash equivalents to ensure that it can
meet its operational cash ow requirements and any maturing nancial liabilities, whilst at all times operating within its nancial
covenants. The level of operational headroom provided by the Group’s committed borrowing facilities is reviewed at least
annually as part of the Group’s three-year planning process. Where this process indicates a need for additional nance, this is
addressed on a timely basis by means of either additional committed bank facilities or raising nance in the capital markets.
The Group’s £300m committed bank facility was scheduled to mature in June 2022. This was cancelled early in July 2021 and
re-nanced with an enlarged committed bank facility for £385m. The replacement facility is scheduled to mature in July 2025 and
there is a one-year extension option exercisable at the discretion of the Group and its lenders. In December 2021, the Group issued
£28m and €33m of USPP Notes. These Notes mature in December 2031 and have a weighted average interest rate of 1.77%.
As at 31 December 2021, the Group had committed borrowing facilities of £706.3m (2020: £586.6m), of which £308.1m (2020:
£246.6m) were undrawn. These undrawn facilities are due to expire in July 2025. The Group’s borrowing requirements are met by
USPP, a multi-currency committed syndicated bank facility of £385.0m (2020: £300.0m) and a committed bilateral bank facility
of £19.0m (2020: £19.0m) which is fully collateralised against a portion of the Group’s cash balance in China.
USPP Notes issued as at 31 December 2021 amounted to £302.3m ($146.0m, €198.0m and £28.0m) and had a weighted
average period to maturity of 6.2 years. $30.0m is repayable in December 2023, €15.0m and $60.0m in 2025, €100.0m and
$26.0m in 2027, $30.0m in 2028, €50.0m in 2029 and €33.0m and £28.0m in 2031. The maturity analysis of the Group’s gross
borrowings (including interest) is shown in the tables below. The cash ows shown are undiscounted.
Asat31December2021
Within
1 year
£m
Between
1 and 2
years
£m
Between
2 and 5
years
£m
Over
5 years
£m
Total
contractual
cashows
£m
Carrying
amount
£m
Trade payables
253.8 – – – 253.8 253.8
Loans and overdrafts
37.4 9.6 178.2 235.0 460.2 407.1
Lease liabilities
11.6 9.2 13.4 13.2 47.4 39.9
Capitalised arrangement fees
– – – – – (3.3)
Derivative liability
(0.6) (0.6) (0.6) 0.2 (1.6) 2.6
Totalnancialliabilities
302.2 18.2 191.0 248.4 759.8 700.1
As at 31 December 2020
Within
1 year
£m
Between
1 and 2 years
£m
Between
2 and 5
years
£m
Over
5 years
£m
Total
contractual
cash ows
£m
Carrying
amount
£m
Trade payables
185.7 185.7
– – –
185.7Loans and overdrafts
44.7 187.4 396.8
84.2
80.5343.2
Lease liabilities
11.2 36.3
9.1
11.112.9
44.3Capitalised arrangement fees
– – – – –
(1.4)Derivative liability
(0.5) (0.4) 2.7
1.4 3.2
7.0Totalnancialliabilities
241.1
92.9 94.3 201.7
630.0570.8
Capitalised arrangement fees shown in the tables above, which have been recognised as a reduction in borrowings in the nancial
statements, amounted to £3.3m as at 31 December 2021 (31 December 2020: £1.4m), of which £1.2m (2020: £1.3m) related to
the USPP and £2.1m (2020: £0.1m) related to the newly signed syndicated bank facility.
The carrying amount of lease liabilities falling due within one year was £11.6m (2020: 11.2m). The carrying amount of lease
liabilities falling due after more than one year was £28.3m (2020: £25.1m).
208
Vesuvius plc
Annual Report and Financial Statements 2021
25. Financial Risk Management
continued
25.3 Capital management
The Company considers its capital to be equal to the sum of its total equity, disclosed on the Group Balance Sheet, and net debt
(Note 14). It monitors its capital using a number of KPIs, including free cash ow, average working capital to sales ratios, net debt
to EBITDA ratios and ROIC (Note 4). The Group’s objectives when managing its capital are:
–
To ensure that the Group and all of its businesses are able to operate as going concerns and ensure that the Group operates
within the nancial covenants contained within its debt facilities
–
To have available the necessary nancial resources to allow the Group to invest in areas that may deliver acceptable future
returns to investors
–
To maintain sufcient nancial resources to mitigate against risks and unforeseen events
–
To maximise shareholder value through maintaining an appropriate balance between the Group’s equity and net debt.
The Group operated within the requirements of its debt covenants throughout the year and has sufcient liquidity headroom
within its committed debt facilities. Details of the Group’s covenant compliance and committed debt facilities can be found in the
Strategic Report on page 42.
25.4 Cash pooling arrangements
The Group enters into zero balancing and notional cash pooling arrangements as part of its ongoing Treasury management
activities. Certain notional cash pooling arrangements meet the criteria for offsetting as claried in amendments to IAS 32
Financial Instruments: Presentation about a legally enforceable right of set-off both in the ordinary course of business and in the
event of default. The following tables set out the amounts of recognised nancial assets and liabilities shown as cash and cash
borrowings and those amounts which are subject to these agreements.
Gross amounts
of recognised
nancial assets/
liabilities
£m
Gross amounts
of recognised
nancial assets/
liabilities offset in
the statement of
nancial position
£m
Net amounts
of nancial
assets/liabilities
presented in the
statement of
nancial position
£m
Financialassets/liabilities
Cash deposits 169.1
–
169.1Cash borrowings (6.7)
–
(6.7)Asat31December2021
162.4 – 162.4
Financialassets/liabilities
Cash deposits 209.8 (0.1) 209.7
Cash borrowings (3.0)
0.1
(2.9)Asat31December2020
206.8 – 206.8
26. EmployeeBenets
26.1 Accounting policy
The net liability or net surplus recognised in the Group Balance Sheet for the Group’s dened benet plans is the present value of
the dened benet obligation at the balance sheet date, less the fair value of the plan assets. The dened benet obligation is
calculated by independent actuaries using the projected unit credit method and by discounting the estimated future cash ows
using interest rates on high-quality corporate bonds that have durations approximating the terms of the related pension liability.
Any asset recognised in respect of a surplus arising from this calculation is limited to the asset ceiling, where this is the present
value of any economic benets available in the form of refunds or reductions in future contributions in respect of the plans.
The Group has an unconditional right to a refund of the UK surplus, as dened under IFRIC 14, and considers that the possibility
that a surplus could be reduced or extinguished by discretionary actions by the Trustee does not affect the existence of the asset at
the end of the reporting period. The Group therefore recognises a pension asset with respect to the scheme valued on an IAS 19
basis. No liability is recognised with respect to further funding contributions.
The expense for the Group’s dened benet plans is recognised in the Group Income Statement as shown in Note 26.8. Actuarial
gains and losses arising on the assets and liabilities of the plans are reported within the Group Statement of Comprehensive
Income; and gains and losses arising on settlements and curtailments are recognised in the Group Income Statement in the
same line as the item that gave rise to the settlement or curtailment or, if material, separately reported as a component of
operating prot.
209
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
26. EmployeeBenets
continued
26.2 Group post-retirement plans
The Group operates a number of pension plans around the world, both dened benet and dened contribution, and accounts
for them in accordance with IAS 19.
The Group’s principal dened benet pension plans are in the UK and the US, the benets of which are based upon the nal
pensionable salaries of plan members. The assets of these plans are held separately from the Group in trustee-administered
funds. The Trustees are required to act in the best interests of the plans’ beneciaries. The Group also has dened benet
pension plans in other territories but, except for those in Germany, these are not individually material in relation to the Group.
(a)Denedbenetpensionplans–UK
The Group’s main dened benet pension plan in the UK (‘the UK Plan’) is closed to new members and to future benet accrual.
The existing plan was established under a trust deed and is subject to the Pensions Act 2004 and guidance issued by the UK
Pensions Regulator.
In November 2021, the Trustee of the Vesuvius Pension Plan signed a pension insurance buy-in agreement with Pension Insurance
Corporation plc (PIC). This buy-in secures an insurance asset from PIC that matches the remaining pension liabilities of the UK
Plan, with the result that the Company no longer bears any investment, longevity, interest rate or ination risks in respect of the
UK Plan. The insurance policies with PIC now cover over £450m of liabilities, and all benets in the UK Plan (with the exception of
a small amount of benets expected to arise in future as a result of guaranteed minimum pensions (GMP) equalisation) are now
insured with PIC.
There is a ‘long-term scheme-specic funding standard’ in Part 3 of the Pensions Act 2004. In terms of Part 3, the UK Plan is
subject to a requirement (‘the statutory funding objective’) that it must have sufcient and appropriate assets to cover its technical
provisions. Such technical provisions are determined as part of the triennial valuation. Under the rules of the UK Plan, the Trustee,
after consultation with the Company, has the power to set the funding contributions taking into account the results of the triennial
valuation and the Pension Act 2004 legislation. Following the buy-in referred to above, no further contributions are expected to be
paid to the UK Plan by the Company, and the cost of GMP equalisation will be met out of the surplus UK Plan assets.
(b)Denedbenetpensionplans–US
The Group has several dened benet pension plans in the US, providing retirement benets based on nal salary or a xed
benet. The Group’s principal US dened benet pension plans are closed to new members and to future benet accrual for
existing members. Actuarial valuations of the US dened benet pension plans are carried out every year and the last full
valuation was carried out as at 31 December 2021. At that date, the market value of the plan assets was $65.4m, representing
a funding level of 80.6% of funded accrued plan benets at that date (using the projected unit method of valuation) of $81.1m.
Funding levels for the Group’s US dened benet pension plans are based upon annual valuations carried out by independent
qualied actuaries and are governed by US Government regulations.
The Group’s US qualied dened benet pension plan is subject to the minimum contribution requirements of the Internal
Revenue Code Sections 412 and 430. Contributions are determined by trustees, in consultation with the Company, based on
the annual valuations which are submitted to the Internal Revenue Service. During the scal year beginning 1 January 2021,
total minimum required contributions were approximately $1.0m. Under these funding laws and based on the plan decit,
the required minimum annual contribution for the 2022 scal year is expected to be $nil and the required annual contributions
for the period 2023–2024 are expected to be in the $0.0m to $1.0m range. Contributions of $1.3m were made during 2021.
There was a $0.2m settlement gain reported in the main US dened benet pension plan in 2020 which related to annuity
purchases of $7.8m being made in May 2020 (the dened benet obligation settled was $8.0m).
(c)Denedbenetpensionplans–Germany
The Group has several dened benet pension arrangements in Germany which are unfunded, as is common practice in that
country. The main plan was closed to new entrants on 31 December 2016 and replaced by a dened contribution plan for
new joiners. The German dened benet plan contains mainly direct pension promises based on works council agreements as
well as on some individual pension promises. The legal framework is the German Company Pensions Act (‘Betriebsrentengesetz’).
The plan is unfunded (book reserved) and the company pays all benet payments when they fall due.
(d)Denedbenetpensionplans–restoftheworldandotherpost-retirementbenets
The Group has several dened benet pension arrangements across the rest of the world (ROW), the largest of which are in
Belgium. The net liability of the ROW plans at 31 December 2021 was £16.9m (2020: £20.7m). The Group also has liabilities
relating to medical insurance arrangements and termination plans which provide for benet to be paid to employees on
retirement. The net liability of these other post-retirement benets as at 31 December 2021 was £7.0m (2020: £7.0m).
(e)Denedcontributionpensionplans
The total expense for the Group’s dened contribution plans in the Group Income Statement amounted to £10.2m (2020: £9.7m)
and represents the contributions payable for the year by the Group to the plans.
210
Vesuvius plc
Annual Report and Financial Statements 2021
26. EmployeeBenets
continued
26.2 Group post-retirement plans
continued
Due to collective agreements, Vesuvius in the US participates, together with other enterprises, in union-run multi-employer
pension plans for temporary workers hired on sites. These are accounted for as dened contribution plans. The bulk of the
multi-employer pension plans related to BMI, which was disposed in 2018. The BMI sale transaction was structured to ensure
as best as possible that any pension liability would go to the acquiring company. There is a ve-year window where Vesuvius
US could still have some liability for any shortfall in the BMI plans should the buyer cease to exist.
26.3 Post-retirementliabilityvaluation
The main assumptions used in calculating the costs and obligations of the Group’s dened benet pension plans, as detailed
below, are set by the Directors after consultation with independent professionally qualied actuaries and include those used
to determine regular service costs and the nancing elements related to the plans’ assets and liabilities. It is the Directors’
responsibility to set the assumptions used in determining the key elements of the costs of meeting such future obligations.
Whilst the Directors believe that the assumptions used are appropriate, a change in the assumptions used could affect the
Group’s prot and nancial position.
The mortality assumptions used in the actuarial valuations of the Group’s UK, US and German dened benet pension liabilities
are summarised in the table below and have been selected to reect the characteristics and experience of the membership of
those plans.
For the UK Plan, the assumptions used have been derived from the Self-Administered Pension Schemes (‘SAPS S3’) All table,
with future longevity improvements in line with the ‘core’ mortality improvement tables published in 2020 by the Continuous
Mortality Investigation (CMI), with a long-term rate of improvement of 1.25% per year. For the Group’s US plans, the assumptions
used have been based on the Pri-2012 mortality tables and MP-2021 projection scale. The Group’s major plans in Germany
have been valued using the modied Heubeck Richttafeln 2018G mortality tables. In respect of the life expectancy tables below,
current pensioners are assumed to be 65 years old, while future pensioners are assumed to be 45 years old.
Lifeexpectancyofpensionplanmembers
2021
2020
UK
years
US
years
Germany
years
UK
years
US
years
Germany
years
Age to which current pensioners are expected to live:
– Men 85.4 85.3
87.2 85.0 85.5
87.1– Women
88.9 87.0 88.9
89.4 87.4
88.8
Age to which future pensioners are expected to live:
– Men 86.9
87.5 86.5 88.2
87.588.1
– Women
90.4 88.4 91.1
90.8
88.8
91.0 (b)Othermainactuarialvaluationassumptions
2021
2020
UK
% p.a.
US
% p.a.
Germany
% p.a.
UK
% p.a.
US
% p.a.
Germany
% p.a.
Discount rate
2.00 2.45 1.20
1.40
2.050.60
Price ination – using RPI for UK
3.25 2.25 2.00
2.902.00
1.502.45
n/a n/a
2.20
n/aRate of increase in pensionable salaries
n/a n/a
2.75
n/a n/a 2.25
Rate of increase to pensions in payment
3.15
n/a
2.002.80
n/a 1.50
The discount rate used to determine the liabilities of the UK Plan for IAS 19 accounting purposes is required to be determined by
reference to market yields on high-quality corporate bonds. The UK discount rate in the above table is based on analysis using the
expected future cash ows of the Vesuvius Pension Plan and the AON Hewitt AA yield curve; the US discount rate is based on the
FTSE (formerly Citigroup) pension discount curve; and the Germany discount rate is based on AA corporate bond yields included
in the iBoxx Euro AA corporate bond indices.
The assumptions for UK price ination are set by reference to the difference between yields on longer-term conventional
government bonds and index-linked bonds, except for CPI, for which no appropriate bonds exist, which is assumed to be
0.8 points lower (2020: 0.7 points lower) than RPI-based ination.
211
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
26. EmployeeBenets
continued
26.3 Post-retirementliabilityvaluation
continued
(c)Sensitivit yanalysisoftheimpactofchangesinsignicantIAS19actuarialassumptions
The UK Plan Trustee has entered into a pension insurance buy-in agreement with the Pension Insurance Corporation (PIC).
The US pensions are not ination linked. The rate of increase in pensionable salaries and of pensions in payment is therefore
not signicant to the valuation of the Group’s overall pension liabilities.
The sensitivity of the dened benet obligation to changes in the weighted principal assumptions is:
Assumption Change in assumption UK
US
GermanyDiscount rate Increase/decrease by 0.1%
– impact on plan liabilities
Decrease/increase by £7.7m Decrease/increase
by £0.7m
Decrease/increase
by £1.1m
– impact on plan assets
Decrease/increase by £7.7m n/a n/a
Price ination Increase/decrease by 0.1%
– impact on plan liabilities
Increase/decrease by £5.1m n/a Increase/decrease
by £0.3m
– impact on plan assets
Increase/decrease by £5.1m n/a n/a
Mortality
Increase by one year
– impact on plan liabilities Increase by £2.0m
Increase by £23.9m
Increase by £3.0m– impact on plan assets
Increase by £23.9m n/a n/a
26.4 Denedbenetobligation
The average duration of the obligations to which the liabilities of the Group’s principal pension plans relate is 16 years for the UK,
19 years for Germany and 12 years for the US.
Denedbenetpensionplans
Other post-
retirement
benet
plans
£m
Total
£m
UK
£m
US
£m
Germany
£m
ROW
£m
Total
£m
Present value as at 1 January 2021
501.8 74.3 63.1 52.1 691.3 7.0 698.3
Exchange differences
– 0.7 (3.7) (3.0) (6.0) (0.2) (6.2)
Current service cost
– – 1.7 3.1 4.8 0.4 5.2
Interest cost
6.8 1.5 0.3 0.5 9.1 0.2 9.3
Remeasurement of liabilities:
– demographic changes
(0.4) 0.2 – 0.1 (0.1) – (0.1)
– nancial assumptions
(24.8) (2.9) (5.7) (0.6) (34.0) – (34.0)
– experience (gains)/losses
5.0 0.5 (0.9) (0.8) 3.8 0.1 3.9
Benets paid
(24.1) (4.1) (1.5) (3.1) (32.8) (0.5) (33.3)
Presentvalueasat31December2021
464.3 70.2 53.3 48.3 636.1 7.0 643.1
212
Vesuvius plc
Annual Report and Financial Statements 2021
26. EmployeeBenets
continued
26.4 Denedbenetobligation
continued
Dened benet pension plans
Other post-
retirement
benet
plans
£m
Total
£m
UK
£m
US
£m
Germany
£m
ROW
£m
Total
£m
Present value as at 1 January 2020
482.0
78.9 54.5 47.5 662.9 6.9 669.8
Exchange differences
–
(2.2)3.1
1.72.6 – 2.6
Current service cost
– 0.1 1.6 3.1 4.8 0.4
5.2Past service cost
0.8 – –
(0.1) 0.7
–0.7
Interest cost
9.0
2.0 0.6
0.712.3 0.2
12.5Settlements – –
(6.2)
–(6.2)
–(6.2)
Remeasurement of liabilities:
– demographic changes
2.2
(0.7)– –
1.5–
1.5– nancial assumptions 51.3
38.2 6.4 4.8
1.90.3
51.6– experience losses/(gains) (6.2) 0.5
– 0.3
(5.4)0.1
(5.3)Benets paid (24.2) (4.5) (1.5) (3.0) (33.2) (0.9) (34.1)
Presentvalueasat31December2020
501.8 74.3 691.3 7.0 698.3
63.1
52.126.5 Fair value of plan assets
2021
2020
UK
£m
US
£m
ROW
£m
Total
£m
UK
£m
US
£m
ROW
£m
Total
£m
As at 1 January
616.4 48.4 31.4 696.2
581.6 50.3 29.4
661.3
Exchange differences
– 0.4 (2.0) (1.6)
–
(1.5)1.2
(0.3)Interest income
8.4 1.0 0.2 9.6
11.0 1.2 0.4 12.6
Settlements
– – – –
–(6.0)
–(6.0)
Return on plan assets
(113.7) 1.3 1.6 (110.8)
49.16.3 0.1
55.5Contributions from employer 4.7
0.1 0.9 2.7 3.7
– 2.2
2.5Administration expenses paid (0.6)
(0.7) (0.5) – (1.2)
(1.2)–
(1.8)Benets paid (3.5) (2.2) (29.8)
(24.1) (3.2) (2.5) (29.8)
(24.1)Asat31December
486.4 48.3 31.4 566.1
616.4 48.4 31.4
696.2
The Group’s pension plans in Germany are unfunded, as is common practice in that country, and accordingly there are no assets
associated with these plans.
26.6 Remeasurementofdenedbenetliabilities/assets
2021
total
£m
2020
total
£m
Remeasurement of liabilities/assets:
– demographic changes
0.1
(1.5)– nancial assumptions
34.0
(51.6)– experience (losses)/gains
(3.9)
5.3Return on plan assets
(110.8)
55.5Total movement
(80.6)
7.7
The remeasurement of dened benet liabilities and assets is recognised in the Group Statement of Comprehensive Income.
213
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
26. EmployeeBenets
continued
26.7 Balance sheet recognition
The amount recognised in the Group Balance Sheet in respect of the Group’s dened benet pension plans and other post-
retirement benet plans is analysed in the following tables, which all relate to continuing operations. All equity securities and
bonds have quoted prices in active markets.
Denedbenetpensionplans
Other post-
retirement
benet
plans
£m
2021
total
£m
UK
£m
US
£m
Germany
£m
ROW
£m
Total
£m
Equities
9.8 3.3 – 2.4 15.5 – 15.5
Bonds
– 44.0 – 3.0 47.0 – 47.0
Annuity insurance contracts
456.7 – – 22.5 479.2 – 479.2
Other assets
19.9 1.0 – 3.5 24.4 – 24.4
Fair value of plan assets
486.4 48.3 – 31.4 566.1 – 566.1
Present value of funded obligations
(462.7) (59.9) – (43.3) (565.9) – (565.9)
23.7 (11.6) – (11.9) 0.2 – 0.2
Present value of unfunded obligations
(1.6) (10.3) (53.3) (5.0) (70.2) (7.0) (77.2)
Totalnetsurpluses/(liabilities)
22.1 (21.9) (53.3) (16.9) (70.0) (7.0) (77.0)
Recognised in the Group Balance Sheet as:
Net surpluses
23.7 – – 1.4 25.1 – 25.1
Net liabilities
(1.6) (21.9) (53.3) (18.3) (95.1) (7.0) (102.1)
Totalnetsurpluses/(liabilities)
22.1 (21.9) (53.3) (16.9) (70.0) (7.0) (77.0)
Dened benet pension plans
Other post-
retirement
benet
plans
£m
2020
total
£m
UK
£m
US
£m
Germany
£m
ROW
£m
Total
£m
Equities 29.7 35.7
4.3 –
1.7–
35.7Bonds
301.3 43.2 – 3.3
347.8–
347.8Annuity insurance contracts
282.1 – – 22.4
304.5–
304.5Other assets
3.3 4.0 8.2 – 8.2
0.9
–Fair value of plan assets
616.4 48.4 – 31.4
696.2–
696.2Present value of funded obligations (500.0) (63.2) (610.0)
–
(46.8)–
(610.0)116.4 – 86.2
(14.8)
–(15.4)
86.2Present value of unfunded obligations (1.8) (11.1) (63.1) (5.3) (81.3) (7.0) (88.3)
Totalnetsurpluses/(liabilities)
114.6
(25.9) (63.1) (20.7) 4.9 (7.0) (2.1)
Recognised in the Group Balance Sheet as:
Net surpluses 117.1
116.4 – –
0.7–
117.1Net liabilities (1.8) (25.9) (63.1) (21.4) (112.2) (7.0) (119.2)
Totalnetsurpluses/(liabilities)
114.6
(25.9) (63.1) (20.7) 4.9 (7.0) (2.1)
(a)UKPlanassetallocation
As at 31 December 2021, of the UK Plan’s total assets, 93.9% (2020: 45.8%) were represented by the annuity insurance contracts
covering the UK Plan’s pension liabilities; 2.0% (2020: 4.8%) were allocated to equities; nil% (2020: 48.9%) to xed income
securities; and 4.1% (2020: 0.5%) to cash.
The UK Plan Trustee has entered into a pension insurance buy-in agreement with the Pension Insurance Corporation (PIC),
whereby the UK Plan Trustee has paid insurance premiums to PIC to insure all of the UK Plan’s liabilities. Under this arrangement,
the value of the PIC insurance contract matches the value of the liabilities for current benets because the ination, interest rate,
investment and longevity risk for Vesuvius in respect of these liabilities are eliminated. The buy-in agreement ensures that the
UK pension plan obligations in respect of all its members and their approved dependants are insured.
As at 31 December 2021, the IAS 19 valuation of the PIC insurance contract value associated with the bought-in liabilities was
£456.7m (2020: £282.1m). The policy and the associated valuation are updated annually to reect retirements and mortality.
214
Vesuvius plc
Annual Report and Financial Statements 2021
26. EmployeeBenets
continued
26.7 Balance sheet recognition
continued
(b)USPlanassetallocation
All of the assets in the main US Plan have a quoted market price in an active market. The Plan mitigates exposure to interest rates
by employing a liability matching investment strategy. All non-derivative assets are invested in liability matching bonds with a
similar average duration to the liabilities of the Plan. Since 2018, the investment allocation has been de-risked from an allocation
of 72% liability matching and 28% return seeking assets, to an allocation of 100% liability matching. The Plan retains equity risk
through use of equity derivative contracts, which provides equity market exposure with some level of equity downside protection.
(c)Denedbenetcontributionsin2022
In 2022, the Group is expected to make contributions into its dened benet pension and other post-retirement benets plans of
around £6.2m with specic contributions of approximately £1.1m, £1.6m and £1.8m anticipated for the US Plans, German Plans
and Belgian Plans respectively.
26.8 Income statement recognition
The expense recognised in the Group Income Statement in respect of the Group’s dened benet retirement plans and other
post-retirement benet plans is shown below:
2021
2020
Dened
benet
pension
plans
£m
Other post-
retirement
benet
plans
£m
Total
£m
Dened
benet
pension plans
£m
Other post-
retirement
benet
plans
£m
Total
£m
Current service cost
4.8 0.4 5.2
4.8 0.4
5.2Past service cost
– – –
0.7
–
0.7Settlements
– – –
(0.2)
–(0.2)
Administration expenses
1.2 – 1.2
1.8 – 1.8
Net interest (gain)/cost
(0.5) 0.2 (0.3)
(0.3)0.2
(0.1)Total net charge
5.5 0.6 6.1
6.8 0.6
7.4
The total net charge of £6.1m (2020: £7.4m), recognised in the Group Income Statement in respect of the Group’s dened benet
pension plans and other post-retirement benets plans, is analysed in the following table:
2021
£m
2020
£m
In arriving at trading prot – within other manufacturing costs
1.8
1.74.6
5.0In arriving at prot before tax – guaranteed minimum pension equalisation charge
–
0.8
(0.3)
(0.1)Total net charge
6.1
7.4
A UK High Court ruling was made on 26 October 2018 in respect of the gender equalisation of guaranteed minimum pensions
(GMPs) for occupational pension schemes. The impact of GMP equalisation as at 31 December 2018 was estimated to be £4.5m.
A second UK High Court GMP equalisation ruling was issued on 20 November 2020. This second ruling considered the treatment
of historical transfers out, i.e. those members who had transferred out before 26 October 2018. The 2020 ruling covers both
individual and bulk transfers out. It does not revisit any of the issues addressed in the 2018 ruling. The impact of GMP equalisation
for the second ruling was estimated to be £0.8m as at 31 December 2020.
The increase in pension liabilities resulting from these judgements have been treated for IAS 19 purposes as plan amendments
and resulted in an increase in the pension decit in the balance sheet and a corresponding past service cost in the Income
Statement. These amendments have previously been treated as separately reported items so that there has been no impact
on headline performance. We are working with the Trustees of our UK pension plan and our actuarial and legal advisers to
understand the extent to which these judgements crystallise additional liabilities for the UK pension plan.
215
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
26. EmployeeBenets
continued
26.9 RiskstowhichthedenedbenetpensionplansexposetheGroup
The principal risks faced by these plans comprise: (i) the risk that the value of the plan assets is not sufcient to meet all plan
liabilities as they fall due; (ii) the risk that plan beneciaries live longer than envisaged, causing liabilities to exceed the available
plan assets; and (iii) the risk that the market-based factors used to value plan liabilities and assets change materially adversely
to increase plan liabilities over the value of available plan assets. Further details are given below.
Following the UK Plan pension insurance buy-in agreement, the ination, interest rate, investment and longevity risks for Vesuvius
in respect of the UK Plan are eliminated. The following risks relate to the other plans operated by the Group:
This is mitigated by using a diversied range of counterparties of high standing and ensuring positions are collateralised as
required.
The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform against this
yield, this will create a decit. To reduce this risk, the pension plans are largely invested in government and corporate bonds.
Changesinbondyields
A decrease in corporate bond yields will increase the scheme liabilities, although this will be partially offset by an increase in the
value of the schemes’ bond holdings.
Inationrisk
Much of the plans’ benet obligations outside the US are linked to ination, and higher ination will lead to higher liabilities.
The majority of the plans’ obligations are to provide benets for the life of the member and in some cases their spouse on death
of the member, so increases in life expectancy will result in an increase in the liabilities.
In August 2016, the pensions for the majority of current pensioners in the US main plan were bought out with an insurance
company, removing all responsibility and risk related to these pensions from the Group. In recent years, a number of further
exercises have been carried out to buy out US benets.
27. Share-basedPayments
27.1 Accounting policy
The Group operates an equity-settled share-based payment arrangement for its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. For grants with market-based conditions attached to them, such as
total shareholder return, fair value is measured using a form of stochastic option pricing model. For grants with non-market-
based conditions, such as growth in headline earnings per share, fair value is measured using the Black-Scholes option pricing
model. The fair value is expensed on a straight-line basis over the vesting period with a corresponding increase in equity.
The cumulative expense recognised is adjusted for the best estimate of the shares that will eventually vest.
27.2 Income statement recognition
The total expense recognised in the Group Income Statement is shown below:
2021
£m
2020
£m
Long-Term Incentive Plan
0.2
0.8
Other plans
2.9
1.6
Total expense
3.1
2.4
The Group operates a number of different share-based payment plans, the most signicant of which is the Long-Term Incentive
Plan (LTIP), details of which can be found in the Directors’ Remuneration Report.
216
Vesuvius plc
Annual Report and Financial Statements 2021
27. Share-basedPayments
continued
27.3 Details of outstanding options
Numberofoutstandingawards
As at
1 Jan 2021
Granted Exercised
Forfeited/
lapsed Expired
As at
31 Dec 2021
LTIP
1,717,225 702,982 (31,637) (448,606) nil 1,939,964
Weighted average exercise price
nil nil nil nil nil nil
Other plans
635,031 391,769 (437,328) (40,439) nil 549,033
Weighted average exercise price
nil nil nil nil nil nil
For the awards exercised during 2021, the market value at the date of exercise ranged from 473 pence to 574 pence per share.
Number of outstanding awards
As at
1 Jan 2020
Granted Exercised
Forfeited/
lapsed
Expired
As at
31 Dec 2020
LTIP
1,833,220 847,503 (345,500) (617,998)
nil1,717,225
Weighted average exercise price
nil nil nil nil nil nil
Other plans
685,099 198,891 (207,211) (41,748)
nil
635,031Weighted average exercise price
nil nil nil nil nil nil
For the options exercised during 2020, the market value at the date of exercise ranged from 351 pence to 540 pence.
Details of market performance conditions are included in the Directors’ Remuneration Report.
2021
2020
Awards
exercisable
as at
31 Dec 2021
no.
Weighted
average
outstanding
contractual
life of
awards
years
Range of
exercise
prices
pence
Awards
exercisable
as at
31 Dec 2020
no.
Weighted
average
outstanding
contractual
life of
awards
years
Range of
exercise
prices
pence
LTIP 8.4
– 8.3
–Weighted average exercise price
–
n/a
–
n/aOther plans
– 0.9
–
0.5
Weighted average exercise price
–
n/a
–
n/a217
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
27. Share-basedPayments
continued
27.4 Options granted under the LTIP during the year
2021
EPS element TSR element
Fair value of options granted
538p 340p
Share price on date of grant
538p 538p
Expected volatility
n/a
39.2%
Risk-free interest rate
n/a
0.2%
Exercise price (per share)
nil nil
Expected term (years)
3 3
Expected dividend yield
nil nil
2020
EPS element
TSR element
Fair value of options granted 392p
242p
Share price on date of grant 392p 392p
Expected volatility n/a 30.3%
Risk-free interest rate n/a 0.2%
Exercise price (per share)
nil nil
Expected term (years)
3 3
Expected dividend yield
nil nil
Vesting of 50% of shares awarded is based on the Group’s three-year total shareholder return (TSR) performance relative to that
of the constituent companies of the FTSE 250 (excluding investment trusts) and vesting of the remaining 50% of shares awarded
is based on headline EPS growth.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2.8 years (2020:
2.8 years) prior to the grant date for the March 2021 grant. The risk-free rate of return was assumed to be the yield to maturity
on a UK xed gilt with the term to maturity equal to the expected life of the option. At the discretion of the Remuneration
Committee, award holders receive the value of dividends that would have been paid on their vested shares in the period
between grant and vesting. Accordingly, there is no discount to the valuation for dividends foregone during the vesting period.
218
Vesuvius plc
Annual Report and Financial Statements 2021
28. Trade and Other Payables
28.1 Accounting policy
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost, using the effective
interest method.
28.2 Analysis of trade and other payables
2021
£m
2020
£m
Non-current
Accruals and other payables
11.6
13.1
Deferred purchase and contingent consideration
–
0.1
Total non-current other payables
11.6
13.2
Current
Trade payables
253.8
185.7
Other taxes and social security
33.5
31.5
Accruals and other payables
85.6
71.5
Total current trade and other payables
372.9
288.7
There is no signicant difference between the fair value of the Group’s trade and other payables balances and the amount at
which they are reported in the Group Balance Sheet.
Included within trade payables in the table above is £27.8m (2020: £17.5m) subject to supplier nancing agreements entered into
with certain of the Group’s banks. Under the terms of the agreements, the Group’s suppliers in certain countries can elect to be
paid earlier than the terms of their agreement with Vesuvius by requesting discounted early settlement from the arranging bank.
This early settlement is effected between the bank and the supplier; from the perspective of the Group, the terms of each payable
remain unchanged. The Group is not charged any interest cost or fee in respect of the agreements.
29. Leases
29.1 Accounting policy
Lease liabilities are recognised at the present value of the remaining lease payments, discounted using the interest rate implicit
in the lease if that rate can be readily determined. If that rate cannot be readily determined, the lessee’s incremental borrowing
rate is used, calculated as the local government bond rate plus an interest rate spread. In cases where there was an option to
terminate or extend a lease, the duration of the lease assumed for this purpose reected the Group’s existing intentions regarding
such options. Lease liabilities include the net present value of the following lease payments:
–
Fixed payments (including in-substance xed payments), less any lease incentives receivable
–
Variable lease payments that are based on an index or a rate
–
Amounts expected to be payable by the lessee under residual value guarantees
–
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
–
Payments of penalties for terminating the lease, if the lease term reects the lessee exercising that option.
Leases of low-value assets and short-term leases (shorter than 12 months) are classied as operating leases and neither the asset
nor the corresponding liability to the lessor is recognised in the Group Balance Sheet. Rentals payable under operating leases are
charged to the Group Income Statement on a straight-line basis over the term of the lease. Benets received and receivable as an
incentive to enter an operating lease are also spread on a straight-line basis over the lease term.
29.2 Lease liabilities
The maturity analysis of the lease liabilities is disclosed in Note 25.2 (d).
The net book value of the Group’s property, plant and equipment assets held as right-of-use assets under lease contracts at
31 December 2021 was £41.9m (2020: £37.7m) (Note 15). The right-of-use asset is depreciated over the shorter of the asset’s
useful life and the lease term on a straight-line basis. The cash payments for leases during the year were £14.1m (2020: £14.3m).
29.3 Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are payable as follows:
2021
£m
2020
£m
Not later than one year
0.5
0.9
Later than one year and not later than ve years
0.2
0.6
Later than ve years
–
0.1
Total operating lease commitments
0.7
1.6
The cost incurred by the Group in the year in respect of assets held under operating leases, all of which was charged within trading
prot, amounted to £2.9m (2020: £4.2m), of which £2.2m (2020: £3.7m) related to short-length leases and £0.7m (2020: £0.5m)
related to leases of low-value items.
219
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
30. Provisions
30.1 Accounting policy
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group
will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to
settle the obligation at the balance sheet date. Where the effect of the time value of money is material, provisions are discounted
using a pre-tax discount rate that reects both the current market assessment of the time value of money and the specic risks
associated with the obligation. Where discounting is used, the increase in the provision due to the passage of time is recognised
as a nance cost.
30.2 Analysis of provisions
Disposal,
closure and
environmental
costs
£m
Restructuring
charges
£m
Other
£m
Total
£m
As at 1 January 2020
34.8 19.1 2.9
56.8
Exchange adjustments (1.7)
0.7 –
(1.0)Charge to Group Income Statement – separately reported items
10.3 6.1 –
16.4Charge to Group Income Statement – trading prot 4.8
– 11.8 16.6
Adjustment to discount
1.0 – – 1.0
Cash spend
(7.0) (16.7) (9.3) (33.0)
As at 31 December 2020 and 1 January 2021
42.2 9.2 5.4 56.8
Exchange adjustments
0.4 (0.2) (0.1) 0.1
Charge to Group Income Statement – trading prot
7.4 – 9.2 16.6
Adjustment to discount
0.7 – – 0.7
Cash spend
(8.9) (4.0) (10.6) (23.5)
As at 31 December 2021
41.8 5.0 3.9 50.7
Of the total provision balance as at 31 December 2021 of £50.7m (2020: £56.8m), £32.6m (2020: £34.0m) is recognised in the
Group Balance Sheet within non-current liabilities and £18.1m (2020: £22.8m) within current liabilities.
The provision for disposal, closure and environmental costs includes the Directors’ current best estimate of the amounts to be
payable in respect of known or probable costs resulting from third-party claims, including legacy matter lawsuits.
There remains inherent uncertainty associated with estimating the future costs of legacy matter lawsuits. In assessing the
probable costs and realisation certainty of these provisions, or related assets, management has made reasonable assumptions,
including projections of the number of future claims, the approximate average cost of those claims (including legal costs and
infrequent larger value claims) and the length of time taken to resolve such claims. The provision reects the Directors’ best
estimate of the future liability and the value of the corresponding asset. By nature, these assumptions are uncertain and therefore
changes to the assumptions used could signicantly alter the Directors’ assessment of the value, volume of claims, timing or
certainty of the costs or related amounts. Sensitivity analyses have been conducted using variations to the key assumptions listed
above and indicatively show:
–
A 10% change in the average cost of claims would impact the gross provision by approximately £1.0m
–
A 20% change in the level of larger value claims would impact the gross provision by approximately £0.7m
–
An increase in the duration over which claims are received of 10% would increase the gross provision by approximately £1.9m.
Assumptions are determined with reference to historical information and trends experienced to date, combined with specialist
views on future outlook. As assumptions can vary individually or in combination, over the longer term there can be no guarantee
that the assumptions used to estimate the provision will result in an accurate prediction of the actual costs that may be incurred.
220
Vesuvius plc
Annual Report and Financial Statements 2021
30. Provisions
continued
30.2 Analysis of provisions
continued
continued
As the resolution of many of the obligations for which provision is made is subject to legal or other regulatory process, the timing of
the associated cash outows is also subject to some uncertainty. However, the majority of the amounts provided are expected to
be utilised over the next ten years. The provision, underlying estimates of costs and associated insurance estimates are regularly
assessed, to reect any changed circumstances with regard to individual matters. Any movements impacting the Income
Statement are included within headline performance.
As set out above, where insurance cover exists for any of these known or probable costs, a related asset is recognised in the
Group Balance Sheet only when its value can be reliably measured and reimbursement is considered to be virtually certain
by management. As at 31 December 2021, £14.4m (2020: £12.4m) was recorded in other receivables in respect of associated
insurance reimbursements, of which £12.4m (2020: £10.4m) is non-current.
In addition, this provision covers the estimate of costs to be payable both in the fullment of obligations incurred in connection
with former Group businesses, resulting from either disposal or closure, together with those related to the demolition and clean-up
of closed sites.
The Group owns a number of disused properties in the US, which do not form part of our trading operations. In 2020, costs of
£10.3m (2021: nil) were incurred at one of these sites to address the signicant increase in the volume of water run-off occurring in
recent years. We engaged waste management specialists and have taken actions to reduce the level of water. We are in contact
with the relevant regulatory authorities and are currently implementing remediation solutions, including the installation of a
treatment facility. These non-recurring costs were treated as a separately reported item in 2020. There was no impact upon
headline performance.
The provision for restructuring charges includes the costs to complete the Group’s major restructuring programmes. The majority
of this balance of £5.0m as at 31 December 2021 (2020: £9.2m) is expected to be paid out over the next two years.
Other
Other provisions comprise amounts payable in respect of known or probable costs resulting both from legal or other regulatory
requirements, workers’ compensation and medical claims, and from third-party claims. As the settlement of many of the
obligations for which provision is made is subject to reasonable assumptions, legal or other regulatory process, the timing of the
associated outows is subject to some uncertainty, but the majority of amounts provided are expected to be utilised over the next
two years and the underlying estimates of costs are regularly updated to reect changed circumstances with regard to individual
matters. During 2021, the Group recognised net charges of £9.2m (2020: £11.8m) in the Group Income Statement to provide for
various medical benets and other claims.
The Group has considered the impact of climate change on provisions including decommissioning or environmental rehabilitation
and there have been no material changes needed to amounts already provided.
31. Off-Balance Sheet Arrangements
In compliance with current reporting requirements, certain arrangements entered into by the Group in its normal course of
business are not reported in the Group Balance Sheet. Of such arrangements, the largest amounts are future lease payments
in relation to assets used by the Group under non-cancellable operating leases (Note 29).
32. Contingent Liabilities
Details of guarantees given by the Company, on behalf of the Group, are given in Note 11 to the Company Financial Statements.
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters.
Certain of Vesuvius’ subsidiaries are subject to legacy matter lawsuits, predominantly in the US, relating to a small number of
products containing asbestos manufactured prior to the acquisition of those subsidiaries by Vesuvius. These suits usually also
name many other product manufacturers. To date, Vesuvius is not aware of there being any liability verdicts against any of these
subsidiaries. Each year, a number of these lawsuits are withdrawn, dismissed or settled.
As the settlement of many of the obligations for which reserve is made is subject to legal or other regulatory process, the timing
and amount of the associated outows is subject to some uncertainty (see Note 30 for further information). The amount paid,
including costs in relation to this litigation, has not had a material effect on Vesuvius’ nancial position or results of operations in
the current year.
221
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
33. Investments in Subsidiaries, Joint Ventures and Associates
33.1 Investment in subsidiaries
A subsidiary is an entity over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and can affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
The subsidiaries, joint ventures and associates of Vesuvius plc and the countries in which they are incorporated are set out below.
With the exception of Vesuvius Holdings Limited, whose ordinary share capital was directly held by Vesuvius plc, the ordinary
capital of the companies listed below was wholly owned by a Vesuvius plc subsidiary as at 31 December 2021.
Company
legal name
Registered ofce address
Jurisdiction
Advent Process
Engineering Inc.
333 Prince Charles Drive, Welland,
Ontario, L3B 5P4, Canada
Canada
(Ontario)
BMI Refractory
Services Inc.
600 N 2nd Street, Suite 401,
Harrisburg, PA 17101-1071,
United States
US
(Pennsylvania)
Brazil 1 Limited 165 Fleet Street, London,
EC4A 2AE, England
England
CCPI Inc.
Suite 201, 910 Foulk Road,
Wilmington, New Castle,
DE 19803, United States
US
(Delaware)
Cookson
Dominicana,
SRL
Km 7 1/2, Autopista San Isidro,
Edicio Modelo A, Zona Franca
San Isidro, Santo Domingo
Oeste, Dominican Republic
Dominican
Republic
East Moon
Investment (HK
Holding)
Company Limited
Unit 01, 82/F, International
Commerce Centre, 1 Austin
Road West, Kowloon, Hong Kong
Hong Kong
Flo-Con
Holding, Inc.
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington, DE 19801,
United States
US (Delaware)
Foseco (FS)
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Foseco (Jersey)
Limited
44 Esplanade, St Helier,
JE4 9WG, Jersey
Jersey
Foseco (UK)
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Foseco Canada
Limited
181 Bay Street, Suite 1800,
Toronto, Ontario, M5J 2T9,
Canada
Canada
(Ontario)
Foseco Espanola
S.A.
5, Barrio Elizalde, Izurza,
Bizkaia, 48213, Spain
Spain
Foseco Foundry
(China) Co
Limited
Room 819, Shekou Zhaoshang
Building, Nanshan District,
Shenzhen, Guangdong,
518067, China
China
Foseco Fundición
Holding
(Espanola), S.L.
5, Barrio Elizalde, Izurza,
Bizkaia, 48213, Spain
Spain
Foseco Holding
(Europe) Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Foseco Holding
(South Africa)
(Pty) Limited
12 Bosworth Street, Alrode,
Alberton, 1449, South Africa
South Africa
Foseco Holding BV Rivium Boulevard 301, Capelle
aan den Ijssel, Rotterdam
2909LK, Netherlands
Netherlands
Foseco Holding
International
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Foseco Holding
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Company
legal name
Registered ofce address
Jurisdiction
Foseco Industrial e
Comercial Ltda
Km 15, Rodovia Raposo
Tavares, Butanta Cep,
São Paulo, 05577-100, Brazil
Brazil
Foseco
International
Holding
(Thailand) Limited
170/69, 22nd Floor Ocean
Tower 1, Ratchadapisek Road,
Klongtoey, Bangkok, 10110,
Thailand
Thailand
Foseco
International
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Foseco Japan
Limited
9th Floor, Orix Kobe Sannomiya
Building, 6-1-10, Goko dori,
Chuo-ku, Kobe Hyogo,
651-0087, Japan
Japan
Foseco Korea
Limited
74 Jeongju-ro, Wonmi-gu,
Bucheon-si, Gyeonggi-do,
14523, South Korea
South Korea
Foseco Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Foseco
Metallurgical Inc.
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington,
DE 19801, United States
US (Delaware)
Foseco
Nederland BV
Binnenhavenstraat 20, 7553 GJ
Hengelo (OV), Netherlands
Netherlands
Foseco Overseas
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Foseco
Philippines Inc.
Unit 401, 4th Floor 8 Antonio
Centre, Prime St. Madrigal Business
Park 2, Ayala Alabang Muntinlupa
City, 1770 Philippines
Philippines
Foseco Portugal
Produtos Para
Fundiçâo Lda
Rua Manuel Pinto de Azevedo,
No 626 4100-320 Porto, Portugal
Portugal
Foseco S.A.S. Le Newton C, 7 Mail Barthélémy
Thimonnier, 77185 Lognes, France
France
Foseco Steel (UK)
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Foseco
Technology
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
J.H. France
Refractories
Company
CT Corporation, 1209 Orange
Street, The Corporation Trust
Company, Wilmington,
DE 19801, United States
US (Delaware)
John G. Stein &
Company Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Mainsail Insurance
Company Limited
Victoria Place, 5th oor, 31 Victoria
Street, Pembroke, Hamilton, HM
10, Bermuda
Bermuda
Mascinco
Empreendimentos
e Participações
Ltda
Avenida Brasil, 49550 – parte,
Distrito Industrial de Palmares –
Campo, Grande – Cep: 23065-480,
Rio de Janeiro, RJ, Brazil
Brazil
222
Vesuvius plc
Annual Report and Financial Statements 2021
Company
legal name
Registered ofce address
Jurisdiction
Mastercodi
Industrial Ltda
Rodovia Raposo Tavares, KM15,
Butantã, 05577-100, Butantã,
São Paulo, Brazil
Brazil
Mercajoya, S.A. Capitán Haya, 56 – 1ºH, 28020
Madrid, Spain
Spain
Metal Way
Equipamentos
Metalurgicos Ltda
Estrada Santa Isabel, 7655 KM37,
Bairro Do Una, Itaquaquecetuba, São
Paulo – SP, CEP: 08580 000, Brazil
Brazil
New Foseco (UK)
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Process Metrix,
LLC
6622 Owens Drive, Pleasanton,
CA 94588, United States
US
(California)
PT Foseco
Indonesia
Jl Rawa Gelam 2/5, Kawasan
Industri, Pulogadung, Jakarta, 13930,
Indonesia
Indonesia
PT Foseco Trading
Indonesia
Jl Rawa Gelam 2/5, Kawasan
Industri, Pulogadung, Jakarta,
13930, Indonesia
Indonesia
Realisations 789,
LLC
CT Corporation, 1209 Orange Street,
The Corporation Trust Company,
Wilmington, DE 19801, United States
US
(Delaware)
S G Blair &
Company Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
SIDERMES Inc.
Business name
Vesuvius Sensors
and Probes
175 montée, Calixa-Lavallée
Verchêres, Québec J0L2R0,
Canada
Canada
SIDERMES Do
Brasil Sensores
Termicos Ltda
Estrada Municipal PDD 436, S/N,
Prédio ‘C’, Bairro da Boa Vista,
Municipio de Piedade, Estado de
São Paulo, Brazil
Brazil
SIDERMES
Latinoamericana
CA
Zona Industrial, San Vicente Av.,
Anton Phillips Grupo Industrial,
San Vicente Local 4, Maracay,
Venezuela
Venezuela
SIDERMES S.A. Urquiza 919 Piso 2 Rosario,
Santa Fe, CP 2000, Argentina
Argentina
SIR
Feuerfestprodukte
GmbH
Siegener Strasse 152, Kreuztal,
D-57223, Germany
Germany
SOLED S.A.S. Centre d’Activités Economiques
Zone Industrielle de Franchepré
54240 Joeuf, France
France
Veservice Ltda Av Brasil, 49550, Distrito Industrial
de Palmares, Campo Grande, Rio de
Janeiro, 23065-480, Brazil
Brazil
Vesuvius
(Thailand) Co.,
Limited
170/69, 22nd Floor Ocean Tower 1,
Ratchadapisek Road, Klongtoey,
Bangkok, 10110, Thailand
Thailand
Vesuvius (V.E.A.R.)
S.A.
Street Urquiza, 919,Floor 2, Rosario,
Provincia de Santa Fé, Argentina
Argentina
Vesuvius
Advanced
Ceramics (China)
Co., Limited
221 Xing Ming Street, China-
Singapore Suzhou Ind Park,
Suzhou, Jiangsu Province, 215021,
China
China
Vesuvius America,
Inc.
1209 Orange Street, Wilmington,
DE 19801, United States
US
(Delaware)
Vesuvius Australia
(Holding) Pty
Limited
40-46 Gloucester Boulevarde,
Port Kembla, NSW, 2505,
Australia
Australia
Company
legal name
Registered ofce address
Jurisdiction
Vesuvius Australia
Pty Limited
40-46 Gloucester Boulevarde,
Port Kembla, NSW, 2505, Australia
Australia
Vesuvius Belgium
N.V.
Zandvoordestraat 366, Oostende,
B-8400, Belgium
Belgium
Vesuvius Canada
Inc
181 Bay Street, Suite 1800, Toronto,
Ontario, M5J 2T9, Canada
Canada
Vesuvius Ceramics
Limited
165 Fleet Street, London, EC4A 2AE,
England
England
Vesuvius China
Holdings Co.
Limited
Unit 01, 82/F International
Commerce Centre, 1 Austin Road
West, Kowloon, Hong Kong
Hong Kong
Vesuvius China
Limited
165 Fleet Street, London, EC4A 2AE,
England
England
Vesuvius Colombia
S.A.S.
Calle 26 No. 102-20 Floor 3,
Bogota, Colombia
Colombia
Vesuvius
Corporation S.A.
Via Nassa 17, Lugano,
CH 6900, Switzerland
Switzerland
Vesuvius CSD Sp
z.o.o.
ul. Jasnogórska 11, Kraków,
31-358, Poland
Poland
Vesuvius Emirates
FZE
Warehouse No: 1J-09/3,
P O Box 49261, Hamriyah Free Zone,
Sharjah, United Arab Emirates
United Arab
Emirates
Vesuvius Europe
Beteiligungs
GmbH
Geschaftsanschrift, Schieferbank
2-16, 45472 Mülheim an der Ruhr,
Germany
Germany
Vesuvius Europe
GmbH & Co KG
Geschaftsanschrift, Schieferbank
2-16, 45472 Mülheim an der Ruhr,
Germany
Germany
Vesuvius Europe
S.A.
17 Rue de Douvrain, Ghlin,
7011, Belgium
Belgium
Vesuvius Europe
S.A.S.
3, Avenue De L’europe, Parc Les
Pivolles, 69150 Décines-Charpieu,
France
France
Vesuvius Financial
1 Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Finland
OY
Pajamäentie 8D7, 00360 Helsinki,
Finland
Finland
Vesuvius Foundry
Products (Suzhou)
Co. Limited
12 Wei Wen Road, China-Singapore
Suzhou Ind Park, Suzhou, Jiangsu
Province, 215122, China
China
Vesuvius Foundry
Technologies
(Jiangsu) Co.
Limited
2 Changchun Road, Economic
Development Area, Changshu,
Jiangsu, 215537, China
China
Vesuvius France
S.A.
Rue Paul Deudon 68, Boite Postale 19,
Feignies 59750, France
France
Vesuvius GmbH Gelsenkirchener Strasse 10,
Borken, D-46325, Germany
Germany
Vesuvius Group
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Group
S.A.
17 Rue de Douvrain, Ghlin,
7011, Belgium
Belgium
Vesuvius Holding
Deutschland
GmbH
Gelsenkirchener Strasse 10,
Borken, D-46325, Germany
Germany
Vesuvius Holding
France S.A.S.
68 Rue Paul Deudon, Boite Postale 19,
Feignies 59750, France
France
Vesuvius Holding
Italia – Società a
Responsabilità
Limitata
Via Mantova 10, 20835 Muggio
MB, Italy
Italy
33. Investments in Subsidiaries, Joint Ventures and Associates
continued
33.1 Investment in subsidiaries
continued
223
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
33. Investments in Subsidiaries, Joint Ventures and Associates
continued
33.1 Investment in subsidiaries
continued
Company
legal name
Registered ofce address
Jurisdiction
Vesuvius Holdings
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Ibérica
Refractarios S.A.
Capitán Haya, 56 – 1ºH,
28020 Madrid, Spain
Spain
Vesuvius
International
Corporation
CT Corporation, 1209 Orange Street,
The Corporation Trust Company,
Wilmington, DE 19801, United States
US
(Delaware)
Vesuvius
Investments
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Istanbul
Refrakter Sanayi
ve Ticaret AS
Gebze OSB2 Mh. 1700.,
Sok No:1704/1, Cayirova,
Kocaeli, 41420, Turkey
Turkey
Vesuvius Italia
S.p.A.
Via Mantova 10, 20835 Muggio
MB, Italy
Italy
Vesuvius Japan
Inc.
9th Floor, Orix Kobe Sannomiya
Building 6-1-10, Goko dori, Chou-
ku,Kobe Hyogo, 651-0087, Japan
Japan
Vesuvius K.S.R.
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire
S43 4XA, England
England
Vesuvius Life Plan
Trustee Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius LLC 502, 5th oor, 1 Myasicsheva str.,
Zhukovsky, Moscow region,
140180, Russian Federation
Russia
Vesuvius
Malaysia
Sdn Bhd
Unit 30-01, Level 30 Tower A,
Vertical Business Suite Avenue 3,
Bangsar South, No 8 Jalan Kirinchi,
Kuala Lumpur Wilayah Persekutuan,
59200, Malaysia
Malaysia
Vesuvius
Management
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius
Management
Services Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Mexico
S.A. de C.V.
Av. Ruiz Cortinez, Num. 140, Colonia
Jardines de San Rafael, Guadalupe,
Nuevo León, CP 67119, Mexico
Mexico
Vesuvius Mid-East
Limited
56, rd 15, Apt 103, Maadi,
Cairo, Egypt
Egypt
Vesuvius Moravia,
s.r.o.
Konska c.p. 740, Trinec,
739 61, Czech Republic
Czech
Republic
Vesuvius Mulheim
Beteiligungs
GmbH
Geschaftsanschrift, Schieferbank 2-16,
45472 Mülheim an der Ruhr, Germany
Germany
Vesuvius Mulheim
GmbH & Co KG
Geschaftsanschrift, Schieferbank 2-16,
45472 Mülheim an der Ruhr, Germany
Germany
Vesuvius NC, LLC Corporation Trust Center, 1209 Orange
Street, Wilmington,
New Castle County, DE 19801,
United States
US
(Delaware)
Vesuvius New
Zealand Limited
Bell Gully, Level 22, Vero Centre,
48 Shortland Street, Auckland,
1010 New Zealand
New
Zealand
Vesuvius Overseas
Investments
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Overseas
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Company
legal name
Registered ofce address
Jurisdiction
Vesuvius Penn
Corporation
CT Corporation, 1209 Orange Street,
Wilmington, DE 19801, United States
US
(Delaware)
Vesuvius Pension
Plans Trustees
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Peru SAC Jiron Saenz Pena 185,
Magdalena del Mar, Lima, Peru
Peru
Vesuvius Poland
Sp z.o.o.
Ul Tyniecka 12, Skawina,
32-050, Poland
Poland
Vesuvius Ras Al
Khaimah FZ-LLC
Street No. F14, RAK Investment
Authority Free Zone, Al Hamra,
Ras Al Khaimah, PO Box 86408, United
Arab Emirates
United
Arab
Emirates
Vesuvius
Refractarios de
Chile S.A.
Street San Martin 870, Room 308,
Tower B, Concepcion, Chile
Chile
Vesuvius
Refractories S.r.l.
Galati, Marea Unire avenue 107, Galati
county, 800329, Romania
Romania
Vesuvius
Refractory India
Private Limited
Room No. 9, 3rd Floor, 7 Ganesh
Chandra Avenue, Kolkata,
WB 700013, India
India
Vesuvius
Refratários Ltda
Av Brasil, 49550, Distrito Industrial
de Palmares, Campo Grande,
Rio de Janeiro, 23065-480, Brazil
Brazil
Vesuvius
Scandinavia AB
4, Forradsgatan, Amal, S-662 34,
Sweden
Sweden
Vesuvius Sensors
& Probes Europe
S.p.A.
10 Via Mantova, Muggio,
Monza e Brianza, 20835, Italy
Italy
Vesuvius-SERT
S.A.S.
3, Avenue de l’Europe, Parc,
Les Pivolles, Decines-Charpieu
69150, France
France
Vesuvius Solar
Crucible (Suzhou)
Co., Ltd
1/F, building 3, No. 12, Weiwen Road
China-Singapore Suzhou Ind Park,
Suzhou, Jiangsu Province, 215122,
China
China
Vesuvius South
Africa (Pty)
Limited
Pebble Lane, Private Bag X2,
Olifantsfontein, Gauteng Province,
1665, South Africa
South
Africa
Vesuvius Sp
z.o.o.
ul. Jasnogórska 11, Kraków,
31-358, Poland
Poland
Vesuvius SSC
Sp z.o.o.
ul. Jasnogórska 11, Kraków,
31-358, Poland
Poland
Vesuvius UK
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Vesuvius Ukraine
LLC
27, Udarnykiv Street, City of
Dnipropetrovsk, 49000, Ukraine
Ukraine
Vesuvius USA
Corporation
CT Corporation, 208 South LaSalle
Street, Chicago, Cook County,
IL 60604, United States
US (Illinois)
Vesuvius VA
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Vesuvius Vietnam
Limited
7th Floor, Peakview Tower Building,
No.36 Hoang Cau Street, O Cho Dua
Ward, Don Da District, Hanoi City,
Vietnam
Vietnam
Vesuvius Zyarock
Ceramics (Suzhou)
Co., Limited
1/F, building 3, No. 12, Weiwen Road
China-Singapore Suzhou Ind Park,
Suzhou, Jiangsu Province, 215122,
China
China
224
Vesuvius plc
Annual Report and Financial Statements 2021
33. Investments in Subsidiaries, Joint Ventures and Associates
continued
33.1 Investment in subsidiaries
continued
The following subsidiary companies have branches registered in the named countries: Foseco (Jersey) Limited in England,
Foseco Holding BV in England, Vesuvius LLC in Kazakhstan, Vesuvius UK Limited in Taiwan and Republic of Korea and Vesuvius
International Corporation in Belgium.
33.2 Investment in joint ventures and associates
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint venture. Joint control is the contractually agreed sharing of control of the arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing control. An associate is an entity over
which the Group has signicant inuence. Signicant inuence is the power to participate in the nancial and operating policy
decisions of an entity, but is not control or joint control over those policies.
The Group’s investments in its associates and joint ventures are accounted for using the equity method from the date signicant
inuence/joint control is deemed to arise until the date on which signicant inuence/joint control ceases to exist or when the
interest becomes classied as an asset held for sale. The Group Income Statement reects the Group’s share of prot after tax
of the related associates and joint ventures. Investments in associates and joint ventures are carried in the Group Balance Sheet
at cost adjusted in respect of post-acquisition changes in the Group’s share of net assets, less any impairment in value.
2021
£m
2020
£m
As at 1 January
12.1
12.7
Share of post-tax prot of joint ventures
1.3
1.1
Dividends received from joint ventures
(1.0)
(2.3)Foreign exchange
0.4
0.6
As at 31 December
12.8
12.1
The investment in joint ventures and associates includes £12.3m (2020: £11.6m) in respect of joint ventures and £0.5m (2020:
£0.5m) in respect of associates. Dividends received from joint ventures consists of £0.2m (2020: £0.2m) from Wuhan Wugang-
Vesuvius Advanced CCR Co., Limited and £0.8m (2020: £2.1m) from Wuhan Wugang-Vesuvius Advanced Ceramics Co., Limited.
Set out below is the summarised nancial information in respect of joint ventures.
2021
£m
2020
£m
Revenue
48.8
39.7Trading prot
3.6
2.9Net nance costs
–
0.1
Prot before tax
3.6
3.0
Income tax expense
(0.9)
(0.7)
Prot after tax
2.7
2.3
Non-current assets
7.6
7.8
Current assets
25.0
19.1
Non-current liabilities
–
–
Current liabilities
(9.2)
(4.9)
Net assets
23.4
22.0
Company
legal name
Registered ofce address
Jurisdiction
Vesuvius-Premier
Refractories
(Holdings)
Limited
1 Midland Way, Central Park,
Barlborough Links, Derbyshire,
S43 4XA, England
England
Vesv Distribution
(Private) Limited
R Tech Park, 13th Floor Western
Express Highway, Goregaon (East)
Mumbai, Mumbai City, MH 400063,
India
India
Company
legal name
Registered ofce address
Jurisdiction
VSV Advanced
Ceramics
(Anshan) Co.,
Limited
Xiaotaizi Village, Ningyuan Town,
Qianshan District, Anshan,
Liaoning Province, 114011,
China
China
Wilkes-Lucas
Limited
165 Fleet Street, London,
EC4A 2AE, England
England
Yingkou Bayuquan
Refractories Co.,
Limited
Cui Tun Village, Hai Dong Ofce,
Bayuquan District, Liaoning Province,
YingKou, 115007, China
China
225
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Group Financial Statements
continued
33. Investments in Subsidiaries, Joint Ventures and Associates
continued
33.2 Investment in joint ventures and associates
continued
Set out below is the summarised nancial information for Wuhan Wugang-Vesuvius Advanced Ceramics Co., Limited, a joint
venture that has transactions and balances which are material to the Group.
2021
£m
2020
£m
Revenue
42.7
34.5Depreciation
(0.9)
(0.9)
Trading prot
3.0
2.4Net nance costs
–
–
Prot before tax
3.0
2.4
Income tax expense
(0.8)
(0.6)
Prot after tax
2.2
1.8
Non-current assets
7.3
7.5
Current assets
1
16.6
11.7
Non-current liabilities
–
–
Current liabilities
(7.8)
(4.2)
Net assets
16.1
15.0
1. Included in current assets are cash and cash equivalents of £3.2m (2020: £2.4m).
The purpose of the Chinese joint venture companies is to research, develop, manufacture and sell refractory products. The role of
Vesuvius is to provide technical personnel, training and access to the Group’s international sales network.
Name of entity
Registered address
Jurisdiction
2021
% ownership
2020
% ownership
Wuhan Wugang-Vesuvius
Advanced CCR Co., Limited
Gongnong Village Qingshan District, Wuhan,
Hubei Province, 430082, China
China
50
50Wuhan Wugang-Vesuvius
Advanced Ceramics Co.,
Limited
Gongnong Village Qingshan District, Wuhan,
Hubei Province, 430082, China
China
50
50 Associates
Name of entity
Registered address
Jurisdiction
2021
% ownership
2020
% ownership
Sapotech Oy Paavo Havaksen tie 5 D, 90570 Oulu, Finland
Finland
14.914.9
Newshelf 480
Proprietary Limited
144 Oxford Road, Rosebank, Melrose,
Johannesburg, 2196, South Africa
South Africa
45
45The Group is considered to hold signicant inuence over Sapotech Oy despite holding less than 20% of its shares because the
agreement under which the Group invested in Sapotech Oy provides that the Group holds one of the four seats on the company’s
board. This allows the Group to participate in policy-making processes and have additional controls over Sapotech Oy’s major
decision-making that do not amount to control but give signicant inuence.
33.3 Non-controlling interests
Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the
Parent Company and are presented separately in the Group Income Statement and within equity in the Group Balance Sheet,
distinguished from Parent Company shareholders’ equity.
The total prot attributable to non-controlling interests as at 31 December 2021 is £5.8m (2020: £4.5m) of which £3.1m relates
to Vesuvius India Limited (2020: £2.6m). The prot attributable to non-controlling interests in respect of the Group’s other
subsidiaries is not considered to be material.
Name of entity
Registered address
Jurisdiction
2021
% ownership
2020
% ownership
Vesuvius India Limited P-104 Taratala Road, Kolkata, 700 088, India
India
55.57
55.57Foseco India Limited
922/923, Gat, Sanaswadi, Taluka, Shirur,
Pune, 412208, India
India
74.98
74.98
Foseco Golden Gate
Company Limited
6 Kung Yeh 2nd Road, Ping Tung Dist,
Ping Tung, 90049, Taiwan
Taiwan
51
51
Foseco (Thailand) Limited 170/69, 22nd Floor Ocean Tower 1, Ratchadapisek
Road, Klongtoey, Bangkok, 10110, Thailand
Thailand
74
74
Vesuvius Ceska Republika, a.s. Prumyslová 726, Konská, Trinec, 739 61,
Czech Republic
Czech
Republic
60
60
226
Vesuvius plc
Annual Report and Financial Statements 2021
227
Our business Our performance Sustainability Governance
Financial Statements
33. Investments in Subsidiaries, Joint Ventures and Associates
continued
33.3 Non-controlling interests
continued
As with Vesuvius plc, all of the above companies have a 31 December year-end. The summarised nancial information for
Vesuvius India Limited is presented below:
2021
£m
2020
£m
Summarised balance sheet
Current assets
99.4
88.6
Current liabilities
(24.9)
(17.8)
Current net assets
74.5
70.8
Non-current assets
17.0
15.7
Non-current liabilities
(2.4)
(2.3)
Non-current net assets
14.6
13.4
Net assets
89.1
84.2
Accumulated NCI
(39.9)
37.8
Summarised statement of comprehensive income
Revenue
102.5
82.8Prot after tax
6.9
5.9
Prot allocated to NCI
3.1
2.6
Dividends paid to NCI
(0.6)
(0.7)
Summarised cash ows
Cash ows from operating activities
4.0
12.7
Cash ows from investing activities
(3.1)
(1.4)
Cash ows from nancing activities
(1.4)
(1.7)
Net increase/decrease in cash and cash equivalents
(0.5)
9.6
34. Related Parties
All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Transactions between related parties that are Group subsidiaries are eliminated on consolidation.
The related parties identied by the Directors include joint ventures, associates and key management personnel.
To enable users of our nancial statements to form a view on the effects of related party relationships on the Group,
we disclose the related party relationship irrespective of whether there have been transactions between the related parties.
34.1 Transactions with joint ventures and associates
All transactions with joint ventures and associates are in the normal course of business. Transactions between the Group and
its joint ventures and associates are disclosed below:
2021
£m
2020
£m
Sales to joint ventures
4.8
3.8
Purchases from joint ventures
31.5
26.7
Purchases from associates
–
0.3
Dividends received
1.0
2.3
Trade payables owed to joint ventures
10.3
5.5
Trade receivables owed by joint ventures
1.3
0.6
Trade payables owed to joint ventures are settled net of trade receivables owed by joint ventures 60 days after the delivery
of goods or services. There are no loans to and from joint ventures.
Notes to the Group Financial Statements
continued
228
Vesuvius plc
Annual Report and Financial Statements 2021
34. Related Parties
continued
34.2 Transactions with key management personnel
There have been no transactions with key management personnel of the Group other than the Directors’ remuneration.
Directors’ remuneration is disclosed in Note 8 to the Group Financial Statements and in the Directors’ Remuneration Report.
34.3 Transactions with other related parties
There are no controlling shareholders of the Group as dened by IFRS. There have been no material transactions with the
shareholders of the Group.
Pension contributions to Group schemes are disclosed in Note 26 to the Group Financial Statements.
Other than the parties disclosed above, the Group has no other material related parties.
229
Our business Our performance Sustainability Governance
Financial Statements
Company Balance Sheet
As at 31 December 2021
Notes
2021
total
£m
2020
total
£m
Fixed assets
Investments 7
1,778.0
1,778.0Total xed assets
1,778.0
1,778.0
Current assets
Debtors – amounts falling due within one year
4.7
1.2
Cash at bank and in hand
–
–
Total current assets
4.7
1.2
Creditors – amounts falling due within one year
Bank loans and overdraft
–
(0.1)
Other creditors including taxation and social security
8
(979.8)
(955.4)Net current liabilities
(975.1)
(954.3)
Total assets less current liabilities
802.9
823.7
Net assets
802.9
823.7
Equity capital and reserves
Called up share capital
9
27.8
27.8Retained earnings
9
775.1
795.9Total shareholders’ funds
802.9
823.7
Company number 8217766
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own income statement.
During 2021, the Company recognised a prot of £32.7m (2020: £17.0m loss).
The Financial Statements on pages 229 to 236 were approved and authorised for issue by the Directors on 3 March 2022 and
signed on their behalf by:
Patrick André Guy Young
Chief Executive Chief Financial Ofcer
230
Vesuvius plc
Annual Report and Financial Statements 2021
Company Statement of Changes in Equity
For the year ended 31 December 2021
Notes
Share
capital
£m
Retained
earnings
£m
Total
£m
As at 1 January 2020
27.8 818.9 846.7
Comprehensive loss recognised for the year
– (17.0) (17.0)
Recognition of share-based payments
10 – 2.4 2.4
Dividend paid
6 – (8.4) (8.4)
As at 31 December 2020
27.8 795.9 823.7
As at 1 January 2021
27.8 795.9 823.7
Comprehensive income recognised for the year
– 32.7 32.7
Recognition of share-based payments
10 – 3.1 3.1
Purchase of ESOP shares
– (1.1) (1.1)
Dividend paid
6 – (55.5) (55.5)
As at 31 December 2021
27.8 775.1 802.9
231
Our business Our performance Sustainability Governance
Financial Statements
Notes to the Company Financial Statements
1. General Information
Vesuvius plc (‘Vesuvius’ or ‘the Company’) is a public company limited by shares. It is incorporated and domiciled in England
and Wales, United Kingdom, and listed on the London Stock Exchange. The nature of the company is a holding company.
The address of its registered ofce is 165 Fleet Street, London EC4A 2AE.
2. Basis of Preparation
2.1 Basis of accounting
The nancial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101) and the Companies Act 2006 as applicable to companies using FRS 101. The nancial
statements have been prepared under the historical cost convention.
The results of the Company are included in the preceding Group Financial Statements.
In these nancial statements, the Company has applied the exemptions available under FRS 101 in respect of the following
disclosures:
–
A cash ow statement and related notes (IAS 1 para 10(d) and IAS 7)
–
Disclosures in respect of capital management and nancial instruments (IAS 1 paras 134–136 and IFRS 7)
–
Disclosures in respect of related party transactions with wholly owned members of the Vesuvius plc Group (IAS 24)
–
Disclosures in respect of the compensation of key management personnel (IAS 24 para 17)
–
Disclosures in respect of fair value measurements (IFRS 13 paras 91–99)
–
The effects of new but not yet effective IFRSs (IAS 8 paras 30–31).
Under Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own prot and
loss account.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these
nancial statements.
2.2 Going concern
The Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in
operational existence for a period of at least 12 months from the date of approval of these nancial statements (disclosed in
Note 2.3 to the Group Financial Statements) and that there is no material uncertainty in respect of going concern. The net current
liabilities are due to amounts owed to subsidiary undertakings, therefore the Directors do not believe that they will affect the
Company’s ability to continue in operational existence. Accordingly, they continue to adopt a going concern basis in preparing
the nancial statements of the Group and the Company.
2.3 Accounting policy
Taxation
Both current and deferred tax are calculated using tax rates and laws that have been enacted, or substantively enacted, by the
balance sheet date.
Current tax payable is based on the taxable result for the year. Deferred taxation is recognised, without discounting, in respect
of all temporary differences that have originated, but not reversed, at the balance sheet date, with the exception that deferred
taxation assets are only recognised if it is considered more likely than not that there will be suitable future prots from which the
reversal of the underlying temporary differences can be deducted. Provision is made for the tax that would arise on remittance
of the retained earnings of overseas subsidiaries only to the extent that, at the balance sheet date, dividends have been accrued
as receivable. All other accounting policies are set out within the respective notes.
Notes to the Company Financial Statements
continued
232
Vesuvius plc
Annual Report and Financial Statements 2021
3. Critical Accounting Judgements and Estimates
For the below estimate, the Group does not have any key assumptions concerning the future, or other key sources of estimation
uncertainty in the reporting period, that are reasonably expected to have a signicant risk of causing a material adjustment to the
carrying amounts of assets/liabilities within the next nancial year. Nonetheless, this estimate has the potential to materially vary
over time and is therefore highlighted.
The Company assesses its investments in subsidiaries and other companies for impairment shortly before the Company’s
year-end or whenever events or changes in circumstances indicate that the recoverable amount of the investment could be less
than the carrying amount of the investment. If this is the case, the investment is considered to be impaired and is written down to its
recoverable amount. Judgement is required in the determination of the recoverable amount as the Company evaluates various
factors related to the operational and nancial position of the relevant investee business, appropriate discounting and long-term
growth rates. The annual investment impairment test is described in Note 7.3 below.
4. Employee Benets Expense
2021
£m
2020
£m
Wages and salaries
2.8
2.5
Social security costs
0.4
0.5
Share-based payments
0.1
1.3
Total employee benets expense
3.3
4.3
The total average number of employees for 2021 was 3 (2020: 3). As at 31 December 2021, the Company had 3 (2020: 3) employees.
Details of the Directors’ remuneration are disclosed in the Directors’ Remuneration Report on pages 144 and 145.
5. Audit and Non-Audit Fees
Amounts payable to PricewaterhouseCoopers LLP in relation to audit and non-audit fees are disclosed within Note 6 to the
Group Financial Statements.
6. Dividend Paid
2021
£m
2020
£m
Amounts recognised as dividends and paid to equity shareholders during the year
Interim dividend for the year ended 31 December 2020 of 3.1p per ordinary share
–
8.4
Final dividend for the year ended 31 December 2020 of 14.3p per ordinary share
38.7
–
Interim dividend for the year ended 31 December 2021 of 6.2p per ordinary share
16.8
–
55.5
8.4
A proposed nal dividend for the year ended 31 December 2021 of £40.5m (2020: £38.7m), equivalent to 15.0 pence (2020: 14.3
pence) per ordinary share, is subject to approval by shareholders at the Company’s Annual General Meeting on 18 May 2022
and has not been included as a liability in these nancial statements. If approved by shareholders, the dividend will be paid on
27 May 2022 to holders of ordinary shares on the register on 19 April 2022.
233
Our business Our performance Sustainability Governance
Financial Statements
7. Investments
7.1 Accounting policy
Shares in subsidiaries, associates and joint ventures are stated at cost less any impairment in value. Impairment is assessed in
accordance with Note 17.1 to the Group Financial Statements.
7.2 Analysis of investments
Shares in
subsidiaries
£m
As at 1 January 2021 and 31 December 2021
1,778.0
The subsidiaries, joint ventures and associates of Vesuvius plc, their country of incorporation and percentage ownership are set
out in Note 33 to the Group Financial Statements. With the exception of Vesuvius Holdings Ltd, whose ordinary share capital
was directly held by Vesuvius plc, the ordinary share capital of the other companies was owned by a Vesuvius plc subsidiary as
at 31 December 2021.
7.3 Impairment of investment in subsidiaries, associates and joint ventures
The Group carried out its investment impairment test as at 31 October 2021. The recoverable amount of the investment exceeded
its carrying value, therefore no impairment charges have been recognised. No further impairment indicators were identied up to
31 December 2021.
The cash ow predictions are based on nancial budgets and strategic plans approved by the Board. These assume a level
of revenue and prots which are based on both past performance and expectations for future market development and take
into account the cyclicality of the business in which the Group operates. In assessing the cash ows of the Parent’s investment in its
subsidiaries, the amounts payable by the Parent to subsidiaries are also taken into account. A sensitivity analysis was carried out
using reasonably possible changes to the key assumptions set out in Note 17.2 to the Group Financial Statements. No scenarios of
impairment were identied.
8. Other Creditors including Taxation and Social Security
2021
£m
2020
£m
Amounts owed to subsidiary undertakings
977.4
953.5
Accruals and other creditors
2.4
1.9
Total amounts falling due within one year
979.8
955.4
Amounts owed to subsidiary undertakings are interest free, have no xed date of repayment and are repayable on demand.
9. Issued Share Capital and Retained Earnings
9.1 Accounting policy
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
9.2 Analysis of issued share capital
The allotted, issued and fully paid ordinary share capital of the Company as at 1 January 2021 and 31 December 2021 was
278,485,071 shares of £0.10 each. 7,271,174 (2020: 7,271,174) shares of £0.10 each were held in Treasury and 884,856 (2020:
1,093,098) shares of £0.10 each were held by the Vesuvius Group employee share ownership plan trust (ESOP). The Company
has one class of shares in issue, ordinary shares. All shareholders enjoy the same rights in relation to these shares, including rights
in relation to voting at General Meetings of the Company, distribution of dividends and repayment of capital.
9.3 Distributable reserves
The Company had distributable reserves in excess of £765m as at 31 December 2021 (2020: £796m), subject to ling these
nancial statements with Companies House. When making a distribution to shareholders, the Directors determine prots
available for distribution by reference to guidance on realised and distributable prots under the Companies Act 2006 issued by
the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017.
The prots of the Company have been received in the form of dividends from subsidiaries and through court-approved capital
reduction. The availability of distributable reserves in the Company is dependent on those dividends meeting the denition of
qualifying consideration within the guidance and on available cash resources of the Group and other accessible sources of funds.
The distributable reserves are subject to any future restrictions or limitations at the time such distribution is made.
Notes to the Company Financial Statements
continued
234
Vesuvius plc
Annual Report and Financial Statements 2021
10. Recognition of Share-based Payments
10.1 Accounting policy
The Company operates an equity-settled share-based payment arrangement for its employees. Equity-settled share-based
payments are measured at fair value at the date of grant. For grants with market-based conditions attached to them, such as
total shareholder return, fair value is measured using a form of stochastic option pricing model. For grants with non-market-
based conditions, such as growth in headline earnings per share, fair value is measured using the Black-Scholes option pricing
model. The fair value is expensed on a straight-line basis over the vesting period with a corresponding increase in equity.
The cumulative expense recognised is adjusted for the best estimate of the shares that will eventually vest.
The Company recharges its subsidiaries for the IFRS 2 expense relating to their employees on an annual basis.
10.2 Prot and loss account recognition
The Company operates a number of different share-based payment schemes, the main features of which are detailed in the
Directors’ Remuneration Report and Note 27 to the Group Financial Statements. A total of £0.1m was charged to the prot and
loss account in the year with regard to share-based payments (2020: £1.3m).
10.3 Details of outstanding options
Number of outstanding awards
Awards
exercisable
as at
31 Dec
2021
Weighted
average
outstanding
contractual
life of
awards
years
Range of
exercise
prices
pence
As at
1 Jan 2021
Granted Exercised
Forfeited/
lapsed Expired
As at
31 Dec 2021
LTIP
1,110,699 391,786 (5,955) (295,946) nil 1,200,584 _ 8.3 n/a
Weighted average exercise price
nil nil nil nil nil nil _ n/a
Other plans
89,309 15,523 (28,246) – nil 76,586 _ 0.8 n/a
Weighted average exercise price
nil nil nil nil nil nil – n/a
For the awards exercised during 2021, the market value at the date of exercise was 531 pence per share.
Number of outstanding awards
Awards
exercisable
as at
31 Dec
2020
Weighted
average
outstanding
contractual
life of
awards
years
Range of
exercise
prices
pence
As at
1 Jan 2020
Granted Exercised
Forfeited/
lapsed Expired
As at
31 Dec 2020
LTIP 872,737 481,238 (243,276) – nil 1,110,699 – 8.4 n/a
Weighted average exercise price
nil nil nil nil nil nil – n/a
Other plans
76,920 12,389 – – nil 89,309 – 0.5 n/a
Weighted average exercise price
nil nil nil nil nil nil – n/a
For options exercised during 2020, the market value at the date of exercise ranged from 351 pence to 395 pence.
Details of market performance conditions are included in the Directors’ Remuneration Report.
As at 31 December 2021, the total options exercisable by all Group employees over the £0.10 ordinary shares and capable of
being satised through new allotments of shares or through shares held by the Company’s ESOP were as follows:
Years of
award/grant
Option
prices
Latest year
of exercise/
vesting
Number
of options/
allocations
outstanding
Long-Term Incentive Plan
2019–2021 nil 2031 1,939,964
Medium-Term Incentive Plan
2020–2021 nil 2023 472,447
Deferred Share Bonus Plan
2019–2021 nil 2024 76,586
235
Our business Our performance Sustainability Governance
Financial Statements
10. Share-based Payments
continued
10.3 Details of outstanding options
continued
Fair value of options granted under the LTIP during the year:
2021
EPS element TSR element
Fair value of options granted
538p 340p
Share price on date of grant
538p 538p
Expected volatility
n/a 39.2%
Risk-free interest rate
n/a 0.2%
Exercise price (per share)
nil nil
Expected term (years)
3 3
Expected dividend yield
nil nil
Vesting of 50% of shares awarded is based on the Group’s three-year total shareholder return (TSR) performance relative to that
of the constituent companies of the FTSE 250 (excluding investment trusts) and vesting of the remaining 50% of shares awarded
is based on headline EPS growth.
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the 2.8 years (2020:
2.8 years) prior to the grant date for the March 2020 grant. The risk-free rate of return was assumed to be the yield to maturity on
a UK xed gilt with the term to maturity equal to the expected life of the option. At the discretion of the Remuneration Committee,
award holders receive the value of dividends that would have been paid on their vested shares in the period between grant and
vesting. Accordingly, there is no discount to the valuation for dividends foregone during the vesting period.
11. Contingent Liabilities
Where the Company enters into nancial guarantee contracts to guarantee the indebtedness of other companies within its
Group, the Company considers these to be insurance arrangements and accounts for them as such. In this respect, the Company
treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required to
make a payment under the guarantee. Guarantees provided by the Company as at 31 December 2021 in respect of the liabilities
of its subsidiary companies amounted to £418.8m (2020: £362.7m), which includes guarantees of $146.0m, €198.0m and £28.0m
(2020: $146.0m and €180.0m) in respect of US Private Placement Loan Notes; £76.9m (2020: £53.5m) in respect of drawings
under the syndicated bank facility; £32.9m (2020: £32.9m) in respect of a guarantee provided to the Company’s UK subsidiary
which acts as Trustee for the Group’s UK pension plan; £2.6m (2020: £7.0m) in respect of guarantees issued to certain banks
covering their exposure on derivative contracts governed by ISDA agreements; and £4.1m (2020: £1.7m) in respect of overdraft
facilities utilised by certain of the Company’s subsidiary companies. The guarantee in respect of the UK pension plan is over all
present and future pension liabilities of the plan and the contingent liability amount represents the net decit on a buy-out basis
as shown in the most recent valuation.
Vesuvius has extensive international operations and is subject to various legal and regulatory regimes, including those covering
taxation and environmental matters. Several of the Company’s subsidiaries are parties to legal proceedings, certain of which
are insured claims arising in the ordinary course of the operations of the company involved, and are aware of a number of issues
which are, or may be, the subject of dispute with tax authorities. Whilst the outcome of litigation and other disputes can never
be predicted with certainty, having regard to legal advice received and the insurance arrangements of the Company and its
subsidiaries, the Directors believe that none of these matters will, either individually or in the aggregate, have a materially
adverse effect on the Company’s nancial condition or results of operations.
Notes to the Company Financial Statements
continued
236
Vesuvius plc
Annual Report and Financial Statements 2021
12. Related Parties
All transactions with related parties are conducted on an arm’s-length basis and in accordance with normal business terms.
Transactions between related parties that are wholly owned Company subsidiaries are not disclosed in this Note.
The related parties identied by the Directors include joint ventures, associates and key management personnel. To enable
users of our nancial statements to form a view on the effects of related party relationships on the Company, we disclose the
related party relationship, irrespective of whether there have been transactions between the related parties.
All transactions with joint ventures and associates are in the normal course of business. Further details of joint ventures and
associates are included in Note 33 to the Group Financial Statements.
There have been no transactions with key management personnel of the Company other than the Directors’ remuneration.
Directors’ remuneration is disclosed in the Annual Report on Directors’ Remuneration.
There are no controlling shareholders of the Company as dened by IFRS. There have been no material transactions with the
shareholders of the Company.
Pension contributions are disclosed in Note 26 to the Group Financial Statements.
Other than the parties disclosed above, the Company has no other material related parties.
237
Our business Our performance Sustainability Governance
Financial Statements
2021
2020 2019 2018 2017
Steel Division
Revenue £m 1,195.3 1,236.7 1,148.7
1,171.5
1,045.4Trading prot
£m 120.1 128.3 100.4
102.0
76.4Return on sales
% 10.0 10.4 8.7
8.7
7.3Employees: year-end
no. 7,677 7,766 7,930
8,323
7,619Foundry Division
Revenue £m 515.1 561.3 535.2
471.4
412.9Trading prot
£m 61.3 68.9 65.1
40.4
25.0Return on sales
% 11.9 12.3 12.2
8.6
6.1Employees: year-end
no. 2,819 3,043 3,080
2,881
2,735Five-Year Summary: Divisional Results from Continuing Operations
Shareholder Information (Unaudited)
Enquiries
The share register is managed by Equiniti, who can be contacted
if you have any Vesuvius shareholding queries.
Equiniti Limited
Aspect House, Spencer Road
Lancing, West Sussex, BN99 6DA
United Kingdom
Telephone*
0371 384 2335 (UK only)
+44 121 415 7047 (Outside the UK)
Website: www.shareview.co.uk
Email: customer@equiniti.com
For the hard of hearing, Equiniti offers a Textel service which
can be accessed by dialling 0371 384 2255 (or +44 121 415 7028
if calling from outside the UK).
Any shareholder enquiries not related to the share register should
be sent by email to shareholder.information@vesuvius.com or by
letter to the Company Secretary at the registered ofce.
Registered Ofce and Group Head Ofce
Vesuvius plc
165 Fleet Street
London EC4A 2AE
United Kingdom
Telephone: +44 (0)20 7822 0000
Registered in England and Wales No. 8217766
LEI: 213800ORZ521W585SY02
Vesuvius Website
Shareholder and other information about the Company, including
details of the current and historical share price, can be accessed
on the Vesuvius website: www.vesuvius.com.
You can view the online Annual Report 2021 on the website.
Shareview and Electronic Communication
Equiniti’s website, www.shareview.co.uk, enables shareholders
to register online to view details of their shareholdings. To access
online information on your shareholding, you will require your
shareholder reference number, which can be found at the top
of your share certicate or on your dividend conrmation.
The Shareview website provides answers to frequently asked
questions and information useful for the management of
investments, including indicative share valuations and dividend
payment details.
Shareholders can register on Shareview to receive shareholder
communications electronically, including the Company’s Annual
Report and Financial Statements, rather than receiving them in
paper form. The registration process requires shareholders to
input their shareholder reference number. To receive shareholder
communications in electronic form, shareholders should select
‘email’ as their mailing preference. Once registered, shareholders
will receive an email notifying them each time a shareholder
communication has been published on the Vesuvius website.
Share Dealing Service
The Company’s shares can be traded through most banks,
building societies or stockbrokers. UK resident shareholders can
also buy and sell shares by telephone or online using Equiniti’s
Shareview dealing service.
Telephone 0345 603 7037 between 8.00 am and 4.30 pm on any
business day (excluding public holidays in England and Wales)
Website: www.shareview.co.uk/dealing
Email: sharedealing@equiniti.com
The shareholder reference number (at the top of your share
certicate or on your dividend conrmation) is required to use
the dealing service.
ShareGift
ShareGift, the charity share donation scheme, is a free service
for shareholders wishing to give shares to a wide range of UK
charitable causes. It is particularly useful for those shareholders
who may wish to dispose of a small quantity of shares where the
market value makes it uneconomic to sell on a commission basis.
Further information can be obtained from ShareGift.
Telephone: +44 (0)20 7930 3737
Website: www.sharegift.org
Email: help@sharegift.org
Dividend Reinvestment Plan
Equiniti offers a dividend reinvestment plan through which
shareholders can use their Vesuvius cash dividends to buy
additional shares in Vesuvius. Further details, including how to
sign up and the terms and conditions of the plan, are available
from the Share Dividend Helpline.
Telephone: 0371 384 2335
(or +44 121 415 7047 if calling from outside the UK)
Website: www.shareview.co.uk
Overseas Payment Service
Equiniti provides a dividend payment service in over 90 countries
that automatically converts dividend payments into local
currency and pays the funds into a shareholder’s bank account.
Further details, including an application form and the terms
and conditions of the service, are available from Equiniti.
Telephone: +44 (0)121 415 7047
Website: www.shareview.co.uk
By post: Equiniti, Aspect House, Spencer Road, Lancing,
West Sussex, BN99 6DA, United Kingdom
Please quote Overseas Payment Service, the Company’s name
and your shareholder reference number.
Financial Calendar
2022 Annual General Meeting 18 May 2022
* Lines are open Monday to Friday 8.30 am to 5.30 pm (excluding public holidays in England and Wales).
Vesuvius plc
Annual Report and Financial Statements 2021
238
Analysis of Ordinary Shareholders
Investor type
Shareholdings
As at 31 December 2021
Private
Institutional
and other
Total
1–1,000
1,001–
50,000
50,001–
500,000
500,001+
Number of holders
2,362
519
2,881
2,232
452
132
65
Percentage of holders
81.99%
18.01%
100%
77.47%
15.69%
4.58%
2.26%
Percentage of shares held
0.48%
99.52%
100%
0.11%
1.34%
7.98%
90.57%
Share Fraud – Spot the Warning Signs
Investment scams are designed to look like genuine investments.
Have you been …
–
Contacted out of the blue
–
Promised tempting returns and told the investment is safe
–
Called repeatedly
–
Told the offer is only available for a limited time?
If so, you might have been contacted by fraudsters.
How to Avoid Share Fraud
1. Reject cold calls
If you have been contacted by telephone, email or post, or via a
third party or at a seminar or exhibition, with an offer to buy or sell
shares, the chances are that it’s a high-risk investment or a scam.
You should treat any offer with extreme caution. The safest thing
to do is to ignore the approach and if you were contacted by
phone to hang up on the call.
2. Check if the rm is authorised by the Financial Conduct
Authority (FCA) and recorded on the Financial Services register
at https://register.fca.org.uk/
The Financial Services Register is a public record of all the rms
and individuals in the nancial services industry that are, or have
been, regulated by the Prudential Regulation Authority and/or
the FCA. If there are no contact details on the Register or if the
rm claims the Register is out of date, call the FCA Consumer
Helpline on 0800 111 6768.
If you’re dealing with an overseas rm, you should check with the
regulator in that country and also check the scam warnings from
foreign regulators.
3. Get impartial advice
Think about getting impartial nancial advice before you hand
over any money. Seek advice from someone unconnected to the
rm that has approached you.
Reporting a Scam
If you suspect that you have been approached by fraudsters,
please tell the FCA Consumer Helpline by contacting them on
0800 111 6768 (or +44 20 7066 1000 from outside the UK) or by
using the share fraud reporting form at www.fca.org.uk/scams,
where you can nd out more about investment scams.
If you have lost money to investment fraud, you should report it
to Action Fraud on 0300 123 2040 (or +44 300 123 2040 from
outside the UK) or online at www.actionfraud.police.uk.
Find out more at www.fca.org.uk/scamsmart.
239
Our business Our performance Sustainability Governance
Financial Statements
Glossary
5S
Five Steps to improve housekeeping
and therefore workplace safety and
efciency: separate, sort, shine,
standardise and sustain
8D
Eight Disciplines: an eight-step
methodology to resolve customer,
supplier and internal quality issues
AGM
Annual General Meeting
CG Statement
The Corporate Governance Statement
CO
2
Carbon dioxide
CO
2
e
Carbon dioxide equivalent
Code
The UK Corporate Governance Code
Company
Vesuvius plc
CORE Values
or Values
The Group’s key values of Courage,
Ownership, Respect and Energy
C
OVID
-19 or
COVID
-19
pandemic
Coronavirus disease (C
OVID
-19), the infectious disease caused by the newly
discovered coronavirus, and the pandemic
that has arisen from this
DO
Dangerous occurrence
DOFR
Dangerous occurrence frequency rate
DSBP
Deferred Share Bonus Plan
DTR
The Disclosure and Transparency Rules
of the UK Financial Conduct Authority
EBITDA
Trading prot before depreciation
and amortisation of non-acquired
intangible charges
ECL
Expected Credit Loss
EEMEA
Eastern Europe, Middle East and Africa
EMEA
Europe, Middle East and Africa
EPS
Earnings per share
ESOP
Employee Share Ownership Plan
EU
European Union
EU27
The 27 European Union countries
FRC
Financial Reporting Council
FRS
Financial Reporting Standards
FTSE 250
Equity index whose constituents are the
101st to 350th largest companies listed
on the London Stock Exchange in terms
of their market capitalisation
FX
Foreign exchange
GEC
Group Executive Committee
GHG
Greenhouse gas
Group
Vesuvius plc and its subsidiary companies
IAS
International Accounting Standards
IFRS
International Financial Reporting
Standards
KPI
Key Performance Indicator
LMS
Learning Management System
LTI
Lost time injury
LTIFR
Lost time injury frequency rate, a KPI which
calculates the number of LTIs per million
hours worked
Median
The middle number in a sorted list of
numbers
MTI
Medically treated injury
MTIFR
Medically treated injury frequency rate
PwC
PricewaterhouseCoopers LLP
NAFTA
Canada, Mexico and USA
Ordinary share
An ordinary share of 10 pence in the capital
of the Company
R&D
Research and development
Scope 1
emissions
Direct CO
2
and CO
2
e emissions from owned
or controlled sources
Scope 2
emissions
Direct CO
2
and CO
2
e from indirect emissions
from the generation of purchased
electricity, steam, heating and cooling
consumed by the Company
Scope 3
emissions
All other direct CO
2
and CO
2
e emissions that
occur in the Company’s value chain
Senior
Leadership
Group
The Group Executive Committee plus the
most senior Vesuvius managers worldwide,
in terms of their contribution to the Group’s
overall results and to the execution of the
Group’s strategy. This group comprises
between 150 and 160 members
Top
Management
Key leadership roles reporting directly to
members of the GEC
TSR
Total shareholder return
Turbo S
The Vesuvius safety training programme
UK GAAP
UK Generally Accepted Accounting
Principles
VISO
Vesuvius Isostatic
VSP
Vesuvius Share Plan
Vesuvius plc
Annual Report and Financial Statements 2021
240
Designed and produced by
Friend
www.friendstudio.com
Print: Pureprint Group
This report has been printed on Image Indigo Offset which is
FSC® certied and made from 100% Elemental Chlorine Free
(ECF) pulp. The mill and the printer are both certied to
ISO 14001 environmental management system.
The report was printed by a CarbonNeutral® printer.
These images were taken by Vesuvius
colleagues who were asked to submit
photographs of different aspects of
their work in a staff competition:
Page 22
Photography by Saugata Datta,
Process Specialist Dry Processes, Vesuvius
Visakhapatnam
Page 76
Photography by Michel Wissink,
Development & Service Technician,
Vesuvius Hengelo
Vesuvius plc
Annual Report 2021
Vesuvius plc
165 Fleet Street
London
EC4A 2AE
T
+44 (0)20 7822 0000
www.vesuvius.com
Visit our online annual report at
report2021.vesuvius.com