TIDMRHIM
RNS Number : 3982I
RHI Magnesita N.V.
21 March 2018
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
Annual Financial Report 2017
RHI Magnesita has today published its Annual Financial Report
for the financial year ended 31 December 2017 (the "Annual Report
2017").
In compliance with Listing Rule 9.6.1 a copy of the Annual
Report 2017 will be submitted to the National Storage Mechanism and
will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM. The Annual Report 2017 is also
available to view and download on the RHI Magnesita website at
www.rhimagnesita.com.
This announcement also contains as appendices additional
information for the purposes of compliance with DTR 6.3.5 (1) of
the UK Disclosure and Transparency Rules. The information below is
extracted, in full unedited text, from the Annual Report 2017. Page
numbers and cross references in the extracted information refer to
page numbers and cross-references in the Annual Report. This
announcement should be read in conjunction with and is not a
substitute for reading the full Annual Report 2017.
Enquiries:
RHI Magnesita N.V.
Eduardo Gotilla, Head of Corporate Finance and Investor
Relations
Tel +44 (0) 20 3823 3661
E-mail: eduardo.gotilla@rhimagnesita.com
Stefan Rathausky, Head of Corporate Communications
Tel +43 50213-6059
E-mail: stefan.rathausky@rhimagnesita.com
RESULTS FOR THE YEARED 31 DECEMBER 2017
Transformational year and strong financial performance
21 March 2018, London. RHI Magnesita N.V. (LSE: RHIM), a global
leading supplier of refractory products, systems and services,
announces its audited results for the year ended 31 December
2017.
Reported (audited) Adjusted Pro-forma (unaudited)
--------------------------------------- -------------------------------------------------
Change
Financial Summary 2017 2016 2017 2016 %
EURm EURm EURm EURm
-------------------- -------------------- ----------------- ------------------- ------------------- -------
Revenue 1,946.1 1,651.2 2,677.2 2,409.1 11%
EBITA 56.7 126.6 304.1 219.3 39%
+230
EBITA margin 2.9% 7.7% 11.4% 9.1% bps
Dividend per share 0.75 0.75 n/a n/a n/a
-------------------- -------------------- ----------------- ------------------- ------------------- -------
Highlights
-- Successful completion of the merger of RHI and Magnesita and
the subsequent admission of RHI Magnesita N.V. to the Premium
Segment of the London Stock Exchange
-- Integration progressing well, with senior management in
place. "One face to the customer" deployed in sales and fully
integrated production and supply chains
-- Adjusted pro-forma revenue of EUR2,677.2 million, up 11%,
driven by sales growth in both steel and industrial divisions,
supported by a more favourable market environment
-- Adjusted pro-forma EBITA of EUR304.1 million, up 39%
-- Adjusted pro-forma EBITA margin of 11.4%, up 230bps from the
previous year, driven by higher sales and the Company's initiatives
to improve operational efficiencies
-- Net Debt/Adjusted pro-forma EBITDA of 1.9x, after the
acquisition of the control of Magnesita in October 2017
-- Faster realization of synergies by one year: EUR40 million in
2018 and the balance of EUR70 million in 2019
-- The Board of Directors will propose a dividend of EUR0.75 per
share, to be paid on 2 July 2018. The proposed dividend is subject
to the approval by the Annual General Meeting of Shareholders, to
be held on 7 June 2018
Commenting on the results, Chief Executive Officer, Stefan
Borgas and Chairman, Herbert Cordt, said:
"2017 was a truly transformational year for the business, which
will go down in the company history as the year when we
successfully implemented and completed the merger of RHI and
Magnesita. The listing on the Premium Segment of the London Stock
Exchange at the end of October was a resounding success for RHI
Magnesita. The merger reshapes the landscape of the sector as RHI
Magnesita is now the global market leader and the driving force of
the industry.
In addition to the cross-border merger, RHI Magnesita recorded a
strong operating performance in the financial year which is
attributable to the company's efficient operations, improving
macroeconomic environment and the engagement of all employees
worldwide. Global steel production outside China increased by 4%.
The combined adjusted pro-forma revenue is up by 11% while adjusted
pro-forma EBITA grew by 39%. The continued shortage of raw
materials from China resulted in higher material input costs, which
are being gradually passed-on in higher prices. Supplying our
customers reliably throughout this period continues to be our
primary focus. We would like to thank our customers for their
continued support and trust.
2018 will be another important year, which has started well for
RHI Magnesita and the Board is looking forward to the coming year
with confidence."
For further enquiries, please contact:
RHI Magnesita N.V.: Stefan Borgas, CEO
Octavio Lopes, CFO
Eduardo Gotilla, Head of Corporate Finance and Investor
Relations
Stefan Rathausky, Head of Corporate Communications
+44 (0) 20 3823 3661
+43 50213-6059
Conference call
The Company will host a teleconference at 9:00am (GMT) this
morning to discuss the results. For conference call details, please
visit the RHI Magnesitas' website
https://ir.rhimagnesita.com/conference-call/.
About RHI Magnesita
RHI Magnesita is the result of the combination of RHI and
Magnesita to form the global leading supplier of high-grade
refractory products, systems and services which are indispensable
for industrial high-temperature processes exceeding 1,200degC in a
wide range of industries, including steel, cement, non-ferrous
metals, and glass, among others. With a vertically integrated value
chain, from raw materials to refractory products and full
performance-based solutions, RHI Magnesita serves more than 10,000
customers in nearly all countries around the world.
The Company has unmatched geographic diversification with more
than 14,000 employees in 35 main production sites and more than 70
sales offices. RHI Magnesita intends to use its global leadership
position in terms of revenue, greater scale, complementary product
portfolio and diversified geographic presence around the world to
target opportunistically those countries and regions benefitting
from more dynamic economic growth prospects.
For more information please visit: www.rhimagnesita.com
Strategic priorities
Enabling enhanced strategic growth by joining forces in the
course of 2017, we created the globally leading refractory producer
RHI Magnesita.
-- Strategic rationale of the merger
This merger of RHI and Magnesita can clearly be seen as a
strategic combination that captures synergies, drives efficiencies
by establishing a leading market position, whilst strengthening our
global geographic cluster, leveraging technology capabilities and
raw material integration.
The strategic rationale for the combination was to complement
one another's footprints and become a more competitive, vertically
integrated global provider of products, systems and services in the
refractory industry. As a result of our extended geographical reach
and product and services portfolio, RHI Magnesita has enhanced
access to the core markets, customer base and geographical regions.
Upon completion of the combination, RHI Magnesita has become the
leading player in the global refractory market. A market, which is
otherwise characterized by high fragmentation and intense
competition with more than 2,000 competitors worldwide. Though, we
see clear indications that the market will consolidate strongly
especially driven by efforts of the Chinese authorities in the
mid-term to long-term.
Due to the increased scale, enhanced market position and cost
synergies of the merger, RHI Magnesita is well positioned to
compete and grow further in this consolidating industry. RHI
Magnesita's defined strategy is to be seen in this light and
focuses on capturing growth options while delivering identified
synergies and pivots around our vision to become the driving force
of the refractory industry. Thus, it is comprehensively developed
around five main topics, which we are tackling over the medium
term: Markets, Portfolio, Technology, Competitiveness and People.
These pillars give us the framework to structurally purse growth
ambitions while ensuring success in the integration and not losing
technological focus.
Our focus for the year ahead
-- Markets: Global lead with strong local organizations and significant market positions
Our objective is to be a clear market leader in all major
markets. Taking into account the differing market trends and our
position in the respective regions, a selective market approach
will be taken. In developed markets such as North America, Europe
and South America, we will focus on ensuring full integration of
the companies and capitalizing all synergy potentials. In
developing countries such as China and India, our strategic
approach is more focused on enhancing our local market positions by
strengthening the local teams and our operational footprint.
-- Portfolio: Comprehensive refractory product portfolio
including basic, non-basic, functional products and services in
high performance segments
RHI Magnesita has already developed a leading market position in
basic products especially in linings for the steel industry. It is
our clear goal, to further extend our current market position in
high end/quality application through product portfolio extensions
especially in non-basic and functional product segments. RHI
Magnesita, with its high vertical integration, is able to rely more
on stable supply of raw materials. Recycling refractory material is
important not only for economic but also for environmental
reasons.
-- Technology: Top solution provider in the refractory industry
with an extensive portfolio based on
innovative technologies and digitalization
RHI Magnesita has always attached great importance to research
and development. The innovative power is based on decades of hard
work and driving edge technological research. RHI Magnesita's
global research team consists out of almost 300 employees, of which
one third have masters and PHDs in refractories or similar topics,
working out of 2 research hubs and 2 centres globally.
Additionally, RHI Magnesita's technical marketing staff of around
400 employees services all customers worldwide. We will continue
investing in R&D to create products, which have a distinct
competitive advantage by costs or by product performance.
Furthermore, we will deepen our knowledge about our customers'
processes in order to maintain our competitive advantage.
-- Competitiveness: Cost competitive and safe production and
sales network supported by lowest cost
G&A services
The recent market environment is characterized by excess
capacities in many customer industries and aggressive export
strategy of Chinese producers. We expect this to continue but on a
lower level than before. Though, we believe that the high pressure
on the market prices and on the profitability of manufacturers, and
subsequently also on suppliers will remain.
Therefore, competitiveness is the backbone of RHI Magnesita's
future success. This includes execution of derived synergies but
also to extract cost efficiencies along the whole value chain. This
remains essential in the prevailing market environment. Therefore,
we have commenced various projects to ensure the optimal set-up of
our plants and our global supply chain.
-- People: Hire, retain and motivate talent and nurture a
meritocratic, performance driven, client-focused and friendly
culture
Our employees are the single most important success factor. The
merger of RHI and Magnesita has created a true global player and
this we need to ensure in all levels of our corporation. Therefore,
we are developing ways to further enhance global careers, enhancing
geographical, gender and functional diversity and generally about
to establish a culture of trust and openness. We believe in our
young talents and built a meritocratic environment in which they
can nurture.
-- Link to remuneration
To ensure the full focus of our top management, strategic
priorities for 2018 and beyond have been allocated to respective
managers and will be a core base for the long-term remuneration
system of RHI Magnesita.
Divisional Performance
RHI Magnesita comprises two divisions, Steel and Industrial.
With its Steel Division, RHI Magnesita provides its customers with
a broad range of customized solutions and comprehensive packages
for steel production consisting of refractories (basic and
non-basic mixes and bricks), machinery, flow control systems, and
Full Line Service solutions. The Industrial Division provides
refractory solutions for the cement, lime, non-ferrous metals and
glass industries as well as the environment, energy and chemicals
sectors.
Steel Division
Refractories demand from the steel industry is directly
associated with the number of furnaces in operation (with respect
to linings) and the steel volumes produced (with respect to flow
control systems). In the long run, the number of furnaces usually
correlates with the development of steel production. Therefore, in
the long run the overall refractories demand from the steel
industry correlates with steel production.
Sales to the Steel Division accounted for 67.3% of the Company's
total revenue in 2017, compared to 64.9% in 2016. Revenue amounted
to EUR1,308.8 million in 2017, up by 22.2% when compared to 2016.
This improvement was largely due to the strong pick-up in steel
production in 2017, in addition to the two months of Magnesita's
sales that started to be consolidated in November 2017. As a
result, gross profit in 2017 stood at EUR302.7 million,
representing 23.1% of the Steel Division's sales 290 bps higher
than 2016.
According to the World Steel Association, steel output in 2017
reached 1.69 billion tonnes, up 5.3% from 2016. In Europe, the
improvement of the underlying market was the main driver for RHI
Magnesita's sales performance in the region during the year.
A combination of antidumping measures, economic growth and
robust exports boosted the performance of sectors using steel.
Steel output in EU increased by 4.1 % compared with 2016, with the
strongest growth recorded in Austria, France, Germany, Italy,
Poland and Spain.
In North America (excl. Mexico), steel output increased by 4.6%
year-on-year. After a few years of decline, the US steel industry
recovered on the back of higher internal demand, stronger economic
activity and supported by the trade cases enacted in 2016. Steel
output in the US posted a 4% increase year-on-year, despite higher
imports, which continue to impact the local industry. Capacity
utilisation improved to 75% in 2017 from 70% in 2016. Sales in the
region outperformed the market, as key growth initiatives came into
fruition, with two new EAF plants starting production during the
year.
Higher deliveries in Latin America were driven by the 7.7% surge
in steel production year-on-year, with Brazil (+9.9%), Mexico
(+6.3%) and Argentina (+12.1%) posting strong performance.
Production in Brazil was driven by the positive momentum for flats
- led by the auto sector demand - and exports, led mainly by the
ramp-up of CSP. Likewise, the expansion in Mexico was boosted by
the combination of higher internal demand, which grew by 4.4%
year-on-year, and exports, which jumped 15.4%. In Argentina, the
positive performance was driven by higher demand and supported by
the renaissance of public works and infrastructure projects.
Steel production in the CIS remained virtually flat
year-on-year. Lower production in Ukraine was offset by
higher output in Russia and Moldova. Business in Russia, the
most important market in the region, recorded mid-single digit
growth, with higher deliveries to EAF, ladle and tundish
applications. Moreover, market share gains in flow control
contributed to sales growth in the region.
Performance in Africa was slightly positive. The Egyptian market
reacted positively to the implementation of import duties on
billets from several countries, in addition to the stronger local
demand. In South Africa, steel production was adversely affected by
higher imports from China, but rebounded in the second half as
antidumping and import duties led refractory consumption to return
to normal levels.
The market environment in Asia-Pacific was dominated by China
and its effect on all steel-producing countries, as it remains a
major exporter to the region. In 2017, several countries
implemented antidumping measures on steel products from China.
Initiatives by the Chinese government to cut capacity, improve
product quality, rationalise and modernise the local industry led
to lower Chinese exports and higher steel prices. Countries like
Thailand, the Philippines and Malaysia were among the biggest
beneficiaries of such developments, with steel output increasing
significantly over 2016. Concurrently, Vietnam has become one of
the largest steel producers in the region after the ramp-up of
Formosa Ha Tinh Steel Corporation during 2017. Finally, steel
output in India recorded a 6.2% increase over 2016. Sales in
Asia-Pacific recorded double-digit growth in 2017, with positive
performance across the product spectrum.
Industrial Division
RHI Magnesita supplies its Industrial Division customers with
high-grade refractory systems. Through the
continuous expansion of its technological capabilities and
problem-solving expertise, RHI Magnesita can provide a wide range
of services required by the complex demands of its customers.
Demand for Cement/Lime is closely linked to the construction
industry. Production of, and demand for, nonferrous metals are
closely associated with the market price of such non-ferrous
metals, including nickel, zinc, copper, aluminium, tin and lead.
Demand for glass is also linked to the construction industry as
well as automobile industry. In the environmental, energy and
chemicals business, demand is closely linked to the development of
the oil price, which is the main driver for new projects.
Sales to this Division accounted for 29.7% of the Company's
total revenue, compared to 32.6% in 2016. Revenue from sales to the
Industrial Division amounted to EUR577.6 million in 2017, up 7.2%
compared to 2016. This improvement was largely explained by the
positive performance of sales to the cement segment, in addition to
the two months of Magnesita's sales that started to be consolidated
in November
2017. Gross profit for 2017 amounted to EUR130.2 million,
representing 22.5% of the Industrial Division sales. In comparison
to 2016, gross margin was 70 bps lower in 2017.
Cement/Lime
Revenue contribution of the cement business increased from 35.2%
of the Industrial Division sales in 2016 to 38.8% in 2017, and as a
percentage of the Company's total revenue, represented 11.7% in
2017 (2016: 11.5% in 2016). Sales to cement customers amounted to
EUR226.8 million in 2017, up 19.8% from the EUR189.3 million
obtained in 2016. Such improvement was driven by a significantly
better market environment in 2017, especially in the second half of
the year. The raw material crisis in China also influenced the
demand for refractories as customers anticipated orders to secure
supply.
Regarding the market environment in 2017, demand for cement in
China continued to rise in 2017 with the development of
construction projects. China is by far the largest cement producer
in the world and the largest RHI Magnesita market for cement
products. Nevertheless, the Chinese government has recently
prohibited capacity expansion in 2018 with the objective to
eliminate inefficient capacity and replace it with more modern and
environmentally friendly facilities.
In India, the second largest cement producer worldwide, demand
declined year-on-year, influenced by lower investments in
infrastructure and housing projects. Sales in the region remained
nearly stable over 2016, with new contracts offsetting the weaker
underlying demand.
In Europe, cement production performed positively after several
years of constant decline. In North America, the year was also very
positive for the cement industry, with higher demand and
consequently higher capacity utilization. RHI Magnesita sales
exceeded market growth, buoyed by a greenfield project in the
region.
Lower activity in Latin America drove weaker performance of the
repair business in the region. Demand in Brazil, which suffered
massive declines in the previous years, has apparently stabilised,
despite still being at low levels.
Nonferrous metals
Revenue contribution of the non-ferrous business was slightly
lower in 2017, from 27.2% of the Industrial Division sales in 2016
to 25.3% in 2017. As a percentage of the Company's total revenue,
this segment represented 7.6% in 2017 (2016: 8.9% in 2016). Sales
to nonferrous customers remained stable in 2017, at EUR147.7
million, compared to EUR146.5 million in 2016.
Despite recovering metal prices in 2017, there were virtually no
greenfield projects in most of the non-ferrous segments in the
year, consequently, reducing most of the business to standard
repairs with very few major new relining activities. Nickel, which
had recovered since the mid-2016, lost ground in the first half of
2017. Zinc continued the strong upwards rally to close the year at
the highest level in five years, while copper only picked up
significantly after the summer. Lead and aluminium also ended the
year at significantly higher levels compared to 2016.
In 2017, sales to the lead sector were weaker, especially
because of two important relining projects in Mexico and the US
delivered in 2016. Furthermore, demand from copper and aluminium
customers in China was slightly weaker in 2017. On the other hand,
higher sales were recorded to the Chinese copper and nickel
industries. A positive trend continued in Africa with capacity
expansion planned or already in development. The highlight in the
region was the supply for a new plant in Algeria, in addition to
several repair orders in Algeria, Libya, Nigeria and South Africa,
which also contributed to the positive performance in the region.
RHI Magnesita also supplied to large relining projects in
ferronickel in New Caledonia and for a ferrochrome Kazakh
smelter.
Other process industries
Other process industries are comprised mostly of glass, EEC
(environment, energy and chemicals) and mineral industries. In
2017, this segment accounted for 35.9% of the Industrial Division
sales (2016: 37.6%) and 10.8% of the Company's total revenue (2016:
12.3%). Revenue in 2017 amounted to EUR209.8 million, up by 3.5%
over the EUR202.7 million recorded in 2016.
The strategic decision to carve out the fused cast businesses
led to higher profitability in the glass business. This decision
was based on the increasing price pressure driven by the oversupply
from India and China. Demand of refractories for the glass industry
improved during the year, especially from flat glass, as greenfield
projects globally came into operation throughout the year. For the
container glass segment, demand remained nearly flat year-on-year.
Repair activities started to recover, however, from more efficient
plants in which refractory life is usually longer.
Sales to the EEC segment were flat compared to 2016, as oil and
gas prices had recovered to a level that could trigger new
investments.
Financial Review
Adjusted Pro-forma Results (unaudited)
The reported statutory results consolidate ten months of results
for RHI and two months of results for RHI Magnesita, which means
that the consolidated financial statements only include two months
of results of Magnesita Refratários. As such, in an effort to
provide comparable information for the two-year time period, the
Directors have carefully considered it appropriate to provide and
analyse adjusted pro-forma results for the combined Group as if it
had always existed.
Given the changes in capital structure arising from the
acquisition of Magnesita, the historical interest, tax and dividend
charges are not deemed to be meaningful. As a result, adjusted
pro-forma results have only been provided down to EBIT.
Adjusted pro-forma results are stated before the impact of Items
such as: divestments, restructuring expenses, merger-related
adjustments and other non-merger related other income and expenses,
which are generally non-recurring.
The tables below reconcile the reported results to adjusted
pro-forma results for 2017:
Reported Magnesita Prelim. Merger-related Foreign Disposed Non-merger Adjusted pro-forma 2017 Adjusted
2017 Jan-Oct PPA adjustments exchange business(3) related pro-forma
Results 2017 effect(1) variations(2) Other 2016
Income/
Expenses
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
(i) (ii) (iii) (iv) (v) (vi) (vii) (i)+(ii)+(iii)-(iv)-(v)-(vi)-(vii)
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
Revenue 1,946.1 846.1 - - - 115.1 - 2,677.2 2,409.1
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
COGS (1,485.6) (614.0) 2.2 - - (98.1) - (1,999.3) (1,822.1)
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
Gross Profit 460.5 232.1 2.2 - - 17.0 - 677.9 587.0
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
SG&A (292.6) (130.8) (8.2) (24.4) - (7.3) - (399.8) (382.1)
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
Other
Operating
Income &
Exp. (124.8) (96.1) - (162.3) (48.2) - (10.4) (0.0) -
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
EBIT 43.1 5.2 (6.0) (186.7) (48.2) 9.6 (10.4) 278.1 204.9
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
Amortization (13.6) (4.4) (8.2) - - (0.1) - (26.0) (14.4)
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
EBITA 56.7 9.6 2.2 (186.7) (48.2) 9.7 (10.4) 304.1 219.3
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
EBITA margin 2.9% 1.1% 8.5% 11.4% 9.1%
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
Depreciation (59.9) (29.9) - - - (2.0) (3.1) (84.7) (90.2)
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
EBITDA 116.6 39.5 2.2 (186.7) (48.2) 11.8 (7.3) 388.8 309.5
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
EBITDA margin 6.0% 4.7% 10.2% 14.5% 12.8%
-------------- ---------- ---------- ---------- --------------- -------------- ------------ ----------- ----------------------------------- ----------
(1) Purchase price allocation
(2) Foreign exchange variations booked within Other Operating Income & Expenses
(3) (i) Divestments related to the merger-control remedies
imposed by European Commission of the production sites in Marone,
Italy (RHI), Lugones, Spain (RHI) and Oberhausen, Germany
(Magnesita) and fused cast business in San Vito, Italy, and
Sherbinska, Russia; and (ii) the suspension of production in Aken,
Germany.
Revenue
Adjusted pro-forma revenue for 2017 was EUR2,677.2 million, a
11.1% increase over the adjusted pro-forma revenue of EUR2,409.1
million achieved in 2016. The increase reflects sales growth in
both the Steel and Industrial Divisions, supported by strong
industrial production globally.
Adjusted pro-forma sales to steel totalled EUR1,913.1 million,
up by 14.2% over 2016 adjusted pro-forma sales. The robust
performance was largely driven by the 5.3% increase in world steel
production in 2017. According to the World Steel Association,
global steel production totalled 1.69 billion tonnes, compared with
1.61 billion tonnes in 2016, with output expanding in almost all
regions, with steel production increasing simultaneously in Europe,
North America and South America, after a few years of production
declines. In addition, RHI Magnesita's growth initiatives evolved
constructively, especially in the US, Brazil and India, where
deliveries growth surpassed underlying steel market growth.
Adjusted pro-forma revenue of the Industrial Division grew by
2.6% in 2017, to EUR658 million, compared to EUR642.1 million in
2016. Growth was led by the cement segment, especially in the
second half of the year. The raw material crisis in China also
influenced the demand for refractories, as some customers
anticipated orders to secure supply. Despite recovering metal
prices in 2017, there were virtually no greenfield projects in the
non-ferrous segment in the year, thus reducing most of the business
to standard repairs with very few major new relining activities.
Demand for refractories from the glass industry improved during the
year, especially from flat glass, as some projects came online
during the year. For the container glass segment, demand remained
nearly flat year-on-year. Finally, sales to the EEC segment were
flat compared to 2016, as oil and gas prices have not recovered yet
to a level that would trigger substantial new investments
Reported Group revenue amounted to EUR1,946.1 million, up by
17.9% over 2016 as a result of growth in both steel and industrial
sales, as explained above, and the consolidation of Magnesita
revenues from 1 November 2017. Reported revenue from the Steel
Division totalled EUR1,308.8 million in 2017, whereas the
Industrial Division amounted to EUR577.6 million.
Adjusted pro-forma EBITA
Adjusted pro-forma EBITA was EUR304.1 million, 38.7% above the
adjusted pro-forma obtained in 2016. Adjusted pro-forma EBITA
margin reached 11.4%, up 230 bps compared to the adjusted pro-forma
margin in 2016. The improvement was mostly driven by higher sales
with resulting better fixed cost dilution, in addition to the
Company's initiatives to improve efficiency in its operations.
The refractory raw material markets suffered a dramatic change
after the Chinese government enforced stricter environmental
controls that caused temporary and permanent closures of raw
material facilities during the year. This measure caused a
significant imbalance between supply and demand and, consequently,
Chinese-sourced raw material prices skyrocketed. Prices for the two
main magnesite-based raw materials, dead-burned magnesia and
electro-fused magnesia, from China have more than doubled during
the year and remain well above historical levels. This environment
created significant challenges for all refractory producers and
forced price adjustments across the supply chain. Moreover, the
environment created scarcity of important raw material for the
refractory industry across the globe. RHI Magnesita's partially
vertically integrated business model, with high quality raw
material sources, allowed the Company to ensure supply to its
customers while managing to maintain competitive costs.
Reported EBITA, which does not exclude transaction costs, merger
related adjustments, foreign exchange variations, disposed
businesses and non-merger related expenses, which are generally
non-recurring, amounted to EUR56.7 million in 2017, with a 2.9%
margin.
Dividends
For the financial year 2017, the Board of Directors will propose
a dividend of EUR0.75 per share, which corresponds to a dividend
payment of EUR33.6 million for the shareholders of RHI Magnesita
N.V.. The proposed dividend is subject to the approval by the
Annual General Meeting of Shareholders on June 7, 2018 and was not
recognized as a liability in the consolidated financial statements
2017.
Working capital
Working Capital performance is measured in both absolute values
and as a percentage of total sales. Cash flow generation from
trading working capital amounted to EUR10.8 million, with a higher
consumption of inventories being offset by an improvement on the
trade payables terms. Absolute values for working capital at year
end amounted to EUR610.2 million. Working Capital intensity,
measured as a percentage of adjusted pro-forma 2nd half annualized
revenue, stood at 22.2% at the end of 2017. At the end of 2016, RHI
and Magnesita, had combined working capital equal to EUR667.8
million, equivalent to 27.8% of adjusted pro-forma 2016
revenue.
Net debt
Net debt amounted to EUR750.8 million at year-end, compared to
EUR298.8 million in the previous year. The net debt number already
includes the acquisition of the control of Magnesita in October
2017 and the proceeds of the merger-related divestments received in
November 2017. Leverage, measured by net debt/ adjusted pro-forma
EBITDA, stood at 1.9x at year-end.
Synergies
We continue to successfully implement our planned integration
actions and remain very confident in achieving significant
synergies. We expect synergies of at least EUR40 million to flow
into the profit and loss in 2018 and EUR70 million are now expected
to be fully captured by 2019. Total cash restructuring costs to
achieve these synergies are projected to amount to EUR70 million,
of which EUR53 million have already been expensed in 2017. Most
cash outflows related to these restructuring costs will be incurred
over 2018.
90% of the initial synergies are a result of expected (i)
SG&A reductions, (ii) lower procurement costs with external
suppliers due to the consolidation of the procurement efforts of
the two companies after the merger and (iii) optimization of the
enlarged production network, with reductions in production and
supply chain costs. At this point, these initiatives are either
already implemented or backed by a comprehensive execution plan. A
dedicated integration team is working on several additional fronts
which may lead to incremental savings that will be communicated
when they reach an adequate maturity level.
Due to the very high volatility in the global raw material
markets the planning uncertainty has increased and could provide
additional risks but also upsides.
RHI Magnesita expects to complete a very significant refinancing
of its capital structure over the course of 2018, taking advantage
of its strong financial standing and significantly lower leverage
ratios than anticipated when these facilities were originally
structured. With that, the Group is confident that net interest
expenses will be reduced by at least EUR10 million in 2018 and
EUR20 million in 2019, in comparison with the adjusted pro-forma
net interest expenses of approximately EUR50 million expected for
RHI Magnesita in 2018, in light of the facilities outstanding as of
31 December 2017, notwithstanding the increase of treasury rates in
the G10.
Integrated Tender Offer
The Group is required - in accordance with Brazilian laws and
regulations - to make a mandatory public offer in Brazil that must
be addressed to all remaining Magnesita shareholders and must be
made on the same terms and conditions as those made available to
the Sellers under the SPA, including as to purchase price and form
of consideration.
The Group has decided to combine the mandatory offer with a
so-called "Delisting Tender Offer" in an Integrated Tender Offer
and filed the respective request with the Brazilian Securities
Commission in November 2017.
According to the original and subsequent filings, shareholders
of Magnesita will have the option of selling each Magnesita share
in exchange for (i) R$17.81, adjusted by SELIC (the Brazilian
benchmark interest rate) from 26 October 2017 until the date of the
settlement of the auction of the Integrated Tender Offer, plus
0.1998 RHI Magnesita share or (ii) for a cash-only alternative
consideration.
The consideration of the cash-only alternative offer will be the
higher of (i) R$31.09, adjusted by SELIC from 26 October 2017 until
the date of the settlement of the auction of the Integrated Tender
Offer, and (ii) R$35.56, not adjusted by SELIC.
Since the cash plus shares option was equivalent to R$57.73 on
28 February 2018, based on RHI Magnesita's share price and the
exchange rate prevailing on that date, the Group expects that
substantially all of Magnesita's minority shareholders will tender
their shares and opt for the cash plus shares consideration. If
100% of Magnesita minority shareholders tender their shares and opt
for the cash plus shares consideration, the Group will disburse
R$445.7 million, adjusted by SELIC from 26 October 2017 until the
date of the settlement of the auction of the Integrated Tender
Offer, and issue an additional 5,000,000 shares.
The Integrated Tender Offer is expected to be completed during
2018.
Other Reported Financial KPIs
Finance costs
Net financial result amounted to EUR30.6 million in 2017,
compared to EUR21.2 million in 2016. The increase was essentially
driven by the consolidation of two months of Magnesita's P&L in
2017 and, to a lower extent, the increase of the net debt due to
the acquisition of Magnesita at the end of October 2017.
Taxation
The Group taxation charge, excluding specific adjusting items
(i.e. non-capitalized tax losses and temporary differences of the
financial year, deferred tax expense due to tax rate changes and
one off non-deductible expenses), was EUR6.3 million (2016: EUR25.8
million). The effective tax rate, excluding specific adjusting
items, was 26.6% (2016: 24.4%). Note 44 of the financial statements
provides additional information on the Group's taxation charge.
Net result
RHI Magnesita reported a loss of EUR12.9 million in 2017,
compared to a EUR75.9 million profit in 2016. The loss was driven
by transaction costs, merger related adjustments, foreign exchange
variations, disposed businesses and non-merger related expenses,
which are generally non-recurring.
Pension
The Group sponsors multiple pensions plans whose liability are
subject to future asset performance, interest rate fluctuations,
actuarial assumptions, benefit plan changes and government
regulations. The majority of the Group's obligations fall under
defined benefit pension plans in its subsidiaries in Austria,
Germany, United States and Brazil. The total net liability amounted
to EUR308.7 million at the end of 2017. Note 28 of the consolidated
financial statements provides additional information on the Group's
pension plans.
Cash flow
Cash flow generation in 2017 was mainly driven by the increase
in free cash flow from operations of EUR221.6 million, an increase
of 36.2% over the EUR162.7 million generated in 2016. The net cash
flow from investing activities totalled a positive income of
EUR33.3 million, driven by the net cash inflow of EUR45.1 million
from acquired subsidiaries (cash disbursement less the cash and
cash equivalent received from the acquired company). Additionally,
the proceeds from the divestment businesses in the amount of
EUR30.6 million also led to a positive cash flow from investing
activities. Net cash flow from financing activities added up
EUR16.4 million, which resulted from the funding raised relating to
the acquisition of Magnesita, as described in Note 26. The Group
had an overall cash generation of EUR271.3 million in 2017.
Capital expenditure
We continue to invest in our strategic priorities with
investments of EUR72.0 million in 2017, in line with the EUR70.8
million invested in the previous year.
Going concern and viability statement
After conducting a review of management analysis, the Directors
have reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For this reason, the Directors consider it appropriate to adopt the
going-concern basis in preparing the Annual Report.
The Directors have assessed the viability of the Group over a
three-year period to December 2020, the period covered by the
latest business plan, taking account of the Group's current
position, individual asset performance forecasts, current net
gearing ratio as disclosed in note 58 of the consolidated financial
statements and the potential impact of the principal risks.
The business plan considers the Group's cash flow, capital
commitments, financial resources, debt covenants and other key
financial risks. Part of the process for the listing at the London
Stock Exchange, was a detailed stress test based on this business
plan. This test reviewed the viability considering major risk
(including changing market conditions, access to financial
instruments, ability to capture the planned synergies, exchange
rate scenarios, production interruption) and focused in detail on
the period from 2018 till June 2019. Because the business plan
covers a longer period and the impact of the considered risks was
modelled for the full span, the Directors could assess the
viability for the Group over a three-year period.
The Directors believe that the Group is well-placed to manage
its principal risks successfully. In making this statement the
Directors have considered the resilience of the Group, taking
account of its current position, the risk appetite, the principal
risks facing the business in severe but reasonable scenarios, and
the effectiveness of any mitigating actions. Based on this
assessment, the Directors have a reasonable expectation that the
Group and Company will be able to continue in operation and meet
its liabilities as they fall due over the period to December 2020.
The Directors have determined that the three-year period to
December 2020 is an appropriate period having regard to the Group's
business model, strategy principal risks and uncertainties, and
viability.
Principal Risks and Uncertainties
Risk framework
A bottom up identification and assessment process was conducted
for the first time in the combined company after the closing of the
merger transaction. This process is based on the direct and full
integration of all functional and operational managers, uniform
structures and methods as well as the use of a professional
software and makes sure that material risks can be discussed and
monitored adequately by the senior executives and the Board.
The Board is aware of the central importance of a formally
approved risk policy and risk appetite specifying the nature and
extent of the risks acceptable to the Group. The future design of
such a risk policy for the combined company and its alignment with
the corporate strategy are currently in working in progress and in
preparation for discussion with the Board.
Risks considered to be unacceptable because of their natures or
their potential financial or qualitative impacts are being
mitigated by appropriate strategies. The implementation and
effectiveness of the defined mitigation measures are being reviewed
continuously. For that purpose, the impacts of risks are considered
before and after the implementation of those mitigation
measures.
The risks identified in the following are those the Board
considers to be the principal ones and which may have a significant
impact on the results of the Group and on its ability to achieve
its strategic objectives. They may occur independently from each
other or in combination. In case they occur in combination their
impact may be reinforced. Also, the Group is facing other risks
than the one mentioned here, some of them being currently unknown
or not considered to be material.
Internal Control System
The Board is ultimately responsible for maintaining effective
risk management, which includes the Group's risk governance
structure, the Group's system of internal controls and the Group's
internal audit approach.
The Group has implemented an internal audit function, with a
dual reporting line to the CFO and the Audit Committee. The
internal audit function is an integral part of the Group's risk
management framework, providing assurance to the Audit Committee
and the Board on the effectiveness of mitigation actions and
internal controls.
The internal audit function conducts its activities in a risk
based manner, developing an audit plan, based on the results of the
risk assessment of various business units and strategic priorities
that are approved by the Audit Committee.
The internal audit function conducts systematic and ad hoc
operational audits and special investigations, reporting the most
relevant observations and recommendations regarding the
effectiveness of the risk management and internal control
procedures to the Audit Committee.
The group has in place a risk management and an internal control
system in relation to its financial reporting process and the
process of preparing the financial statements. These systems
include policies and procedures to ensure that adequate accounting
records are maintained and transactions are recorded accurately and
fairly to permit the preparation of financial statements in
accordance with the applicable accounting standards.
The Board reviews the effectiveness of the system of internal
financial, operational and compliance controls and the risk
management. The Board examines whether the system of internal
controls operated effectively throughout the year and will make
recommendations when appropriate.
These systems are based on the three lines of defence model that
the Company has implemented, supported by an internal control
guideline reflecting the responsibility for risk management and
internal controls at all management levels.
The internal audit function supports these systems by activities
based on risk oriented audits and the Company's internal control
guideline and standards.
For the accounting process, an accounting handbook is available
that addresses all the internal control issues into the accounting
process.
No matter how comprehensive a risk management and control system
may be, it cannot be assumed to be exhaustive, nor can it provide
certainty that it will prevent negative developments from occurring
in the Group's business and business environment or that response
to risk will be fully effective. The Group's risk
management framework is designed to avoid or mitigate rather
than to eliminate the risks associated with the accomplishment of
the Group's strategic objectives. It provides reasonable assurance
but not absolute assurance against material misstatement or
loss.
In 2016, the Group had not identified any major failings in its
internal risk management and control system.
Principal Risks Mitigation
-------------------------- ------------------------------------ ---------------------------------
Macroeconomic environment Changes in global economic Diversified customer base
and condition of and adverse political developments in term of industries
customer industries used to and are expected and geographies
to have a noticeable impact Diversified product portfolio
on the Group's revenue and in terms of technology
profitability. and prices
The demand for refractory Technological leadership
products is directly influenced Optimization of the production
by steel production, the network to increase cost
investment climate, metal flexibility
and energy prices and the Continuous monitoring
production methods used by of revenue and profitability
customers'. performance
Due to the Group's cost structure,
fluctuations in sales volume
have an
impact on the utilization
of the production capacities,
and consequently on the
Group's profitability.
-------------------------- ------------------------------------ ---------------------------------
Fluctuations in Due to the Group's global Active balance sheet and
exchange rates and sales and production activities, exposure management
energy prices, revenue and profitability Improvement of energy
increasing volatility may be impacted by currency efficiency
of raw material fluctuations. Vertical integration and
prices The Group relies on external usage of own raw material
supply of energy and raw Supply chain optimization
material for its production
activities. Fluctuations
in demand and/ or supply
on the global markets have
a significant impact on the
prices and hence on the production
costs for refractory products.
-------------------------- ------------------------------------ ---------------------------------
Business interruption As a producing company, the Diversified production
and supply chain Group is exposed to business network in terms of geographies
interruption risk resulting Centralized supply chain
either from natural catastrophes, management allowing production
fire, machinery breakdown transfers and substitutions
or supply chain disruption. in case of disruption
The Group partly relies on Operational risk management
a small number of production and maintenance policies
sites or a small number of Risk based investment
external suppliers for certain policy
materials. Global insurance coverage
The inability to produce
or supply those materials
may have a significant impact
on the Group's ability to
produce and deliver its products.
-------------------------- ------------------------------------ ---------------------------------
Regulatory and compliance Full compliance with laws Development and implementation
risks and of best practices through
regulations is a matter of a code of conduct and
course for the further compliance policies
Group. Nevertheless, like and procedures
many other Implementation of an effective
internationally operating internal control system,
corporations, it in particular in exposed
is confronted with increasing processed
regulatory Global communication and
complexity and is exposed training of compliance
to regulatory programs
and compliance risks which Whistle blowing system
may result in (Compliance Helpline)
financial losses or operational Ethical values supported
restrictions by corporate culture
-------------------------- ------------------------------------ ---------------------------------
Environment, health Controlled emissions and Usage of recycling material
& safety risks usage of potentially hazardous wherever possible
materials are inherent to Selection of raw materials
the production of refractory and additives according
products. Regulatory changes to ecological criteria
in this area may result in Regular environmental
higher production costs and audits and risk monitoring
additional investment needs. at all sites
Also the risk of uncontrolled Regular legal compliance
emissions at our production checks
sites exists and may result Worldwide Health & Safety
in high financial losses policies
and liabilities. Health & Safety objectives
Especially at our production defined as goals for top
sites, employees and contractors executives
may be exposed to Health Quality management
& Safety hazards which cannot
be completely eliminated.
Also our products may potentially
cause accidents at the customers'
sites.
-------------------------- ------------------------------------ ---------------------------------
Risks related to Considerable integration Preparation of integration
the merger efforts are necessary to at an early stage
deliver the planned synergies Dedicated project team
and the expected benefits Continuous monitoring
of the merger. The risks of risk and performance
associated with the merger Establishment of a strong,
include for example the diversion common corporate culture
of management attention,
operational disruptions and
increased employee and/or
customer churn.
-------------------------- ------------------------------------ ---------------------------------
Statement of Directors' responsibilities
The Directors are responsible for preparing the Company's Annual
Report. The Company's Annual Report comprises the Strategic Report,
the Governance Report, the Consolidated Financial Statements, the
Company's Financial Statements and some other information. The
Directors are responsible for preparing the Annual Report in
accordance with applicable law and regulations. The Directors are
required by law to prepare the Annual Report for each financial
year. The Directors have prepared the Annual Report in accordance
with International Financial Reporting Standards ("IFRS") as
adopted by the European Union and the relevant provisions of the
Dutch Civil Code. The Directors must not approve the Annual Report
unless they are satisfied that it gives a true and fair view of the
state of affairs of the Group and the Company and of the profit or
loss of the Group for that period. In preparing the Annual Report,
the Directors are required to:
(a) select suitable accounting policies and then apply them consistently;
(b) make judgements and accounting estimates that are reasonable and prudent;
(c) state whether applicable IFRS as adopted by the European
Union and the relevant provisions of the Dutch Civil Code have been
followed, subject to any material departures disclosed and
explained in the Annual Report; and
(d) prepare the Annual Report on the going concern basis, unless
it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose, with reasonable accuracy at any time,
the financial position of the Company and the Group and enable them
to ensure that the Annual Report complies with applicable law and,
as regards the consolidated financial statements, Article 4 of the
IAS Regulation. They are also responsible for safeguarding the
assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
With reference to section 5.25c paragraph 2c of the Dutch Act on
Supervision, each of the Directors, whose names and functions are
listed in the Governance section, confirm that, to the best of
their knowledge:
-- the Company's financial statements and the consolidated
financial statements, which have been prepared in accordance with
IFRS as adopted by the European Union and the relevant provisions
of the Dutch Civil Code, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Group;
-- the Annual Report gives a true and fair view on the situation
on the balance sheet date, the development and performance of the
business and the position of the Company and the Group companies of
which the financial information is included in the Annual Report
and includes a description of the principal risks and uncertainties
that the Company faces; and
-- having taken all matters considered by the Board and brought
to the attention of the Board during the financial year into
account, the Directors consider that the Annual Report, taken as a
whole is fair, balanced and understandable. The Directors believe
that the disclosures set out in the Annual Report provide the
information necessary for shareholders to assess the Company's
position, performance, business model and strategy.
After conducting a review of management analysis, the Directors
have reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future.
For this reason, the Directors consider it appropriate to adopt the
going-concern basis in preparing the Annual Report.
Forward looking statements
The consolidated financial statements presented here are
consistent with the criteria of international accounting standards
- IFRS issued by the International Accounting Standards Board -
IASB, based on audited financial information. Nonfinancial
information contained herein, as well as other operational
information, were not audited by independent auditors and may
include forward-looking statements and reflects the current views
and perspectives of the management on the evolution of
macro-economic environment, conditions of the mining and
refractories industries, company performance and financial results.
Any statements, projections, expectations, estimates and plans
contained in this document that do not describe historical facts,
and the factors or trends affecting financial condition, liquidity
or results of operations, are forward-looking statements and
involve several risks and uncertainties.
This document should not be construed as legal, tax, investment
or other advice. This document does not constitute an offer, or
invitation, or solicitation of an offer, to subscribe for or
purchase any securities, and neither any part of this document nor
any information or statement contained herein shall form the basis
of or be relied upon in connection with any contract or commitment
whatsoever. Under no circumstances, neither the Company nor its
subsidiaries, directors, officers, agents or employees be liable to
third parties (including investors) for any investment decision
based on information and statements in this document, or for any
damages resulting therefrom, corresponding or specific.
The information presented or contained in this document is
current as of the date hereof and is subject to change without
notice. RHI Magnesita has no obligation to update it or revise it
in light of new information and / or in face of future events,
safeguard the current regulations which we are submitted to. This
document and its contents are proprietary information of the
Company and may not be reproduced or circulated, partially or
completely, without the prior written consent of the Company.
Consolidated Financial Statements 2017
Consolidated Statement of Financial Position
as of 31.12.2017
in EUR million Notes 31.12.2017 31.12.2016
------------------------------------------------ ----- ---------- ----------
ASSETS
Non-current assets
Property, plant and equipment (11) 901.3 521.8
Goodwill (12) 210.4 37.8
Other intangible assets (13) 217.6 71.1
Investments in joint ventures and associates (14) 30.5 20.5
Other non-current financial assets (15) 25.1 18.9
Other non-current assets (16) 24.2 17.7
Deferred tax assets (17) 180.4 144.8
------------------------------------------------ ----- ---------- ----------
1,589.5 832.6
Current assets
Inventories (18) 676.6 365.3
Trade and other current receivables (19) 530.0 399.1
Income tax receivables (20) 13.5 9.3
Other current financial assets (21) 34.1 3.0
Cash and cash equivalents (22) 442.4 182.9
------------------------------------------------ ----- ---------- ----------
1,696.6 959.6
------------------------------------------------ ----- ---------- ----------
3,286.1 1,792.2
------------------------------------------------ ----- ---------- ----------
EQUITY AND LIABILITIES
Equity
Share capital (23) 44.8 289.4
Group reserves (24) 576.2 219.3
---------- ----------
Equity attributable to shareholders of RHI Magnesita
N.V. 621.0 508.7
Non-controlling interests (25) 138.7 15.3
------------------------------------------------ ----- ---------- ----------
759.7 524.0
Non-current liabilities
Non-current financial liabilities (26) 983.8 327.2
Other non-current financial liabilities (27) 55.5 66.9
Deferred tax liabilities (17) 11.7 13.5
Provisions for pensions (28) 308.7 236.8
Other personnel provisions (29) 82.5 80.6
Other non-current provisions (30) 53.8 4.5
Other non-current liabilities (31) 9.0 6.9
------------------------------------------------ ----- ---------- ----------
1,505.0 736.4
Current liabilities
Current financial liabilities (26) 241.8 156.0
Other current financial liabilities (27) 17.4 15.6
Trade payables and other current liabilities (32) 671.4 312.7
Income tax liabilities (33) 16.1 18.4
Current provisions (34) 74.7 29.1
------------------------------------------------ ----- ---------- ----------
1,021.4 531.8
------------------------------------------------ ----- ---------- ----------
3,286.1 1,792.2
------------------------------------------------ ----- ---------- ----------
Consolidated Statement of Profit or Loss
from 01.01.2017 to 31.12.2017
in EUR million Notes 2017 2016
----------------------------------------------------- ----- --------- ---------
Revenue (35) 1,946.1 1,651.2
Cost of sales (36) (1,485.6) (1,294.8)
----------------------------------------------------- ----- --------- ---------
Gross profit 460.5 356.4
Selling and marketing expenses (37) (125.0) (105.2)
General and administrative expenses (38) (167.5) (134.5)
Other income (39) 91.2 102.7
Other expenses (40) (216.1) (103.3)
----------------------------------------------------- ----- --------- ---------
EBIT 43.1 116.1
Interest income (41) 5.6 4.1
Interest expenses (42) (27.1) (17.5)
Other net financial expenses (43) (9.1) (7.8)
--------- ---------
Net finance costs (30.6) (21.2)
Share of profit of joint ventures and associates (14) 11.0 10.9
----------------------------------------------------- ----- --------- ---------
Profit before income tax 23.5 105.8
Income tax (44) (36.4) (29.9)
----------------------------------------------------- ----- --------- ---------
Profit after income tax (12.9) 75.9
----------------------------------------------------- ----- --------- ---------
attributable to shareholders of RHI Magnesita
N.V. (18.4) 74.0
attributable to non-controlling interests (25) 5.5 1.9
in EUR
Earnings per share (basic and diluted) (53) (0.45) 1.86
Consolidated Statement of Comprehensive Income
from 01.01.2017 to 31.12.2017
in EUR million Notes 2017 2016
----------------------------------------------------- ----- ------ ------
Profit after income tax (12.9) 75.9
----------------------------------------------------- ----- ------ ------
Currency translation differences
Unrealised results from currency translation (7) (44.3) (1.9)
Deferred taxes thereon (44) 1.7 (0.6)
Current taxes thereon (0.4) (1.9)
Reclassification reserves to profit or loss (7) 40.7 (2.0)
Deferred taxes thereon (44) (5.7) (0.1)
Current taxes thereon (0.5) (0.4)
Cash flow hedges
Unrealised results from fair value change (56) 0.6 0.4
Deferred taxes thereon (44) (0.1) (0.2)
Reclassification reserves to profit or loss (56) 0.5 0.0
Deferred taxes thereon (44) (0.1) 0.0
Fair value changes of available-for-sale financial
instruments
Unrealised results from fair value change (55) 0.0 0.1
Reclassification reserves to profit or loss (55) 0.0 (0.1)
Items that will be reclassified subsequently
to profit or loss, if necessary (7.6) (6.7)
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans (28) (11.3) (10.2)
Deferred taxes thereon (44) 2.9 3.8
Share of other comprehensive income of joint
ventures (14) (0.1) (0.1)
----------------------------------------------------- ----- ------ ------
Items that will not be reclassified to profit
or loss (8.5) (6.5)
Other comprehensive income after income tax (16.1) (13.2)
----------------------------------------------------- ----- ------ ------
Total comprehensive income (29.0) 62.7
----------------------------------------------------- ----- ------ ------
attributable to shareholders of RHI Magnesita
N.V (28.5) 60.5
attributable to non-controlling interests (25) (0.5) 2.2
Consolidated Statement of Cash Flows
from 01.01.2017 to 31.12.2017
in EUR million Notes 2017 2016
----------------------------------------------------- ----- ------- ------
Profit after income tax (12.9) 75.9
Adjustments for
income tax 36.4 29.9
depreciation and amortisation charges 72.7 65.1
impairment losses of property, plant and equipment
and intangible assets 19.8 8.9
income from the reversal of investment subsidies (1.2) (1.0)
(reversals of impairment losses)/impairment
losses on securities 1.9 (0.5)
losses from the disposal of property, plant
and equipment 1.5 0.3
gains from the disposal of securities and
shares 0.0 (0.9)
losses from the disposal of subsidiaries 19.3 4.1
interest result 21.5 13.4
share of profit of joint ventures and associates (11.0) (10.9)
other non-cash changes 82.6 (8.9)
Changes in
inventories (112.4) 29.0
trade receivables and receivables from long-term
construction contracts 12.1 4.3
other receivables and assets 7.6 (10.0)
provisions (15.2) (25.2)
trade payables 111.1 26.9
prepayments received on orders 9.1 1.4
other liabilities 20.6 (1.5)
----------------------------------------------------- ----- ------- ------
Cash flow from operating activities 263.5 200.3
Income tax paid less refunds (41.9) (37.6)
----------------------------------------------------- ----- ------- ------
Net cash flow from operating activities (47) 221.6 162.7
----------------------------------------------------- ----- ------- ------
Investments in subsidiaries net of cash 45.1 0.0
Cash flows from the sale of subsidiaries net
of cash 30.6 (4.6)
Investments in property, plant and equipment
and intangible assets (72.0) (70.8)
Cash inflows from the sale of property, plant
and equipment 2.7 3.5
Investments in/ cash inflows from non-current
receivables (0.2) 0.0
Investments in securities (11.8) 0.0
Cash inflows from the sale of securities and
shares 21.8 6.1
Dividends received from joint ventures and
associates 10.8 9.5
Investment subsidies received 1.2 0.4
Interest received 5.1 3.0
----------------------------------------------------- ----- ------- ------
Net cash flow from investing activities (48) 33.3 (52.9)
----------------------------------------------------- ----- ------- ------
Capital expenses for the issue of shares (3.0) 0.0
Payments to non-controlling interests (0.6) 0.0
Dividend payments to shareholders of the Group (29.9) (29.9)
Dividend payments to non-controlling interests (1.1) (0.6)
Proceeds from non-current borrowings and loans 459.8 1.6
Repayments of non-current borrowings and loans (375.6) (29.0)
Changes in current borrowings (8.3) (5.8)
Interest payments (24.9) (17.0)
----------------------------------------------------- ----- ------- ------
Net cash flow from financing activities (49) 16.4 (80.7)
----------------------------------------------------- ----- ------- ------
Total cash flow 271.3 29.1
----------------------------------------------------- ----- ------- ------
Change in cash and cash equivalents 271.3 29.1
----------------------------------------------------- ----- ------- ------
Cash and cash equivalents at beginning of
year 182.9 149.7
Changes due to currency translation (11.8) 4.1
Cash and cash equivalents at year-end (51) 442.4 182.9
Total interest paid (50) 25.6 17.5
Total interest received (50) 5.1 3.2
----------------------------------------------------- ----- ------- ------
Consolidated Statement of Changes in Equity
from 01.01.2017 to 31.12.2017
Additional
Share paid-in
in EUR million capital capital Mandatory reserves
---------------------------------------------------- -------- ---------- --------------------
Notes (23) (24) (24)
01.01.2017 289.4 38.3 -
---------------------------------------------------- -------- ---------- ------------------
Profit after income tax - - -
Currency translation differences - - -
Cash flow hedges - - -
Remeasurement of defined benefit plans - - -
Share of other comprehensive income of joint
ventures - - -
-------- ---------- ------------------
Other comprehensive income after income tax - - -
---------------------------------------------------- -------- ---------- ------------------
Total comprehensive income - - -
---------------------------------------------------- -------- ---------- ------------------
Dividends - - -
Issue of ordinary shares related to business
combinations 5.0 174.5 -
Costs for the issue of shares net of tax - (8.8) -
Change in non-controlling interests due to
addition to consolidated companies - - -
Transactions with shareholders 5.0 165.7 -
---------------------------------------------------- -------- ---------- ------------------
Disposal of defined benefit plans - - -
Downstream merger from RHI AG to RHI Magnesita
N.V. (249.6) (38.3) 288.7
---------------------------------------------------- -------- ---------- ------------------
Reclassifications (249.6) (38.3) 288.7
---------------------------------------------------- -------- ---------- ------------------
31.12.2017 44.8 165.7 288.7
---------------------------------------------------- -------- ---------- ------------------
Additional
Share paid-in
in EUR million capital capital Mandatory reserves
---------------------------------------------------- -------- ---------- --------------------
Notes (23) (24) (24)
01.01.2016 289.4 38.3 -
---------------------------------------------------- -------- ---------- ------------------
Profit after income tax - - -
Currency translation differences - - -
Cash flow hedges - - -
Remeasurement of defined benefit plans - - -
Share of other comprehensive income of joint
ventures - - -
-------- ---------- ------------------
Other comprehensive income after income tax - - -
---------------------------------------------------- -------- ---------- ------------------
Total comprehensive income - - -
---------------------------------------------------- -------- ---------- ------------------
Dividends - - -
Other changes in equity - - -
Transactions with shareholders - - -
---------------------------------------------------- -------- ---------- ------------------
Reclassification due to disposal of defined
benefit plans - - -
---------------------------------------------------- -------- ---------- ------------------
31.12.2016 289.4 38.3 0.0
---------------------------------------------------- -------- ---------- ------------------
Group reserves
-------------------------------------------------------------------------
Accumulated other comprehensive income
----------------------------------------------------------------------- -------------------- --------------- -------
Equity attribut-able
to share-holders
Defined Currency of RHI Magnesita Non-controlling Total
Retained earnings Cash flow hedges benefit plans translation N.V. interests equity
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(24) (24) (24) (24) (25)
331.0 (0.7) (100.3) (49.0) 508.7 15.3 524.0
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(18.4) - - - (18.4) 5.5 (12.9)
- - - (2.5) (2.5) (6.0) (8.5)
- 0.8 - 0.8 0.1 0.9
- - (8.3) - (8.3) (0.1) (8.4)
- - (0.1) - (0.1) - (0.1)
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
- 0.8 (8.4) (2.5) (10.1) (6.0) (16.1)
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(18.4) 0.8 (8.4) (2.5) (28.5) (0.5) (29.0)
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(29.9) - - - (29.9) (1.2) (31.1)
- - - - 179.5 - 179.5
- - - - (8.8) - (8.8)
- - - - 0.0 125.1 125.1
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(29.9) - - - 140.8 123.9 264.7
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(1.0) - 1.0 - - - -
(0.8) - - - - - -
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
(1.8) - 1.0 - - - -
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
280.9 0.1 (107.7) (51.5) 621.0 138.7 759.7
------------------------- ---------------- -------------- ------------ -------------------- --------------- -------
Group reserves
-----------------------------------------------------------------------
Accumulated other comprehensive income
------------------- --------------- -------
Equity attributable
Defined Currency to shareholders Non-controlling Total
Retained earnings Cash flow hedges benefit plans translation of RHI AG interests equity
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
(24) (24) (24) (24) (25)
284.5 (0.9) (91.9) (41.8) 477.6 13.8 491.4
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
74.0 - - - 74.0 1.9 75.9
- - - (7.2) (7.2) 0.3 (6.9)
- 0.2 - - 0.2 - 0.2
- - (6.4) - (6.4) - (6.4)
- - (0.1) - (0.1) - (0.1)
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
- 0.2 (6.5) (7.2) (13.5) 0.3 (13.2)
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
74.0 0.2 (6.5) (7.2) 60.5 2.2 62.7
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
(29.9) - - - (29.9) (0.7) (30.6)
0.5 - - - 0.5 - 0.5
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
(29.4) - - - (29.4) (0.7) (30.1)
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
1.9 - (1.9) - - - -
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
331.0 (0.7) (100.3) (49.0) 508.7 15.3 524.0
------------------------- ---------------- -------------- ------------ ------------------- --------------- -------
Notes
to the Consolidated Financial Statements 2017
PRINCIPLES AND METHODS
(1) General
RHI Magnesita is a globally operating industrial group. The core
activities of the RHI Magnesita Group comprise the development and
production as well as the sale, installation and maintenance of
high-grade refractory products and systems which are used in
industrial high-temperature processes exceeding 1,200degC. RHI
Magnesita supplies customers in the steel, cement, lime, glass and
nonferrous metals industries. In addition, RHI Magnesita products
are employed in the environment (waste incineration), energy
(refractory construction) and chemicals (petrochemicals)
sectors.
The ultimate parent undertaking of the Group is RHI Magnesita
N.V., a public company with limited liability under Dutch law. The
company is registered with the Dutch Trade Register of the Chamber
of Commerce under the number 68991665 and has its corporate seat in
Arnhem, Netherlands. The administrative seat and registered office
is located at Wienerbergstraße 9, 1100 Vienna, Austria.
The shares of RHI Magnesita N.V. are listed on the Main Market
of the London Stock Exchange and are included in the FTSE 250
index.
RHI Magnesita N.V. was established on 20 June 2017 and became
the ultimate parent of the RHI Magnesita Group as of 26 October
2017, after completing the corporate restructuring of RHI AG. Until
then, RHI AG was the ultimate parent of the group. This
restructuring represented a common control transaction that had no
impact on the Consolidated Financial Statements, except for the
reclassification of individual equity components.
The Consolidated Financial Statements are prepared as of the
reporting date of the Annual Financial Statements of RHI Magnesita
N.V.. The financial year of RHI Magnesita N.V. corresponds to the
calendar year. Insofar as financial years of companies included in
the Consolidated Financial Statements do not end on the reporting
date of RHI Magnesita N.V. on 31 December due to local legal
requirements, interim Financial Statements are prepared for the
purpose of consolidation. The reporting date of the Indian
subsidiaries Orient Refractories Ltd., RHI Clasil Private Limited
and RHI India Private Limited is 31 March.
The Consolidated Financial Statements for the period from 1
January to 31 December 2017 were drawn up in accordance with all
International Financial Reporting Standards (IFRSs) mandatory at
the time of preparation as adopted by the European Union (EU). The
presentation in the Consolidated Statement of Financial Position
distinguishes between current and non-current assets and
liabilities. Assets and liabilities are classified as current if
they are due within one year or within a longer normal business
cycle. Inventories as well as trade receivables and trade payables
are generally presented as current items. Deferred tax assets and
liabilities as well as assets and provisions for pensions and
termination benefits are generally presented as non-current
items.
The Consolidated Statement of Profit or Loss is drawn up in
accordance with the cost of sales method. Under this method,
revenue is offset against the expenses incurred to generate it,
which are allocated to the functions production, sales and
administration.
With the exception of specific items such as available-for-sale
financial assets, derivative financial instruments and plan assets
for defined benefit obligations, the Consolidated Financial
Statements are prepared in accordance with the principle of
historical acquisition and production costs. The measurement
methods applied to the exceptions are described in the
following.
The preparation of the Consolidated Financial Statements in
agreement with generally accepted accounting and valuation
principles under IFRS, as adopted by the EU, requires the use of
estimates and assumptions that influence the amount and
presentation of assets and liabilities recognised as well as the
disclosure of contingent assets and liabilities as of the reporting
date and the recognition of income and expenses during the
reporting period. Although these estimates reflect the best
knowledge of the management based on experience from comparable
transactions, the actual values recognised at a later date may
differ from these estimates.
All amounts in the notes and tables are shown in EUR million,
unless indicated otherwise. For computational reasons, rounding
differences may occur.
The Annual Report was prepared by the Board of Directors and
authorized for issue on 20 March 2018 and is subject to adoption at
the Annual General Meeting of Shareholders on 7 June 2018.
(2) Initial application of new financial reporting standards
In the financial year 2017, the following revised financial
reporting standards including the changes in other standards, which
are also adopted by the EU, were applied for the first time:
Mandatory Effects on RHI Magnesita
Publication application Consolidated Financial
Standard Title (EU endorsement)(1) for RHI Magnesita Statements
-------- -------------------------- -------------------- ------------------ ------------------------
Amendments of standards
------------------------------------ -------------------- ------------------ ------------------------
Various Annual Improvements to 08.12.2016 01.01.2017/ No effect
IFRSs 2014-2016 Cycle 01.01.2018
(07.02.2018)
-------- -------------------------- -------------------- ------------------ ------------------------
IAS 7 Disclosure Initiative 29.01.2016 01.01.2017 Additional notes
disclosures
(06.11.2017)
-------- -------------------------- -------------------- ------------------ ------------------------
IAS 12 Recognition of Deferred 19.01.2016 01.01.2017 No effect
Tax Assets for Unrealized
Losses
(06.11.2017)
-------- -------------------------- -------------------- ------------------ ------------------------
1) according to EU Endorsement Status Report of 27.02.2018
IAS 7 "Statements of Cash Flow: Disclosure initiative"
The amendments to IAS 7 on the Statement of Cash Flows require
additional information on changes in financial liabilities. The
additional information affects both cash and non-cash changes. In
order to meet the new disclosure requirements, additional
information is presented in Note (49).
(3) Other changes in comparative information
In order to improve the informative value of the Consolidated
Financial Statements as of 31 December 2017, the following changes
in presentation were made compared to the previously published
Financial Statements:
The line item operating EBIT was eliminated from the
Consolidated Statement of Profit or Loss because in the newly
formed RHI Magnesita Group this represents no longer a key figure
for measuring performance. Consequently, the former separately
presented items result from derivatives from supply contracts,
impairment losses, income from restructuring and restructuring
expenses are now presented as other income and other expenses (see
Notes (39) and (40)).
Liabilities to fixed-term or puttable non-controlling interests
of EUR32.0 million (31.12.2016: EUR32.5 million), which were
previously included in financial liabilities (Note (26)), were
reclassified to other financial liabilities (Note (27)) as this
presentation is more appropriate.
Personnel provisions in the Consolidated Statement of Financial
Position are reported separately as provisions for pensions (Note
(28)) and other personnel provisions (Note (29)).
The information for the previous year was adjusted accordingly
for all the above-mentioned changes in presentation.
(4) New financial reporting standards not yet applied
The IASB issued further standards, amendments to standards and
interpretations, whose application is, however, not yet mandatory
for the year 2017. They were not applied early on a voluntary
basis.
The following accounting standards were adopted by the EU by the
time of the preparation of the RHI Magnesita Consolidated Financial
Statements:
Expected effects
Mandatory on RHI Magnesita
Publication application Consolidated Financial
Standard Title (EU endorsement)(1) for RHI Magnesita Statements
-------- ------------------------------ -------------------- ------------------ -----------------------
New standards
---------------------------------------- -------------------- ------------------ -----------------------
IFRS 2 Classification and Measurement 20.06.2016 01.01.2018 No effect
of Share-based Payment
Transactions
(26.02.2018)
-------- ------------------------------ -------------------- ------------------ -----------------------
IFRS 4 Applying IFRS 9 Financial 12.09.2016 01.01.2018 Not relevant
Instruments with IFRS
4 Insurance Contracts
(03.11.2017)
-------- ------------------------------ -------------------- ------------------ -----------------------
IFRS 9 Financial Instruments 24.07.2014 01.01.2018 No material effects
(22.11.2016)
-------- ------------------------------ -------------------- ------------------ -----------------------
IFRS 15 Revenue from Contracts 28.05.2014 01.01.2018 Timing differences
with Customers (11.09.2015)/ in revenue recognition
(22.09.2016)
-------- ------------------------------ -------------------- ------------------ -----------------------
IFRS 15 Clarifications to IFRS 12.04.2016 01.01.2018 Timing differences
15 Revenue from Contracts in revenue recognition
with Customers
(31.10.2017)
-------- ------------------------------ -------------------- ------------------ -----------------------
IFRS 16 Leases 13.01.2016 01.01.2019 Material effects
expected
(31.10.2017)
-------- ------------------------------ -------------------- ------------------ -----------------------
Various Annual Improvements 08.12.2016 01.01.2017/ No effect
to IFRSs 2014-2016 Cycle 01.01.2018
(07.02.2018)
-------- ------------------------------ -------------------- ------------------ -----------------------
1) according to EU Endorsement Status Report of 27.02.2018
IFRS 9 "Financial Instruments"
IFRS 9 was published in July 2014 and subsequently endorsed by
the European Union on 22 November 2016. IFRS 9 includes revised
guidance on classification and measurement of financial
instruments, including a new expected credit loss model for
calculating impairment on financial assets and new general hedge
accounting requirements. The standard replaces existing guidance in
IAS 39 Financial Instruments: Recognition and Measurement. RHI
Magnesita will implement IFRS 9 per 1 January 2018 using the
modified retrospective approach, meaning that the 2017 comparative
numbers in the 2018 Financial Statements will not be restated. Any
impact of IFRS 9 as of 1 January 2018 will be recognised directly
in equity.
RHI Magnesita has reviewed the impact of this new standard and
has concluded that the impact is limited to the following:
With regard to the revised classification and measurement
principles, IFRS 9 contains three classification categories:
"measured at amortised cost", "fair value through other
comprehensive income" and "fair value through profit or loss". The
standard eliminates the existing IAS 39 categories: "loans and
receivables", "held to maturity" and "available-for-sale". For RHI
Magnesita Group this new classification only means that the assets
currently classified as "available-for-sale" or "financial assets
at cost" will be classified as "fair value through other
comprehensive income" or "fair value through profit or loss",
whereas all assets in the category "loans and receivables" will be
recorded at "amortised cost". Receivables that are part of
factoring agreements will be classified as "fair value through
profit or loss". The resulting effect on the measurement of the
financial assets will be immaterial for RHI Magnesita Group.
With regard to the impact of the expected loss model on trade
and other current receivables RHI Magnesita concluded that the
impact is immaterial.
IFRS 15 "Revenue from Contracts with Customers"
IFRS 15 provides uniform regulations for revenue recognition
which are applicable to all contracts with customers. IFRS 15
supersedes IAS 18 "Revenue" and IAS 11 "Construction Contracts".
The decisive factor for revenue recognition is no longer the
transfer of significant risks and rewards, but rather, when the
customer obtains control over the goods and services agreed and can
benefit from them.
IFRS 15 introduces a five-step model to determine revenue
recognition. According to this model, the contract with the
customer and the separate performance obligations therein has to be
identified. Then the transaction price must be determined and
allocated to the identified performance obligations. Revenue must
then be recognised separately for each performance obligation in
the amount of the allocated pro-rata transaction price. For this
purpose, criteria were defined which distinguish between satisfying
a performance obligation either at a point in time or over
time.
IFRS 15 is applicable to financial years starting on or after 1
January 2018. The RHI Magnesita Group will apply the modified
retrospective method. Under this method, IFRS 15 is applied to
those contracts that are not yet complete as of 1 January 2018. The
cumulative effect of the initial application will be recognised as
an adjustment of the opening balance of group reserves in the item
retained earnings as of 1 January 2018.
In an implementation project, RHI Magnesita analysed its
business models in respect of the new regulations. Based on the
analyses performed the effects of the initial application of IFRS
15 on the Consolidated Financial Statements are as follows:
If contracts with customers include the delivery of products,
revenue is recognised at the time when control over the products is
passed to the customer in accordance with IFRS 15. Based on the
individual Incoterms rule agreed in the customer contract, time of
transfer of control over the products is determined. The Incoterms
rules describe mainly the tasks, costs and risks involved in
delivery of goods from the seller to the buyer. For the Incoterms
rules CPT (Carriage paid to), CIP (Carriage and Insurance paid to)
as well as for CFR (Cost and Freight) and CIF (Cost, Insurance and
Freight) it was determined, that the time of passing control
deviates from the time of transfer of significant risks and
rewards. As a result revenue will be recognised at a later point in
time. Therefore, the estimated effect from the initial application
of IFRS 15 will result in a reduction of retained earnings as at 1
January 2018 in the amount of about EUR6.2 million.
By applying IFRS 15, additional separate performance obligations
can be identified in supply contracts with customers. When multiple
independent performance obligations are identified, the transaction
price has to be allocated to the components by reference to their
relative standalone selling prices in the future. Accordingly,
temporary shifts may occur in revenue recognition. The impact on
revenue recognition is of minor importance.
In addition to delivering products, the RHI Magnesita Group also
provides various services. When services represent separate
performance obligations within a contract, a corresponding
transaction price has to be allocated to the service component.
This may influence the timing of revenue recognition. Moreover, it
causes an increase in revenue from providing services at the
expense of revenue from the sale of products. The impact on revenue
recognition is of minor importance.
In the Steel segment, multi-component contracts with variable
payment arrangements are concluded in some cases. For such
contracts, the transaction price depends on the customer's
production performance (e.g. amount per ton of steel produced in
the customer aggregate serviced). Pursuant to the current
provisions on revenue recognition according to IAS 18, revenue for
those refractory products is recognised in the Group based on the
production performance achieved by the customer. If the customer
already obtains control over the refractory products with the
installation of the refractory materials in the aggregate, revenue
must be recognised at this time in accordance with IFRS 15. Since
the consideration to be paid by the customer is completely
variable, revenue in the Group must be determined on the basis of
an estimate. In such cases, revenue from refractory products is
recognised earlier in accordance with IFRS 15. In the Consolidated
Statement of Financial Position, receivables from customer
contracts that have not been invoiced yet lead to the recognition
of a contract asset. Most of the products supplied to the customers
in this business model are consumables with very high turnover.
Consequently, RHI Magnesita Group determined that revenue will only
be recognised earlier and thus will have an effect on the
Consolidated Financial Statements for those customer aggregates in
which refractories with long durability are applied. As far as
other products or services apart from refractory products represent
separate performance obligations in such multi-component contracts,
a variable transaction price has to be allocated to the components
by reference to their relative standalone selling prices. This may
influence the timing of revenue recognition. However, no material
changes in revenue recognition are expected for such contracts with
variable payment arrangements.
IFRS 16 "Leases"
The accounting standard IFRS 16, which was issued in January
2016, supersedes IAS 17 "Leases" and the related interpretations
and is applicable to financial years beginning on or after 1
January 2019. Accounting for the lessor according to IFRS 16 is
comparable to the current regulations. In contrast, accounting will
change fundamentally for the lessee with the application of IFRS
16. In future, most leases will have to be recognised as assets and
liabilities in the Statement of Financial Position of the lessee,
regardless of whether they are considered operating or financing
leases under the previous criteria of IAS 17.
According to IFRS 16, a lessee recognises a right of use, which
represents his right to use the underlying asset, and a liability
from the lease, which reflects the obligation of lease payments.
Exemptions are provided for short-term leases and assets of minor
value. Moreover, the type of expenses related to these leases will
change since IFRS 16 replaces the straight-line expenses for
operating leases with a depreciation charge for rights of use and
interest expenses for liabilities from the lease. In the
Consolidated Statement of Cash Flows, there is a shift from cash
flow from operating activities to cash flow from financing
activities since the repayment of leasing liabilities must in any
case be shown as cash flow from financing activities.
As a lessee, RHI Magnesita can apply IFRS 16 based on the
retrospective method or the modified retrospective method with
optional simplification rules; the option chosen has to be applied
consistently to all leases of the Group. RHI Magnesita currently
intends to initially apply IFRS 16 as of 1 January 2019. At present
it is still undecided which transition method the Group will choose
and whether the exemption options will be used.
RHI Magnesita has started to assess the possible effects on the
Consolidated Financial Statements, but can currently not determine
the precise effects of the application of IFRS 16 on the reported
assets and liabilities. Due to the fact that obligations from
rental and leasing contracts of EUR56.9 million exist in the RHI
Magnesita Group as of 31 December 2017 (31.12.2016: EUR66.7
million) (see Note (60)), RHI Magnesita expects a significant
extension of the Statement of Financial Position due to the initial
application of IFRS 16. Together with the resulting shift between
EBIT and net finance costs as well as the shift between cash flow
from operating activities and financing activities, the Group
expects a significant impact on the presentation of the asset,
financial and earnings position.
The following financial reporting standards were issued by the
IASB, but had not yet been adopted by the EU at the time of the
preparation of the RHI Magnesita Consolidated Financial
Statements:
Expected effects
Mandatory on RHI Magnesita
application Consolidated Financial
Standard Title Publication(1) for RHI Magnesita Statements
-------- ----------------------------- -------------- ------------------ -----------------------
New standards and interpretations
--------------------------------------- -------------- ------------------ -----------------------
IFRS 14 Regulatory Deferral 30.01.2014 No EU endorsement Not relevant
Accounts
-------- ----------------------------- -------------- ------------------ -----------------------
IFRS 17 Insurance Contracts 18.05.2017 01.01.2021 No effect
-------- ----------------------------- -------------- ------------------ -----------------------
IFRIC Foreign Currency Transactions 08.12.2016 01.01.2018 No effect
22 and Advance Consideration
-------- ----------------------------- -------------- ------------------ -----------------------
IFRIC Uncertainty over Income 07.06.2017 01.01.2019 No effect
23 Tax Treatments
-------- ----------------------------- -------------- ------------------ -----------------------
Amendments of standards
--------------------------------------- -------------- ------------------ -----------------------
IAS 28 Long-term Interests 12.10.2017 01.01.2019 No effect
in Associates and Joint
Ventures
-------- ----------------------------- -------------- ------------------ -----------------------
IAS 40 Transfers of Investment 08.12.2016 01.01.2018 No effect
Properties
-------- ----------------------------- -------------- ------------------ -----------------------
IFRS 9 Prepayment Features 12.10.2017 01.01.2019 No effect
with Negative Compensation
-------- ----------------------------- -------------- ------------------ -----------------------
IFRS 10, Sale or Contribution 11.09.2014 Postponed No effect
IAS 28 of Assets between an by EU
Investor and its Associate
or Joint Venture
-------- ----------------------------- -------------- ------------------ -----------------------
Various Annual Improvements 12.12.2017 01.01.2019 No effect
to IFRSs 2015-2017 Cycle
-------- ----------------------------- -------------- ------------------ -----------------------
1) according to EU Endorsement Status Report of 27.02.2018
(5) Group of consolidated companies
In addition to RHI Magnesita N.V. as the parent company, the RHI
Magnesita Consolidated Financial Statements include the Financial
Statements of 112 subsidiaries (31.12.2016: 77) and of the RHISA
Employee Trust, Sandton, South Africa.
In 2017 two joint ventures and two associates are accounted for
under the equity method. In the previous year, the Group held only
one investment in a joint venture. 19 (31.12.2016: three)
subsidiaries and three (31.12.2016: three) other investments which
are considered to be immaterial for the financial position and
performance of the RHI Magnesita Group due to their suspended or
minimal business activities are not included in the Consolidated
Financial Statements.
The group of consolidated companies developed as follows:
2017 2016
Full Equity Full Equity
Number of consolidated companies consolidation method consolidation method
--------------------------------- -------------- ------- -------------- -------
Balance at beginning of
year 78 1 78 1
Additions 43 3 2 0
Retirements and disposals (7) 0 (2) 0
--------------------------------- -------------- ------- -------------- -------
Balance at year-end 114 4 78 1
Changes in the group of consolidated companies in the reporting
year 2017
Acquisition of Magnesita
On 26 October 2017 RHI Magnesita N.V. via its indirect,
wholly-owned subsidiary Dutch Brasil Holding B.V. obtained control
in Magnesita Refratários S.A. and its subsidiaries (Magnesita)
after acquiring 50% plus one share and corresponding voting rights
in Magnesita Refratários S.A.. Magnesita is a global group
dedicated to the production and sale of an extensive line of
refractory materials and industrial minerals, and distinguishes
itself through its vertically integrated operations. Shares of
Magnesita are listed on the Novo Mercado segment of the Brazilian
Stock Exchange in São Paulo ("Novo Mercado"). The strategic
rationale for the acquisition is to create a global, leading
refractory company and become a more competitive, vertically
integrated global provider of products, systems and services in the
refractory industry.
The purchase price amounts to EUR296.8 million and was paid in
the form of 5,000,000 newly issued ordinary shares of RHI Magnesita
N.V. and EUR117.3 million in cash. The closing price of EUR 35.9
per share was used as a basis for determining the fair value of the
issued ordinary shares.
The preliminary fair values of the acquired assets and
liabilities according to IFRS at the acquisition date are presented
as follows:
in EUR million 26.10.2017
--------------------------------------------- ----------
Property, plant and equipment 439.0
Other intangible assets 161.4
thereof customer relations 122.0
Investments in joint ventures and associates 9.9
Other non-current financial assets 4.3
Other non-current assets 16.3
Deferred tax assets 49.9
Inventories 244.7
Trade and other current receivables 175.6
Income tax receivables 9.2
Other current financial assets 42.7
Cash and cash equivalents 166.2
Assets held for sale 33.6
Non-current financial liabilities (550.8)
Deferred tax liabilities (0.3)
Provisions for pensions (81.0)
Other personnel provisions (1.5)
Other non-current provisions (51.7)
Other non-current liabilities (2.0)
Current financial liabilities (131.4)
Current derivative financial liabilities (0.2)
Trade and other current liabilities (238.4)
Income tax liabilities (10.1)
Current provisions (25.8)
Liabilities relating to assets held for sale (9.4)
--------------------------------------------- ----------
Net assets 250.2
Non-controlling interest (125.1)
--------------------------------------------- ----------
Proportional share of net assets acquired 125.1
Goodwill 171.7
--------------------------------------------- ----------
Purchase price 296.8
The purchase price allocation has not been finalized yet, as the
valuations of the acquired assets and liabilities assumed have not
been completely finalized. From today's perspective the Group
expects further fair value adjustments mainly on property, plant
and equipment, intangible assets, inventories, provisions and
deferred taxes.
The remaining preliminary goodwill of EUR171.7 million
essentially reflects expected synergies achieved by optimizing
production capacities and cost structure as well as new business of
the enlarged Group. Goodwill is not deductible for tax
purposes.
Non-controlling interests have been measured at their
proportionate share of Magnesita's identifiable net assets.
Trade receivables comprise gross contractual receivables
amounting to EUR145.0 million, of which EUR14.3 million are
estimated as presumably irrecoverable, resulting in a fair value of
EUR130.7 million. In case of receivables from joint ventures and
associates of EUR17.8 million as well as other receivables
amounting to EUR27.1 million the fair value corresponds to the
gross amount. Due to the short-term nature of receivables, the
Group assumes that the future cash flows correspond to the fair
value.
The acquisition-related costs reported under administrative
expenses in the consolidated income statement amount to EUR24.4
million for the current financial year and EUR12 million in the
previous year. In addition, the Group recognised EUR9.1 million
issue costs, less income tax amounting to EUR0.3 million, directly
in equity.
In the period from November to December 2017, Magnesita
generated revenue of EUR172.2 million and profit after income tax
of EUR6.3 million. If the acquisition had been carried out at 1
January 2017, consolidated revenue would have amounted to
EUR2,677.2 million and profit after income tax to EUR118.4 million.
The pro-forma annual revenue and profit after income tax were
determined under the assumption that the fair value adjustments and
merger control divestments would have also been made as of 1
January 2017.
The Group is required - in accordance with the share purchase
agreement (SPA) and Brazilian laws and regulations - to make a
mandatory public offer in Brazil which must be addressed to all
remaining Magnesita shareholders and must be made on the same terms
and conditions as those made available to the Sellers under the
SPA, including as to purchase price and form of consideration. The
Group decided to combine the mandatory offer with a so-called
"delisting tender offer" in an Integrated Tender Offer and has
filed with the Brazilian Securities Commission the respective
request.
According to the original and subsequent filings, shareholders
of Magnesita will have the option of selling each Magnesita share
in exchange of
(i) R$17.81, adjusted by SELIC (the Brazilian benchmark interest
rate) from 26 October 2017 until the date of the settlement of the
auction of the Integrated Tender Offer, plus 0.1998 RHI Magnesita
shares or
(ii) a cash-only alternative consideration.
The consideration of the cash-only alternative offer will be the
higher of:
(i) R$31.09, adjusted by SELIC from 26 October 2017 until the
date of the settlement of the auction of the Integrated Tender
Offer, and
(ii) R$35.56, not adjusted by SELIC.
Since the cash plus shares option was equivalent to R$57.73 on
28 February 2018, in light of the RHI Magnesita share price and the
exchange rate prevailing on that date, the Group expects
substantially all of Magnesita's minority shareholders to tender
their shares and opt for the cash plus shares consideration. If
100% of Magnesita's minority shareholders tender their shares and
opt for the cash plus shares consideration, the Group will disburse
R$455.6 million, adjusted by SELIC from 26 October 2017 until the
date of the settlement of the auction of the Integrated Tender
Offer, and issue an additional 5,000,000 shares.
The Integrated Tender Offer is expected to be completed during
2018. The difference between the amount paid in the Integrated
Tender Offer and the book value of non-controlling interest
acquired will be recognised directly in equity.
Acquisition of Agellis
On 13 October 2017, RHI Magnesita acquired 100% of the shares of
Agellis Group AB (Agellis), located in Lund, Sweden. Agellis
provides products optimizing the molten metal processing, aimed at
increasing quality, reducing maintenance and assisting safety. This
technical know-how was the main reason for the acquisition. The
purchase price amounts to EUR5.6 million whereof EUR5.0 million
were paid in cash and EUR0.6 million represent the recorded
liability for an earn-out agreement. The earn-out is based on the
revenue outcome of the financial year 2020 and will be paid in July
2021. The estimated earn-out corresponds to 52% of the maximum
earn-out and has been discounted with the transaction internal rate
of return.
The fair values of the acquired assets and liabilities according
to IFRS at the acquisition date are presented as follows:
in EUR million 13.10.2017
------------------------------------ ----------
Property, plant and equipment 0.1
Other intangible assets 2.1
Other non-current financial assets 0.1
Deferred tax assets 0.9
Inventories 0.3
Trade and other current receivables 0.7
Trade and other current liabilities (1.0)
------------------------------------ ----------
Net assets 3.2
Goodwill 2.4
------------------------------------ ----------
Purchase Price 5.6
Goodwill amounting to EUR2.4 million primarily refers to the
value of potential new customers and, to a limited extent, the
assembled workforce. Goodwill is not deductible for tax
purposes.
Other additions
Additions are related to the establishment of the RHISA Employee
Trust, Sandton, in South Africa with effect from 13 March 2017. The
operating activities of the RHI Magnesita Group in South Africa are
subject to the Black Economic Empowerment legislation. Based on
this, the RHI Magnesita Group has transferred 25.4% of the shares
in RHI Refractories Africa (Pty) Ltd. to a trust, whose
beneficiaries are employees of RHI Refractories Africa (Pty) Ltd.
The trust is fully consolidated in the Consolidated Financial
Statements since the RHI Magnesita Group can exercise a controlling
influence on the trust due to the contractual terms and
conditions.
In addition, RHI Feuerfest GmbH, Vienna, Austria, was included
for the first time in the Consolidated Financial Statements with
effect from 19 May 2017. This company took over the operating
activities after the corporate restructuring of former RHI AG.
Furthermore, RHI Magnesita N.V. which is based in Arnhem, the
Netherlands, and has its place of management in Austria, was
established on 20 June 2017 and subsequently fully consolidated. As
of 26 October 2017, after completing the corporate restructuring of
RHI AG, the company became the ultimate parent of the RHI Magnesita
Group.
Disposals
At the end of October 2017, all shares in the two entities REFEL
S.p.A., San Vito al Tagliamento, Italy, and CJSC "RHI Podolsk
Refractories", Moscow, Russia (together subsequently called Fused
Cast) were sold.
In order to satisfy the conditions imposed by the European
Commission to approve the acquisition of Magnesita, the Group sold
its magnesia-carbon bricks business concentrated in Oberhausen,
Germany, as well as its entire dolomite business in the European
Economic Area, which consisted of 100% shares in Dolomite Franchi
S.p.A., Brescia, Italy, and its production site in Lugones, Spain
(together subsequently called merger control divestments) at the
end of November.
The net assets disposed at the date of deconsolidation consist
of the following items:
Disposal groups in EUR million Merger control Fused Cast
--------------------------------------------- -------------- ----------
Property, plant and equipment 27.9 0.1
Other non-current assets 0.4 0.1
Inventories 24.5 11.2
Trade and other current receivables 44.7 2.1
Income tax receivables 1.6 0.5
Cash and cash equivalents 3.4 6.3
Deferred tax liability (2.2) 0.0
Provisions for pensions (1.1) 0.0
Other personnel provisions (2.7) (1.1)
Trade payables and other current liabilities (43.4) (11.2)
Income tax liability (0.4) (0.1)
Current provision (0.2) 0.0
--------------------------------------------- -------------- ----------
Net assets disposed 52.5 7.9
The result from deconsolidation is determined as follows:
in EUR million Merger control Fused Cast
-------------------------------------------------- -------------- ----------
Proceeds from the sale 42.6 0.3
Net assets disposed (52.5) (7.9)
Reclassification currency translation differences 0.0 (1.8)
Investment reimbursement (3.7) 0
-------------------------------------------------- -------------- ----------
Result from deconsolidation (13.6) (9.4)
The loss was recognised in other expenses in the Consolidated
Statement of Profit or Loss. The selling price for the merger
control divestments of EUR42.6 million consists of EUR40.0 million
paid in cash and EUR2.6 million deferred consideration that will be
due on the second anniversary of the disposal. The loss from
deconsolidation of the merger control divestments includes an
investment reimbursement obligation of EUR3.7 million to the former
subsidiary Dolomite Franchi S.p.A.. The selling price for fused
cast amounted to EUR0.3 million and was paid in cash.
Changes in the group of consolidated companies in the previous
year
On 4 March 2016, the subsidiary RHI United Offices Europe, S.L.
(100%), based in Lugones, Spain, was established and included in
the Consolidated Financial Statements as of this date. On 1
September 2016, the subsidiary RHI United Offices America, S.A. de
C.V. (100%), based in Monterrey, Mexico, was established. The
purpose of these companies is the provision of internal
administrative services.
With effect from 12 May 2016 the subsidiary RHI
Rückversicherungs AG (100%) based in Vaduz, Liechtenstein, was
liquidated.
As of 6 June 2016, all shares (100%) in RHI Monofrax, LLC,
Wilmington, USA, were sold. The net assets disposed at the date of
deconsolidation consist of the following items:
in EUR million 06.06.2016
--------------------------------------------- ----------
Inventories 11.9
Trade and other current receivables 0.3
Cash and cash equivalents 4.6
Personnel provisions (5.6)
Other non-current provisions (0.7)
Trade payables and other current liabilities (2.7)
---------------------------------------------- ----------
Net assets disposed 7.8
The result from deconsolidation is determined as follows:
in EUR million 06.06.2016
-------------------------------------------------- ----------
Net assets disposed (7.8)
Reclassification currency translation differences 3.7
--------------------------------------------------- ----------
Result from deconsolidation (4.1)
The loss, taking into account the transaction-related costs of
EUR0.5 million incurred in the USA, was recognised in other
expenses in the Consolidated Statement of Profit or Loss. The
selling price of US$1 was paid in cash.
Companies of the RHI Magnesita Group
The main operating companies of the RHI Magnesita Group pursue
the following core business activities:
Name and registered office Country of
of the company core activity Core business activity
-------------------------------- -------------- ----------------------------
Didier-Werke Aktiengesellschaft,
Germany Germany Production
Magnesit Anonim Sirketi, Turkey Turkey Mining, production, sales
Magnesita Mineração
S.A., Brazil Brazil Mining
Magnesita Refractories Company,
USA USA Mining, production, sales
Magnesita Refractories GmbH,
Germany Germany Production, sales
Magnesita Refratários
S.A., Brazil International Production, sales,
Orient Refractories Limited,
India India Production, sales
Production, sales, provision
RHI Canada Inc., Canada Canada of services
RHI Feuerfest GmbH, Austria International Sales, R&D, financing
RHI GLAS GmbH, Germany International Sales
RHI Refractories (Dalian) Co.,
Ltd., PR China PR China Production
Production, sales, provision
RHI US Ltd., USA USA of services
RHI-Refmex, S.A. de C.V., Mexico Latin America Sales
Veitsch-Radex GmbH & Co OG,
Austria Austria Mining, production
The following list shows all companies in which RHI Magnesita
holds a share of at least 20% (with the exception of the RHISA
Employee Trust):
31.12.2017 31.12.2016
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
---- --------------------------------------------------- -------- ----- -------- -----
1. RHI Magnesita N.V., Arnhem, Netherlands - -
2. RHI AG, Vienna, Austria - -
Fully consolidated subsidiaries
3. Agellis Group AB, Sund, Sweden 60. 100.0 - -
Baker Refractories Holding Company, Las
4. Vegas, USA 47. 100.0 - -
Baker Refractories I.C., Inc., Las Vegas,
5. USA 4. 100.0 - -
6. Baker Refractories, Las Vegas, USA 47. 100.0 - -
7. Betriebs- und Baugesellschaft mit beschränkter 12. 100.0 12. 100.0
Haftung, Wiesbaden, Germany
CJSC "RHI Podolsk Refractories", Moskau,
8. Russia - - 60.,114. 100.0
9. D.S.I.P.C.-Didier Société Industrielle 12. 100.0 12. 100.0
de Production et de
Constructions, Breuillet, France
10. Didier Belgium N.V., Evergem, Belgium 77.,108. 100.0 77.,108. 100.0
11. Didier Vertriebsgesellschaft mbH, Wiesbaden, 12. 100.0 12. 100.0
Germany
12. Didier-Werke Aktiengesellschaft, Wiesbaden, 1.,60. 100.0 2.,60. 100.0
Germany
13. Dolomite Franchi S.p.A., Brescia, Italy - - 60. 100.0
14. Dutch Brasil Holding B.V., Arnhem, Netherlands 114. 100.0 114. 100.0
15. Dutch MAS B.V., Arnhem, Netherlands 12. 100.0 12. 100.0
16. Dutch US Holding B.V., Arnhem, Netherlands 114. 100.0 114. 100.0
17. FE "VERA", Dnepropetrovsk, Ukraine 60. 100.0 60. 100.0
Feuerfestwerk Bad Hönningen GmbH, Hilden, 119. 100.0 - -
18. Germany
19. FireShark Refractories GmbH, Vienna, Austria 75. 100.0 - -
20. Full Line Supply Africa (Pty) Ltd., Sandton, 86. 100.0 86. 100.0
South Africa
21. GIX International Limited, Newark, United 120. 100.0 120. 100.0
Kingdom
22. INDRESCO U.K. Ltd., Newark, United Kingdom 21. 100.0 21. 100.0
23. INTERSTOP (Shanghai) Co., Ltd., Shanghai, 113. 100.0 113. 100.0
PR China
24. Latino America Refractories ApS, Hellerup, - - 120. 100.0
Denmark
Liaoning RHI Jinding Magnesia Co., Ltd.,
25. Dashiqiao City, PR China1) 60. 83.3 60. 83.3
26. LLC "RHI Wostok Service", Moskau, Russia 60.,75. 100.0 2.,60. 100.0
27. LLC "RHI Wostok", Moskau, Russia 60.,75. 100.0 2.,60. 100.0
28. Lokalbahn Mixnitz-St. Erhard Aktien-Gesellschaft, 100. 100.0 100. 100.0
Vienna, Austria
29. LWB Holding Company, Las Vegas, USA 61. 100.0 - -
30. LWB Refractories Belgium S.A., Liège, 49.,119. 100.0 - -
Belgium
LWB Refractories Beteiligungs GmbH & Co.
31. KG, Hilden, Germany 39.,61. 100.0 - -
32. LWB Refractories Hagen GmbH, Hagen, Germany 119. 100.0 - -
LWB Refractories Holding France S.A.S.,
33. Valenciennes, France 119. 100.0 - -
34. M.E. Refractories Company FZE i. l., Dubai, 38. 100.0 - -
United Arab Emirates
35. Mag Data Participaçoes e Investimentos 54. 100.0 - -
em Projetos de Mineração S.A.,
Contagem, Brazil
36. Magnesit Anonim Sirketi, Eskisehir, Turkey2) 60. 100.0 60. 100.0
37. Magnesita Asia Refractory Holding Ltd, Hong 33. 100.0 - -
Kong, PR China
38. Magnesita Finance S.A., Luxembourg, Luxembourg 54. 100.0 - -
Magnesita Grundstücks-Beteiligungs
39. GmbH, Hilden, Germany 54. 100.0 - -
Magnesita International Limited, London,
40. United Kingdom 54. 100.0 - -
41. Magnesita Malta Finance Ltd., St. Julians, 42.,119. 100.0 - -
Malta
31.12.2017 31.12.2016
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
---- ----------------------------------------------- -------- ----- -------- -----
Magnesita Malta Holding Ltd., St. Julians,
42. Malta 49.,119. 100.0 - -
43. Magnesita Mineração S.A., Brumado, 38.,54., 100.0 - -
Brazil 126.
44. Magnesita NAM Insurance Company, Wilmington, 29. 100.0 - -
USA
45. Magnesita Refractories (Canada) Inc., Montreal, 4. 100.0 - -
Canada
46. Magnesita Refractories (Dalian) Co. Ltd., 38. 100.0 - -
Dalian, PR China
47. Magnesita Refractories Company, York, USA 29. 100.0 - -
Magnesita Refractories de Mexico S.A. de
48. C.V., Monterrey, Mexico 4.,5. 100.0 - -
49. Magnesita Refractories GmbH, Hilden, Germany 119. 100.0 - -
Magnesita Refractories Ltd., Dinnington,
50. United Kingdom 4. 100.0 - -
Magnesita Refractories Middle East FZE,
51. Dubai, United Arab Emirates 38. 100.0 - -
52. Magnesita Refractories S.C.S., Valenciennes, 33.,119. 100.0 - -
France
Magnesita Refractories S.R.L., Trezzano
53. Sul Naviglio, Italy 119. 100.0 - -
54. Magnesita Refratários S.A., Contagem, 14. 50.0 - -
Brazil
55. Magnesita Resource (Anhui-Chizhou) Company. 37. 100.0 - -
Ltd., Chizhou, PR China
56. Mezubag AG, Pfäffikon, Switzerland 113. 100.0 113. 100.0
Orient Refractories Limited, Neu Delhi,
57. India 16. 69.6 16. 69.6
58. Premier Periclase Limited, Drogheda, Ireland 16. 100.0 16. 100.0
59. Producción RHI México, S. de R.L. 91.,120. 100.0 91.,120. 100.0
de C.V., Ramos Arizpe, Mexico
60. Radex Vertriebsgesellschaft m.b.H., Leoben, 116. 100.0 116. 100.0
Austria
61. Rearden G Holdings Eins GmbH, Hilden, Germany 38. 100.0 - -
62. REFEL S.p.A., San Vito al Tagliamento, Italy - - 12. 100.0
63. Refractarios Argentinos S.A.I.C.M., Buenos 54. 100.0 - -
Aires, Argentina
Refractarios Magnesita Chile S/A, Santiago, 63. 100.0 - -
64. Chile
65. Refractarios Magnesita Colombia S/A, Sogamoso, 54. 100.0 - -
Colombia
Refractarios Magnesita del Perú S.A.C., 54. 100.0 - -
66. Lima, Peru
Refractory Intellectual Property GmbH &
67. Co KG, Vienna, Austria 68.,75. 100.0 2.,68. 100.0
Refractory Intellectual Property GmbH, Vienna, 75. 100.0 2. 100.0
68. Austria
69. Reframec Manutenção e Montagens 54. 100.0 - -
de Refratários S.A., Matozinhos, Brazil
RHI Argentina S.R.L., San Nicolás,
70. Argentina 16.,120. 100.0 16.,120. 100.0
71. RHI Canada Inc., Burlington, Canada 120. 100.0 120. 100.0
72. RHI Chile S.A., Santiago, Chile 21.,120. 100.0 21.,120. 100.0
73. RHI Clasil Private Limited, Hyderabad, India(1) 120. 53.7 120. 53.7
74. RHI Dinaris GmbH, Wiesbaden, Germany 108. 100.0 108. 100.0
75. RHI Feuerfest GmbH, Vienna, Austria 1. 100.0 - -
76. RHI Finance A/S, Hellerup, Denmark 75. 100.0 2. 100.0
77. RHI GLAS GmbH, Wiesbaden, Germany 108. 100.0 108. 100.0
RHI India Private Limited, Navi Mumbai,
78. India 14.,120. 100.0 14.,120. 100.0
79. RHI ITALIA S.R.L., Brescia, Italy 75. 100.0 2. 100.0
80. RHI Marvo Feuerungs- und Industriebau GmbH, 81. 100.0 81. 100.0
Gerbstedt, Germany
81. RHI MARVO Feuerungs- und Industriebau GmbH, 12. 100.0 12. 100.0
Kerpen, Germany
82. RHI MARVO S.R.L., Ploiesti, Romania 60.,114. 100.0 60.,114. 100.0
83. RHI Normag AS, Porsgrunn, Norway 60. 100.0 60. 100.0
RHI Refractories (Dalian) Co., Ltd., Dalian,
84. PR China 60. 100.0 60. 100.0
RHI Refractories (Site Services) Ltd., Newark,
85. United Kingdom 22. 100.0 22. 100.0
31.12.2017 31.12.2016
Ser. Share- Share Share- Share
no. Name and registered office of the company holder in % holder in %
---- ------------------------------------------------------ ---------- ----- --------- -----
RHI Refractories Africa (Pty) Ltd., Sandton,
86. South Africa 60.,111. 100.0 60. 100.0
RHI Refractories Andino C.A., Puerto Ordaz, 120. 120. 100.0
87. Venezuela 100.0
RHI Refractories Asia Ltd., Hongkong,
88. PR China - - 112. 100.0
RHI Refractories Asia Pacific Pte. Ltd.,
89. Singapore 75. 100.0 2. 100.0
90. RHI Refractories Egypt LLC., Cairo, Egypt 60.,114. 100.0 60.,114. 100.0
RHI Refractories España, S.L., Lugones, 12.,15. 100.0 12.,15. 100.0
91. Spain
RHI Refractories France SA, Breuillet,
92. France(3) 112. 100.0 112. 100.0
RHI Refractories Holding Company, Wilmington, 120. 100.0 120. 100.0
93. USA
RHI Refractories Ibérica, S.L., Lugones, 112. 100.0 112. 100.0
94. Spain
RHI Refractories Italiana s.r.l., Brescia, 112. 100.0 112. 100.0
95. Italy
RHI Refractories Liaoning Co., Ltd., Bayuquan, 60. 66.0 60. 66.0
96. PR China(1)
RHI Refractories Lugones, S.L., Lugones,
97. Spain - - - -
RHI Refractories Mercosul Ltda., Sao Paulo, 114.,120. 100.0 114.,120. 100.0
98. Brazil
99. RHI Refractories Nord AB, Stockholm, Sweden 112. 100.0 112. 100.0
RHI Refractories Raw Material GmbH, Vienna, 1.,60.,75. 100.0 2.,60. 100.0
100. Austria
RHI Refractories Site Services GmbH, Wiesbaden, 12. 100.0 12. 100.0
101. Germany
RHI Refractories UK Limited, Bonnybridge, 12. 100.0 12. 100.0
102. United Kingdom
RHI Refratários Brasil Ltda, Belo
103. Horizonte, Brazil 14.,120. 100.0 14.,120. 100.0
RHI Sales Europe West GmbH, Mülheim-Kärlich, 12.,112. 100.0 12.,112. 100.0
104. Germany
RHI Trading (Dalian) Co., Ltd., Dalian,
105. PR China 60. 100.0 60. 100.0
RHI United Offices America, S.A. de C.V., 91.,107. 100.0 91.,107. 100.0
106. Monterrey, Mexico
RHI United Offices Europe, S.L., Lugones, 91. 100.0 91. 100.0
107. Spain
RHI Urmitz AG & Co. KG, Mülheim-Kärlich, 11.,12. 100.0 11.,12. 100.0
108. Germany
109. RHI US Ltd., Wilmington, USA 16. 100.0 16. 100.0
RHI-Refmex, S.A. de C.V., Ramos Arizpe,
110. Mexico 91.,120. 100.0 91.,120. 100.0
111. RHISA Employee Trust, Sandton, South Africa(4) - 0.0 - -
SAPREF AG für feuerfestes Material,
112. Basel, Switzerland 120. 100.0 120. 100.0
Stopinc Aktiengesellschaft, Hünenberg, 12.,60. 100.0 12.,60. 100.0
113. Switzerland
Veitscher Vertriebsgesellschaft m.b.H.,
114. Vienna, Austria 75. 100.0 2. 100.0
Veitsch-Radex America LLC., Wilmington,
115. USA 109. 100.0 109. 100.0
116. Veitsch-Radex GmbH & Co OG, Vienna, Austria 75.,117. 100.0 2.,117. 100.0
117. Veitsch-Radex GmbH, Vienna, Austria 75. 100.0 2. 100.0
Veitsch-Radex Vertriebsgesellschaft m.b.H., 75. 100.0 2. 100.0
118. Vienna, Austria
Vierte LWB Refractories Holding GmbH,
119. Hilden, Germany 31.,61. 100.0 - -
120. VRD Americas B.V., Arnhem, Netherlands 60.,75. 100.0 2.,60. 100.0
Zimmermann & Jansen GmbH, Düren,
121. Germany 12. 100.0 12. 100.0
Subsidiaries not consolidated due to minor
significance
122. Agellis Process AB, Lund, Sweden 3. 100.0 - -
123. Agellis Surface AB, Lund, Sweden 3. 100.0 - -
Araçuaí Holding S.A., São
124. Paulo, Brazil 135. 100.0 - -
125. Dr.-Ing. Petri & Co. Unterstützungsgesellschaft 12. 100.0 12. 100.0
m.b.H., Wiesbaden, Germany
Grayhill MDMM Holding Ltda., São
126. Paulo, Brazil 54. 100.0 - -
127. INTERSTOP do Brasil Equipamentos Metalurgicos - - 113. 100.0
Ltda i. l., Barueri, Brazil
128. Magnesita Australia PTY Ltd. i. l., Australia 37. 100.0 - -
Magnesita Refractories A.B., Köping, 119. 100.0 - -
129. Sweden
Magnesita Refractories PVT Ltd, Mumbai,
130. India 61.,119. 100.0 - -
Magnesita Refractories S.A. (Pty) Ltd.,
131. Middleburg, South Africa 49. 100.0 - -
31.12.2017 31.12.2016
Share
Ser. Share- Share Share- in
no. Name and registered office of the company holder in % holder %
---- ----------------------------------------------- --------- ----- ---------- -----
MAG-Tec (MSA Service) Ltda., Contagem,
132. Brazil 54. 98.7 - -
Metal Data Participações Ltda.,
133. Rio de Janeiro, Brazil 54. 61.0 - -
Metal Data S.A. - Mineração
134. e Metalurgia, Contagem, Brazil 54.,133. 100.0 - -
135. MMD Araçuaí Holding Ltda., São
Paulo, Brazil 35.,54. 100.0 - -
136. MPC, Metal Process Control AB, Lund, Sweden 3. 100.0 - -
137. Refractarios Especiales Y Moliendas S.A.,
Buenos Aires, Argentina 63. 100.0 - -
138. Refractarios Magnesita Uruguay S/A, Montevideo,
Uruguay 54. 100.0 - -
139. RHI Réfractaires Algérie E.U.R.L.,
Sidi Amar, Algeria 92. 100.0 92. 100.0
Equity-accounted joint ventures and associated
companies
140. Krosaki Magnesita Refractories LLC, York,
USA 47. 40.0 - -
Magnesita Envoy Asia Ltd., Kaohsiung,
141. Taiwan 4. 50.0 - -
MAGNIFIN Magnesiaprodukte GmbH & Co KG,
142. St. Jakob, Austria 114.,146. 50.0 114.,146. 50.0
143. Sinterco S.A., Nameche, Belgium 61. 70.0 - -
Other immaterial investments, measured
at cost
LLC "NSK Refractory Holding", Moskau,
144. Russia 60. 49.0 60. 49.0
145. LLC "NSK Refractory", Novokuznetsk, Russia 60. 49.0 60. 49.0
146. MAGNIFIN Magnesiaprodukte GmbH, St. Jakob,
Austria 114. 50.0 114. 50.0
1) In accordance with IAS 32, fixed-term or puttable
non-controlling interests are shown under liabilities.
2) Further shareholders are VRD Americas B.V., Lokalbahn Mixnitz
St. Erhard Aktien-Gesellschaft and Veitscher Vertriebsgesellschaft
mbH.
3) Further shareholders are Didier-Werke AG, RHI Dinaris GmbH
and RHI GLAS GmbH.
4) Controlling influence due to contractual terms and
conditions
i.l. In liquidation
(6) Methods of consolidation
Subsidiaries
Subsidiaries are companies over which RHI Magnesita N.V.
exercises control. Control exists when the company has the power to
decide on the relevant activities, is exposed to variable returns
from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
The acquisition method is used to account for all business
combinations. Under this method, the purchase price for the shares
in a consolidated subsidiary is offset against the proportional
share of net assets based on the fair value of the acquired assets
and liabilities at the date of acquisition or when control is
obtained. Intangible assets which were previously not recognised in
the separate Financial Statements of the company acquired are also
measured at fair value. Intangible assets identified when a company
is acquired, including for example patents, brand names and
customer relations, are only measured separately at the time of
acquisition if they are identifiable and are in the control of the
company and a future economic benefit is expected.
For the acquisition of companies in which less than 100% of the
shares are acquired, IFRS 3 allows an accounting policy choice
whereby either goodwill proportionate to the share held or goodwill
including the share accounted for by non-controlling interests can
be recognised. This accounting policy choice can be exercised anew
for any company acquisition. For the acquisition of Magnesita,
non-controlling interests have been measured at their proportionate
share of Magnesita's identifiable net assets.
The purchase price allocation at the date of acquisition can be
made on a preliminary basis in justified cases. If adjustments are
necessary in favour or at the expense of assets and liabilities
within twelve months of the acquisition, they will be made
accordingly. These adjustments will be presented in the notes.
After completing the purchase price allocation, the determined
goodwill is allocated to the relevant cash-generating unit and
tested for impairment at this level. In accordance with the
provisions of IFRS 3, negative goodwill is immediately recognised
to profit or loss in other income after renewed measurement of the
identifiable assets, liabilities and contingent liabilities.
Shares in net assets of subsidiaries that are not attributable
to RHI Magnesita N.V. are shown separately under equity as
non-controlling interests. The basis for non-controlling interests
are the equity of the subsidiary concerned after adjustment to the
accounting and measurement principles of the RHI Magnesita Group
and proportional consolidation entries.
Transaction costs which are directly related to business
combinations are expensed as incurred. Conditional components of
the purchase price are recorded at fair value at the date of
initial consolidation.
When additional shares are acquired in companies which are
already included in the Consolidated Financial Statements as
subsidiaries, the difference between the purchase price and the
proportional carrying amount in the subsidiary's net assets is
offset against shareholders' equity. Gains and losses from the sale
of shares are also recorded in equity unless they lead to a loss of
the controlling influence.
In the case of a step acquisition and the related obtaining of a
controlling interest, the difference between the carrying amount to
be transferred and the fair value at the date of the initial full
consolidation is realised through profit or loss.
Intragroup receivables and liabilities as well as income and
expenses are fully eliminated.
Intragroup results related to intragroup deliveries of
non-current assets and inventories as well as transfers of shares
are eliminated.
In accordance with IAS 12, deferred taxes are calculated on
temporary differences arising from the consolidation.
Subsidiaries are deconsolidated on the day control ends.
Joint ventures and associates
Shares in joint ventures and associates are accounted for using
the equity method. A joint venture is a joint arrangement between
the RHI Magnesita Group and one or several other partners whereby
the parties that have joint control over the arrangement have
rights to the net assets of the arrangement.
An associate is an entity over which the RHI Magnesita Group has
significant influence. Significant influence is the power to
participate in an investee's financial and operating policy
decisions without control or joint control. A significant influence
can be assumed if a company holds directly or indirectly 20% of the
shares of the investee or has other abilities (e.g. through seats
in the supervisory board) to influence the company's financial and
operating policy decisions. These presumptions can also be
disproved if the company has no significant influence.
At the date of acquisition, a positive difference between the
acquisition costs and the share in the fair values of identified
assets and liabilities of the joint ventures and associates is
determined and recognised as goodwill. Goodwill is shown under the
item investments in joint ventures and associates in the Statement
of Financial Position.
The acquisition cost of investments accounted for using the
equity method is increased or decreased each year to reflect the
change in the equity of the individual joint venture or associate
that is attributable to the RHI Magnesita Group. Unrealised
intragroup results from transactions with these companies are
offset against the carrying amount of the investment on a pro-rata
basis during consolidation, if they are material.
RHI Magnesita examines at every reporting date whether there are
objective indications of an impairment of the shares in joint
ventures and associates. If such indications exist, the required
impairment is determined as the difference between the recoverable
amount and the carrying amount of the joint ventures and associates
and recognised in profit and loss in the item share of profit of
joint ventures and associates.
The Financial Statements of the companies accounted for using
the equity method are prepared in accordance with uniform
accounting and measurement methods throughout the Group.
(7) Foreign currency translation
Functional currency and presentation currency
The Consolidated Financial Statements are presented in Euro,
which represents the functional and presentation currency of RHI
Magnesita N.V..
The items included in the Financial Statements of each Group
company are valued based on the currency of the primary economic
environment in which the company operates (functional
currency).
Foreign currency transactions and balances
Foreign currency transactions in the individual Financial
Statements of group companies are translated into the functional
currency based on the exchange rate in effect on the date of the
transaction. Gains and losses arising from the settlement of such
transactions and the measurement of monetary assets and liabilities
in foreign currencies at the closing rate are recognised in profit
or loss under other income or expenses. Contrary to this,
unrealised currency translation differences from monetary items
which form part of a net investment in a foreign business are
recognised in other comprehensive income in equity. Non-monetary
items in foreign currency are carried at historical rates.
Group companies
The Annual Financial Statements of foreign subsidiaries that
have a functional currency differing from the Group presentation
currency are translated into Euros as follows:
Assets and liabilities are translated at the closing rate on the
reporting date of the Group, while monthly income and expenses and
consequently the profit for the year as presented in the Statement
of Profit or Loss are translated at the respective closing rates of
the previous month. Differences resulting from this translation
process and differences resulting from the translation of amounts
carried forward from the prior year are recorded under other
comprehensive income without recognition to profit or loss. Monthly
cash flows are translated at the respective closing rates of the
previous month. Goodwill and adjustments to the fair value of
assets and liabilities related to the purchase price allocations of
a subsidiary outside the European currency area are recognised as
assets and liabilities of the respective subsidiary and translated
at the closing rate.
The Euro exchange rates of currencies important for the RHI
Magnesita Group are shown in the following table:
Closing rate Average rate(1)
Currencies 1 EUR = 31.12.2017 31.12.2016 2017 2016
---------------------- -------- ---------- ---------- -------- -------
Argentine Peso ARS 22.93 16.74 18.65 16.27
Brazilian Real BRL 3.96 3.42 3.60 3.90
Canadian Dollar CAD 1.50 1.42 1.46 1.47
Chilean Peso CLP 735.00 700.25 733.37 748.21
Chinese Renminbi Yuan CNY 7.78 7.31 7.61 7.32
Indian Rupee INR 76.40 71.43 73.36 74.31
Mexican Peso MXN 23.56 21.77 21.27 20.48
Norwegian Krone NOK 9.85 9.09 9.30 9.31
Pound Sterling GBP 0.89 0.86 0.87 0.81
Swiss Franc CHF 1.17 1.08 1.11 1.09
South African Rand ZAR 14.75 14.33 15.02 16.40
US Dollar USD 1.20 1.05 1.12 1.11
1) Arithmetic mean of the monthly closing rates
(8) Principles of accounting and measurement
Property, plant and equipment
Property, plant and equipment is measured at acquisition or
production cost, less accumulated depreciation on a systematic
basis and impairments. These assets are depreciated on a
straight-line basis over the expected useful life. Depreciation is
calculated pro rata temporis beginning in the month the asset is
available for use, i.e. when the asset is at its designated
location and ready for operations as intended by management.
Leased property, plant and equipment that qualifies as asset
purchase financed with long-term funds is capitalised at the market
value of the asset or the lower present value in accordance with
IAS 17. The leased assets are depreciated on a systematic basis
over the useful life. The payment obligations resulting from future
lease instalments are discounted and recorded as liabilities.
Current lease payments are apportioned between a finance charge and
the amortisation of the outstanding liability. As of the reporting
date, the property, plant and equipment leased through finance
leases is of small scale. All other leases are treated as operating
leases. The lease payments resulting from operating leases are
recorded as expenses.
The production costs of internally generated assets comprise
direct costs as well as a proportional share of capitalisable
production overheads and borrowing costs. If financing can be
specifically allocated to an investment, the actual borrowing costs
are capitalised as production costs. If no direct connection can be
made, the average rate on borrowed capital of the Group is used as
the capitalization rate due to the central funding of the
Group.
Expected demolition and disposal costs at the end of an asset's
useful life are capitalised as part of acquisition cost and
recorded as a provision. The criteria for this treatment are a
legal or constructive obligation towards a third party and the
ability to prepare a reliable estimate.
Real estate, land and plant under construction are not
depreciated on a systematic basis. Depreciation of other material
property, plant and equipment is based on the following useful
lives in the RHI Magnesita Group:
Factory and office buildings 15 to 50 years
Land improvement 8 to 30 years
Crusher machines and mixing facilities 8 to 20 years
Presses 10 to 12 years
Tunnel, rotary and shaft kilns 50 years
Other calcining and drying kilns 20 to 30 years
Cars, other plant, furniture and fixtures 3 to 35 years
The residual carrying amounts and economic useful lives are
reviewed regularly and adjusted if necessary.
Depletion is recorded on raw material deposits of the volume
actually mined in proportion to the estimated volume.
When components of plant or equipment have to be replaced at
regular intervals, the relevant replacement costs are capitalised
as incurred if the criteria set forth in IAS 16 have been met. The
carrying amount of the replaced components is derecognised. Regular
maintenance and repair costs are expensed as incurred.
Gains or losses from the disposal of property, plant and
equipment, which result as the difference between the net
realizable value and the carrying amount, are recognised as income
or expense in the Consolidated Statement of Profit or Loss.
Goodwill
Goodwill is recognised as an asset in accordance with IFRS 3. It
is tested for impairment at least once each year, or when events or
a change in circumstances indicate that the asset could be
impaired.
In accordance with IFRS 3, negative goodwill is recognised
through profit or loss immediately after a new assessment of the
identified assets, liabilities and contingent liabilities.
Other intangible assets
Research costs are expensed in the year incurred and included
under general and administrative expenses.
Development costs also represent expenses in the period. They
are recognised under general and administrative expenses. They are
only capitalised if the allocable costs of the intangible asset can
be measured reliably during its development period. Moreover,
capitalization requires that the product or process development can
be clearly defined, is feasible in technical, economic and capacity
terms and is intended for own use or sale. In addition, future cash
inflows which cover not only normal costs but also the related
development costs must be expected. Capitalised development costs
are amortised on a straight-line basis over the expected useful
life, however, over a maximum of ten years, and recognised in cost
of sales.
The development costs for internally generated software are
expensed as incurred if their primary purpose is to maintain the
functionality of existing software. Expenses that can be directly
and conclusively allocated to individual programmes and represent a
significant extension or improvement over the original condition of
the software are capitalised as production costs and added to the
original purchase price of the software. These direct costs include
the personnel expenses for the development team as well as an
adequate, proportional share of overheads. Software is
predominantly amortised on a straight-line basis over a period of
four years.
Purchased intangible assets are measured at acquisition cost,
which also includes acquisition-related costs, less accumulated
amortisation and impairments. Intangible assets with a finite
useful life are amortised on a straight-line basis over the
expected period of useful life. The following table shows the most
important useful lives:
Patents 7 to 18 years
Brand rights 20 years
Land use rights 50 or 65 years
Customer relations 6 to 15 years
Impairment of property, plant and equipment, goodwill and other
intangible assets
Property, plant and equipment and intangible assets, including
goodwill, are tested for impairment if there is any indication that
the value of these items may be impaired. Intangible assets with an
indefinite useful life and goodwill are tested for impairment at
least annually.
An asset is considered to be impaired if its recoverable amount
is less than the carrying amount. The recoverable amount of an
asset is the higher of its fair value less costs of disposal and
its value in use (present value of future cash flows). If the
carrying amount is higher than the recoverable amount, an
impairment loss equivalent to the resulting difference is
recognised in the Consolidated Statement of Profit or Loss. If the
reason for an impairment loss recognised in the past for property,
plant and equipment and for other intangible assets ceases to
exist, a reversal of impairment on the amortised acquisition and
production costs is recognised in profit or loss.
In the case of impairments related to cash-generating units
(CGU) which contain goodwill, existing goodwill is initially
reduced. If the required impairment exceeds the carrying amount of
the goodwill, the difference is apportioned proportionately to the
remaining non-current tangible and intangible assets of the CGU.
Reversals of impairment losses recognised on goodwill are not
permitted and are therefore not considered. The effects of
impairment tests at the CGU level are shown in other income or
other expenses in the Consolidated Statement of Profit or Loss.
If there is an indication for an impairment of a specific asset,
only this specific asset will be tested for impairment.
Cash-generating units (CGU)
In the RHI Magnesita Group the individual assets do not generate
cash inflows independent of one another; therefore, no recoverable
amount can be presented for individual assets. As a result, the
assets are combined in CGUs, which largely generate independent
cash inflows. These units are combined in strategic business units
and reflect the market presence and the market appearance and are
as such responsible for cash inflows.
The organisational structures of the Group reflect these units.
In addition to the joint management and control of the business
activities in each unit, the sales know-how and the knowledge of
RHI Magnesita's products are also incorporated in these units. The
sales know-how is reflected in long-standing customer relationships
or knowledge of the customer's production facilities and processes.
Product knowledge is manifested in the application-oriented
knowledge of chemical, physical and thermal properties of RHI
Magnesita products. The services offered extend over the life cycle
of RHI Magnesita products at the customer's plant, from the
appropriate installation and support of optimal operations, to
environmentally sound disposal or sustainable reuse in RHI
Magnesita's production process. These factors determine cash inflow
to a significant extent and consequently form the basis for the CGU
structures of RHI Magnesita.
The CGUs of the strategic business unit Steel are Linings and
Flow Control. These two units are determined according to the
production stages in the process of steel production.
In the Industrial Division, each industry segment (glass,
cement/lime, nonferrous metals and environment, energy, chemicals)
forms a separate CGU. The independent CGU Fused Cast in the
Industrial Division was sold in 2017.
In the Raw Materials Division, all raw material producing
facilities with the exception of Norway are combined in one CGU.
The plant in Porsgrunn, Norway, was not included in the raw
materials unit, but treated as a separate CGU because a management
team was installed specifically for the coordination and
implementation of the optimization measures due to the dimension
and the special situation at the Porsgrunn plant. This organisation
goes beyond plant management and also includes sub-tasks of the
administration processes.
As in the previous year, the impairment test is based on the
value in use. The recoverable amount is determined using the
discounted cash flow method and incorporates the terminal value.
The detailed planning of the first five years is congruent with the
strategic business and financial planning. Based on the detailed
planning period, it is geared to a steady-state business
development, which balances out possible economic or other
non-sustainable fluctuations in the detailed planning period and
forms the basis for the calculation of the terminal value. In the
impairment test 2017, the terminal value is based on a growth rate
derived from the difference of the current and the possible degree
of utilisation of the assets.
The net cash flows are discounted using the weighted average
cost of capital (WACC). The weighted average cost of capital is
calculated taking into account comparable companies (peer group).
The corresponding parameters are derived from capital market
information. In addition, country-specific risk premiums are
considered in the weighted average cost of capital.
The weighted average cost of capital before tax is determined
per legal unit and weighted according to the share of revenue of
the legal units. The weighted interest rates range between 5.7% and
8.6% in the year 2017. In the previous year, the interest rates
determined on the same basis ranged between 6.4% and 8.0%.
Composition of estimated future cash flows
The estimates of future cash flows include forecasts of the cash
flows from continued use. If assets are disposed at the end of
their useful life, the related cash flows are also included in the
forecasts.
A simplified Statement of Cash Flows serves to determine the
cash flows on the basis of strategic business and financial
planning. The forecasts include cash flows from future maintenance
investments. Expansion investments are only taken into account in
the future cash flows when there has been a significant cash
outflow or significant payment obligations have been entered into
due to services received and it is sufficiently certain that the
investment measure will be completed. All other expansion
investments are not considered; this applies in particular to
expansion investments that have been decided on but not begun.
Future cash flows from financing and for income taxes are
generally not included. For reasons of practicability, the expected
cash flows also include tax payments, therefore the values in use
are determined using an after-tax weighted average cost of capital.
The after-tax weighted average cost of capital is iteratively
reconciled to an implicit pre-tax weighted average cost of capital,
which is indicated in the notes. If the result before tax is
negative in the detailed planning period, tax inflows (tax refunds)
are considered regardless of whether tax loss carryforwards
exist.
With respect to pension obligations, a differentiation is made
between earned entitlements and entitlements yet to be earned.
Provisions for pensions do not reduce the carrying value of a CGU;
accordingly, pension payouts are not included in the recoverable
amounts. Expected additions to provisions for pensions are
considered cash effective with respect to service cost. The
interest expense related to pension obligations represents a
financing expense and is consequently not considered in the
forecast of cash flows.
Working capital is included in the carrying amount of the CGU;
therefore, the recoverable amount only takes into account changes
in working capital.
Basis for Planning
Basis for the impairment test was the five-year forward-looking
business plan that was used on the one hand to support the decision
making of the acquisition of Magnesita and on the other hand to
support the listing at the London Stock Exchange. This business
plan has been updated with the budget 2018 as starting point, that
was approved by the Board, and developed with the growth rates used
in the forward-looking business plan.
2017 2016
Goodwill
per group
Perpetual of CGUs Perpetual Goodwill
WACC before annuity in EUR WACC before annuity growth in EUR
Tax growth rate million tax rate million
------------------------- ----------- ------------ ---------- ----------- --------------- --------
Preliminary goodwill
not yet allocated 171.7
Steel Division - Linings 8.6% 0.9% 9.4 7.6% 0.9% 9.4
Steel Division - Flow
Control 8.5% 0.9% 28.3 8.0% 0.9% 27.4
Industrial Division
- Glass 7.2% 0.9% 0.0 7.0% 0.9% 0.0
Industrial Division
- Cement 8.4% 0.9% 0.5 7.2% 0.9% 0.5
Industrial Division
- Nonferrous 7.7% 0.9% 0.2 6.8% 0.9% 0.2
Industrial Division
- EEC 8.0% 0.9% 0.3 7.0% 0.9% 0.3
Raw Material - Raw
Material 7.9% 0.9% 0.0 6.7% 0.9% 0.0
Raw Material - Norway 5.7% 0.0% 0.0 6.5% 0.0% 0.0
In addition, an intangible asset with indefinite useful life of
EUR1.8 million (31.12.2016: EUR1.8 million) is allocated to the
Steel Division - Flow Control.
The preliminary goodwill determined due to the Magnesita
acquisition was not considered in the impairment calculation since
the purchase price allocation is not complete yet and it is not
possible to make a reliable estimate of the allocations to CGUs. On
the other hand, no triggering events were identified that would
lead to an impairment of the goodwill.
Result of impairment test
Based on the impairment test conducted in the financial year
2017, the recoverability of the assets was demonstrated in all
CGUs.
In the year 2016, the impairment losses for the former CGU
Industrial/Fused Cast amounted to EUR8.0 million. In the first half
of 2017, the Fused Cast plants were classified as a disposal group,
which led to an additional impairment of EUR1.8 million. The
disposal group was sold in the fourth quarter.
As in the previous year, no reversals of impairments were made
in the financial year 2017.
Other financial assets and liabilities
The Group initially recognises securities which are held for
trading on the trading date when the entity becomes a party to the
contractual provisions of the instruments. All other financial
assets and financial liabilities are initially recognised on the
date when they are originated. Financial assets are derecognised if
the entity transfers substantially all the risks and rewards or if
the entity neither transfers nor retains substantially all the
risks and rewards and has not retained control. Financial
liabilities are derecognised when the contractual obligations are
settled, withdrawn or have expired.
The item other financial assets in the Consolidated Statement of
Financial Position of RHI Magnesita includes shares in
non-consolidated subsidiaries and other investments, securities,
financial receivables and positive fair values of derivative
financial instruments.
The item other financial liabilities includes negative fair
values of derivative financial instruments as well as liabilities
to fixed-term or puttable non-controlling interests.
Shares in non-consolidated subsidiaries and investments in other
companies are classified entirely as "available for sale" in the
RHI Magnesita Group. These available-for-sale financial assets of
minor significance are measured at cost. If there are indications
that the fair value is lower, the lower value is recognised.
Securities classified as available-for-sale are initially
measured at fair value including any related transaction expenses.
Subsequent measurement reflects fair value, with changes in fair
value being recorded in other comprehensive income. The accumulated
gains and losses from fair value measurement that are recorded
under other comprehensive income are reclassified to the Statement
of Profit or Loss with the disposal of the financial assets.
Impairments are charged to profit or loss. Impairment losses on
equity instruments recognised to profit or loss are reversed
through other comprehensive income. Reversals of impairment for
debt instruments are recognised to profit or loss.
Securities are classified as at fair value through profit or
loss if they are classified as held for trading or designated as
such on initial recognition. Directly attributable transaction
costs are recognised in profit or loss as incurred. Securities at
fair value through profit or loss are measured at fair value and
changes therein, including any interest income, are recognised in
profit or loss.
Financial receivables are measured at amortised cost applying
the effective interest method. Any doubt concerning the
collectability of the receivables is reflected in the use of the
lower present value of the expected future cash flows. Foreign
currency receivables are translated at the closing rate.
Derivative financial instruments, which are not part of an
effective hedging relationship in accordance with IAS 39 or do not
meet the hedge accounting requirements, must be classified as held
for trading in accordance with IFRS and measured at fair value
through profit or loss. In the RHI Magnesita Group, this
measurement category includes derivatives related to purchase
obligations, forward exchange contracts, embedded derivatives in
open orders that are denominated in currencies other than the
functional currency as well as derivative financial instruments in
the form of interest rate swaps.
Derivative financial instruments relating to purchase
obligations are accounted for in accordance with IAS 39 and concern
a long-term power supply contract which provides for the purchase
of fixed amounts of electricity at fixed prices. The measurement is
made taking into account quoted electricity prices in the futures
market. Based on the fixed amounts of electricity, the cash flows
for the entire term of the contract are initially determined as the
difference between forward rates and contractually fixed prices and
discounted at the reporting date using a cost of borrowing rate
corresponding to the term. The measurement effects resulting from
this electricity derivative are shown as gain or loss from
derivatives from supply contracts in the Statement of Profit or
Loss.
The measurement of forward exchange contracts and embedded
derivatives in open orders denominated in a currency other than the
functional currency is made on a case-by-case basis at the
respective forward rate on the reporting date. These forward rates
are based on spot rates, and also include forward premiums and
discounts. Unrealised valuation gains or losses and results from
the realisation are recognised to the Statement of Profit or Loss
under other income or expenses. The underlying transactions for the
derivatives are carried at amortised cost.
For derivative financial instruments, which are incorporated in
an effective hedging relationship in accordance with IAS 39, the
provisions regarding hedge accounting are applied. RHI Magnesita
has concluded derivative financial instruments in the form of
interest rate swaps to hedge the cash flow risk of financial
liabilities carrying variable interest. Hedging transactions are
shown as part of cash flow hedge accounting. The interest rate
swaps as hedging instruments are measured at fair value, which
corresponds to the amount which RHI Magnesita would receive or has
to pay on the reporting date when the financial instrument is
terminated. The fair value is calculated using the interest rates
and yield curves relevant on the reporting date. The effective part
of the fair value changes is initially recorded in other
comprehensive income as an unrealised gain or loss. Only at the
time of the realisation of the underlying transaction, the
contribution of the hedging instrument is shown in the Statement of
Profit or Loss. Ineffective parts of the fair value changes of cash
flow hedges are recognised immediately in the Statement of Profit
or Loss. If the underlying transaction is no longer expected to
take place, the accumulated amount previously recorded in other
comprehensive income is reclassified to the Statement of Profit or
Loss.
Capital shares of non-controlling interests in subsidiaries with
a fixed term are recognised under other financial liabilities in
the Consolidated Statement of Financial Position in accordance with
IAS 32. The liabilities are measured at amortised cost. The share
of profit attributable to non-controlling interests is recognised
under interest expenses in the Statement of Profit or Loss.
Dividend payments to non-controlling interests reduce
liabilities.
Furthermore, the RHI Magnesita Group has entered into purchase
obligations with non-controlling shareholders of a subsidiary.
Based on these agreements, the shareholders receive the right to
tender their shares at any time on previously defined conditions.
In this case, IAS 32 provides for carrying a liability in the
amount of the probable future exercise price. The difference
between the estimated liability and the carrying amount of the
non-controlling interest was recognised to equity at the time of
initial recognition without affecting profit or loss. Subsequently,
the liability to puttable non-controlling interests is measured at
amortised cost and changes are recorded in net finance costs.
Deferred taxes
Deferred taxes are recognised on temporary differences between
the tax base and the IFRS carrying amount of assets and
liabilities, tax-loss carryforwards and consolidation entries.
Deferred tax assets are recognised on temporary differences
insofar as it is probable that sufficient deferred tax liabilities
exist or that sufficient taxable income before the reversal of
temporary differences is available for the settlement of deductible
temporary differences.
Deferred taxes are recognised on temporary differences relating
to shares in subsidiaries and joint ventures, unless the parent
company is in a position to control the timing of the reversal of
the temporary differences and it is probable that the temporary
differences will not reverse. No temporary differences are
recognised for financial instruments which were issued by
subsidiaries to non-controlling interests and which are classified
as a financial liability in accordance with IFRS.
The RHI Magnesita Group accounts for deferred tax assets for
unused tax loss carryforwards to the extent that it is probable
that a taxable income will be available.
The calculation of deferred taxes is based on the tax rate
expected in the individual countries at the time the deferred tax
asset is realised or the liability is settled and generally
reflects the enacted or substantively enacted tax rate on the
reporting date. As in the previous year, deferred taxes of the
Austrian group companies are determined at the corporation tax rate
of 25%. Deferred tax assets and liabilities of the Brazilian group
companies are measured at the tax rate of 34%. Tax rates from 12.5%
to 35.0% (31.12.2016: 12.5% to 37.9%) were applied to the other
companies.
Deferred tax assets and liabilities are offset if there is an
enforceable right to offset current tax receivables against current
tax liabilities, and if the deferred taxes relate to income taxes
due from/to the same tax authorities.
Inventories
Inventories are stated at acquisition or production cost, or at
net realizable value as of the reporting date. The determination of
acquisition cost of purchased inventories is based on the moving
average price method. Finished goods and work in process are valued
at fixed and variable production cost. The net realizable value is
the estimated selling price in the ordinary course of business
minus any estimated cost to complete and to sell the goods.
Impairments due to reduced usability are reflected in the
calculation of the net realizable value.
Long-term construction contracts
Construction contracts are accounted for using the percentage of
completion method if the criteria defined in IAS 11 have been
met.
Under the percentage of completion method, production costs
incurred plus an appropriate mark-up for profit based on the stage
of completion are recognised under receivables from construction
contracts and under revenue. The stage of completion is based on
the expenses incurred as a percentage of the expected total
expenses for the contract. Any expected losses on a contract are
covered by provisions, which also reflect identifiable risks.
Prepayments received from customers are deducted from contract
receivables. Any resulting negative balance on a construction
contract is recorded as a liability from construction
contracts.
Trade and other current receivables
Receivables are initially measured at fair value and
subsequently carried at amortised cost minus any valuation
allowances. These valuation allowances are determined on an
individual basis and reflect any recognizable risk of default. A
default leads to the derecognition of the relevant receivables.
Receivables denominated in foreign currencies are translated
using the closing rate.
Emission certificates
Emission certificates acquired for a consideration are carried
at cost and recognised to profit and loss in cost of sales when
used up, written down to fair value or sold. In the case of a
shortfall, a provision is recognised equivalent to the fair value
of the lacking emission certificates.
Emission certificates allocated free of charge are not accounted
for. Proceeds from the sale of these rights are recognised as
income.
Cash and cash equivalents
Cash on hand, checks received and cash at banks with an original
term of a maximum of three months are shown under cash and cash
equivalents. Moreover, shares in money market funds, which are only
exposed to insignificant value fluctuations due to their high
credit rating and investments in extremely short-term money market
instruments and can be converted to defined cash amounts within a
few days at any time, are also recorded under cash equivalents
under IAS 7.
Cash and cash equivalents denominated in foreign currencies are
translated at the closing rate.
Disposal groups held for sale
Non-current assets and disposal groups which can be sold in
their present state and whose sale is highly probable are
classified as held for sale. Assets and liabilities which are
intended to be sold together in a single transaction represent a
disposal group held for sale and are shown separately from other
assets and liabilities in the Statement of Financial Position. All
accumulated income and expenses recorded in other comprehensive
income which are related to disposal groups classified as held for
sale are presented separately in the Consolidated Statement of
Changes in Equity.
Non-current assets and disposal groups which are classified as
held for sale are carried at the lower of fair value less costs to
sell and carrying amount. Impairments are initially allocated to
existing goodwill and then to the non-current assets on a pro-rata
basis, based on the carrying amount of each individual asset of the
disposal group. Impairments beyond that are allocated to current
assets pursuant to the liquidity principle and recognised through
profit or loss in the item other expenses. Non-current assets are
not depreciated as long as they are classified as held for
sale.
Financial liabilities
Financial liabilities include liabilities to financial
institutions and other lenders and are measured at fair value less
directly attributable transaction costs at initial recognition. In
subsequent measurements these liabilities are measured at amortised
cost applying the effective interest method. Financial liabilities
in foreign currency are translated at the closing rate.
Provisions
Provisions are recognised when the Group incurs a legal or
constructive obligation as a result of past events, and it is
probable that an outflow of resources will be required to meet this
obligation, and the amount of the obligation can be reliably
estimated.
Non-current provisions are measured at their discounted
settlement value as of the reporting date if the discount effect is
material.
If maturities cannot be estimated, they are shown under current
provisions.
Provisions for pensions
With respect to post-employment benefits, a differentiation is
made between defined contribution and defined benefit plans.
Defined contribution plans limit the company's obligation to the
agreed amount of contributions to earmarked pension plans. The
related expenses are shown in the functional areas and thus in
EBIT. No provisions are necessary.
Defined benefit plans require the company to provide the agreed
amount of benefits to active and former employees and their
dependents, with a differentiation made between pension systems
financed through provisions and pension systems financed by
funds.
For pension plans financed through external funds, the pension
obligation according to the projected unit credit method is netted
out against the fair value of the plan assets. If the plan assets
are not sufficient to cover the obligation, the net obligation is
recognised under provisions for pensions. However, if the plan
assets exceed the obligations, the asset recognised is limited to
reductions of future contribution payments to the plan and is shown
under other non-current assets.
The present value of defined benefit obligations for current
pensions, future pension benefits and similar obligations and the
related expenses are calculated separately for each plan annually
by independent qualified actuaries in accordance with the
provisions of IAS 19. The present value of future benefits is based
on the length of service, expected wage/salary developments and
pension adjustments.
The expense to be recognised in a period includes current and
past service costs, settlement gains and losses, interest expenses
from the interest accrued on obligations, interest income from plan
assets and administration costs paid from plan assets. The net
interest expense is shown separately in net finance costs. All
other expenses related to defined benefit plans are allocated to
the costs of the relevant functional areas.
Actuarial assumptions are required to calculate these
obligations, above all the interest rate used for discounting, but
also the rates of increases in wages/salaries and pensions as well
as the retirement starting age and probability of employee turnover
and actual claims. The calculation is based on local biometric
parameters.
Interest rates chosen on the basis of the interest on
high-quality corporate bonds issued with adequate maturities and
currencies are applied to determine the present value of pension
obligations. In countries where there is no sufficiently liquid
market for high-quality corporate bonds, the returns on government
bonds are used as a basis.
The rates of increase for wages/salaries were based on an
average of past years, which is also considered to be realistic for
the future.
The fluctuation probabilities were estimated specific to age or
according to seniority.
The retirement age used for the calculation is based on the
respective statutory provisions of the country concerned. The
calculation is based on the earliest possible retirement age
according to the current statutory provisions of the respective
country, among other things depending on gender and date of
birth.
Remeasurement gains and losses are recorded net of deferred
taxes under other comprehensive income in the period incurred.
Other personnel provisions
Other personnel provisions include provisions for termination
benefits, service anniversary bonuses, payments to semi-retirees,
share-based payments and lump-sum settlements.
Provisions for termination benefits are primarily related to
obligations to employees whose employment is subject to Austrian
law.
Employees who joined an Austrian company before 31 December 2002
receive a one-off lump-sum termination benefit as defined by
Austrian labour legislation if the employer terminates the
employment relationship or when the employee retires. The amount of
the termination payment depends on the relevant salary at the time
of the termination as well as the number of years of service and
ranges between two and twelve monthly salaries. These obligations
are measured in accordance with IAS 19 using the projected unit
credit method applying an accumulation period of 25 years.
Remeasurement gains and losses are recorded directly to other
comprehensive income after considering tax effects and shown in the
Statement of Comprehensive Income.
For employees who joined an Austrian company after 31 December
2002, employers are required to make regular contributions equal to
1.53% of the monthly wage/salary to a statutory termination benefit
scheme. The company has no further obligations. Claims by employees
to termination benefits are filed with the statutory termination
benefit scheme, while the regular contributions are treated like
defined contribution pension plans and included under personnel
expenses of the functional areas.
Service anniversary bonuses are one-time special payments that
are dependent on the employee's wage/salary and length of service.
The employer is required by collective bargaining agreements or
company agreements to make these payments after an employee has
reached a certain number of uninterrupted years of service with the
same company. Obligations are mainly related to service anniversary
bonuses in Austrian and German group companies. Under IAS 19
service anniversary bonuses are treated as other long-term employee
benefits. Provisions for service anniversary bonuses are calculated
based on the projected unit credit method. Remeasurement gains or
losses are recorded in the personnel costs of the functional areas
in the period incurred.
Local labour laws and other similar regulations require
individual group companies to create provisions for semi-retirement
obligations. The obligations are partially covered by qualified
plan assets and are reported on a net basis in the Statement of
Financial Position.
For cash-settled share-based payments for the members of the
former Management Board of RHI AG, a provision is recorded for the
services received and measured at fair value on the date of
receipt. Until the debt is settled, its fair value is recalculated
at each reporting date and on the settlement date. All changes in
fair value are recognised to profit or loss in general and
administrative expenses.
Obligations for lump-sum settlements are based on company
agreements in individual companies.
Other provisions
Provisions for warranties are created for individual contracts
at the time of the sale of the goods concerned, or after a service
has been provided. The amounts of the provisions are based on the
expected or actual warranty claims.
Provisions for restructuring are created insofar as a detailed
formal restructuring plan has been developed and announced prior to
the reporting date or whose implementation was commenced prior to
the reporting date.
The Group recognises provisions for demolition and disposal
costs and environmental damages. RHI Magnesita's facilities and its
refractory, exploration and mining operations are subject to
environmental and governmental laws and regulations in each of the
jurisdictions in which it operates. These laws govern, among other
things, reclamation or restoration of the environment in mined
areas and the clean-up of contaminated properties. Provisions for
demolition and disposal costs and environmental damages include the
estimated demolition and disposal costs of plants and buildings as
well as environmental restoration costs arising from mining
activities, based on the present value of estimated cash flows of
the expected costs. The estimated future costs of deactivation of
assets are reviewed annually and adjusted, if appropriate.
Provisions for labour and civil contingencies are recognised for
all risks referring to legal proceedings that represent probable
loss. Assessment of the likelihood of loss includes analysis of
available evidence, including the opinion of internal and external
legal advisors of the RHI Magnesita Group.
Trade payables and other current liabilities
These liabilities are initially recognised at fair value, and
subsequently measured at amortised cost.
Liabilities denominated in foreign currencies are translated at
the closing rate.
Government grants
Government grants to promote investments are recognised as
deferred income and released through profit or loss over the useful
life of the relevant asset distributed on a straight-line
basis.
Grants that were granted as compensation for expenses or losses
are recognised to profit or loss in the periods in which the
subsidized expenses are incurred. In the RHI Magnesita Group, they
mainly include grants for research and employee development. Grants
for research are recorded as income in general and administrative
expenses.
Revenue and expenses
Revenue comprises the sale of products and services less rebates
and other sales deductions.
Revenue is realised when ownership and risk are transferred to
the customer or when a service is performed, the consideration has
been contractually defined or can otherwise be determined and the
RHI Magnesita Group can therefore expect to collect the related
receivable. If formal acceptance by the customer is agreed, the
related revenue is only recognised after this acceptance has been
received.
Revenue on construction contracts is realised according to the
percentage of completion method, if the requirements of IAS 11 have
been met.
Expenses are recognised to the Statement of Profit or Loss when
a service is consumed or the costs are incurred.
Interest income and expenses are recognised in accordance with
the effective interest method.
Dividends from investments that are not accounted for using the
equity method are recognised to profit and loss at the time the
legal claim arises.
Income taxes are recognised according to the local regulations
applicable to each company. Current and deferred income taxes are
recognised in the Statement of Profit or Loss unless they are
related to items which were recorded directly in equity or in other
comprehensive income. In such a case, income taxes are also
recorded in equity or other comprehensive income.
RHI Feuerfest GmbH, Vienna, Austria, acts as the head of a
corporate tax group. The corporate tax group of RHI AG, Vienna,
Austria was terminated with 31 December 2016 due to the corporate
restructuring of RHI AG in 2017. A new tax compensation agreement
has been concluded and is in force since 1 January 2017 between the
head of the group and eight Austrian group members. According to
the group and tax compensation agreement, the members of the group
have to pay a positive tax compensation of 20% of the taxable
profit to the head of the group if the result is positive, as long
as tax loss carry forwards exist with the head of the group;
subsequently 25% of the taxable profit have to be paid. In case of
a tax loss of the group member, the head of the group has to pay a
negative tax compensation to the member of the group, with a rate
of 12.5% being applied insofar as the loss can be utilised within
the group. In case the losses of a group member were compensated
(negative tax allocation payment) and this group member generates
taxable income within the next three years (after compensation),
the positive tax allocation amounts to 12.5%. In case of a loss in
the tax group, an unused tax loss of a group member is retained and
offset against future taxable profits of the group member. When the
contract is terminated, a compensation payment is agreed for unused
tax losses of a group member, which were allocated to the head of
the group.
In Germany, Didier-Werke Aktiengesellschaft, Wiesbaden, acts as
the head of a tax group for corporate and trade tax purposes. The
seven tax group members are obliged to transfer their profit or
loss to Didier-Werke Aktiengesellschaft based on a profit or loss
transfer agreement. Additionally, Didier-Werke Aktiengesellschaft,
Wiesbaden, acts as the head of a tax group for input tax purposes
with nine German tax group members. Furthermore, Rearden G Holdings
Eins GmbH, Hagen, acts as the head of a two-level structure tax
group with four group members for corporate, trade tax and input
tax purposes.
(9) Segment reporting
The RHI Magnesita Group comprises the operating segments Steel,
Industrial and Raw Materials. This segmentation of the business
activities is geared to internal control and reporting.
The segmentation into Steel and Industrial represents a grouping
by the main customer industries. The Steel segment specializes in
supporting customers in the steel-producing and steel-processing
industry. The Industrial segment serves customers in the glass,
cement/lime, nonferrous metals and environment, energy, chemicals
industries. The main activities of the two segments consist of
market development, global sales of high-grade refractory bricks,
mixes and special products as well as providing services at the
customers' sites.
The operating activities of the segment Raw Materials primarily
consist of supplying group companies with raw materials. This
includes mining magnesite and dolomite in mines owned by the Group
and raw material production based on seawater, processing and
finishing raw materials as well as purchasing and selling raw
materials. Within the Group, raw materials are carried at market
price. The globally located manufacturing sites, which process the
raw materials, are combined in one organisational unit. The
allocation of manufacturing cost variances of the production plants
to the Steel and Industrial Divisions is based on the supply
flow.
The research activities of the RHI Magnesita Group are managed
centrally. R&D costs are allocated directly to the three
segments.
The Shared Service Centre costs of the Group are allocated to
the three operating segments according to the agreed Service Level
Agreements. The allocation of expenses of Group management is based
on external revenue.
Statements of profit or loss up to EBIT are available for each
segment. The gross profit serves the management of the RHI
Magnesita Group for internal management. The profit of joint
ventures and associates is allocated to the segments. Net finance
costs and income taxes are managed on a group basis and are not
allocated.
Segment assets include trade receivables and inventories, which
are available to the operating segments and are reported to the
management for control and measurement, as well as property, plant
and equipment, goodwill and other intangible assets, which are
allocated to the segments based on the capacity of the assets
provided to the segments. Investments in joint ventures and
associates are allocated to the segments. All other assets are not
allocated. The recognition of segment assets is determined on the
basis of the accounting and measurement methods applied to the IFRS
Consolidated Financial Statements.
Data on revenue by country are disclosed by the sites of the
customers. Data on non-current assets (property, plant and
equipment and intangible assets) are disclosed on the basis of the
respective locations of the companies of the RHI Magnesita
Group.
(10) Discretionary decisions, assumptions and estimates
The RHI Magnesita Group used forward-looking assumptions and
estimates, especially with respect to business combinations,
non-current assets, valuation adjustments to inventories and
receivables, provisions and income taxes to a certain extent in the
application of accounting and measurement methods.
The estimates are based on comparable values in the past, plan
data and other findings regarding transactions to be accounted. The
actual values may ultimately deviate from the assumptions and
estimates made. The resulting changes in value of assets,
liabilities, revenue and expenses are accounted for in the
reporting period in which the change is made and in the affected
future reporting periods.
Business combinations (initial consolidation)
Estimates relating to the calculation of fair values of acquired
assets, liabilities and contingent liabilities are required within
the context of business combinations.
If intangible assets are identified, discretionary estimates are
necessary for the determination of fair values by means of
discounted cash flows, especially regarding the duration and amount
of future cash flows, as well as for the determination of an
adequate discount rate. When determining the fair value of land,
buildings and technical plant, above all the estimate of
comparability of the reference objects with the objects subject to
valuation is discretionary.
When making discretionary decisions in the context of purchase
price allocations on major acquisitions, RHI Magnesita consults
with independent experts who accompany the execution of the
discretionary decisions and record it in appraisal documents.
Impairment of intangible assets with finite useful lives and
property, plant and equipment
Intangible assets with a finite useful life and property, plant
and equipment must be tested for impairment when events or a change
in circumstances indicate that the carrying amount of an asset may
not be recoverable. The carrying amounts of these assets amounted
to EUR1,117.1 million at 31 December 2017 (31.12.2016: EUR591.1
million). In accordance with IAS 36, such impairment losses are
determined through comparisons with the discounted future cash
flows expected from the related assets of the cash-generating units
(CGU).
As part of the annual planning process, the impairment test is
conducted for the CGUs defined in the RHI Magnesita Group, thus
taking into account all changes resulting from updates of strategic
planning. Sensitivity analyses are also performed as part of the
impairment test. In their calculation one of the main parameters is
changed as follows: increase in the discount rate by 10%, reduction
in the form of the contribution margin by 10% and reduction of the
growth rate in terminal value by 50%. In all CGUs these simulations
do not result in impairments.
Likewise, in all CGUs a reduction of the discount rate by 10%,
an increase in profitability in the form of the contribution margin
by 10% and an increase in the growth rate in terminal value by 50%
do not result in reversals of impairments.
Impairment of goodwill
The effect of an adverse change by plus 10% in the estimated
interest rates as of 31 December 2017 or by minus 10% in the
contribution margin would not result in an impairment of goodwill
recognised (carrying amount 31.12.2017: EUR38.7 million,
31.12.2016: EUR37.8 million).
Impairment of other intangible assets with indefinite useful
life
The effect of an adverse change by plus 10% in the estimated
interest rate as of 31 December 2017 or by minus 10% in the
contribution margin would not result in an impairment charge to
intangible assets with indefinite useful lives recognised (carrying
amount at 31.12.2017 and 31.12.2016: EUR1.8 million).
Provisions for pensions and termination benefits
The present value of pension and termination benefit obligations
depends on a number of factors, which are based on actuarial
assumptions such as interest rates, future salary and pension
increases as well as life expectancy. Due to the long-term
orientation of these obligations, these assumptions are subject to
significant uncertainties.
The following sensitivity analysis shows the change in present
value of the pension and termination benefit obligations if one key
parameter changes, while the other influences are maintained
constant. In reality, however, it is rather unlikely that these
influences do not correlate. The present value of the pension
obligations for the sensitivities shown was calculated using the
same method as for the actual present value of the pension
obligations (projected unit credit method).
31.12.2017 31.12.2016
---------------------
Change of assumption
in percentage points Pension Termination Pension Termination
in EUR million or years plans benefits plans benefits
--------------------- --------------------- ------- ----------- ------- -----------
Present value of the
obligations - 517.1 58.1 289.2 58.5
--------------------- --------------------- ------- ----------- ------- -----------
Interest rate +0.25 (14.9) (1.5) (7.6) (1.6)
(0.25) 15.7 1.6 8.0 1.6
Salary increase +0.25 0.8 1.6 0.6 1.5
(0.25) (0.7) (3.5) (0.6) (1.4)
Pension increase +0.25 10.6 - 5.0 -
(0.25) (10.2) - (4.9) -
Life expectancy +1 year 18.3 - 12.9 -
(1) year (23.6) - (13.2) -
These changes would have no immediate effect on the result of
the period as remeasurement gains and losses are recorded in other
comprehensive income without impact on profit or loss.
The assumptions regarding the interest rate are reviewed
semi-annually; all other assumptions are reviewed at the end of the
year.
Other provisions
The recognition and measurement of other provisions totalling
EUR128.5 million (31.12.2016: EUR33.6 million) were based on the
best possible estimates using the information available at the
reporting date. The estimates take into account the underlying
legal relationships and are performed by internal experts or, when
appropriate, also by external experts. Despite the best possible
assumptions and estimates, cash outflows expected at the reporting
day may deviate from actual cash outflows. As soon as additional
information is available, the estimates made are reviewed and
provisions are also adjusted.
Income taxes
The calculation of income taxes of RHI Magnesita N.V. and its
subsidiaries is based on the tax laws applicable in the individual
countries. Due to their complexity, the tax items presented in the
Financial Statements may be subject to different interpretations by
local finance authorities.
When determining the amount of the capitalisable deferred tax
assets, an estimate of the management is required regarding the
amount of future taxable income and the expected time. Should the
future taxable profit deviate by 10% from the assumption made on
the reporting date within the planning period defined for the
accounting and measurement of deferred taxes, the net position of
deferred tax assets amounting to EUR168.7 million (31.12.2016:
EUR131.3 million) would have to be increased by EUR0.8 million
(31.12.2016: EUR1.8 million) or reduced by EUR0.9 million
(31.12.2016: EUR1.7 million).
Other items
With respect to the other items of the Statement of Financial
Position, RHI Magnesita currently assumes that no material effects
on the financial position and performance would result for the
following financial years due to changes in the estimates and
assumptions.
NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(11) Property, plant and equipment
Property, plant and equipment developed as follows in the year
2017 and in the previous year:
Real
estate, Prepayments
land Technical Other plant, made and
and Raw material equipment, furniture plant under
in EUR million buildings deposits machinery and fixtures construction Total
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Cost at 01.01.2017 453.7 32.1 877.9 294.2 43.8 1,701.7
Currency translation (14.5) (0.5) (23.5) (6.5) (2.3) (47.3)
Additions to consolidated
companies(1) 148.6 16.6 214.1 5.4 54.4 439.1
Additions 6.5 1.5 13.6 8.8 34.4 64.8
Retirements and disposals (20.4) 0.0 (24.4) (9.5) 0.0 (54.3)
Reclassifications 7.3 1.0 16.5 6.1 (30.0) 0.9
Reclassification as held
for sale (25.4) (5.1) (92.5) (10.6) (0.9) (134.5)
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Cost at 31.12.2017 555.8 45.6 981.7 287.9 99.4 1,970.4
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Accumulated depreciation
01.01.2017 285.6 24.5 639.3 229.6 0.9 1,179.9
Currency translation (5.3) 0.0 (11.2) (5.0) (0.1) (21.6)
Depreciation charges 8.7 0.5 36.4 14.3 0.0 59.9
Impairment losses 9.4 0.0 7.9 1.1 0.3 18.7
Retirements and disposals (19.6) 0.0 (23.1) (9.0) 0.0 (51.7)
Reclassifications 0.4 0.0 0.0 0.0 0.0 0.4
Reclassification as held
for sale (22.4) (3.6) (79.9) (10.3) (0.3) (116.5)
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Accumulated depreciation
31.12.2017 256.8 21.4 569.4 220.7 0.8 1,069.1
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Carrying amounts at 31.12.2017 299.0 24.2 412.3 67.2 98.6 901.3
1) preliminary
Real
estate, Prepayments
land Technical Other plant, made and
and Raw material equipment, furniture plant under
in EUR million buildings deposits machinery and fixtures construction Total
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Cost at 01.01.2016 448.0 31.8 877.0 286.3 49.2 1,692.3
Currency translation 0.2 0.0 (6.0) (0.2) (0.1) (6.1)
Disposals of consolidated
companies (4.2) 0.0 (15.4) (2.3) 0.0 (21.9)
Additions 5.9 0.3 13.7 7.6 32.8 60.3
Retirements and disposals (5.3) 0.0 (11.0) (4.2) (0.7) (21.2)
Reclassifications 9.1 0.0 19.6 7.0 (37.4) (1.7)
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Cost at 31.12.2016 453.7 32.1 877.9 294.2 43.8 1,701.7
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Accumulated depreciation
01.01.2016 282.1 24.2 633.5 220.1 0.2 1,160.1
Currency translation 0.9 0.0 (3.9) 0.5 0.0 (2.5)
Disposals of consolidated
companies (4.2) 0.0 (15.4) (2.3) 0.0 (21.9)
Depreciation charges 7.8 0.3 32.3 14.3 0.0 54.7
Impairment losses 4.0 0.0 2.9 1.0 0.9 8.8
Retirements and disposals (5.1) 0.0 (10.1) (4.0) 0.0 (19.2)
Reclassifications 0.1 0.0 0.0 0.0 (0.2) (0.1)
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Accumulated depreciation
31.12.2016 285.6 24.5 639.3 229.6 0.9 1,179.9
------------------------------- ---------- ------------ ----------- ------------- ------------- -------
Carrying amounts at 31.12.2016 168.1 7.6 238.6 64.6 42.9 521.8
The impairment losses of EUR18.7 million are primarily related
to the restructuring of operations in Germany and Brazil. In 2016,
impairment losses of EUR8.8 million were mainly caused by the
restructuring of the CGU Industrial/Fused Cast and the CGU Raw
Materials/Norway.
The item prepayments made and plant under construction includes
plant under construction with a carrying amount of EUR96.5 million
(31.12.2016: EUR41.7 million), with the modification of the smelter
at the site in Radenthein, Austria, representing the largest
investment project under construction of the financial year
2017.
As in the previous year, there are no restrictions on the sale
of property, plant and equipment.
(12) Goodwill
Goodwill developed as follows:
in EUR million 2017 2016
-------------------------------------------- ----- -----
Cost at beginning of year 40.2 40.1
Currency translation (1.6) 0.1
Additions to consolidated companies(1) 174.1 0.0
Reclassification as held for sale (0.4) 0.0
-------------------------------------------- ----- -----
Cost at year-end 212.3 40.2
-------------------------------------------- ----- -----
Accumulated impairment at beginning of year (2.4) (2.6)
Currency translation 0.1 0.2
Reclassification as held for sale 0.4 0.0
-------------------------------------------- ----- -----
Accumulated impairment at year-end (1.9) (2.4)
-------------------------------------------- ----- -----
Carrying amount at year-end 210.4 37.8
1) preliminary
(13) Other intangible assets
Other intangible assets changed as follows in the financial year
2017:
Internally
generated intangible Other intangible
in EUR million assets assets Total
--------------------------------------- --------------------- ---------------- ------
Cost at 01.01.2017 45.9 114.0 159.9
Currency translation (0.2) (10.0) (10.2)
Additions to consolidated companies(1) 0.0 163.5 163.5
Additions 4.1 1.5 5.6
Retirements and disposals 0.0 (0.6) (0.6)
Reclassifications (0.6) (0.3) (0.9)
Reclassification as held for sale (1.6) (1.7) (3.3)
--------------------------------------- --------------------- ---------------- ------
Cost at 31.12.2017 47.6 266.4 314.0
--------------------------------------- --------------------- ---------------- ------
Accumulated amortisation 01.01.2017 27.7 61.1 88.8
Currency translation (0.2) (2.0) (2.2)
Amortisation charges 3.8 9.0 12.8
Impairment losses 0.8 0.0 0.8
Retirements and disposals 0.0 (0.6) (0.6)
Reclassifications (0.6) 0.2 (0.4)
Reclassification as held for sale (1.3) (1.5) (2.8)
--------------------------------------- --------------------- ---------------- ------
Accumulated amortisation 31.12.2017 30.2 66.2 96.4
--------------------------------------- --------------------- ---------------- ------
Carrying amounts at 31.12.2017 17.4 200.2 217.6
1) preliminary
Other intangible assets changed as follows in the previous
year:
Internally
generated intangible Other intangible
in EUR million assets assets Total
------------------------------------ --------------------- ---------------- ------
Cost at 01.01.2016 42.2 130.5 172.7
Currency translation (0.2) (0.2) (0.4)
Disposals of consolidated companies (1.1) (1.5) (2.6)
Additions 5.0 1.0 6.0
Retirements and disposals 0.0 (17.5) (17.5)
Reclassifications 0.0 1.7 1.7
------------------------------------ --------------------- ---------------- ------
Cost at 31.12.2016 45.9 114.0 159.9
------------------------------------ --------------------- ---------------- ------
Accumulated amortisation 01.01.2016 25.5 73.0 98.5
Currency translation (0.3) 0.1 (0.2)
Disposals of consolidated companies (1.1) (1.5) (2.6)
Amortisation charges 3.5 6.9 10.4
Impairment losses 0.1 0.0 0.1
Retirements and disposals 0.0 (17.5) (17.5)
Reclassifications 0.0 0.1 0.1
------------------------------------ --------------------- ---------------- ------
Accumulated amortisation 31.12.2016 27.7 61.1 88.8
------------------------------------ --------------------- ---------------- ------
Carrying amounts at 31.12.2016 18.2 52.9 71.1
Internally generated intangible assets comprise capitalised
software and product development costs.
Other intangible assets include in particular acquired customer
relations, patents, trademark rights, software, and land use
rights. The customer relations of Magnesita have a preliminary
carrying amount of EUR116.1 million and a remaining useful life of
8 to 15 years. The land use rights have a carrying amount of
EUR26.0 million (31.12.2016: EUR23.4 million) and a remaining
useful life of 20 to 60 years.
As in the previous year, there are no restrictions on the sale
of intangible assets.
(14) Investments in joint ventures and associates
The following investments in joint ventures and associates are
accounted for using the equity method in the RHI Magnesita
Consolidated Financial Statements:
in EUR million 31.12.2017 31.12.2016
------------------------------ ---------- ----------
Investments in joint ventures 20.7 20.5
Investments in associates 9.8 0.0
------------------------------ ---------- ----------
Carrying amount at year-end 30.5 20.5
Joint ventures
As in the previous year, the RHI Magnesita Group holds a share
of 50% in MAGNIFIN Magnesiaprodukte GmbH & Co KG, a company
based in St. Jakob, Austria. The company's core business activity
is the production and sale of halogen-free flame retardants for
plastics. The investment in MAGNIFIN is treated as a financial
investment. MAGNIFIN is set up as an independent vehicle. RHI
Magnesita has a residual interest in the net assets of the company
and accordingly classified its share as a joint venture. There are
no listed market prices.
The following table summarises the income and expenses of
MAGNIFIN:
in EUR million 2017 2016
--------------------------- ----- -----
Revenue 40.3 40.0
Profit before income tax 20.8 20.9
Depreciation 0.8 1.7
Interest expense 0.2 0.3
Other comprehensive income (0.2) (0.3)
Total comprehensive income 20.6 20.6
Income taxes on the share of profit of MAGNIFIN amounting to
EUR2.7 million (2016: EUR2.8 million) are recognised by the head of
the tax group, RHI Feuerfest GmbH, Vienna, Austria, due to the
legal form of the joint venture and transferred to Veitscher
Vertriebsgesellschaft m.b.H., Vienna, Austria, in accordance with
the provisions of the tax compensation agreement.
The net assets of MAGNIFIN are shown in the table below:
in EUR million 31.12.2017 31.12.2016
--------------------------------------------------- ---------- ----------
Non-current assets 9.3 9.9
Current assets (without cash and cash equivalents) 10.2 12.9
Cash and cash equivalents 19.7 16.7
Non-current liabilities and provisions (4.0) (4.0)
Current provisions (1.2) (1.1)
Trade payables and other current liabilities (2.7) (3.2)
--------------------------------------------------- ---------- ----------
Net assets 31.3 31.2
The development of the carrying amount of the share in MAGNIFIN
in the RHI Magnesita Consolidated Financial Statements is shown
below:
in EUR million 2017 2016
--------------------------------------------------- ------ -----
Proportional share of net assets at beginning
of year 15.6 14.4
Share of profit 10.8 10.9
Share of other comprehensive income (remeasurement
losses) (0.1) (0.1)
Dividends received (10.7) (9.5)
Other changes in value 0.0 (0.1)
--------------------------------------------------- ------ -----
Proportional share of net assets at year-end 15.7 15.6
Goodwill 4.9 4.9
--------------------------------------------------- ------ -----
Carrying amount of investment at year-end 20.6 20.5
In the course of the acquisition of Magnesita the Group acquired
interests in an immaterial joint venture with a carrying amount of
EUR0.1 million as of 31 December 2017 (26.10.2017: EUR0.1 million).
The Group's share of the profit after income tax, other
comprehensive income and total comprehensive income for November
and December 2017 amounts to less than EUR0.1 million.
Associates
In the course of the acquisition of Magnesita the Group acquired
interests in Sinterco S.A.. Sinterco is located in Nameche,
Belgium, and is dedicated to the production of sintered doloma. The
direct parent, which is ultimately controlled by RHI Magnesita,
holds a share of 70% in equity of Sinterco but does not have
control over Sinterco due to a special agreement with the minority
shareholder and accordingly classified its share as an associate.
There are no listed market prices.
In November and December 2017 Sinterco generated revenue
amounting to EUR4.0 million. Profit after income tax and total
comprehensive income amount to less than EUR0.1 million.
The net assets of Sinterco are shown in the table below:
in EUR million 31.12.2017 26.10.2017
------------------------ ---------- ----------
Non-current assets 26.3 26.0
Current assets 13.8 13.4
Non-current liabilities (20.7) (20.5)
Current liabilities (6.4) (5.9)
------------------------ ---------- ----------
Net assets 13.0 13.0
At 31 December 2017 as well as at 26 October 2017 the carrying
amount of the investment in Sinterco in the RHI Magnesita
Consolidated Financial Statements amounts to EUR9.1 million.
In the course of the acquisition of Magnesita the Group acquired
a second, but immaterial, associate with a carrying amount of
EUR0.7 million as of 31 December 2017 (26.10.2017: EUR0.7 million).
The Group's share of the profit after income tax for November and
December 2017 amounts to EUR0.1 million. Total comprehensive income
including other comprehensive income of less than EUR0.1 million,
amounts to EUR0.1 million.
(15) Other non-current financial assets
Other non-current financial assets consist of the following
items:
in EUR million 31.12.2017 31.12.2016
------------------------------------------------------ ---------- ----------
Interests in subsidiaries not consolidated 0.8 0.0
Available-for-sale investments 0.4 0.4
Available-for-sale securities and shares 15.0 15.8
Securities designated as fair value through profit
and loss 2.3 0.0
Interest derivatives designated as cash flow hedges 1.5 0.0
Non-current receivables from disposal of subsidiaries 2.6 0.0
Other non-current financial receivables 2.5 2.7
------------------------------------------------------ ---------- ----------
Other non-current financial assets 25.1 18.9
At 31 December 2017 accumulated impairments on investments,
securities and shares of EUR3.8 million (31.12.2016: EUR2.0
million) are recognised.
(16) Other non-current assets
Other non-current assets include the following items:
in EUR million 31.12.2017 31.12.2016
------------------------------------------ ---------- ----------
Receivables from other taxes 9.9 6.7
Stripping costs 8.0 8.3
Judicial deposits 3.7 0.0
Plan assets from overfunded pension plans 2.0 2.1
Prepaid expenses 0.6 0.6
------------------------------------------ ---------- ----------
Other non-current assets 24.2 17.7
Prepaid expenses for stripping costs arising from mining raw
materials in a surface mine are shown in non-current assets due to
the planned use of the mine.
Receivables from other taxes are related to input tax credits,
which are expected to be utilised in the medium term.
(17) Deferred taxes
Deferred taxes are related to the following significant balance
sheet items and loss carryforwards:
31.12.2017 2017 31.12.2016(1) 2016(1)
Deferred Deferred Deferred Deferred Expense/
in EUR million tax assets tax liabilities Expense/(Income) tax assets tax liabilities (Income)
--------------------------- ----------- ---------------- ---------------- ----------- ---------------- ---------
Property, plant and
equipment,
intangible assets 21.6 81.5 (4.7) 22.3 38.5 0.8
Inventories 16.1 1.1 5.7 16.9 1.0 (3.5)
Trade receivables, other
assets 6.3 38.3 (11.5) 1.6 3.1 (8.7)
Pensions and other
personnel
provisions 70.2 0.3 6.4 53.1 0.4 2.6
Other provisions 20.5 1.2 3.0 3.9 0.7 (0.1)
Trade payables, other
liabilities 26.6 4.8 (1.4) 16.5 1.1 2.4
Tax loss carryforwards 134.6 - 8.4 61.8 - 10.8
Offsetting (115.5) (115.5) - (31.3) (31.3) -
--------------------------- ----------- ---------------- ---------------- ----------- ---------------- ---------
Deferred taxes 180.4 11.7 5.9 144.8 13.5 4.3
1) Comparative values adjusted to current presentation
As of 31 December 2017, subsidiaries which generated tax losses
in the past year or the previous year recognised net deferred tax
assets on temporary differences and on tax loss carryforwards of
EUR26.0 million (31.12.2016: EUR32.3 million). These assets are
considered to be unimpaired because the companies concerned are
expected to generate taxable income in the future. This assessment
is based on measures implemented in 2016, which lead to increased
taxable income. On the one hand, a subsidiary was sold; on the
other hand, the financing of a subsidiary was optimized.
Tax loss carryforwards totalled EUR609.7 million in the RHI
Magnesita Group as of 31 December 2017 (31.12.2016: EUR383.7
million). A significant portion of the tax loss carryforwards
originates in Austria and in Brazil and can be carried forward
indefinitely. The annual offset of the tax loss carryforwards in
Austria is limited to 75% and in Brazil to 30% of the respective
tax profits. No deferred taxes were recognised for tax loss
carryforwards of EUR157.7 million (31.12.2016: EUR156.9 million).
The main part of the non-capitalised tax losses can be carried
forward indefinitely. EUR3.4 million (31.12.2016: EUR25.8 million)
will lapse at the earliest in the year 2020 if not used by
then.
In addition, no deferred tax assets were recognised for
temporary differences totalling EUR16.2 million (31.12.2016: EUR2.2
million) as it is not sufficiently probable that they can be used.
The deductible temporary differences can be carried forward
indefinitely.
Taxable temporary differences of EUR667.0 million (31.12.2016:
EUR109.3 million) and deductible temporary differences of EUR295.6
million were not recognised on shares in subsidiaries because the
corresponding distributions of profit or the sale of the
investments are not expected in the foreseeable future.
The maturity structure of deferred taxes is shown in the table
below:
31.12.2017 31.12.2016
in EUR million Current Non-current Total Current Non-current Total
------------------------- ------- ----------- ----- ------- ----------- -----
Deferred tax assets 50.9 129.5 180.4 39.0 105.8 144.8
Deferred tax liabilities 0.4 11.3 11.7 0.0 13.5 13.5
(18) Inventories
Inventories as presented in the Consolidated Statement of
Financial Position consist of the following items:
in EUR million 31.12.2017 31.12.2016
-------------------------------------------- ---------- ----------
Raw materials and supplies 183.7 74.5
Unfinished products and unfinished services 122.1 99.4
Finished products and goods 353.6 184.9
Prepayments made 17.2 6.5
-------------------------------------------- ---------- ----------
Inventories 676.6 365.3
The inventories recognised as of 31 December 2017 totalled
EUR676.6 million (31.12.2016: EUR365.3 million), of which EUR9.0
million (31.12.2016: EUR2.7 million) are carried at net realizable
value.
The impairment losses recorded in the financial year 2017,
netted out against reversals of impairment losses, amount to EUR4.0
million (2016: EUR1.1 million).
As in the previous year, there are no restrictions on the
disposal of inventories.
(19) Trade and other current receivables
Trade and other current receivables as presented in the
Statement of Financial Position are classified as follows:
in EUR million 31.12.2017 31.12.2016
-------------------------------------------------- ---------- ----------
Trade receivables 394.9 309.0
Receivables from long-term construction contracts 11.7 7.8
Receivables from other taxes 77.0 65.9
Receivables from joint ventures and associates 19.4 1.0
Prepaid expenses 3.7 2.8
Prepaid transaction costs related to financial
liabilities 2.5 0.0
Receivables from property transactions 2.5 3.3
Emission rights 1.6 0.0
Receivables from employees 1.3 0.8
Receivables from personnel welfare foundation 0.8 0.8
Receivables from non-consolidated subsidiaries 0.3 0.0
Other current receivables 14.3 7.7
-------------------------------------------------- ---------- ----------
Trade and other current receivables 530.0 399.1
thereof financial assets 419.9 312.1
thereof non-financial assets 110.1 87.0
Receivables from long-term construction contracts consist of the
following components:
in EUR million 31.12.2017 31.12.2016
-------------------------------------------------- ---------- ----------
Contract costs incurred up to the reporting date 13.2 10.0
Profits recognised by the reporting date 1.4 0.8
Prepayments received (2.9) (3.0)
-------------------------------------------------- ---------- ----------
Receivables from long-term construction contracts 11.7 7.8
Receivables from other taxes include input tax credits and
receivables from energy tax refunds, research, education and
apprentice subsidies.
As in the previous year, trade receivables with a total nominal
value of EUR34.0 million were assigned for financial liabilities as
of 31 December 2017 (31.12.2016: EUR34.0 million).
Accumulated valuation allowance to trade and other current
receivables developed as follows:
in EUR million 2017 2016
------------------------------------------------ ----- -----
Accumulated valuation allowance at beginning of
year 35.2 30.1
Currency translation (1.1) 0.4
Addition 11.2 7.4
Use (3.2) (0.3)
Reversal (5.6) (2.4)
Reclassification as held for sale (2.1) 0.0
------------------------------------------------ ----- -----
Accumulated valuation allowance at year-end 34.4 35.2
(20) Income tax receivables
Income tax receivables amounting to EUR13.5 million (31.12.2016:
EUR9.3 million) are mainly related to tax prepayments and
deductible withholding taxes.
(21) Other current financial assets
This item of the Consolidated Statement of Financial Position
consists of the following components:
in EUR million 31.12.2017 31.12.2016
------------------------------------ ---------- ----------
Securities held for trading 32.3 0.0
Derivatives in open orders 0.8 1.1
Forward exchange contracts 0.9 0.4
Other current financial receivables 0.1 1.5
------------------------------------ ---------- ----------
Other current financial assets 34.1 3.0
At 31 December 2017 accumulated impairments on other current
financial receivables of EUR1.1 million (31.12.2016: EUR0.0
million) are recognised.
(22) Cash and cash equivalents
This item of the Consolidated Statement of Financial Position
consists of the following components:
in EUR million 31.12.2017 31.12.2016
-------------------------- ---------- ----------
Cash at banks 373.2 179.9
Money market funds 67.5 0.4
Checks 1.4 2.5
Cash on hand 0.3 0.1
-------------------------- ---------- ----------
Cash and cash equivalents 442.4 182.9
(23) Share capital
At 31 December 2016, the fully paid-in share capital of RHI AG
amounted to EUR289,376,212.84 and consisted of 39,819,039 zero par
value bearer shares. One share granted a rounded calculated share
of EUR7.27 in capital stock.
In exchange for the cancellation of the RHI AG shares as a
result of the merger, in which RHI AG merged with and into RHI
Magnesita N.V., the shareholders of RHI AG received one newly
issued ordinary share of RHI Magnesita N.V. for each RHI AG share.
As part of the purchase price for the acquisition of control of
Magnesita, RHI Magnesita N.V. issued 5,000,000 new ordinary shares
to the sellers of Magnesita shares as at 26 October 2017. Following
the merger and the acquisition of control and also at year-end
2017, RHI Magnesita N.V.'s issued and fully paid-in share capital
therefore consists of 44,819,039 ordinary shares at EUR1 each
share.
The authorized share capital of RHI Magnesita N.V. amounts to
EUR100,000,000 divided into 100,000,000 ordinary shares, of which
44,819,039 ordinary shares are issued and outstanding as explained
before.
All outstanding RHI Magnesita shares grant the same rights. The
shareholders are entitled to payment of the dividend adopted and
have one voting right per share at the Annual General Meeting.
There are no RHI Magnesita shares with special control rights. No
limitations regarding the voting rights of RHI Magnesita shares,
including from agreements between shareholders, are known to the
company.
On 20 October 2017 the voluntary employee stock ownership
programme "4 plus 1" for employees and executives of RHI AG as well
as members of the management, executives and employees of RHI group
companies was terminated. Until the termination of the plan
employees received one RHI share free of charge for four RHI shares
they purchased themselves. During 2017, 2,310 (2016: 7,998) shares
were acquired over the stock exchange for the employee stock
ownership plan and issued to employees. No own shares were held by
RHI AG at the merger date and at 31 December 2016.
(24) Group reserves
Additional paid-in capital
At 31 December 2017, additional paid-in capital comprises
premiums on the issue of shares less issue costs net of tax by RHI
Magnesita N.V.. The additional paid-in capital as of 31 December
2016, was eliminated in the course of downstream merger from RHI AG
to RHI Magnesita N.V..
Mandatory reserves
The articles of association stipulate a mandatory reserve of
EUR288,699,230.59 which was created in connection with the merger.
No distributions, allocations or additions may be made and no
losses of the company may be allocated to the mandatory
reserve.
Retained earnings
The item retained earnings includes the result of the financial
year and results that were earned by consolidated companies during
prior periods, but not distributed.
Accumulated other comprehensive income
The item cash flow hedges includes gains and losses from the
effective part of cash flow hedges less tax effects. The
accumulated gain or loss from the hedge allocated to reserves is
only reclassified to the Statement of Profit or Loss if the hedged
transaction also influences the result or is terminated.
The item defined benefit plans includes the gains and losses
from the remeasurement of defined benefit pension and termination
benefit plans taking into account tax effects. No reclassification
of these amounts to the Statement of Profit or Loss will be made in
future periods.
Currency translation includes the accumulated currency
translation differences from translating the Financial Statements
of foreign subsidiaries as well as unrealised currency translation
differences from monetary items which are part of a net investment
in a foreign operation, net of related income taxes. If foreign
companies are deconsolidated, the currency translation differences
are recognised in the Statement of Profit or Loss as part of the
gain or loss from the sale of shares in subsidiaries. In addition,
when monetary items cease to form part of a net investment in a
foreign operation, the currency translation differences of these
monetary items previously recognised in other comprehensive income
are reclassified to profit or loss. In the financial year 2017, the
Group reassessed its internal financing structure and as a result
reclassified accumulated losses of EUR38.9 million to the profit or
loss statement. Due to the disposal of Fused Cast accumulated
foreign currency translation losses of EUR1.8 million were
reclassified to the Statement of Profit or Loss. The corresponding
tax effect led to an income of EUR6.2 million.
(25) Non-controlling interests
Non-controlling interests in Magnesita
Non-controlling interests hold a share of 50% minus one share in
the listed company Magnesita Refratários S.A. and its subsidiaries
(Magnesita). Magnesita is a global group dedicated to the
production and sale of an extensive line of refractory materials
and industrial minerals and distinguishes itself through its
vertically integrated operations.
Based on the net assets of Magnesita, the carrying amount of the
non-controlling interests is determined as follows:
in EUR million 31.12.2017 26.10.2017
--------------------------------------------- ---------- ----------
Non-current assets 660.8 680.8
Current assets 678.2 672.0
Non-current liabilities (619.6) (687.3)
Current liabilities (471.1) (415.3)
--------------------------------------------- ---------- ----------
Net assets before intragroup eliminations 248.3 250.2
--------------------------------------------- ---------- ----------
Intragroup eliminations (0.1) 0.0
--------------------------------------------- ---------- ----------
Net assets 248.2 250.2
Percentage of non-controlling interests 50.0% 50.0%
--------------------------------------------- ---------- ----------
Carrying amount of non-controlling interests 124.1 125.1
The aggregate Statement of Profit or Loss and Statement of
Comprehensive Income are shown below:
in EUR million 11-12/2017
---------------------------------------------------------------------- ----------
Revenue 172.2
Operating expenses, net finance costs and income tax (165.9)
---------------------------------------------------------------------- ----------
Profit after income tax before intragroup eliminations 6.3
---------------------------------------------------------------------- ----------
Intragroup eliminations 0.0
---------------------------------------------------------------------- ----------
Profit after income tax 6.3
thereof attributable to non-controlling interests of Magnesita 3.1
in EUR million 11-12/2017
---------------------------------------------------------------------- ----------
Profit after income tax 6.3
Other comprehensive income (9.8)
---------------------------------------------------------------------- ----------
Total comprehensive income (3.5)
thereof attributable to non-controlling interests of Magnesita (1.8)
The following table shows the summarised Statement of Cash
Flows:
in EUR million 11-12/2017
---------------------------------------- ----------
Net cash flow from operating activities 46.5
Net cash flow from investing activities 18.7
Net cash flow from financing activities (2.8)
---------------------------------------- ----------
Total cash flow 62.4
Non-controlling interests in Orient Refractories Ltd.
Non-controlling interests hold a share of 30.4% (31.12.2016:
30.4%) in the listed company Orient Refractories Ltd. (in the
following "ORL"), based in New Delhi, India. ORL is allocated to
the Steel segment.
Based on the net assets of the company, the carrying amount of
the non-controlling interests is determined as follows:
in EUR million 31.12.2017 31.12.2016
--------------------------------------------- ---------- ----------
Non-current assets 25.6 28.9
Current assets 48.8 44.6
Non-current liabilities (6.8) (8.2)
Current liabilities (16.6) (14.8)
--------------------------------------------- ---------- ----------
Net assets before intragroup eliminations 51.0 50.5
Intragroup eliminations (0.2) (0.2)
--------------------------------------------- ---------- ----------
Net assets 50.8 50.3
--------------------------------------------- ---------- ----------
Percentage of non-controlling interests 30.4% 30.4%
--------------------------------------------- ---------- ----------
Carrying amount of non-controlling interests 15.4 15.3
The aggregate Statement of Profit or Loss and Statement of
Comprehensive Income are shown below:
in EUR million 2017 2016
--------------------------------------------------------- ------ ------
Revenue 77.9 68.6
Operating expenses, net finance costs and income
tax (70.1) (61.9)
--------------------------------------------------------- ------ ------
Profit after income tax before intragroup eliminations 7.8 6.7
Intragroup eliminations 0.1 (0.3)
--------------------------------------------------------- ------ ------
Profit after income tax 7.9 6.4
thereof attributable to non-controlling interests
of ORL 2.4 1.9
in EUR million 2017 2016
--------------------------------------------------------- ----- ----
Profit after income tax 7.9 6.4
Other comprehensive income (3.6) 0.8
--------------------------------------------------------- ----- ----
Total comprehensive income 4.3 7.2
thereof attributable to non-controlling interests
of ORL 1.3 2.2
The following table shows the summarised Statement of Cash Flows
of ORL:
in EUR million 2017 2016
---------------------------------------- ----- -----
Net cash flow from operating activities 6.4 7.9
Net cash flow from investing activities (1.0) (0.5)
Net cash flow from financing activities (3.8) (2.3)
---------------------------------------- ----- -----
Total cash flow 1.6 5.1
Net cash flow from financing activities includes dividend
payments to non-controlling interests amounting to EUR1.1 million
(2016: EUR0.6 million).
Accumulated other comprehensive income attributable to
non-controlling interests
The development of accumulated other comprehensive income
attributable to non-controlling interests is shown in the following
table:
Cash flow Defined benefit Currency
in EUR million hedges plans translation
-------------------------------------------------- --------- --------------- ------------
Accumulated other comprehensive income 01.01.2017 0.0 0.0 0.1
Unrealised results from currency translation - - (6.0)
Unrealised results from fair value change 0.1 - -
Remeasurement of defined benefit plans - (0.1) -
-------------------------------------------------- --------- --------------- ------------
Accumulated other comprehensive income 31.12.2017 0.1 (0.1) (5.9)
(26) Financial liabilities
Financial liabilities include all interest-bearing liabilities
of the RHI Magnesita Group due to financial institutions and other
lenders at the respective reporting date.
The financial liabilities have the following contractual
remaining terms:
Total Remaining term
in EUR million 31.12.2017 up to 1 year 2 to 5 years over 5 years
-------------------------------------- ---------- ------------ ------------ ------------
Export credits and investment
financing 346.4 65.6 280.0 0.8
Syndicated Financing 266.2 0.0 266.2 0.0
Bonded loans ("Schuldscheindarlehen") 230.5 0.0 162.0 68.5
Utilised other credit lines
and other loans 102.1 102.1 0.0 0.0
Accrued interest 7.8 7.8 0.0 0.0
---------- ------------ ------------ ------------
Liabilities to financial institutions 953.0 175.5 708.2 69.3
Perpetual bond 215.3 64.3 0.0 151.0
Senior notes 55.6 1.1 54.5 0.0
Other financial liabilities 1.7 0.9 0.7 0.1
-------------------------------------- ---------- ------------ ------------ ------------
Financial liabilities 1,225.6 241.8 763.4 220.4
Total Remaining term
in EUR million 31.12.2016 up to 1 year 2 to 5 years over 5 years
-------------------------------------- ---------- ------------ ------------ ------------
Bonded loans ("Schuldscheindarlehen") 253.5 55.0 139.5 59.0
Export credits and one-time
financing 154.5 29.0 116.9 8.6
Utilised other credit lines 65.9 65.9 0.0 0.0
Accrued interest 1.6 1.6 0.0 0.0
---------- ------------ ------------ ------------
Liabilities to financial institutions 475.5 151.5 256.4 67.6
Other financial liabilities 7.7 4.5 3.1 0.1
-------------------------------------- ---------- ------------ ------------ ------------
Financial liabilities 483.2 156.0 259.5 67.7
RHI Magnesita Group adapted its financing structure in the
context of the acquisition of Magnesita. In addition to obtaining
acquisition financing for the purchase price of Magnesita,
financial liabilities related to the bonded loans concluded in 2012
and 2014 were refinanced. The conclusion of changed and new loan
agreements is dated as of July 2017 for the majority of the volume.
The main loan agreements concluded relate to syndicated financing
arrangements amounting to a total of EUR477.0 million and a bonded
loan of EUR178.0 million. In addition, all existing export loans
and one-off financing were also refinanced in the course of the
transaction in the fourth quarter of 2017.
Of the liabilities to financial institutions recognised at 31
December 2017 EUR34.0 million (31.12.2016: EUR34.0 million) are
secured by assignment of receivables and EUR2.6 million
(31.12.2016: EUR0.0 million) by assignment of cash and cash
equivalents. In case the loan agreements are not met, the financing
banks are entitled to inflows from the receivables and cash and
cash equivalents assigned.
Net debt/adjusted EBITDA is the most important financial
covenant of the loan agreements. Depending on the facility, net
debt/adjusted EBITDA is calculated either on the group level or on
the respective RHI or Magnesita subgroup level. Compliance with the
covenants is measured predominantly on an annual or semi-annual
basis. During the reporting years 2017 and 2016, the Group met all
covenant requirements.
For liabilities of EUR1,109.9 million (31.12.2016: EUR383.0
million), lenders have a termination option in the case of a change
of control. In the event that certain reasons for termination
exist, the lenders may declare the loan due with immediate effect
and demand immediate repayment of the principal including interest,
as well as the payment of other amounts payable that may have been
incurred.
Taking into account interest swaps, 34% (31.12.2016: 61%) of the
liabilities to financial institutions carry fixed interest and 66%
(31.12.2016: 39%) carry variable interest.
The following table shows fixed interest terms and conditions,
taking into account interest rate swaps, without liabilities from
deferred interest:
Interest 31.12.2017 Interest 31.12.2016
terms Carrying terms Carrying
fixed Effective annual Cur- amount in fixed Effective annual Cur- amount in
until interest rate rency EUR million until interest rate rency EUR million
--------- ------------------ ------ ------------ -------- ------------------ ------ ------------
2018 EURIBOR + margin EUR 369.6 2017 EURIBOR + margin EUR 125.1
Variable interest Variable interest
rate + margin EUR 34.0 rate + margin EUR 34.0
LIBOR + margin USD 54.4 LIBOR + margin USD 10.2
4.11% USD 18.3 0.69% EUR 50.0
4.15% USD 13.4
Interbank Deposit
Certificate (CDI)
+ margin BRL 145.5
Various - variable Various - variable
rate Var. 16.0 rate Var. 15.0
Various - fixed Various - fixed
rate Var. 10.5 rate Var. -
2018 1.13% EUR 30.0
2019 0.68% EUR 10.0 2019 0.68% EUR 15.0
0.72% EUR 7.1 0.72% EUR 10.7
3.77% EUR 3.0 1.42% + margin EUR 3.0
1.59% EUR 4.0 3.25% EUR 15.0
1.49% EUR 16.0
3.15% EUR 12.0
1.46% + margin EUR 10.0
2020 4.19% USD 70.7 2020 3.15% + margin EUR 24.5
4.98% USD 62.4 3.90% EUR 13.6
7.50% BRL 8.2
2021 1.97% EUR 17.0
2022 1.74% EUR 63.0 2022 4.50% EUR 6.0
4.60% EUR 3.0
2023 0.35% + margin EUR 13.8
2024 3.10% EUR 37.0 2024 3.00% EUR 53.0
3.20% EUR 5.5
4.00% EUR 9.6
--------- ------------------ ------ ------------ -------- ------------------ ------ ------------
945.2 473.9
In some cases, the terms to maturity of the contracts are
substantially longer than the period during which interest terms
are fixed.
The financial liability from the perpetual bond bears fixed
interest of 8.6%, financial liability from senior notes bears fixed
interest of 7.9%.
(27) Other financial liabilities
Other financial liabilities include the negative fair value of
derivative financial instruments as well as fixed-term and puttable
non-controlling interests in group companies. This item of the
Consolidated Statement of Financial Position consists of the
following items:
31.12.2017 31.12.2016
in EUR million Current Non-current Total Current Non-current Total
-------------------------------------- ------- ----------- ----- ------- ----------- -----
Liabilities from derivatives from
supply contracts 6.8 33.4 40.2 5.9 43.1 49.0
Liabilities from interest rate
swaps 0.0 0.2 0.2 0.5 0.4 0.9
Liabilities from derivatives in
open orders 0.5 0.0 0.5 0.1 0.0 0.1
Derivative financial liabilities 7.3 33.6 40.9 6.5 43.5 50.0
Liabilities to fixed-term or puttable
non-controlling interests 10.1 21.9 32.0 9.1 23.4 32.5
-------------------------------------- ------- ----------- ----- ------- ----------- -----
Other financial liabilities 17.4 55.5 72.9 15.6 66.9 82.5
Additional explanations on derivative financial instruments are
provided under Note (56).
(28) Provisions for pensions
The net liability from pension obligations in the Consolidated
Statement of Financial Position is derived as follows:
in EUR million 31.12.2017 31.12.2016
---------------------------------------------------- ---------- ----------
Present value of pension obligations 517.1 289.2
Fair value of plan assets (228.6) (56.4)
---------------------------------------------------- ---------- ----------
Funded status 288.5 232.8
Asset ceiling 18.3 1.9
---------------------------------------------------- ---------- ----------
Net liability from pension obligations 306.8 234.7
thereof assets from overfunded pension plans 1.9 2.1
thereof pensions 308.7 236.8
The present value of pension obligations by beneficiary groups
is structured as follows:
in EUR million 31.12.2017 31.12.2016
------------------------------------- ---------- ----------
Active beneficiaries 107.9 71.2
Vested terminated beneficiaries 71.9 17.9
Retirees 337.3 200.1
------------------------------------- ---------- ----------
Present value of pension obligations 517.1 289.2
The calculation of pension obligations is based on the following
actuarial assumptions:
in % 31.12.2017 31.12.2016
------------------------ ---------- ----------
Interest rate 3.1% 1.9%
Future salary increase 2.8% 2.2%
Future pension increase 2.1% 1.3%
These are average values which were weighted with the present
value of the respective pension obligation.
The calculation of the actuarial interest rate for the European
currency area is based on a yield curve for returns of high-quality
corporate bonds denominated in EUR with an average rating of AA,
which is derived from pooled index values. The calculation of the
actuarial interest rate for the USD and GBP currency area is based
on a yield curve for returns of high-quality corporate bonds
denominated in USD with an average rating of AA, which is derived
from pooled index values. Where there are very long-term
maturities, the yield curve follows the performance of bonds
without credit default risk. The interest rate is calculated
annually at 31 December, taking into account the expected future
cash flows which were determined based on the current personal and
commitment data.
As in the previous year, the calculation in Austria was based on
the Pagler & Pagler AVÖ 2008 P biometric calculation principles
for salaried employees. In Germany, the Heubeck 2005 G actuarial
tables were used as a basis. In the other countries,
country-specific mortality tables were applied.
The main pension regulations are described below:
The Austrian group companies account for EUR122.6 million
(31.12.2016: EUR124.4 million) of the present value of pension
obligations and for EUR26.1 million (31.12.2016: EUR26.3 million)
of the plan assets. The agreed benefits include pensions,
invalidity benefits and benefits for surviving dependents.
Commitments in the form of company or individual agreements depend
on the length of service and the salary at the time of retirement.
For the majority of commitments the amount of the company pension
subsidy is limited to 75% of the final remuneration including a
pension pursuant to the General Social Insurance Act (ASVG). RHI
Magnesita has concluded pension reinsurance policies for part of
the commitments. The pension claims of the beneficiaries are
limited to the coverage capital required for these commitments.
Pensions are predominantly paid in the form of annuities and are
partially indexed. For employees joining the company after 1
January 1984, no defined benefits were granted. Rather, a defined
contribution pension model is in place. In addition, there are
commitments based on the deferred compensation principle, which are
fully covered by pension reinsurance policies, and commitments for
preretirement benefits for employees in mining operations.
The pension plans of the German group companies account for
EUR158.6 million (31.12.2016: EUR123.4 million) of the present
value of pension obligations and for EUR0.7 million (31.12.2016:
EUR0.7 million) of plan assets. The benefits included in company
agreements comprise pensions, invalidity benefits and benefits for
surviving dependents. The amount of the pension depends on the
length of service for the majority of the commitments and is
calculated as a percentage of the average monthly wage/salary of
the last twelve months prior to retirement. In some cases
commitments to fixed benefits per year of service have been made.
The pensions are predominantly paid in the form of annuities and
are adjusted in accordance with the development of the consumer
price index for Germany. The pension plans are closed for new
entrants, except one contribution-based plan. There is no defined
contribution model on a voluntary basis. Individual commitments
have been made, with major part of them being retired
beneficiaries.
The pension plan of the US group company Magnesita Refractories
Company, York, USA, accounts for EUR73.7 million of the present
value of pension obligations and for EUR60.0 million of the plan
assets. The pension plan is a non-contributory defined benefit plan
covering a portion of the employees of the company. The plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Effective 21 June 1999, the Company
offered the participants the opportunity to elect to participate in
a single enhanced defined contribution plan. Participants who make
this election are no longer eligible for future accruals under this
plan. All benefits accrued as of the date of transfer will be
retained. Employees hired after 21 June 1999 and employees that did
not meet the plan's eligibility requirements as of 21 June 1999 are
not eligible for this plan. The pensions are predominantly paid in
the form of annuities and are adjusted annually based on the U.S.
consumer price index. The Company's contributions for the year
ended 31 December 2017 met, or exceeded, the minimum funding
requirements of ERISA.
The pension plan of the UK group company Magnesita Refractories
Ltd., Dinnington, United Kingdom, accounts for EUR60.7 million of
the present value of pension obligations and holds EUR76.5 million
of assets, although only EUR60.7 million of the plan assets are
reflected on the balance sheet due to the application of IFRIC 14
(asset ceiling). The company sponsors a funded defined benefit
pension plan for qualifying UK employees. The plan is administered
by a separate board of trustees which is legally separate from the
company. The trustees are composed of representatives of both the
employer and employees, plus an independent professional trustee.
The trustees are required by law to act in the interest of all
relevant beneficiaries and are responsible for the investment
policy with regard to the assets plus the day to day administration
of the benefits. Under the plan, employees are entitled to annual
pensions on retirement at age 65 of one-sixtieth of final
pensionable salary for each year of service. Pensionable salary is
defined as basic salary less the Lower Earnings Limit. Benefits are
also payable on death and following other events such as
withdrawing from active service. No other post-retirement benefits
are provided to these employees.
The pension liabilities of the Brazilian group company Magnesita
Refratários S.A. accounts for EUR62.3 million of the present value
of pension obligations and for EUR36.3 million of the plan assets
and qualifies as optional benefit plan. Employees are entitled to
contribute to the plan, with the company contributing 1.5 times
this value. The agreed benefits include pensions, invalidity
benefits and benefits for surviving dependents. Commitments in the
form of company or individual agreements depend on the length of
service and salary at the time of retirement. For the majority of
commitments, the amount of the company pension obligation is
limited to 75% of the final remuneration. At retirement the
employee may choose to receive up to 25% of his/her amount at once
or receive it on a pro-rata base with different options of monthly
quotes.
The following table shows the development of net liability from
pension obligations:
in EUR million 2017 2016
---------------------------------------------------- ------ ------
Net liability from pension obligations at beginning
of year 234.7 243.9
Currency translation (2.3) (2.2)
Additions to consolidated companies(1) 81.0 0.0
Disposals of consolidated companies 0.0 (5.6)
Pension cost 8.5 9.3
Remeasurement losses/(gains) 6.0 9.0
Benefits paid (17.8) (17.2)
Employers' contributions to external funds (3.3) (2.5)
---------------------------------------------------- ------ ------
Net liability from pension obligations at year-end 306.8 234.7
1) preliminary
The present value of pension obligations developed as
follows:
in EUR million 2017 2016
-------------------------------------------------- ------ ------
Present value of pension obligations at beginning
of year 289.2 304.9
Currency translation (7.9) (2.8)
Additions to consolidated companies(1) 240.3 0.0
Disposals of consolidated companies 0.0 (11.5)
Current service cost 3.3 3.5
Interest cost 7.2 6.8
Remeasurement losses/(gains)
from changes in demographic assumptions (0.6) (0.3)
from changes in financial assumptions 6.1 10.3
due to experience adjustments 2.2 (1.1)
Benefits paid (23.1) (21.0)
Employee contributions to external funds 0.4 0.4
-------------------------------------------------- ------ ------
Present value of pension obligations at year-end 517.1 289.2
1) preliminary
The development of plan assets is shown in the table below:
in EUR million 2017 2016
----------------------------------------------- ----- -----
Fair value of plan assets at beginning of year 56.4 63.8
Currency translation (5.9) (0.5)
Additions to consolidated companies(1) 174.6 0.0
Disposals of consolidated companies 0.0 (5.9)
Interest income 2.3 1.1
Administrative costs (paid from plan assets) (0.2) (0.1)
Income on plan assets less interest income 3.0 (1.1)
Benefits paid (5.3) (3.8)
Employers' contributions to external funds 3.3 2.5
Employee contributions to external funds 0.4 0.4
----------------------------------------------- ----- -----
Fair value of plan assets at year-end 228.6 56.4
1) preliminary
The changes in the asset ceiling are shown below:
in EUR million 2017 2016
-------------------------------------------------- ----- -----
Asset ceiling at beginning of year 1.9 2.8
Currency translation (0.3) 0.1
Additions to consolidated companies(1) 15.3 0.0
Interest expense 0.1 0.0
(Gains)/losses from changes in asset ceiling less
interest expense 1.3 (1.0)
-------------------------------------------------- ----- -----
Asset ceiling at year-end 18.3 1.9
1) preliminary
At 31 December 2017 the weighted average duration of pension
obligations amounts to 12 years (31.12.2016: 11 years).
The following amounts were recorded in the Consolidated
Statement of Profit or Loss:
in EUR million 2017 2016
--------------------------------------------- ----- -----
Current service cost 3.3 3.5
Interest cost 7.2 6.8
Interest income (2.3) (1.1)
Interest expense from asset ceiling 0.1 0.0
Administrative costs (paid from plan assets) 0.2 0.1
--------------------------------------------- ----- -----
Pension expense recognised in profit or loss 8.5 9.3
The remeasurement results recognised in other comprehensive
income are shown in the table below:
in EUR million 2017 2016
---------------------------------------------------- ----- -----
Accumulated remeasurement losses at beginning of
year 113.3 102.4
Reclassification due to disposal of defined benefit
plans 0.0 1.9
Remeasurement losses/(gains) on present value of
pension obligations 7.7 8.9
Income on plan assets less interest income (3.0) 1.1
(Gains)/losses from changes in asset ceiling less
interest 1.3 (1.0)
---------------------------------------------------- ----- -----
Accumulated remeasurement losses at year-end 119.3 113.3
The present value of plan assets is distributed to the following
classes of investments:
31.12.2017 31.12.2016
No active No active
in EUR million Active market market Total Active market market Total
-------------------------- ------------- --------- ----- ------------- --------- -----
Insurances 0.0 38.4 38.4 0.0 38.8 38.8
Equity instruments 4.8 23.1 27.9 5.0 0.0 5.0
Debt instruments 17.2 45.2 62.4 0.0 8.2 8.2
Cash and cash equivalents 35.0 0.4 35.4 0.0 0.3 0.3
Other assets 60.8 3.7 64.5 0.2 3.9 4.1
-------------------------- ------------- --------- ----- ------------- --------- -----
Fair value of plan assets 117.8 110.8 228.6 5.2 51.2 56.4
The present value of the insurances to cover the Austrian
pension plans corresponds to the coverage capital. Insurance
companies predominantly invest in debt instruments and to a low
extent in equity instruments and properties.
Plan assets do not include own financial instruments of the
Group or assets utilised by the RHI Magnesita Group.
RHI Magnesita works with professional fund managers for the
investment of plan assets. They act on the basis of specific
investment guidelines adopted by the pension fund committee of the
respective pension plans. The committees consist of management
staff of the finance department and other qualified executives.
They meet regularly in order to approve the target portfolio with
the support of independent actuarial experts and to review the
risks and the performance of the investments. In addition, they
approve the selection or the extension of contracts of external
fund managers.
The largest part of the assets is invested in pension
reinsurance, which creates a low counterparty risk towards
insurance companies. In addition, the Group is exposed to interest
risks and longevity risks resulting from defined benefit
commitments.
The Group generally endows the pension funds with the amount
necessary to meet the legal minimum allocation requirements of the
country in which the fund is based. Moreover, the Group makes
additional allocations at its discretion from time to time. In the
financial year 2018, RHI Magnesita expects employer contributions
to external plan assets to amount to EUR4.8 million and direct
payments to entitled beneficiaries to EUR17.9 million. In the
previous year, employer contributions of EUR2.4 million and direct
pension payments of EUR15.1 million had been expected for the
financial year 2017.
(29) Other personnel provisions
Other personnel provisions consist of the following items:
in EUR million 31.12.2017 31.12.2016
---------------------------- ---------- ----------
Termination benefits 58.1 58.5
Service anniversary bonuses 19.4 18.3
Share-based payments 2.9 1.4
Semi-retirements 1.4 1.7
Lump-sum settlements 0.7 0.7
---------------------------- ---------- ----------
Other personnel provisions 82.5 80.6
Provisions for termination benefits
Provisions for termination benefits were based on the following
weighted average measurement assumptions:
in % 31.12.2017 31.12.2016
----------------------- ---------- ----------
Interest rate 1.7% 1.8%
Future salary increase 3.8% 2.9%
The interest rate for the measurement of termination benefit
obligations in the Euro area was determined taking into account the
company specific duration of the portfolio.
Provisions for termination benefits developed as follows in the
financial year and the previous year:
in EUR million 2017 2016
------------------------------------------------- ----- -----
Provisions for termination benefits at beginning
of year 58.5 60.1
Currency translation (0.1) 0.0
Current service cost 1.5 1.5
Interest cost 1.0 1.3
Remeasurement losses/(gains)
from changes in financial assumptions 5.1 2.9
due to experience adjustments 0.4 (1.7)
Benefits paid (4.1) (5.6)
Reclassification (0.4) 0.0
Reclassification as held for sale (3.8) 0.0
------------------------------------------------- ----- -----
Provisions for termination benefits at year-end 58.1 58.5
Payments for termination benefits are expected to amount to
EUR3.0 million in the year 2018. In the previous year, the payments
for termination benefits expected for the year 2017 amounted to
EUR1.9 million.
The following remeasurement gains and losses were recognised in
other comprehensive income:
in EUR million 2017 2016
---------------------------------------------- ----- ----
Accumulated remeasurement losses at beginning
of year 23.6 22.3
Remeasurement losses(1) 5.6 1.3
Reclassification as held for sale (1.3) 0.0
---------------------------------------------- ----- ----
Accumulated remeasurement losses at year-end 27.9 23.6
1) Including EUR0.1 million (2016: EUR0.1 million) from a joint
venture accounted for using the equity method
At 31 December 2017 the weighted average duration of termination
benefit obligations amounts to 11 years (31.12.2016: 11 years).
Provisions for service anniversary bonuses
The measurement of provisions for service anniversary bonuses is
based on an average weighted interest rate of 1.4% (31.12.2016:
1.5%) and takes into account salary increases of 3.6% (31.12.2016:
3.8%).
Provisions for semi-retirement
The discount rate of provisions for semi-retirement amounts to
0.0% as of 31 December 2017 (31.12.2016: 0.0%).
The funded status of provisions for obligations to employees
with semi-retirement contracts is shown in the table below:
in EUR million 31.12.2017 31.12.2016
--------------------------------------------- ---------- ----------
Present value of semi-retirement obligations 5.0 5.1
Fair value of plan assets (3.6) (3.4)
--------------------------------------------- ---------- ----------
Provisions for semi-retirement obligations 1.4 1.7
External plan assets are beyond the reach of all creditors and
exclusively serve to meet semi-retirement obligations.
(30) Other non-current provisions
The development of non-current provisions is shown in the table
below:
Demolition/
disposal costs,
Contract Labour and environmental
in EUR million obligations civil contingencies damages Other Total
-------------------------- ------------ -------------------- ---------------- ----- -----
01.01.2017 4.0 0.0 0.5 0.0 4.5
Currency translation (1.1) (0.3) (0.3) (0.1) (1.8)
Additions to consolidated
companies(1) 28.9 9.1 9.0 4.7 51.7
Use (1.7) 0.0 0.0 (0.2) (1.9)
Reversal (0.5) 0.0 (0.2) 0.0 (0.7)
Addition 2.4 0.6 0.0 0.0 3.0
Reclassifications (1.0) 0.0 0.0 0.0 (1.0)
-------------------------- ------------ -------------------- ---------------- ----- -----
31.12.2017 31.0 9.4 9.0 4.4 53.8
1) preliminary
The provision for contract obligations amounting to EUR31.0
million (31.12.2016: EUR4.0 million) is related to a lease contract
and to contracts for logistics services and the procurement of raw
materials. In November 2017, RHI Magnesita sold a plant located in
Oberhausen, Germany, in order to satisfy the conditions imposed by
the European Commission in connection with their approval of the
Acquisition of Control of Magnesita. As RHI Magnesita is obligated
to provide raw materials at cost, the Group has recognised a
provision for unfavourable contracts as part of the purchase price
allocation to reflect the foregone profit margin. The preliminary
fair value of this provision is based on current market prices and
discounted over the contractual lifetime of 12 years. The
non-current portion of this contract obligation amounts to EUR27.6
million as of 31.12.2017.
The provision for labour and civil contingencies amounting to
EUR9.4 million primarily comprises a provision relating to a public
civil action that aims to condemn RHI Magnesita for damages caused
by overloaded trucks in disagreement with the traffic legislation.
In addition, a provision for a legal action is included where a
supplier requires the condemnation payment of RHI Magnesita in
connection with consulting services, advice and
representations.
The item provision for demolition and disposal costs and
environmental damages amounting to EUR9.0 million primarily
includes provisions for the estimated costs of mining site
restoration of several mines in Brazil amounting to EUR3.8 million
and various sites in the United States amounting to EUR4.8
million.
The item other provisions includes provisions related to tax
litigation procedures in Peru related to corporate income tax of
fiscal year 2009 amounting to EUR2.6 million and judicial action
filed in Colombia related to corporate income tax of fiscal year
2010 amounting to EUR1.5 million. Furthermore, several provisions
are included that are individually immaterial and cannot be
allocated to one of the above-mentioned categories. Currently,
these provisions are expected to be used in a period from two to
four years.
(31) Other non-current liabilities
Other non-current liabilities consist of the following
items:
in EUR million 31.12.2017 31.12.2016
--------------------------------------------------- ---------- ----------
Deferred income for subsidies received 4.7 4.7
Liabilities employees 2.8 1.3
Contingent consideration for acquired subsidiaries 0.6 0.0
Miscellaneous non-current liabilities 0.9 0.9
--------------------------------------------------- ---------- ----------
Other non-current liabilities 9.0 6.9
thereof financial liabilities 0.6 0.0
thereof non-financial liabilities 8.4 6.9
(32) Trade payables and other current liabilities
Trade payables and other current liabilities included in the
Consolidated Statement of Financial Position consist of the
following items:
in EUR million 31.12.2017 31.12.2016
--------------------------------------------- ---------- ----------
Trade payables 461.3 202.1
Prepayments received on orders 24.1 14.9
Liabilities to employees 99.2 51.8
Taxes other than income tax 23.2 16.5
Payables from commissions 13.2 5.9
Liabilities to joint ventures and associates 9.1 0.0
Customers with credit balances 6.5 6.0
Payables from property transactions 4.8 2.8
Liabilities to non-consolidated subsidiaries 1.1 0.1
Other current liabilities 28.9 12.6
--------------------------------------------- ---------- ----------
Trade payables and other current liabilities 671.4 312.7
thereof financial liabilities 500.2 217.3
thereof non-financial liabilities 171.2 95.4
The item liabilities to employees primarily consists of
obligations for wages and salaries, payroll taxes and employee
related duties, performance bonuses, unused vacation and flexitime
credits.
Other current liabilities include EUR3.7 million investment
reimbursement obligation to the former subsidiary Dolomite Franchi
S.p.A., EUR1.3 million (31.12.2016: EUR0.0 million) liabilities
from emission rights and other accrued expenses.
(33) Income tax liabilities
Income tax liabilities amounting to EUR16.1 million (31.12.2016:
EUR18.4 million) primarily include income taxes for the current
year and previous years which have not yet been definitively
audited by domestic and foreign tax authorities. Taking into
account a multitude of factors, including the interpretation,
commenting and case law regarding the respective tax laws as well
as past experiences, adequate liabilities have been recognised as
far as apparent.
(34) Current provisions
The development of current provisions is shown in the table
below:
Demolition/
disposal costs,
Restruc-turing environmental Contract Guaran-tees
in EUR million costs damages Warran-ties obliga-tions provided Other Total
-------------------------- -------------- ---------------- ----------- ------------- ----------- ----- -----
01.01.2017 2.1 8.2 11.1 0.0 3.3 4.4 29.1
Currency translation (0.2) 0.0 (0.3) (0.2) 0.0 (0.2) (0.9)
Additions to consolidated
companies(1) 19.5 0.0 0.1 2.6 0.0 3.6 25.8
Use (3.2) (0.5) (1.5) (1.9) 0.0 (2.4) (9.5)
Reversal (0.8) (0.1) (1.5) (0.8) (0.4) (0.2) (3.8)
Addition 18.6 1.7 3.9 4.3 0.0 4.0 32.5
Reclassifications 1.6 0.0 (3.0) 3.2 0.0 (0.1) 1.7
Reclassification
from current liabilities 0.0 0.0 (0.1) 0.0 0.0 (0.1) (0.2)
-------------------------- -------------- ---------------- ----------- ------------- ----------- ----- -----
31.12.2017 37.6 9.3 8.7 7.2 2.9 9.0 74.7
1) preliminary
Provisions for restructuring costs amount to EUR37.6 million as
of 31 December 2017 (31.12.2016: EUR2.1 million) and primarily
consist of benefit obligations to employees due to termination of
employment. The increase in the fiscal year 2017 results from the
acquisition-related reorganisation of the Group.
The item demolition and disposal costs, environmental damages
includes provisions for the estimated demolition and disposal costs
of plants and buildings, of which an amount of EUR2.5 million
(31.12.2016: EUR2.8 million) refers to former sites in Duisburg,
Germany and EUR2.7 million (31.12.2016: EUR1.0 million) in Aken,
Germany. It is assumed that these provisions will be used up within
in the next twelve months.
Provisions for warranties include provisions for claims arising
from warranties and other similar obligations from the sale of
refractory products.
Provision for contract obligations include provisions for
unfavourable contracts from the sale of refractory products
amounting to EUR4.7 million and provisions for unfavourable
contracts related to a lease contract, to contracts for logistics
services and the procurement of raw materials totalling EUR4.9
million. In November 2017, RHI Magnesita sold a plant located in
Oberhausen, Germany, in order to satisfy the conditions of the
merger control divestment imposed by the European Commission in
connection with their approval of the Acquisition of Control of
Magnesita. As RHI Magnesita is obligated to provide raw materials
at cost, the Group has recognised a provision for unfavourable
contracts as part of the purchase price allocation to reflect the
foregone profit margin. The preliminary fair value of this
provision is based on current market prices and discounted over the
contractual lifetime of 12 years. The current portion of this
contract obligation amounts to EUR2.5 million as of 31.12.2017.
Provisions for guarantees provided include obligations from
sureties and guarantees to banks and insurance companies in the
country and abroad. The exact due date of the cash outflow is
uncertain at present.
The item other provisions include provisions for real estate
transfer tax amounting to EUR 2.4 million resulting from corporate
reorganisation of RHI Magnesita as well as a provision for the
share-based remuneration programme of the members of the former
Management Board of RHI AG of EUR1.4 million (31.12.2016: EUR0.7
million).
In addition, provisions for legal proceedings including
attorney's fees amounting to EUR3.1 million are included in the
item other provisions. It is currently uncertain when precisely the
cash outflow is due.
In the context of the legal proceedings to review the cash
compensation of the former minority shareholders of Didier-Werke
AG, Wiesbaden, Germany, a provision amounting to EUR0.6 million was
in place at 31 December 2016. With a decision of 17 January 2017,
the Frankfurt Higher Regional Court followed the amount of the
adequate cash compensation according to an expert opinion and set
the compensation at EUR102.37 per no-par share of Didier-Werke AG.
This amount carried an interest rate of five percentage points
above the base rate since 26 August 2010. In addition, the RHI
Magnesita Group had to bear the court costs, costs of the legal
counsel and the out-of-court costs of the claimant. No appeals were
permitted. The decision is thus final. The payment was made in
February 2017.
Furthermore, several provisions, which are individually
immaterial and cannot be allocated to one of the above-mentioned
categories, are included in other provisions. A large part of these
costs is expected to be paid within twelve months.
NOTES TO THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS
(35) Revenue
Revenue is essentially generated by product deliveries. The
distribution of revenue by product group, division and country is
given in the explanations to segment reporting under Note (52).
Revenue includes revenues from long-term construction contracts
amounting to EUR81.3 million (2016: EUR58.7 million).
(36) Cost of sales
Cost of sales comprises the production cost of goods sold as
well as the purchase price of merchandise sold. In addition to
direct material and production costs, it also includes overheads
including depreciation charges on production equipment,
amortisation charges of intangible assets as well as impairment
losses and reversals of impairment losses of inventories. Moreover,
cost of sales also includes the costs of services provided by the
Group or services received.
(37) Selling and marketing expenses
This item includes personnel expenses for the sales staff,
commissions, as well as depreciation charges and other operating
expenses related to the market and sales processes.
(38) General and administrative expenses
General and administrative expenses primarily consist of
personnel expenses for the administrative functions, legal and
other consulting costs, expenses for research and non-capitalisable
development costs.
Research and development expenses totaled EUR24.0 million (2016:
EUR23.9 million), of which development costs amounting to EUR4.6
million (2016: EUR4.8 million) were capitalised. Income from
research grants amounted to EUR3.8 million (2016: EUR4.0 million)
in the reporting year 2017. Amortisation and impairment of
development costs amounting to EUR4.3 million (2016: EUR3.4
million) are recognised under cost of sales.
For the acquisition of Magnesita, costs totaling EUR33.5 million
were incurred in the financial year 2017 (2016: EUR12.1 million).
They are primarily related to legal and other advisory fees and
fees for the consulting investment banks. Of the total costs,
EUR24.4 million (2016: EUR12.1 million) were recognised in profit
or loss under general and administrative expenses and EUR9.1
million were accounted for as a deduction from equity since these
costs were directly attributable to the issue of RHI Magnesita
shares in 2017. Thereof EUR3.0 million were cash-effective and are
shown in the Consolidated Statement of Cash Flows in the item
capital expenses for the issue of shares.
(39) Other income
The individual components of other income are:
in EUR million 2017 2016
----------------------------------------------- ---- -----
Foreign exchange gains 68.2 85.0
Gains from derivative financial instruments 14.2 2.7
Result from derivatives from supply contracts 4.9 10.1
Income from restructuring 0.3 0.3
Income from the disposal of non-current assets 0.9 0.9
Miscellaneous income 2.7 3.7
----------------------------------------------- ---- -----
Other income 91.2 102.7
In 2017, the valuation of the commodity futures contract for
electricity for the fusion plant in Porsgrunn, Norway, led to an
income of EUR4.9 million (2016: EUR10.1 million). Further
information is presented in Note (56).
(40) Other expenses
Other expenses include:
in EUR million 2017 2016
----------------------------------------------- ------- -------
Foreign exchange losses (126.3) (76.9)
Restructuring costs (62.7) (8.9)
Losses from the disposal of non-current assets (7.6) (0.5)
Losses from derivative financial instruments (6.9) (6.8)
Impairment losses (2.1) (8.6)
Miscellaneous expenses (10.5) (1.6)
----------------------------------------------- ------- -------
Other expenses (216.1) (103.3)
Net foreign currency result
The net foreign currency effects amount to EUR(58.1) million
(2016: EUR8.1 million). The net amount of gains and losses from
derivative financial instruments in the EBIT amounts to EUR7.3
million (2016: EUR(4.1) million). This amount includes realised
effects from forward exchange contracts of EUR10.8 million (2016:
EUR(3.6) million).
Restructuring costs
Merger related restructuring
In order to achieve the expected synergies from the acquisition
of Magnesita the Group initiated a global restructuring programme
which led to EUR35.3 million expenses in 2017.
Merger control divestments
The European Commission approved the acquisition of Magnesita
subject to the divestment of RHI's entire dolomite business
concerning the production sites in Marone, Italy, and Lugones,
Spain, and Magnesita's production, sale, and related activities of
magnesia-carbon bricks concentrated in Oberhausen, Germany.
Consequently, all related assets and liabilities were reclassified
as a disposal group. At the end of November, the disposal resulted
in expenses amounting to EUR13.6 million. Further details regarding
this divestment are included in Note (5) on the changes in the
group of consolidated companies.
Sale of fused cast business
The disposal of the Italian San Vito plant and the Russian
Podolsk plant, which produce fused cast refractories for the use in
the glass industry, resulted in expenses amounting to EUR9.4
million. Further details regarding this divestment are included in
Note (5) on the changes in the group of consolidated companies.
Porsgrunn plant, Norway
The high-grade products manufactured at this site stand in
direct competition with products available on the market. Due to
the massive drop in raw material prices in 2016, external purchases
were increased and the capacities for the Group's own production
restricted accordingly. This resulted in expenses for unused
logistics services amounting to EUR4.4 million in 2017. In 2016
expenses amounting to EUR4.2 million were recorded, which comprised
personnel costs of EUR1.4 million and costs from purchase contracts
for the delivery of raw materials and provision of logistics
services of EUR2.8 million.
Sale RHI Monofrax LLC, USA
The sale of RHI Monofrax LLC, Wilmington, USA, resulted in
expenses amounting to EUR4.6 million in 2016. Further details
regarding this deconsolidation are included in Note (5) on the
changes in the group of consolidated companies in the previous
year.
Clydebank plant, United Kingdom
The Clydebank site was closed at the end of the year 2016 and
the activities for isostatically pressed products concentrated at
the site in Bonnybridge. This resulted in personnel costs of EUR0.1
million in 2016.
Impairment losses
The plants in San Vito, Italy, and Sherbinska, Russia, produce
fused cast products. The production of such fused cast products is
associated with high fixed costs, which combined with low capacity
utilisation burden the achievable margins and led to an impairment
of EUR8.0 million as of 31 December 2016 for the CGU
Industrial/Fused Cast. In the first half of 2017, these two plants
were classified as a disposal group, which led to an additional
impairment of EUR1.8 million. The disposal group was sold in the
fourth quarter. Additionally, other minor investments totalling
EUR0.3 million (2016: EUR0.6 million) were fully impaired.
Miscellaneous expenses
The miscellaneous expenses include EUR6.5 million
non-recoverable input tax (ICMS), of which the majority is related
to the stream-lining of operations in Brazil.
(41) Interest income
This item includes interest on cash at banks and similar income
amounting to EUR2.8 million (2016: EUR2.9 million), interest income
on financial receivables amounting to EUR0.2 million (2016: EUR0.2
million) and interest income on available-for-sale securities and
shares amounting to EUR2.5 million (2016: EUR1.0 million), of which
EUR2.0 million (2016: EUR0.4 million) is accounted for by impaired
securities.
(42) Interest expenses
This item includes interest expenses for bonded loans and bank
loans less capitalised interest on borrowings, interest from
interest rate swaps, tax-related interest, interest expenses
attributable to non-controlling interests totalling EUR3.3 million
(2016: EUR3.4 million) and other interest and similar expenses.
(43) Other net financial expenses
Other net financial expenses consist of the following items:
in EUR million 2017 2016
-------------------------------------------------- ----- -----
Interest income on plan assets 2.2 1.1
Interest expense on provisions for pensions (7.2) (6.8)
Interest expense on provisions for termination
benefits (1.0) (1.3)
Interest expense on other personnel provisions (0.3) (0.4)
----- -----
Net interest expense personnel provisions (6.3) (7.4)
Reversal of impairment losses/(impairment losses)
on securities (1.9) 0.5
Expenses from the valuation of put options (0.9) (1.8)
Gains from the disposal of securities and shares 0.0 0.9
Other net financial expenses (9.1) (7.8)
(44) Income tax
Income tax consists of the following items:
in EUR million 2017 2016
------------------------------------------ ----- -----
Current tax expense 30.5 25.6
Deferred tax expense/(income) relating to
temporary differences (2.5) (6.5)
tax loss carryforwards 8.4 10.8
----- -----
5.9 4.3
------------------------------------------ ----- -----
Income tax 36.4 29.9
The current tax expense of the year 2017 includes tax expenses
for previous periods of EUR2.8 million (2016: EUR1.8 million) and
income from income tax relating to other periods of EUR8.6 million
(2016: EUR8.2 million). In 2017, EUR6.7 million were attributable
to the reversal of a provision related to a tax audit in Germany.
In 2016, the completion of a tax audit in Turkey led to the
reversal of a provision of EUR6.3 million.
In addition to the income taxes recognised in the Statement of
Profit or Loss, tax income totalling EUR4.1 million (2016: EUR1.1
million), which is attributable to other comprehensive income, was
also recognised in other comprehensive income. Tax expense
totalling EUR6.3 million (2016: tax income of EUR0.5 million) was
reclassified from other comprehensive income to the Statement of
Profit or Loss.
The administrative seat, place of effective management and
registered office is located in Vienna, Austria. Consequently RHI
Magnesita N.V. is considered tax resident in Austria under the tax
rules of Austria and under the double taxation treaty between
Austria and the Netherlands. The reasons for the difference between
the arithmetic income tax expense, which would result from the
application of the Austrian corporate tax rate of 25% on the profit
before income tax, and the income tax reported are shown below:
in EUR million 2017 2016
---------------------------------------------------------- ------ -----
Profit before income tax 23.5 105.8
Arithmetic tax expense with tax rate of 25% (2016:
25%) 5.9 26.5
Different foreign tax rates 1.0 1.2
Expenses not deductible for tax purposes, non-creditable
taxes 20.4 12.5
Income not subject to tax and tax advantages (7.1) (2.2)
Non-capitalised tax losses and temporary differences
of the financial year 11.9 2.1
Utilisation of previously unrecognised loss carryforwards
and temporary differences (1.2) (0.6)
Capitalization of previously unrecognised loss
carryforwards and temporary differences (5.8) (0.5)
Change in valuation allowance on deferred tax
assets 3.7 1.4
Deferred tax expense due to tax rate changes 9.5 1.3
Deferred income tax relating to prior periods 3.3 (4.4)
Current income tax relating to prior periods (5.8) (6.4)
Other 0.6 (1.0)
---------------------------------------------------------- ------ -----
Recognised tax expense 36.4 29.9
Effective tax rate (in %) 154.9% 28.3%
Deferred tax expense due to tax rates changes is primarily
attributable to the reduction of the corporate income tax rate in
the United States from 35% to 21% (EUR(7.5) million) and in Norway
(2017: EUR(1.1) million, 2016:
EUR(1.2) million).
(45) Expense categories
The presentation of the Consolidated Statement of Profit or Loss
is based on the cost of sales method. The following table shows a
classification by expense category for the financial year 2017 and
the previous year:
Selling General
Cost and marketing and administrative Other income/ Total
in EUR million of sales expenses expenses expenses 2017
------------------------ --------- -------------- ------------------- ------------- -------
Changes in inventories,
own work capitalised (50.4) 0.2 (3.9) 1.5 (52.6)
Cost of materials 919.2 4.0 5.3 (0.3) 928.2
Personnel costs 259.2 72.4 100.2 22.8 454.6
Depreciation
charges(1) 68.4 0.9 6.0 17.2 92.5
Other income (8.5) 0.0 (6.9) (91.3) (106.7)
Other expenses 297.7 47.5 66.8 175.0 587.0
------------------------ --------- -------------- ------------------- ------------- -------
Total 1,485.6 125.0 167.5 124.9 1,903.0
1) Including impairment losses on property, plant and equipment
and intangible assets
Selling General
Cost and marketing and administrative Other income/ Total
in EUR million of sales expenses expenses expenses 2016
------------------------ --------- -------------- ------------------- ------------- -------
Changes in inventories,
own work capitalised 22.6 0.0 (4.8) 0.0 17.8
Cost of materials 781.4 0.4 2.7 1.2 785.7
Personnel costs 253.5 58.4 85.3 1.5 398.7
Depreciation
charges(1) 60.5 0.5 4.2 8.8 74.0
Other income (14.7) 0.0 (8.2) (92.3) (115.2)
Other expenses 191.5 45.9 55.3 81.4 374.1
------------------------ --------- -------------- ------------------- ------------- -------
Total 1,294.8 105.2 134.5 0.6 1,535.1
1) Including impairment losses on property, plant and equipment
and intangible assets
Cost of materials includes expenses for raw materials and
supplies, and purchased goods of EUR759.0 million (2016: EUR620.3
million) as well as expenses for services received, especially
energy, amounting to EUR169.2 million (2016: EUR165.4 million).
Amortisation charges of intangible assets are largely recognised
in cost of sales.
(46) Personnel costs
Personnel costs consist of the following components:
in EUR million 2017 2016
----------------------------------------------- ----------- -----------
Wages and salaries 360.1 305.8
Pensions
Defined benefit plans 3.4 3.6
Defined contribution plans 3.4 3.1
Termination benefits
Defined benefit plans 1.5 1.5
Defined contribution plans 2.0 1.9
Other expenses 1.5 4.1
Social security costs 68.7 68.3
Fringe benefits 14.0 10.4
----------------------------------------------- ----------- -----------
Personnel expenses (without interest expenses) 454.6 398.7
Personnel costs do not include amounts resulting from the
interest accrued on personnel provisions. They amount to EUR6.3
million (2016: EUR7.4 million) and are recorded in net finance
costs.
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The Statement of Cash Flows shows how cash and cash equivalents
of the Group change through cash inflows and cash outflows during
the reporting year. In accordance with IAS 7, cash flows from
operating activities, from investing activities and from financing
activities are distinguished. Cash flows from investing and
financing activities are determined on the basis of cash payment,
while cash flow from operating activities is derived from the
Consolidated Financial Statements using the indirect method.
The respective monthly changes in items of the Statement of
Financial Position of companies that report in foreign currencies
are translated at the closing rate of the previous month and
adjusted for effects arising from changes in the group of
consolidated companies or in other businesses. Therefore, the
Statement of Cash Flows cannot be derived directly from changes in
items of the Consolidated Statement of Financial Position. As in
the Statement of Financial Position, cash and cash equivalents are
translated at the closing rate. The effects of changes in exchange
rates on cash and cash equivalents are shown separately.
(47) Net cash flow from operating activities
Net cash flow from operating activities is derived indirectly
based on profit after income tax. Profit after income tax is
adjusted for results which are allocable to the cash flows from
investing or financing activities and for non-cash expenses and
income. Other non-cash expenses and income include in particular
the net interest expenses for defined benefit pension plans
amounting to EUR6.3 million (2016: EUR7.4 million), net
remeasurement losses of monetary foreign currency positions and
derivative financial instruments of EUR51.2 million (2016: net
remeasurement gain of EUR21.9 million) and non-cash funding of
provisions for restructuring amounting to EUR13.6 million (2016:
funding of EUR1.0 million). Taking into account the change in funds
tied up in working capital as well as other operating assets and
liabilities and income taxes paid, the result is net cash flow from
operating activities.
(48) Net cash flow from investing activities
Net cash flow from investing activities shows the cash inflows
and outflows for disposals of and additions to non-current assets.
The cash outflows for investments in property, plant and equipment
and intangible assets differ from the additions to assets primarily
through additions to assets already capitalised, which will have a
cash effect in the following year.
Cash effects from business combinations or the sale of companies
(net change in cash and cash equivalents from initial
consolidations and deconsolidations) are shown separately. Total
cash inflows due to the acquisition of subsidiaries net of cash
acquired amount to EUR45.1 million in the reporting year. The
acquisition of a share of 50.0% plus one share in Magnesita led to
a cash inflow of EUR50.2 million (purchase price paid of EUR117.3
million less acquired cash and cash equivalents of EUR167.5
million). The purchase price paid for the acquisition of 100% of
the shares of Agellis amounts to EUR5.1 million.
The sale of Fused Cast and the merger control divestments in the
financial year 2017 led to a total cash inflow of EUR30.6 million
(purchase price received of EUR40.3 million less cash and cash
equivalents disposed of amounting to EUR9.7 million).The sale of
the subsidiary RHI Monofrax LLC, Wilmington, USA, as of 6 June 2016
led to a cash outflow of EUR4.6 million.
Interest and dividends received are included under cash flow
from investing activities.
(49) Net cash flow from financing activities
Net cash flow from financing activities includes outflows from
dividend payments and interest payments. In contrast, interest on
borrowings capitalised in accordance with IAS 23 is included in
cash flow from investing activities, and tax-related interest is
recognised in cash flow from operating activities.
Inflows resulting from the proceeds and repayments of loans and
other financial liabilities are classified as non-current or
current according to the term of financing.
The net cash flow from financing activities consists of payments
to shareholders of the Group and non-controlling interests as well
as changes in financial liabilities and assets. The reconciliation
of movements of financial liabilities and assets to cash flows
arising from financing activities is shown in the table below:
Cash changes Non-cash changes
---------------------------------------------------
Changes in Additions Interest
foreign exchange to consolidated expense and
in EUR million 01.01.2017 rates companies other changes 31.12.2017
--------------------------- ---------- ------------ ----------------- ---------------- -------------- ----------
Liabilities to financial
institutions 475.5 60.1 (13.3) 407.9 22.8 953.0
Perpetual bond 0.0 0.0 (5.6) 217.9 3.0 215.3
Senior notes 0.0 0.0 (1.4) 56.3 0.7 55.6
Liabilities to fixed-term
or puttable
non-controlling
interests 32.5 (3.2) (1.7) 0.0 4.4 32.0
Other financial liabilities 7.7 (3.4) (0.1) 0.1 (2.6) 1.7
Prepaid transaction costs
related to financial
liabilities 0.0 (2.5) 0.0 0.0 0.0 (2.5)
--------------------------- ---------- ------------ ----------------- ---------------- -------------- ----------
Changes of financial
liabilities
and assets arising from
financing activities 515.7 51.0 (22.1) 682.2 28.3 1,255.1
(50) Total interest paid and interest received
Total interest paid amounts to EUR25.6 million in the reporting
period (2016: EUR17.5 million), of which EUR0.1 million (2016:
EUR0.0 million) are included in cash flow from operating
activities, EUR0.6 million (2016: EUR0.5 million) in cash flow from
investing activities and EUR24.9 million (2016: EUR17.0 million) in
cash flow from financing activities.
Total interest received amounts to EUR5.1 million for the
financial year 2017 (2016: EUR3.2 million), of which EUR0.0 million
(2016: EUR0.2 million) are included in cash flow from operating
activities and EUR5.1 million (2016: EUR3.0 million) in cash flow
from investing activities.
(51) Cash and cash equivalents
Cash and cash equivalents as presented in the Consolidated
Statement of Cash Flows correspond to the cash and cash equivalents
recognised in the Consolidated Statement of Financial Position.
They include restricted cash totalling EUR80.8 million at 31
December 2017 (31.12.2016: EUR19.8 million). Restricted cash is
mainly related to cash and cash equivalents at subsidiaries (mainly
in Brazil, India and China) to which the company only has limited
access due to foreign exchange and capital transfer controls.
EUR75.8 million (31.12.2016: EUR13.5 million) are accounted for by
subsidiaries with non-controlling interests.
OTHER DISCLOSURES
(52) Segment reporting
Segment reporting by operating company division
The following tables show the financial information for the
operating segments for the year 2017 and the previous year:
Group
in EUR million Steel Industrial Raw Materials Reconcil-iation 2017
-------------------------------------- ------- ---------- ------------- --------------- -------
External revenue 1,308.8 577.6 59.7 0.0 1,946.1
Internal revenue 0.0 0.0 228.8 (228.8) 0.0
-------------------------------------- ------- ---------- ------------- --------------- -------
Segment revenue 1,308.8 577.6 288.5 (228.8) 1,946.1
Gross profit 302.7 130.2 27.6 0.0 460.5
EBIT 26.4 9.8 6.9 0.0 43.1
Net finance costs 0.0 0.0 0.0 (30.6) (30.6)
Share of profit of joint ventures
and associates 0.1 0.0 10.9 0.0 11.0
-------
Profit before income tax 23.5
Depreciation and amortisation charges (34.8) (18.1) (19.8) 0.0 (72.7)
Segment assets 31.12.2017 1,131.7 445.5 835.3 843.1 3,255.6
Investments in joint ventures and
associates 31.12.2017 9.2 0.0 21.3 0.0 30.5
-------
3,286.1
Investments in property, plant and
equipment and intangible assets
(according to non-current assets
statement) 36.7 21.0 12.7 0.0 70.4
Group
in EUR million Steel Industrial Raw Materials Reconcil-iation 2016
----------------------------------------- ------- ---------- ------------- --------------- -------
External revenue 1,071.4 538.6 41.2 0.0 1,651.2
Internal revenue 0.0 0.0 224.8 (224.8) 0.0
----------------------------------------- ------- ---------- ------------- --------------- -------
Segment revenue 1,071.4 538.6 266.0 (224.8) 1,651.2
Gross profit 216.4 124.7 15.3 0.0 356.4
EBIT 76.3 32.0 7.8 0.0 116.1
Net finance costs 0.0 0.0 0.0 (21.2) (21.2)
Share of profit of joint ventures 0.0 0.0 10.9 0.0 10.9
-------
Profit before income tax 105.8
Depreciation and amortisation charges (31.3) (16.5) (17.3) 0.0 (65.1)
Segment assets 31.12.2016 645.4 269.6 397.8 458.9 1,771.7
Investments in joint ventures 31.12.2016 0.0 0.0 20.5 0.0 20.5
-------
1,792.2
Investments in property, plant and
equipment and intangible assets
(according to non-current assets
statement) 28.7 16.7 20.9 0.0 66.3
Revenue amounting to EUR195.5 million (2016: EUR183.9 million)
was realised with one customer in 2017, which is included in the
Steel segment. No other single customer contributed 10% or more to
consolidated revenue in 2017 or 2016. Companies which are known to
be part of a group are treated as one customer.
Segment assets include the external receivables and inventories
which are reported to the management for control and measurement
and which are available to operating segments, as well as property,
plant and equipment, goodwill and other intangible assets which are
allocated to the segments based on the capacity of the assets
provided to the segments. Shares in joint ventures are allocated to
the segments. All other assets are recognised under
reconciliation.
When allocating revenue to product groups, a distinction is made
between shaped products (e.g. hydraulically pressed bricks, fused
cast bricks, isostatically pressed products) and unshaped products
(e.g. repair mixes, construction mixes and castables) as well as
other revenue. Other includes revenue from the provision of
services as well as the sale of non-group refractory products.
In the reporting year, revenue is classified by product group as
follows:
in EUR million Steel Industrial Raw Materials Group 2017
------------------ ------- ---------- ------------- ----------
Shaped products 826.3 435.0 0.2 1,261.5
Unshaped products 353.2 63.8 58.9 475.9
Other 129.3 78.8 0.6 208.7
------------------ ------- ---------- ------------- ----------
Revenue 1,308.8 577.6 59.7 1,946.1
In 2016, revenue was classified by product group as follows:
in EUR million Steel Industrial Raw Materials Group 2016
------------------ ------- ---------- ------------- ----------
Shaped products 675.6 403.8 0.0 1,079.4
Unshaped products 314.8 61.5 40.9 417.2
Other 81.0 73.3 0.3 154.6
------------------ ------- ---------- ------------- ----------
Revenue 1,071.4 538.6 41.2 1,651.2
Segment reporting by country
Revenue is classified by customer sites as follows:
in EUR million 2017 2016
--------------------------------------------------- ------- -------
Netherlands 14.1 14.7
All other countries
India 204.3 170.7
USA 195.0 151.2
Germany 137.0 142.7
PR China 121.4 88.9
Mexico 118.6 113.6
Italy 105.9 93.2
Brazil 91.5 32.9
Canada 70.8 60.8
Russia 59.0 49.1
Other countries, each below EUR42.3 million (2016:
EUR41.5 million) 828.5 733.4
--------------------------------------------------- ------- -------
Revenue 1,946.1 1,651.2
The carrying amounts of property, plant and equipment and
intangible assets are classified as follows by the respective sites
of the group companies:
in EUR million 31.12.2017 31.12.2016
--------------------------------------------------------- ---------- ----------
Brazil 644.1 6.0
Austria 214.0 206.5
PR China 138.9 128.3
Germany 98.6 87.9
India 58.8 64.2
USA 56.6 6.2
Turkey 31.8 34.1
Mexico 28.8 28.4
Other countries, each below EUR19.1 million (31.12.2016:
EUR20.8 million) 57.7 69.1
--------------------------------------------------------- ---------- ----------
Property, plant and equipment and intangible assets 1,329.3 630.7
(53) Earnings per share
In accordance with IAS 33, earnings per share are calculated by
dividing the profit or loss attributable to the shareholders of RHI
Magnesita N.V. (2016: RHI AG) by the weighted average number of
shares outstanding during the financial year.
2017 2016
--------------------------------------------------- ---------- ----------
Profit after income tax attributable to the owners
of the parent (in EUR million) (18.4) 74.0
Weighted average number of shares 40,682,053 39,819,039
--------------------------------------------------- ---------- ----------
Earnings per share (in EUR) (0.45) 1.82
There are no options for the issue of new shares or other
circumstances that may lead to diluting effects. Therefore, the
basic and diluted earnings per share are identical.
(54) Dividend payments and proposed dividend
Based on a resolution adopted by the 38(th) Annual General
Meeting of RHI AG on 5 May 2017, dividends totalling EUR29.9
million were paid out to the shareholders in the financial year
2017 for the year 2016, which corresponded to a dividend of EUR0.75
per share.
For the financial year 2017, the Board of Directors will propose
a dividend of EUR0.75 per share, which corresponds to a dividend
payment of EUR33.6 million for the shareholders of RHI Magnesita
N.V.. The proposed dividend is subject to the approval by the
Annual General Meeting on 7 June 2018 and was not recognised as a
liability in the Consolidated Financial Statements 2017.
Dividend payments to the shareholders of RHI Magnesita N.V. have
no income tax consequences for RHI Magnesita N.V..
(55) Additional disclosures on financial instruments
The following tables show the carrying amounts and fair values
of financial assets and liabilities by measurement category and
level and the allocation to the measurement category in accordance
with IFRS 13. In addition, carrying amounts are shown aggregated
according to measurement category.
Fair value 31.12.2017(2)
------------ ----- -----------
IAS 39 recognised
Measurement (Amortised) in profit recognised Carrying Fair
in EUR million category(1) Level cost or loss in equity amount value
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Interests in subsidiaries
not consolidated FAAC - 0.8 - - 0.8 -
Available-for-sale investments FAAC - 0.4 - - 0.4 -
Available-for-sale securities AfS 1 - - 12.6 12.6 12.6
Available-for-sale shares FAAC - 2.4 - - 2.4 -
Securities designated
as fair value through
profit or loss FAFVTPL 1 - 2.3 - 2.3 2.3
Interest derivatives
designated as cash flow
hedges - 2 - 1.5 1.5 1.5
Non-current receivables
from disposal of subsidiaries LaR - 2.6 - - 2.6 -
Other non-current financial
receivables LaR - 2.5 - - 2.5 -
Trade and other current
receivables LaR - 419.9 - - 419.9 -
Other current financial
receivables LaR - 0.1 - - 0.1 -
Financial assets held
for trading - securities FAHfT 1 - 32.3 - 32.3 32.3
Financial assets held
for trading - derivatives FAHfT 2 - 1.7 - 1.7 1.7
Cash and cash equivalents LaR - 442.4 - - 442.4 -
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Financial assets 921.5
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Liabilities to financial
institutions FLAAC 2 953.0 - - 953.0 966.1
Perpetual bond FLAAC 1 215.3 - - 215.3 217.0
Senior notes FLAAC 2 55.6 - - 55.6 55.6
Other financial liabilities FLAAC 2 1.7 - - 1.7 1.7
Financial liabilities
held for trading - derivatives FLHfT 2 - 40.9 - 40.9 40.9
Liabilities to fixed-term
or puttable non-controlling
interests FLAAC 2 32.0 - - 32.0 32.0
Contingent consideration
for acquired subsidiaries FLFVTPL 3 - 0.6 0.6 0.6
Trade payables and other
current liabilities FLAAC - 500.2 - - 500.2 -
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Financial liabilities 1,799.3
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Aggregated according to measurement
category
Loans and receivables LaR 867.5 - - 867.5
Available for sale financial
instruments AfS - - 12.6 12.6
Financial assets designated
as fair value through
profit or loss FAFVTPL - 2.3 - 2.3
Financial assets at cost FAAC 3.6 - - 3.6
Financial assets held
for trading FAHfT - 34.0 - 34.0
Financial liabilities
measured at amortised
cost FLAAC 1,757.8 - - 1,757.8
Financial liabilities
held for trading FLHfT - 40.9 - 40.9
Financial liabilities
measured at fair value
through profit or loss FLFVTPL - 0.6 - 0.6
Fair value 31.12.2016(2)
------------ ----- -----------
IAS 39 recognised
Measurement (Amortised) in profit recognised Carrying Fair
in EUR million category(1) Level cost or loss in equity amount value
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Available-for-sale investments FAAC - 0.4 - - 0.4 -
Available-for-sale securities AfS 1 - - 15.3 15.3 15.3
Available-for-sale shares FAAC - 0.5 - - 0.5 -
Other non-current financial
receivables LaR - 2.7 - - 2.7 -
Trade and other current
receivables LaR - 312.1 - - 312.1 -
Other current financial
receivables LaR - 1.5 - - 1.5 -
Financial assets held
for trading - derivatives FAHfT 2 - 1.5 - 1.5 1.5
Cash and cash equivalents LaR - 182.9 - - 182.9 -
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Financial assets 516.9
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Liabilities to financial
institutions FLAAC 2 475.5 - - 475.5 497.7
Other financial liabilities FLAAC 2 7.7 - - 7.7 7.7
Interest derivatives
designated as cash flow
hedges - 2 - - 0.9 0.9 0.9
Financial liabilities
held for trading - derivatives FLHfT 2 - 49.1 - 49.1 49.1
Liabilities to fixed-term
or puttable non-controlling
interests FLAAC 2 32.5 - - 32.5 32.5
Trade payables and other
current liabilities FLAAC - 217.3 - - 217.3 -
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Financial liabilities 783.0
-------------------------------- ------------ ----- ----------- ---------- ---------- -------- ------
Aggregated according to measurement
category
Loans and receivables LaR 499.2 - - 499.2
Available for sale financial
instruments AfS - - 15.3 15.3
Financial assets at cost FAAC 0.9 - - 0.9
Financial assets held
for trading FAHfT - 1.5 - 1.5
Financial liabilities
measured at amortised
cost FLAAC 733.0 - - 733.0
Financial liabilities
held for trading FLHfT - 49.1 - 49.1
1) FAAC: Financial assets at cost
AfS: Available for sale financial instruments
FAFVTPL: Financial assets measured at fair value through profit
or loss
LaR: Loans and receivables
FAHfT: Financial assets held for trading
FLAAC: Financial liabilities measured at amortised cost
FLHfT: Financial liabilities held for trading
FLFVTPL: Financial liabilities measured at fair value through
profit or loss
2) The items trade and other non-current receivables and
payables also include non-financial assets and liabilities; they
are therefore not considered in the table of financial instruments.
The reconciliation to the respective items of the Statement of
Financial Position is provided in Notes ((19) and (31)).
In the RHI Magnesita Group especially securities and derivative
financial instruments are measured at fair value.
Fair value is defined as the amount for which an asset could be
exchanged, or a liability settled, between market participants in
an arm's length transaction on the day of measurement. When the
fair value is determined it is assumed that the transaction in
which the asset is sold or the liability is transferred takes place
either in the main market for the asset or liability, or in the
most favourable market if there is no main market. RHI Magnesita
considers the characteristics of the asset or liability to be
measured which a market participant would consider in pricing. It
is assumed that market participants act in their best economic
interest.
RHI Magnesita takes into account the availability of observable
market prices in an active market and uses the following hierarchy
to determine fair value:
Level
1: Prices quoted in active markets for identical financial instruments.
Level Measurement techniques in which all important data used are
2: based on observable market data.
Level Measurement techniques in which at least one significant parameter
3: is based on non-observable market data.
The fair value of available-for-sale securities, securities
designated as fair value through profit or loss and securities held
for trading is based on price quotations at the reporting date
(Level 1). Due to the sale of securities in the year 2016, income
of EUR0.1 million, which was previously recognised in other
comprehensive income, had to be reclassified to the Statement of
Profit or Loss.
The fair value of interest derivatives in a hedging relationship
(interest rate swaps) is determined by calculating the present
value of future cash flows based on current yield curves taking
into account the corresponding terms (Level 2). For two existing
hedging relationships, which were previously included in an
effective hedging relationship in accordance with IAS 39 and to
which the rules of hedge accounting were applied, the requirements
for hedge accounting were no longer given as of 30 June 2017.
Consequently, the fair values of these interest derivatives have to
be classified as financial liabilities held for trading.
The fair value of financial assets and liabilities held for
trading corresponds to the market value of the forward exchange
contracts and the embedded derivatives in open orders denominated
in a currency other than the functional currency, as well as the
market value of a long-term power supply contract, which was
classified as a derivative financial instrument since the financial
year 2015. These financial assets and liabilities held for trading
are measured based on quoted forward rates (Level 2).
The fair value of the contingent consideration liability
amounting to EUR0.6 million recognised in the year 2017 due to the
acquisition of Agellis is determined by discounting the estimated
earn-out with the transaction's internal rate of return (Level
3).
RHI Magnesita takes into account reclassifications in the
measurement hierarchy at the end of the reporting period in which
the changes occur. There were no shifts between the different
measurement levels in the two reporting periods.
Financial liabilities and liabilities to fixed-term or puttable
non-controlling interests are carried at amortised cost in the
Consolidated Statement of Financial Position; the fair values of
the financial liabilities are only shown in the notes. The fair
value of the perpetual bond is based on price quotations at the
reporting date (Level 1), all other liabilities are calculated at
the present value of the discounted future cash flows using yield
curves that are currently observable (Level 2).
Shares in non-consolidated subsidiaries of EUR0.8 million
(31.12.2016: EUR0.0 million), available-for-sale investments of
EUR0.4 million (31.12.2016: EUR0.4 million) and available-for-sale
shares of EUR2.4 million (31.12.2016: EUR0.5 million) are equity
instruments carried at cost for which there is no quoted price on
an active market. It was not possible to derive a fair value based
on comparable transactions. These investments and shares are
immaterial in comparison with the total position of the Group.
The financial receivables approximately correspond to the fair
value as due to the amount of the existing receivables no material
deviation between the fair value and the carrying amount is assumed
and the credit default risk is accounted for by forming valuation
allowances.
The remaining terms of trade and other current receivables and
liabilities as well as cash and cash equivalents are predominantly
short. Therefore, the carrying amounts of these items approximate
fair value at the reporting date.
At the two reporting dates, no contractual netting agreement of
financial assets and liabilities were in place.
Net results by measurement category in accordance with IAS
39
The effect of financial instruments on the income and expenses
recognised in the reporting years 2017 and 2016 is shown in the
following table, classified according to the measurement categories
defined in IAS 39:
in EUR million 2017 2016
----------------------------------------------------------- ------ ------
Net gain on available-for-sale financial assets
recognised in the Statement of Profit or Loss 0.5 2.4
recognised in other comprehensive income 0.0 0.1
reclassified from other comprehensive income to the
Statement of Profit or Loss 0.0 (0.1)
------ ------
0.5 2.4
Net loss from loans and receivables as well as financial
liabilities at amortised cost (87.7) (13.1)
Net gain on financial assets and financial liabilities
classified as held for trading 12.2 6.0
Net gain from financial assets at fair value through
profit or loss designated on initial recognition 0.1 0.0
The net gain on available-for-sale financial assets recognised
in the Consolidated Statement of Profit or Loss includes income
from securities and shares, income from the disposal of securities
and shares, income realised from changes in market value originally
recognised in other comprehensive income as well as impairment
losses and income from reversals of impairment losses.
The net loss arising from loans and receivables as well as
financial liabilities includes interest income and expenses,
changes in valuation allowances and losses on derecognition,
foreign exchange gains and losses as well as expenses related to
the measurement of put options.
The net gain of financial assets held for trading and financial
liabilities includes unrealised results from the measurement of a
long-term commodity futures contract as well as changes in the
market value and realised results of forward exchange contracts and
embedded derivatives in open orders in a currency other than the
functional currency of RHI Magnesita, interest derivatives which do
not meet the requirements of hedge accounting in accordance with
IAS 39 and interest income from securities.
The net gain from financial assets at fair value through profit
or loss designated on initial recognition includes income related
to the measurement of securities.
Net finance costs include interest income amounting to EUR5.0
million (2016: EUR3.1 million) and interest expenses of EUR26.5
million (2016: EUR17.0 million), which result from financial assets
and liabilities which are not carried at fair value through profit
or loss.
(56) Derivative financial instruments
Commodity futures
The RHI Magnesita Group concluded a commodity futures contract
for electricity for the fusion plant in Porsgrunn, Norway, in
November 2011 which has been accounted for as a financial
instrument in accordance with IAS 39 since 31 December 2015 because
the "own-use exemption" (exemption for own use in accordance with
IAS 39.5) no longer applies.
The measurement of the entire term of the contract until the end
of the year 2023 at market price level leads to a financial
liability of EUR40.1 million at 31 December 2017 (31.12.2016:
EUR49.0 million). The corresponding present value of the cash flows
for the agreed electricity supply totals EUR83.4 million at 31
December 2017 (31.12.2016: EUR97.5 million); the present value of
the cash flow at market price amounts to EUR43.3 million
(31.12.2016: EUR48.5 million).
Interest rate swaps
RHI Magnesita has concluded interest rate swaps to hedge the
cash flow risk of financial liabilities carrying variable interest
rates. Financial liabilities carrying variable interest were
designated as hedged items. The cash flow changes of the hedged
items, which result from the changes of the variable interest
rates, are balanced out by the cash flow changes of the interest
rate swaps. These hedging measures pursue the objective to
transform variable-interest financial liabilities into
fixed-interest financial liabilities, thus hedging the cash flow
from the financial liabilities. Credit risks are not part of the
hedge.
The term of two hedging relationships with a nominal volume of
EUR17.2 million at the reporting date (31.12.2016: EUR25.7 million)
ends in the financial year 2019. The interest payments from the
underlying transaction and the compensation payments from the two
interest rate swaps are made quarterly at the end of the quarter.
The refinancing of liabilities to financial institutions carried
out in the course of the acquisition of Magnesita led to the early
repayment of, among others, two financial liabilities carrying
variable interest which are designated as the underlying
transactions for these two hedging relationships. Due to the early
repayment, the expected transaction, the future variable interest
payments, was no longer expected to take place. Consequently, the
expense of EUR0.3 million recognised in other comprehensive income
was reclassified to profit or loss as of 30 June 2017 and
recognised in interest expenses. The changes in the fair value of
these interest rate swaps are now recognised through profit or
loss. In the year 2016 no ineffectiveness had to be recognised
through profit or loss for these two hedges. Fixed interest rates
amount to roughly 0.7% as in the previous year. The variable
interest rates are based on the EURIBOR.
The term of two other hedging relationships, which were acquired
in the course of the acquisition of Magnesita, with a total nominal
volume of US$160.0 million at the reporting date ends in the second
half of the financial year 2020. The interest and compensation
payments for these hedging relationships are due semi-annually at
the end of January respectively March and at the end of July
respectively September. The interest expenses are recognised
accordingly on a period basis. The effectiveness of a hedging
relationship is tested on a prospective and retrospective basis. In
the reporting year no hedge ineffectiveness had to be recognised
through profit or loss. Fixed interest rates amount to roughly
1.3%; the variable interest rates are based on the LIBOR.
A hedging relationship with a nominal value of EUR50.0 million
(31.12.2016: EUR50.0 million) ended on 31 July 2017. The expense of
EUR0.2 million recognised in other comprehensive income was
reclassified to profit or loss and recognised under interest
expenses.
The fair values of the interest rate swaps totalled EUR1.3
million at the reporting date (31.12.2016: EUR(0.9) million).
Forward exchange contracts
As of 31 December 2017, there are no material open forward
exchange contracts. The nominal value and fair value of forward
exchange contracts as of 31 December 2016 are shown in the table
below:
31.12.2016
Nominal value Fair value
Purchase Sale in million in EUR million
------------------ --------- -------------------------------------------------------------------- ---------------
EUR ZAR ZAR 100.0 (0.1)
EUR USD USD 90.0 0.4
EUR CNY EUR 21.7 0.1
EUR CAD CAD 10.0 0.0
MXN USD USD 10.0 0.0
EUR INR EUR 8.9 0.0
Forward exchange contracts 0.4
(57) Financial risk management
Financial risks are incorporated in RHI Magnesita's corporate
risk management and are centrally controlled by Group Treasury.
None of the following risks have a significant influence on the
going concern of the RHI Magnesita Group.
Credit risks
The maximum credit risk from recognised financial assets amounts
to EUR921.5 million (31.12.2016: EUR516.9 million) and is primarily
related to investments with banks and receivables due from
customers.
The credit risk with banks related to investments (especially
cash and cash equivalents) is reduced by the fact that business
transactions are generally only carried out with contractual
partners with a good credit rating.
In order to counteract the default risk related to these
transactions, receivables from customers are hedged as far as
possible through credit insurance and collateral arranged through
banks (guarantees, letters of credit), even if the contractual
partner has a top class credit rating. Credit and default risks are
monitored continuously, and provisions are formed for risks that
have occurred and for identifiable risks.
In the following, the credit risk from trade receivables is
shown classified by customer industry, by foreign currency and by
term.
This credit risk, which is hedged by existing credit insurance,
letters of credit and bank guarantees, is shown by customer segment
in the following table:
in EUR million 31.12.2017 31.12.2016
------------------------------------- ---------- ----------
Segment Steel 294.3 208.6
Segment Industrial 96.9 96.0
Segment Raw Materials 3.7 4.4
------------------------------------- ---------- ----------
Trade receivables 394.9 309.0
Credit insurance and bank guarantees (158.1) (181.5)
------------------------------------- ---------- ----------
Net credit exposure 236.8 127.5
The following table shows the carrying amounts of receivables
denominated in currencies other than the functional currencies of
the group companies. The carrying amounts of the receivables in the
functional currency of the respective Group company are included
under other functional currencies:
in EUR million 31.12.2017 31.12.2016
---------------------------- ---------- ----------
US Dollar 96.0 50.1
Euro 9.9 6.7
Pound Sterling 3.8 2.9
Other currencies 7.9 2.6
Other functional currencies 277.3 246.7
---------------------------- ---------- ----------
Trade receivables 394.9 309.0
The classification of receivables by days outstanding is shown
below:
in EUR million 31.12.2017 31.12.2016
------------------------------------------------ ---------- ----------
Neither impaired nor past due at reporting date 283.2 217.4
Not impaired at reporting date and past due in
the following time frames
Less than 30 days 36.6 20.5
Between 30 and 59 days 14.6 7.2
Between 60 and 89 days 5.7 2.7
More than 90 days 19.4 12.8
Impaired at reporting date 67.7 81.6
Valuation allowances (32.3) (33.2)
------------------------------------------------ ---------- ----------
Trade receivables 394.9 309.0
With respect to receivables that were neither impaired nor
overdue, there were no indications at the reporting date that the
debtors would be unable to meet their payment obligations. No
valuation allowance was recognised for overdue receivables
amounting to EUR76.3 million at the reporting date (31.12.2016:
EUR43.2 million) and impaired receivables of EUR35.4 million
(31.12.2016: EUR48.8 million) because the risk of default is
essentially covered by credit insurance, bank guarantees and
letters of credit.
Liquidity risk
Liquidity risk refers to the risk that financial obligations
cannot be met when due. The Group's financial policy is based on
long-term financial planning and is centrally controlled and
monitored continuously at RHI Magnesita. The liquidity requirements
resulting from budget and medium-term planning are secured by
concluding appropriate financing agreements. As of 31 December
2017, the RHI Magnesita Group has a credit facility of EUR317.2
million (31.12.2016: EUR310.8 million) at its disposal, which is
unused and available immediately. At 31 December 2016, unused
credit lines from the sale of receivables amounted to EUR6.8
million. These lines of credit were concluded with different
international banks in order to ensure independence of banks. The
companies of the RHI Magnesita Group are integrated into a clearing
process managed by Central Treasury and provided with financing
limits in order to minimize the need of borrowings for the Group as
a whole.
Non-derivative financial instruments
An analysis of the terms of non-derivative financial liabilities
based on undiscounted cash flows including the related interest
payments shows the following expected cash outflows:
Remaining term
--------- -----------------------
Carrying
amount Cash up to 1 2 to 5 over 5
in EUR million 31.12.2017 outflows year years years
-------------------------------------- ----------- --------- ------- ------ ------
Liabilities to financial institutions
fixed interest 176.7 202.7 60.6 96.8 45.3
variable interest 776.3 858.1 146.5 683.7 27.9
Perpetual bond 215.3 309.5 79.1 52.9 177.5
Senior Notes 55.5 66.0 5.2 60.8 0.0
Other financial liabilities 1.7 1.8 0.9 0.8 0.1
Liabilities to fixed-term or
puttable non-controlling interests 32.0 161.0 10.1 12.3 138.6
Contingent consideration for
acquired subsidiaries 0.6 0.6 0.0 0.6 0.0
Trade payables and other current
liabilities 500.2 500.2 500.2 0.0 0.0
-------------------------------------- ----------- --------- ------- ------ ------
Non-derivative financial liabilities 1,758.3 2,099.9 802.6 907.9 389.4
Remaining term
--------- -----------------------
Carrying
amount Cash up to 1 2 to 5 over 5
in EUR million 31.12.2016 outflows year years years
-------------------------------------- ----------- --------- ------- ------ ------
Liabilities to financial institutions
fixed interest 214.6 237.6 26.0 140.6 71.0
variable interest 260.9 267.5 133.5 132.3 1.7
Other financial liabilities 7.7 7.8 4.5 3.2 0.1
Liabilities to fixed-term or
puttable non-controlling interests 32.5 182.2 9.1 13.0 160.1
Trade payables and other current
liabilities 217.3 217.3 217.3 0.0 0.0
-------------------------------------- ----------- --------- ------- ------ ------
Non-derivative financial liabilities 733.0 912.4 390.4 289.1 232.9
Derivative financial instruments
The remaining terms of derivative financial instruments based on
expected undiscounted cash flow as of 31 December 2017 and 31
December 2016 are shown in the table below:
Remaining term
---------- ---------------------------
Carrying
amount up to 2 to over
in EUR million 31.12.2017 Cash flows 1 year 5 years 5 years
---------------------------------------------- ----------- ---------- ------- -------- --------
Receivables from derivatives with net
settlement
Interest derivatives designated as
cash flow hedges 1.5 1.5 0.9 0.6 0.0
Financial assets held for trading 1.7 1.7 1.7 0.0 0.0
Liabilities from derivatives with net
settlement
Financial liabilities held for trading 40.9 43.5 7.5 28.8 7.2
Remaining term
---------- ---------------------------
Carrying
amount up to 2 to over
in EUR million 31.12.2016 Cash flows 1 year 5 years 5 years
---------------------------------------------- ----------- ---------- ------- -------- --------
Receivables from derivatives with net
settlement
Financial assets held for trading 1.5 1.5 1.5 0.0 0.0
Liabilities from derivatives with net
settlement
Interest derivatives designated as
cash flow hedges 0.9 0.9 0.7 0.2 0.0
Financial liabilities held for trading 49.1 51.9 6.1 31.0 14.8
Foreign currency risks
Foreign currency risks arise especially where business
transactions (operating activities, investments, financing) are
conducted in a currency other than the functional currency of a
company. They are monitored at the group level and analysed with
respect to hedging options. The net position of the Group in the
respective currency serves as the basis for decisions regarding the
use of hedging instruments.
Foreign currency risks according to IFRS 7 are created through
financial instruments which are denominated in a currency other
than the functional currency (in the following: foreign currency)
and are monetary in nature. Important primary monetary financial
instruments include trade receivables and payables, cash and cash
equivalents as well as financial liabilities as shown in the
Consolidated Statement of Financial Position. Equity instruments
are not of a monetary nature and therefore not linked to a foreign
currency risk in accordance with IFRS 7.
The majority of foreign currency financial instruments in the
RHI Magnesita Group result from operating activities, above all
from intragroup financing transactions, unless the foreign exchange
effects recognised to profit or loss on monetary items, which
represent part of a net investment in a foreign operation in
accordance with IAS 21, are eliminated or hedged through forward
exchange contracts. Significant provisions denominated in foreign
currencies are also included in the analysis of risk.
The following table shows the foreign currency positions in the
major currencies as of 31 December 2017:
in EUR million USD EUR MXN CAD Other Total
------------------------------ ------- ------- ------ ----- ------ ---------
Financial assets 583.9 88.5 (0.1) 22.7 48.6 743.6
Financial liabilities,
provisions (727.5) (218.6) (18.6) (2.4) (47.1) (1,014.2)
------------------------------ ------- ------- ------ ----- ------ ---------
Net foreign currency position (143.6) (130.1) (18.7) 20.3 1.5 (270.6)
The foreign currency positions as of 31 December of the previous
year are structured as follows:
in EUR million USD EUR MXN CAD Other Total
------------------------------ ------- ------ ------ ----- ------ -------
Financial assets 207.4 64.8 0.1 4.5 26.9 303.7
Financial liabilities,
provisions (156.2) (37.8) (14.2) (0.1) (24.0) (232.3)
------------------------------ ------- ------ ------ ----- ------ -------
Net foreign currency position 51.2 27.0 (14.1) 4.4 2.9 71.4
The disclosures required by IFRS 7 for foreign exchange risks
include a sensitivity analysis that shows the effects of
hypothetical changes in the relevant risk variables on profit or
loss and equity. In general, all non-functional currencies in which
group companies enter into financial instruments are considered to
be relevant risk variables. The effects on a particular reporting
period are determined by applying the hypothetical changes in these
risk variables to the financial instruments held by the Group as of
the reporting date. It is assumed that the positions on the
reporting date are representative for the entire year. The
sensitivity analysis does not include the foreign exchange
differences that result from translating the net asset positions of
the foreign group companies into the group currency, the Euro.
A 10% appreciation or devaluation of the relevant functional
currency against the following major currencies as of 31 December
2017 would have had the following effect on profit or loss and
equity (both excluding income tax):
Appreciation of
10% Devaluation of 10%
in EUR million Gain/(loss) Equity Gain/(loss) Equity
----------------- ----------- ------ ------------ ------
US Dollar 20.3 20.3 (24.8) (24.8)
Euro 11.9 11.9 (14.5) (14.5)
Mexican Peso 1.7 1.7 (2.1) (2.1)
Canadian Dollar (1.8) (1.8) 2.3 2.3
Other currencies (0.4) (0.4) 0.3 0.3
The hypothetical effect on profit or loss at 31 December 2016
can be summarised as follows:
Appreciation of
10% Devaluation of 10%
in EUR million Gain/(loss) Equity Gain/(loss) Equity
----------------- ----------- ------ ------------ ------
US Dollar (4.8) (5.6) 5.9 6.9
Euro (2.8) 7.7 2.7 (10.1)
Mexican Peso 1.3 1.3 (1.6) (1.6)
Canadian Dollar (0.4) (1.5) 0.5 1.9
Other currencies (0.4) (0.4) 0.4 0.4
Interest rate risks
The interest rate risk in the RHI Magnesita Group is primarily
related to financial instruments carrying variable interest rates,
which may lead to fluctuations in results and cash flows. At 31
December 2017, interest rate hedges amounting to a nominal volume
of EUR17.2 million (31.12.2016: EUR75.7 million) and a nominal
volume of US$160.0 million existed; a variable interest rate was
converted into a fixed interest rate through an interest rate
swap.
The exposure to interest rate risks is presented through
sensitivity analyses in accordance with IFRS 7. These analyses show
the effects of changes in market interest rates on interest
payments, interest income and interest expense and on equity.
The RHI Magnesita Group measures fixed-interest financial assets
and financial liabilities at amortised cost, and did not use the
fair value option. A hypothetical change in the market interest
rates for these financial instruments at the reporting date would
have had no effect on profit and loss or equity.
Changes in market interest rates on financial instruments
designated as hedges as a part of cash flow hedges to protect
against interest rate-related payment fluctuations have an effect
on equity and are therefore included in the equity-related
sensitivity analysis. If the market interest rate as of 31 December
2017 had been 25 basis points higher or lower, equity would have
been EUR0.5 million (31.12.2016: EUR0.2 million) higher or lower
taking into account tax effects.
Changes in market interest rates have an effect on the interest
result of primary, variable interest financial instruments whose
interest payments are not designated as hedged items as a part of
cash flow hedge relationships against interest rate risks, and are
therefore included in the calculation of the result-related
sensitivities. If the market interest rate as of 31 December 2017
had been 25 basis points higher or lower, the interest result would
have been EUR0.5 million (31.12.2016: EUR0.0 million) lower or
higher.
Other market price risk
RHI Magnesita holds certificates in an investment fund amounting
to EUR12.6 million (31.12.2016: EUR15.3 million) to cover the
legally required protection of personnel provisions of Austrian
group companies. The market value of these certificates is
influenced by fluctuations of the worldwide volatile stock and bond
markets.
In the financial year 2015, an energy supply contract with a
term until the year 2023 had to be classified as a derivative
financial instrument in accordance with IAS 39 for the first time.
The fair value of the financial liability amounts to EUR40.1
million at 31 December 2017 (31.12.2016: EUR49.0 million). If the
quoted forward prices at 31 December 2017 had been 20% higher or
lower, EBIT would have been EUR8.7 million (31.12.2016: EUR9.7
million) higher or lower. In contrast, if the borrowing cost
relevant for discounting had been 25 basis points higher or lower
at the reporting date, EBIT would have been EUR0.3 million
(31.12.2016: EUR0.4 million) higher or lower.
(58) Capital management
The objectives of the capital management strategy of the RHI
Magnesita Group are to secure going concern at all times by
creating a solid capital base to finance growth, investments, to
increase shareholders value on a sustained basis and to generate
adequate returns to enable attractive dividend payments to the
shareholders and to service debt.
The RHI Magnesita Group manages its capital structure through
careful monitoring and assessment of the overall economic framework
conditions, credit, interest rate and FX risks and the requirements
and risks related to operations and taking into account strategic
projects.
The capital structure key figures at the reporting date are
shown below:
31.12.2017 31.12.2016
-------------------------- ---------- ----------
Net debt (in EUR million) 750.8 298.8
Net gearing ratio (in %) 98.8% 57.0%
Net debt, which reflects financial liabilities net of cash and
cash equivalents and non-derivative other current financial assets,
is controlled by Corporate Treasury. The main task of the Corporate
Treasury department is to execute the capital management strategy
as well as to secure liquidity to support business operations on a
sustainable basis, to use banking and financial services
efficiently and to limit financial risks while at the same time
optimizing earnings and costs.
The net gearing ratio is the ratio of net debt to equity. It
amounts to 98.8% for the current financial year. In the previous
year, the net gearing ratio amounted to 57.0%.
The increase in net debt and gearing results primarily from the
acquisition of Magnesita in the course of which additional debt was
assumed.
In the reporting year 2017 and in the previous year, all
externally imposed capital requirements were met. The Group has
sufficient liquidity headroom within its committed debt
facilities.
RHI Magnesita N.V. is subject to minimum capital requirements
according to its articles of association. The articles of
association stipulate a mandatory reserve of EUR288,699,230.59
which was created in connection with the merger.
(59) Contingent liabilities
At 31 December 2017, warranties, performance guarantees and
other guarantees amount to EUR39.8 million (31.12.2016: EUR32.0
million). The terms of contingent liabilities range between two
months and 11 years, depending on the type of liability. Based on
experiences of the past, the probability that contingent
liabilities are used is considered to be low.
In addition, contingent liabilities from sureties of EUR0.5
million (31.12.2016: EUR0.7 million) were recorded, of which EUR0.3
million (31.12.2016: EUR0.3 million) are related to contingent
liabilities to creditors from joint ventures.
Individual proceedings and lawsuits which result from ordinary
activities are pending as of 31 December 2017 or can potentially be
exercised against RHI Magnesita in the future. The related risks
were analysed with a view to their probability of occurrence. The
Group is party to tax proceedings in Brazil with the estimated
amount of EUR178.3 million for the following lawsuits, for which no
provision was set up according to IFRS, as management classified
risks of loss (based on the evaluation of legal advisors) as
possible but not probable:
In 2011, the Brazilian Tax Authorities raised an assessment in
respect of corporate income tax and social contribution on tax
goodwill referring to the years 2008 and 2009. The Tax Authorities
are challenging the deductibility of the amortisation of the tax
goodwill arising from mergers of subsidiaries. In 2016, the company
was notified of the decision rendered by the CARF, which annulled
over 90% of the tax assessment notice. However, this decision may
still be amended due to appeals filed by the company and the
General Counsel to the National Treasury (PGFN). The final decision
is expected within one to two years. The potential loss from this
lawsuit amounts to EUR87.8 million (including interest and
penalties) as at 31 December 2017.
In 2016, the Brazilian Tax Authorities extended their above
review into the years 2011 and 2012. In December 2016 the company
filed a defence against the tax assessment notice. The final
decision is expected within two to three years. The potential loss
from this lawsuit amounts to EUR40.0 million (including interest
and penalties) as at 31 December 2017.
In 2013, the Brazilian Tax Authorities raised an assessment
notice for allegedly failing to pay social security contributions
in the period from January to December 2009. The company has
appealed the assessment. Legal opinions demonstrate that the
company has solid supporting documentation capable of reversing the
assessment. The potential loss from this proceeding amounts to
EUR6.0 million (including interest and penalties) as at 31 December
2017.
Furthermore, the Brazilian Tax Authorities raised an assessment
into a former holding company in Brazil in respect of federal
taxes. The assessment relates to federal tax offsets made by the
company up to and including 2008 which have not been approved by
the Federal Revenue Service. Legal opinions demonstrate that the
company has solid supporting documentation capable of reversing the
assessment. The potential loss amounts to EUR11.1 million
(including interest and penalties) as at 31 December 2017.
In addition, the Brazilian Tax Authorities raised an assessment
into the calculation basis of CFEM (Financial Compensation for
Exploration of Mineral Resources). Based on the opinion of the
legal advisors the company has appealed the assessment and the loss
was considered possible due to jurisprudence of the Brazilian
court. Additionally, recent changes on CFEM legislation, mostly
adopting the company's interpretation, also demonstrate that the
interpretation taken is the most accurate, which is a fact judges
can decide upon. The potential loss from this proceeding amounts to
EUR13.9 million (including interest and penalties) as at 31
December 2017.
Magnesita Refratários S.A., Contagem, Brazil, is also involved
in other minor lawsuits totalling EUR19.5 million which relate to a
number of assessments concerning various taxes and related
obligations.
Proceedings and lawsuits in which other subsidiaries are
involved have no significant negative influence on the financial
position and performance of the RHI Magnesita Group.
(60) Other financial obligations
Other financial obligations consist of the following items:
Total Remaining term
up to 1
in EUR million 31.12.2017 year 2 to 5 years over 5 years
------------------------------------ ---------- ------- ------------ ------------
Obligations from rental and leasing
contracts 56.9 16.1 24.2 16.6
Capital commitments 5.9 5.9 0.0 0.0
------------------------------------ ---------- ------- ------------ ------------
Other financial obligations 62.8 22.0 24.2 16.6
Total Remaining term
up to 1
in EUR million 31.12.2016 year 2 to 5 years over 5 years
------------------------------------ ---------- ------- ------------ ------------
Obligations from rental and leasing
contracts 66.7 13.8 32.6 20.3
Capital commitments 2.5 2.5 0.0 0.0
------------------------------------ ---------- ------- ------------ ------------
Other financial obligations 69.2 16.3 32.6 20.3
Other financial obligations are exclusively due to third
parties. They are shown at nominal value.
Rental and leasing obligations for property, plant and equipment
of EUR23.1 million (2016: EUR21.8 million) are recognised in the
Consolidated Statement of Profit or Loss of the financial year
2017.
The conditions of the most important operating rental and
leasing agreements can be summarised as follows:
At the company's head office in Vienna, Austria, a rental
agreement exists which has been renegotiated in 2017 and ends on 31
December 2018.
Another rental contract for offices has a term until 30 April
2020. The tenant has a two-time optional right to extend the
contract by three years each. The annual rent is coupled to the
development of the consumer price index.
At one production site, the area for operating a plant has been
leased for the long term. The related contract ends in April 2062
and includes an extension option for another 30 years. The rent is
subject to adaptation to inflation.
The Group also rents numerous mining vehicles, diggers,
forklifts and the like by cancellable leasing agreements. The
contracts have terms ranging from two to seven years; most of them
do not include a purchasing option after the contract ends.
In addition to the aforementioned financial obligations, the RHI
Magnesita Group also has long-term purchase obligations related to
the supply with raw materials, especially for electricity, natural
gas, strategic raw materials as well as for the transport of raw
materials within the Group. This results in other financial
obligations of the nominal value of EUR99.9 million at the
reporting date (31.12.2016: EUR90.3 million). The remaining terms
of the contracts amount to up to nine years. Purchases from these
arrangements are recognised in accordance with the usual course of
business. Purchase contracts are regularly reviewed for imminent
losses, which may occur, for example, when requirements fall below
the agreed minimum purchase volume or when contractually agreed
prices deviate from the current market price level.
(61) Expenses for the Group auditor
The expensed fees for the activities of the Group auditor PwC
that are included in the Consolidated Statement of Profit or Loss
are shown in the following table:
in EUR million 2017 2016
------------------------------------------------ ---- ----
Audit of the Financial Statements 2.4 1.0
thereof invoiced by PwC Accountants N.V. 0.2 0.0
thereof invoiced by PwC network firms 2.2 1.0
Other audit related services 0.1 0.1
Tax compliance services 0.9 1.7
Other non-audit services 2.5 0.3
------------------------------------------------ ---- ----
Total fees 5.9 3.1
Other audit related services, tax compliance services and other
non-audit services were performed and invoiced by PwC network firms
outside of the Netherlands.
In 2017, EUR0.5 million of the audit fees invoiced by PwC
network firms of EUR2.2 million are related to the full audit of
the half-year consolidated financial statements. The other
non-audit services of EUR2.5 million in 2017 are mainly related to
services in connection with the acquisition of Magnesita and
listing on the London Stock Exchange.
(62) Annual average number of employees
The average number of employees of the RHI Magnesita Group based
on full time equivalents amounts to:
2017 2016
-------------------------------------- ----- -----
Salaried employees 3,788 3,544
Waged workers 4,781 4,134
-------------------------------------- ----- -----
Number of employees on annual average 8,569 7,678
All but one of them work outside of the Netherlands.
(63) Transactions with related parties
Related companies include subsidiaries that are not fully
consolidated, joint ventures, associates and MSP Foundation,
Liechtenstein, as a shareholder of RHI Magnesita N.V. since it
exercises significant influence based on its share of more than 25%
in RHI Magnesita N.V.. In accordance with IAS 24, the personnel
welfare foundation of Stopinc AG, Hünenberg, Switzerland, also has
to be considered a related company.
Related persons are persons having authority and responsibility
for planning, directing and controlling the activities of the Group
(key management personnel) and close members of those persons'
families. Since 26 October 2017 key management personnel comprises
members of the Board of Directors of RHI Magnesita N.V. and the
Executive Management Team. Before that members of the Management
Board and the Supervisory Board of RHI AG formed the key management
personnel.
Related companies
In the financial year 2017, the Group conducted the following
transaction with its related companies:
Non-consolidated
Joint ventures Associates subsidiaries
in EUR million 2017 2016 2017 2017
------------------------------- ------------- ------------- ---------- ----------------
Revenue from the sale of goods
and services 3.4 3.3 0.4 0.1
Purchase of raw materials 2.5 1.9 3.8 0.0
Interest income 0.1 0.1 0.0 0.0
Trade and other receivables 1.3 1.0 1.1 0.2
Loans granted 0.0 0.0 17.0 0.1
Trade liabilities 0.6 0.0 8.5 1.1
Dividends received 10.7 9.5 0.0 0.0
In the financial years 2017 and 2016, the Group charged
electricity and stock management costs to the joint venture
MAGNIFIN Magnesiaprodukte GmbH & Co KG, St. Jakob, Austria, and
purchased raw materials. In November and December 2017, the
associate Sinterco S.A.,Nameche, Belgium, sold sintered doloma to
the RHI Magnesita Group. Furthermore, the Group has a financing
receivable of EUR17.0 million from a loan agreement with
Sinterco.
The balances at the end of the financial year are unsecured and
will be paid in cash. For the financial year 2016, business
transactions with non-consolidated subsidiaries are not listed as
they were of minor significance. All income and expenses of the
joint ventures, associates and non-consolidated subsidiaries
acquired in the course of the acquisition of Magnesita relate to
the periods November and December 2017. Before the acquisition of
Magnesita the Group had no associates.
To secure a pension claim of a former employee of MAGNIFIN, RHI
Magnesita has assumed a surety amounting to EUR0.3 million
(31.12.2016: EUR0.3 million). A resulting cash outflow is not
expected. No guarantees were received.
In the financial years 2017 and 2016 no transactions were
carried out between the RHI Magnesita Group and MSP Foundation,
with the exception of the dividend paid.
A service relationship with respect to the company pension
scheme of the employees of Stopinc AG exists between the personnel
welfare foundation of Stopinc AG and the fully consolidated
subsidiary Stopinc AG. Stopinc AG makes contribution payments to
the plan assets of the foundation to cover pension obligations. The
pension plan is recognised as a defined benefit plan and is
included in Note (28). At 31 December 2017 current account
receivables of EUR0.8 million (31.12.2016: EUR0.8 million) from the
personnel welfare foundation exist, for which an interest of 2.5%
(2016: 2.5%) is charged. In the past reporting period, employer
contributions amounting to EUR0.5 million (2016: EUR0.5 million)
were made to the personnel welfare foundation. The overfunding of
the pension plan is recognised as a non-current asset of EUR2.0
million (31.12.2016: EUR2.1 million).
Related persons
Remuneration of key management personnel of the Group, which is
subject to disclosure in accordance with IAS 24, comprises the
remuneration of the active Board of Directors and the Executive
Management Team (EMT) from November to December 2017 as well as the
former Management Board and Supervisory Board of RHI AG until
October 2017.
After RHI AG merged with and into RHI Magnesita N.V. Stefan
Borgas was appointed Executive Director and the other members of
the former Management Board of RHI AG were appointed EMT Members.
At the same time, the Group combined with Magnesita and Octavio
Lopes was appointed second Executive Director, and additional EMT
members were appointed. For the financial year 2017, expenses for
the remuneration of the Executive Directors, EMT members and former
Management Board, active in 2017, recognised in the Consolidated
Statement of Profit or Loss total EUR12.6 million (2016: EUR10.1
million) The expenses, not including non-wage labour costs amount
to EUR11.8 million (2016: EUR9.4 million), of which EUR9.8 million
(2016: EUR4.6 million) were related to current benefits (fixed,
variable and other earnings), EUR0.0 million (2016: EUR2.9 million)
to benefits related to the termination of employment and EUR1.9
million (2016: EUR1.9 million) to share-based remuneration. At 31
December 2017, liabilities for performance-linked variable earnings
and share-based payments for active members of the former
Management Board of EUR6.7 million (2016: EUR1.6 million) are
recognised as liabilities. There are no obligations arising from
post-employment benefits and legally required termination
benefits.
In addition to the variable remuneration, the members of the
former Management Board of RHI AG active in 2017 and 2016 were also
entitled to share-based payments. This programme was a
performance-linked and share-based compensation model, in which the
vesting period per tranche extends over the respective financial
year. At the beginning of the programme, a portion of the annual
salary was defined for the members of the former Management Board
of RHI AG, and was translated into a number of virtual shares using
a reference price. The relevant reference price for the
remuneration programme of the respective financial year
corresponded to the average RHI AG share price from 1 December of
the previous year to 31 January of the current reporting year. The
actual, vested entitlement to virtual shares depended on the level
of target achievement; financial criteria (adjusted EBIT, ROACE,
adjusted for external costs related to the planned acquisition of
Magnesita) determined 70% and other criteria 30% of the
entitlement. The equivalent value of the number of virtual shares
determined per tranche were paid in cash in the three equal
portions in the following three financial years. This equivalent
value in cash was determined on the basis of the average share
price of the respective period from 1 December of the reporting
year to 31 January of the following year. The programme was
terminated after RHI AG merged with and into RHI Magnesita N.V. and
the provisioned amount will be paid over the next three years.
The effects of this compensation programme on the Consolidated
Financial Statements are shown in the table below:
Number of virtual Expense in EUR
shares Provision in EUR million million
31.12.2017 31.12.2016 31.12.2017 31.12.2016 2017 2016
----------------------- ---------- ---------- ------------ ------------ ------- -------
Compensation programme
2017 68,389 - 2.5 - 2.7 -
Compensation programme
2016 44,020 73,042 1.6 1.7 0.5 1.8
Compensation programme
2015 6,022 14,781 0.2 0.4 0.1 0.1
----------------------- ---------- ---------- ------------ ------------ ------- -------
Total 118,431 87,823 4.3 2.1 3.3 1.9
In the financial year 2017, a payment of EUR1.2 million was made
for the compensation programmes 2017, 2016 and 2015 (2016: EUR 0.1
million for the compensation program 2015).
For members of the Non-Executive Directors as well as for the
former Supervisory Board members (capital representatives),
remuneration totalling EUR0.8 million (2016: EUR0.3 million) was
recognised through profit or loss in the year 2017. The
compensation paid to the members of the former Supervisory Board
and Non-Executive Directors only consists of short-term employee
benefits.
Employee representatives acting as Non-Executive Directors of
RHI Magnesita N.V. or as Supervisory Board members of the former
RHI AG, who are employed by the Group, do not receive compensation
for their activity as Non-Executive Directors or Supervisory Board
members. For their activity as employees in the company and the
activity of their close relatives employed with RHI Magnesita,
expenses of EUR0.7 million (2016: EUR0.8 million) are recognised.
This group of persons received zero (2016: 176) RHI AG shares in
the reporting year as part of the employee stock ownership plan "4
plus 1" as the programme was terminated in 2017
No advance payments or loans were granted to key management
personnel. The RHI Magnesita Group did not enter into contingent
liabilities on behalf of the key management personnel.
Directors Dealings reports are published on the websites of RHI
Magnesita N.V. and of the London Stock Exchange. The members of the
Board of Directors are covered by D&O insurance at RHI
Magnesita.
Detailed and individual information on the remuneration of the
Board of Directors is presented in the Annual Report on
Remuneration of the RHI Magnesita Group.
Earnings of former members of the former Management Board
amounted to EUR3.5 million (2016: EUR1.2 million), of which EUR1.4
million are related to share-based remuneration.
From 16 October 2015 until 28 September 2016, a non-remunerated
consultancy agreement with a close relative of a related person was
in place for the support of the initiation of the transaction with
the shareholders of Magnesita, which was terminated before the
signing of the agreement regarding the acquisition of the
company.
(64) Corporate bodies of former RHI AG (until 25 October
2017)
Members of the Management Board
Stefan Borgas, Chairman
Barbara Potisk-Eibensteiner (until 31 August 2017)
Thomas Jakowiak
Gerd Schubert
Reinhold Steiner
Members of the Supervisory Board
Herbert Cordt, Chairman
Helmut Draxler, Deputy Chairman
Wolfgang Ruttenstorfer, Deputy Chairman
Hubert Gorbach
Alfred Gusenbauer
Gerd Peskes
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
David A. Schlaff
Employee representatives:
Walter Geier
Christian Hütter
Roland Rabensteiner
Franz Reiter
(65) Board of Directors of RHI Magnesita N.V. (from 26 October
2017)
The members of the Board of Directors are as follows:
Executive Directors
Stefan Borgas, CEO
Octavio Lopes, CFO
Non-independent Non-Executive Directors
Herbert Cordt, Chairman
Fersen Lambranho
David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Independent Non-Executive Directors
Celia Baxter
Andrew Hosty
Jim Leng
John Ramsay
Wolfgang Ruttenstorfer
Karl Sevelda
Employee representatives:
Franz Reiter (from 13 November 2017)
Michael Schwarz (from 8 December 2017)
(66) Material events after the reporting date
On 26 January 2018, Magnesita redeemed US$70 million of its
US$250 million 8.625% perpetual notes.
On 30 January 2018, it was announced that Magnesita (through its
fully-owned subsidiary Magnesita Refractories Company, York, USA)
has given notice of the early redemption of the entire principal
amount outstanding (US$63.3 million) of its US$400 million 7.875%
Senior Notes due March 2020, to be effected on 30 March 2018, at a
price equal to 100% of the principal amount plus accrued and unpaid
interest.
On 28 February 2018, RHI Magnesita N.V. decided to amend the
cash-only alternative offer of the Integrated Tender Offer to
ensure it is "at least" equivalent to Magnesita's shares' economic
value. For further details refer to Note (5) - Acquisition of
Magnesita.
After the reporting date on 31 December 2017, there were no
other events of special significance which may have a material
effect on the financial position and performance of the RHI
Magnesita Group.
(67) Company Financial Statements of RHI Magnesita N.V.
Company Balance Sheet as at 31 December 2017
(before appropriation of result)
in EUR million Notes 31.12.2017 30.06.2017
--------------------------------- ------ ---------- ----------
ASSETS
Fixed assets
Financial fixed assets (A) 571.5 0.0
--------------------------------- ------ ---------- ----------
571.5 0.0
Current assets
Receivables from group companies 62.5 70.0
Cash and cash equivalents 0.1 0.0
----------------------------------------- ---------- ----------
Total current assets 62.6 70.0
----------------------------------------- ---------- ----------
Total assets 634.1 70.0
----------------------------------------- ---------- ----------
EQUITY AND LIABILITIES
Equity
Share capital (B) 44.8 0.0
Additional paid-in capital (C) 165.7 70.0
Legal and mandatory reserves (D) 237.3 0.0
Other reserves 263.5 0.0
Result for the period (F) (90.3) 0.0
--------------------------------- ------ ---------- ----------
Shareholders' Equity 621.0 70.0
----------------------------------------- ---------- ----------
Current liabilities
Trade payables 2.8 0.0
Accrued liabilities 10.3 0.0
----------------------------------------- ---------- ----------
Total current liabilities 13.1 0.0
----------------------------------------- ---------- ----------
Total equity and liabilities 634.1 70.0
----------------------------------------- ---------- ----------
Company Statement of Profit or Loss for the period 1 July to 31
December 2017
in EUR million Notes 2017
------------------------------------ ------ ------
General and administrative expenses (13.0)
-------------------------------------------- ------
Result before taxation (13.0)
Income tax 0.0
Net result from investments (E) (77.3)
------------------------------------ ------ ------
Net result for the period (F) (90.3)
Movements in Shareholder's Equity
Other
Legal and mandatory reserves reserves
----------------------------------
Cash Equity
Share Additional flow Currency Manda-tory Retained Net attributable
in EUR million capital paid-in capital hedges transla-tion reserves earnings result to shareholders
---------------- -------- ---------------- ------- ------------- ---------- --------- ------- ----------------
Incorporation
20 June 2017 - - - - - - - 0.0
Increase of
equity - 70.0 - - - - - 70.0
---------------- -------- ---------------- ------- ------------- ---------- --------- ------- ----------------
Balance as of
30 June 2017 - 70.0 - - - - - 70.0
Net result - - - - - - (90.3) (90.3)
Downstream
merger
from RHI AG 39.8 (70.0) (0.1) (71.2) 288.7 270.0 - 457.2
Issue of
ordinary
shares minus
costs 5.0 165.7 - - - - - 170.7
Net income/
(expense)
recognised
directly
in equity - - 0.2 19.7 - (6.5) - 13.4
Balance as of
31 December
2017 44.8 165.7 0.1 (51.5) 288.7 263.5 (90.3) 621.0
Notes to the Company Financial Statements for the period ended
31 December 2017
General
RHI Magnesita N.V. is a public company with limited liability
under Dutch law. The company is registered with the Dutch Trade
Register of the Chamber of Commerce under the number 68991665 and
has its corporate seat in Arnhem, Netherlands. The administrative
seat, place of effective management and registered office is
located at Wienerbergstraße 9, 1100 Vienna, Austria.
The shares of RHI Magnesita N.V. (ISIN code NL0012650360) are
listed on the Main Market of the London Stock Exchange and are
included in the FTSE 250 index.
The first financial year of the Company ended on 30 June 2017.
On 16 October 2017 the general meeting of the company resolved to
amend and completely readopt the articles of association of the
company. Upon the amendment of articles of association of the
company, taking effect on 26 October 2017, the current financial
year runs from 1 July 2017 up to and including 31 December
2017.
Basis of preparation
The Company Financial Statements have been prepared in
accordance with the provisions of Part 9 of Book 2 of the Dutch
Civil Code. The Company uses the option of Section 362, subsection
8, of Part 9, Book 2, of the Dutch Civil Code to prepare the
Company Financial Statements on the basis of the same accounting
principles as those applied for the Consolidated Financial
Statements. Valuation is based on recognition and measurement
requirements of accounting standards adopted by the EU (i.e. only
IFRS that is adopted for use in the EU at the date of
authorisation) as explained further in the Notes to the
Consolidated Financial Statements.
Significant accounting policies
Financial fixed assets
Investments in group companies in the Company Financial
Statements are accounted for using the equity method.
Net result from investments
The share in the result of investments comprises the share of
the company in the result of these investments.
Fixed assets
(A) Financial fixed assets
The financial fixed assets comprise investments in:
Share in
Name and registered office of the company %
---------------------------------------------------- --------
Didier Werke A.G., Wiesbaden, Germany 12.5
RHI Refractories Raw Material GmbH, Vienna, Austria 25.0
RHI Feuerfest GmbH, Vienna, Austria 100.0
The investments have developed as follows:
in EUR million
------------------------------------------------------- ------
Balance as at 30 June 2017 0.0
From downstream merger 457.2
Capital contributions 179.5
Changes from currency translation and cash flow hedges 19.9
Changes from defined benefit plans (5.6)
Equity settled transaction (2.2)
Net result from investments (77.3)
------------------------------------------------------- ------
Balance as at 31 December 2017 571.5
A list of investments in group companies, prepared in accordance
with the relevant legal requirements (Dutch Civil Code, Book 2,
Sections 379), is shown in Note 5 of the Consolidated Financial
Statements.
Equity
(B) Share capital
The company's authorised share capital amounts to
EUR100,000,000, comprising 100,000,000 ordinary shares, each of
EUR1 nominal value. Following the merger and also at year-end 2017,
RHI Magnesita N.V.'s issued and fully paid-in share capital
consists of 44,819,039 ordinary shares.
(C) Additional paid-in capital
At 31 December 2017, additional paid-in capital comprises
premiums on the issue of shares less issue costs net of tax by RHI
Magnesita N.V.. The additional paid-in capital as of 30 June 2017
was eliminated in the course of the downstream merger from RHI AG
to RHI Magnesita N.V..
(D) Legal and mandatory reserves
Cash flow hedges
The item cash flow hedges includes gains and losses from the
effective part of cash flow hedges less tax effects.
Currency translation
Currency translation includes the accumulated currency
translation differences from translating the financial statements
of foreign subsidiaries as well as unrealised currency translation
differences from monetary items which are part of a net investment
in a foreign operation, net of related income taxes. If foreign
companies are deconsolidated, the currency translation differences
are recognised in the Statement of Profit or Loss as part of the
gain or loss from the sale of shares in subsidiaries. In addition,
when monetary items which are part of a net investment in a foreign
operation are paid back, the currency translation differences of
these monetary items previously recognised in other comprehensive
income are reclassified to profit or loss.
The cash flow hedges reserve and the currency translation
reserve are legal reserves and are restricted for distribution.
Mandatory reserve
The articles of association stipulate a mandatory reserve of
EUR288,699,230.59 which was created in connection with the
merger.
No distributions may be made from the mandatory reserve, no
losses of the company may be allocated to the mandatory reserve and
no allocation or addition may be made to the mandatory reserve.
(E) Net results from investments
The exact legal steps of the merger are reflected in the Company
Financial Statements. Consequently the interests in the investments
are recognised as per date of the transaction, in this case 26
October 2017.
The results of the investments for the period from 26 October to
31 December 2017 amount to a loss of EUR77.3 million and are
recognised in the Company Statement of Profit or Loss.
The results of the investments for the period from 1 January to
25 October 2017 amount to a profit of EUR71.9 million and have been
recognised as an effect from the downstream merger under retained
earnings.
(F) Net result for the period
A different accounting treatment of the merger has been applied
in the Consolidated Financial Statements and the Company Financial
Statements. In the Consolidated Financial Statements the results of
a full year have been recognised in the profit or loss account (the
so called 'pooling of interest methodology'), whereas in the
Company Financial Statements the results of the period 26 October
2017 to 31 December 2017 have been recognised in the profit or loss
account (the so called 'carryover accounting methodology). The
difference between the Consolidated Financial Statements and the
Company Financial Statements is shown in the table below:
in EUR million 2017
------------------------------------------------------------- ------
Company's net result for the period 1 July to 31 December
2017 (90.3)
Result of the investments for the period from 1 January
2017 to 25 October 2017 recognised in retained earning 71.9
------------------------------------------------------------- ------
Company's consolidated results (attributable to shareholders
of RHI Magnesita N.V.) (18.4)
Proposed appropriation of result
It is proposed that pursuant to Article 27 clause 1 of the
articles of association of the company the result shown in RHI
Magnesita N.V. income statement be appropriated as follows:
in EUR million 2017
--------------------------------------------------------- ------
Loss attributable to shareholders (90.3)
In accordance with Article 27 clause 1 to be transferred
to retained earnings (90.3)
--------------------------------------------------------- ------
At the disposal of the General Meeting of Shareholders 0.0
It is proposed that EUR33.6 million of retained earnings are
distributed among the shareholders.
Other notes
Information regarding auditor's fees, number of employee's and
the remuneration of the Board of Directors is included in Note 61
to 63 of the Consolidated Financial Statements.
Material events after the reporting date
On 28 February 2018, RHI Magnesita N.V. decided to amend the
cash-only alternative offer of the Integrated
Tender Offer to ensure it is "at least" equivalent to
Magnesita's shares' economic value. For further details refer
to Note 5 of the Consolidated Financial Statements - Acquisition
of Magnesita.
Vienna, 20 March 2018
Executive Directors
Stefan Borgas Octavio Lopes
CEO CFO
Non-independent Non-Executive Directors
Herbert Cordt,
Chairman
David Schlaff Fersen Lambranho
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg
Independent Non-Executive Directors
Celia Baxter John Ramsay
Andrew Hosty Wolfgang Ruttenstorfer
Jim Leng Karl Sevelda
Employee representatives
Franz Reiter Michael Schwarz
Other information
Provisions of the articles of association on profit and distributions
The stipulations of Article 27 and 28 of the Articles of Association concerning profit and
distributions are:
27 Profit and distributions
27.1 The Board may resolve that the profits realised during a financial year will fully or
partially be appropriated to increase and/or form reserves. With due regard to Article 26.2,
a deficit may only be offset against the reserves prescribed by law to the extent this is
permitted by law.
27.2 The allocation of profits remaining after application of Article 27.1 shall be determined
by the General Meeting. The Board shall make a proposal for that purpose. A proposal to make
a distribution of profits shall be dealt with as a separate agenda item at the General Meeting.
27.3 Distribution of profits shall be made after adoption of the annual accounts if permitted
under the law given the contents of the annual accounts.
27.4 The Board may resolve to make interim distributions and/or to make distributions at the
expense of any reserve of the Company, other than the Mandatory Reserve.
27.5 Distributions on Shares may be made only up to an amount which does not exceed the amount
of the Distributable Equity. If it concerns an interim distribution, the compliance with this
requirement must be evidenced by an interim statement of assets and liabilities as referred
to in Section 2:105 paragraph 4 of the Dutch Civil Code. The Company shall deposit the statement
of assets and liabilities at the Dutch Trade Register within eight days after the day on which
the resolution to make the distribution is published.
27.6 Distributions on Shares payable in cash shall be paid in euro, unless the Board determines
that payment shall be made in another currency.
27.7 The Board is authorised to determine that a distribution on Shares will not be made in
cash but in kind or in the form of Shares, or to determine that Shareholders may choose to
accept the distribution in cash and/or in the form of Shares, all this out of the profits
and/or at the expense of reserves, other than the Mandatory Reserve, and all this if and in
so far the Board has been designated by the General Meeting in accordance with Article 6.1.
The Board shall set the conditions under which such a choice may be made.
28 Release for payment
Distributions of profits and other distributions shall be made payable four weeks after adoption
of the relevant resolution, unless the Board or the General Meeting at the proposal of the
Board determine another date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UAANRWBAOURR
(END) Dow Jones Newswires
March 21, 2018 03:01 ET (07:01 GMT)
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