Castings: FY25 a tough year but signs that underlying markets are beginning to improve

Castings Plc is a market leading iron casting and machining group based in the UK, supplying both the domestic and export markets. The company is listed on the LSE main market and has a market cap of £120m. Full year results to 31 March 2025 were released on 11 June 2025.

We were delighted to welcome CEO, Adam Vicary and FD, Steve Mant, to a webinar for private investors to talk about the excellent full year results and the prospects for the current year . A recording of the webinar is available here.

The past year to March 2025 was a challenging year for Castings which suffered volume declines of 21%. In turn profits fell to £4.8m, down 75% due to the operating gearing inherent in the business.  However the company has a very strong balance sheet and used this strength to invest in a new foundry facility positioning them well for future growth. The final dividend was held which meant the dividend for the year increased by 0.4%. The forward schedules are more encouraging from Autumn 2025 and energy prices are beginning to come down.

The quarter by quarter performance showed a decline in each of the first 3 quarters before pricing up in Q4 and this has continued into the first 2 months of the current year. The German market was especially tough but the US market has been stable and also started well in the current year. There will be a 10% tariff but no business has been lost so far. Lower volumes impacted the energy hedges which cost an unexpected £1.5m in the past year. This is not expected to be repeated due to a new energy hedging strategy.

There was significant investment made in capacity over the last year with £17m spent in total including investment in a new 12,000 tonne foundry line, the first new foundry line since 2008. The additional line will provide increased flexibility, production of larger parts and enable the company to supply additional market segments such wind, electric trucks, agriculture and off-road vehicles.  

Castings Ductile was established during the year following the purchase of foundry assets in Scunthorpe and the business was back producing in July. The facility will produce larger iron castings particularly to the energy segment. Siemens energy has returned as a customer as has British Steel and there are 20% more customers compared to when the business was purchased. Capacity is running at 30% currently so there is lots of opportunity for improvement. It’s early days and losses were made in the past year but this business is expected to make a positive overall contribution in the current year.

Looking at the long term heavy truck registrations chart the cyclicality of the business can be clearly seen with the most recent peak seen in 2023. Volvo are estimating a small increase in registrations in 2025 and Castings Autumn schedules also point towards a small increased in demand.  Castings supply the top six European OEM’s.

Looking at the financials in more detail all line items were impacted by the 20% decline in heavy truck volumes. Revenues fell 21% to £177m, operating profit fell 75% to £4.8, illustrating the operating leverage of the business and the operating margin fell from 8.8% to 2.7%. The company maintained its progressive dividend policy and increased the dividend marginally to 18.4p. The track record over the last 25 years on dividends has been exceptionally strong with increases every year but the GFC and Covid. After investment of £19.8m the company ended the year with net cash of £15.6m. Of the new investment, £11m was spent on the new foundry line and another £5m is expected in the current year out of a total expected capex spend of £10m.

It is worth pointing out that the foundry performance includes the newly acquired Castings Ductile loss of £1.3m and the electricity penalty cost of £1.5m neither of which will be repeated in 2026. Without these the foundry margin would have been 1.6% higher at 3.3%. The machine shop has been profitable since 2023 and profits per tonne remain above those of the foundry. Gross margin from the foundry was maintained at 30% during the year and the business remains cash generative.

As a reminder, Castings is a green iron producer. This means that it doesn’t use any virgin material, only melting scrap metal, and 100% renewable power, including their own 1MW power supply. The continued investment in facilities is also impressive and they are one of the leaders in manufacturing automation. The company now has 65 robotic handling and processing cells and that investment is continuing in the current year. A number of projects in AI are underway although their current view is that applications for industry are not currently sufficiently developed.

The top 4 customers make up 62% of revenues and this number has been fairly consistent over recent years.

Looking at the outlook for the current year volumes have shown a modest improvement (to the tune of 3-5%) and the Autumn schedules indicate this continuing into the Autumn. The new line and new plant in Scunthorpe are providing cross selling opportunities. Headwinds remain with energy costs still 30-40% higher than Europe and over 5x those of the US despite the recent energy price falls. The minimum wage and NI increase have also added significant costs to the business. Capex was £19.8m in the previous year, is expected to be £10m in the current year before falling to £5m after that.

Castings already has a strong net cash balance sheet but having gone through a capex hump in FY25 the cash levels are expected to be improved further in the coming years. The company is in a very good position for growth with plenty of capacity to take advantage of any cyclical improvement and the ability to diversify into other markets. The strong balance sheet and consistent track record of dividend growth should provide investors with further comfort. The last year has clearly been a tricky one for management to navigate but they have steered the business calmly through the choppy waters and are well positioned for the future.

A recording of the webinar is available here. If you would like further information on other webinars organised by Yellowstone Advisory, please contact info@yellowstoneadvisory.com