TIDMRHIM
RNS Number : 8500C
RHI Magnesita N.V.
22 October 2020
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
Q3 2020 TRADING UPDATE
Continued resilience and improving customer outlook; Production
Optimisation Plan extended; FY guidance and interim dividend
re-instated
RHI Magnesita (LSE: RHIM), the leading global supplier of
refractory products, systems and solutions, today provides an
update on trading for the three months to 30 September 2020 ('Q3')
and the strategic cost measures being taken to ensure the long-term
success of the Group.
Q3 Trading
Consistent with expectations at the half year results on 5
August 2020, Q3 trading was similar to Q2 reflecting continued
stability in our markets during what is seasonally a quieter period
in July and August. Encouragingly, the order book improved steadily
but still slowly through the period. With the exception of the
Industrial Projects business, we now have stronger visibility to
the beginning of 2021.
Within the Steel Division, North America and South America
started to see signs of recovery in Q3. Europe and India continued
to reflect the slower rate of recovery in the steel industry in
both regions. Activity levels improved further in China, although
from a low base.
The Industrial Division remained subdued. While Q3 is a
seasonally quieter period for the Cement/Lime segment, it was
further impacted by customers delaying orders. We continue to
expect to see modest seasonal improvements in Q4. The projects
business experienced further postponements, as customers delay
capital projects, and will not see the peak levels experienced in
2019.
Raw material prices fell slightly in July and August and
improved in September. The Group continues to derive a solid margin
from its backward integration, with a 2.3% Adjusted EBITA margin
contribution in Q3 2020, unchanged from the H1 2020 results.
As previously announced, the Group expects to realise EUR50
million of short-term fixed cost savings for the full year 2020 as
part of its Covid-19 response. EUR10 million of these will be
maintained into 2021 in the form of lower depreciation.
Strategic initiatives
The Group continues to make good progress on its longer-term,
strategic cost savings initiatives. These comprise the Production
Optimisation Plan and SG&A Reduction Plan.
Plans to extend the Production Optimisation Plan have now been
finalised and the Group intends to close additional production
facilities with a focus on Europe and South America. The intention
is to take the total plant rationalisation up to 10 sites by H1
2022 and increases the cumulative strategic cost savings (including
the SG&A Reduction Plan) to EUR100 million by 2022.
The total capital expenditure for the strategic cost savings
initiatives increases to EUR160 million by 2022, with exceptional
restructuring costs of EUR100 million and impairments of EUR110
million. The details of the strategic cost savings initiatives are
included as an appendix.
Strong financial position
RHI Magnesita has a resilient balance sheet, liquidity of EUR1.1
billion, no material debt maturity before 2023 and significant
headroom under its net debt to EBITDA covenant. The Group continues
its focus on working capital management, especially inventories and
accounts receivable. Working capital has reduced further in the
third quarter and the Group expects further cash inflows in Q4.
Dividend reinstated
Due to the resilient underlying cash generation, strength of the
balance sheet and improving confidence in the market outlook, the
Board is today declaring an interim dividend of EUR0.50 per share,
which is in line with the 2019 interim dividend. The dividend will
be payable to shareholders on 21 December 2020 on the register at
the close of trading on 4 December 2020. The ex-dividend date is 3
December 2020.
While the Group continues to target leverage of between 0.5x and
1.5x net debt to EBITDA, the impact of COVID-19 on 2020 EBITDA
means that leverage is likely to be modestly above this range at
the end of 2020 and through 2021 as the Group continues to
prioritise investment in projects to improve its competitive
position and shareholder returns. The Board is confident that
leverage should reduce thereafter.
Outlook
While there remains uncertainty on the continuing impact of the
COVID-19 pandemic, we are confident that the Group will continue to
demonstrate its resilience, while remaining well-positioned for
when the recovery takes place. Our confidence is underpinned by the
Group's clear strategy and the benefit of ongoing business
improvement initiatives. This supports the decision to pay an
interim dividend and our expectations for FY 2020 adjusted EBITA(1)
to be in line with current market expectation(2) .
Conference call
The Company will host a conference call at 8.15am UK time this
morning to discuss the trading update. The conference call details
are: +44 20 3936 3000 with the access code: 080443
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (596/2014/EU).
Further information:
Investors: Annabel Hill, Interim Head of Investor Relations +44 7792034254
annabel.hill@rhimagnesita.com
Press: Matt Denham, Teneo +44 7825 735596
About RHI Magnesita
RHI Magnesita is the leading global supplier of high-grade
refractory products, systems and solutions which are critical for
high-temperature processes exceeding 1,200degC in a wide range of
industries, including steel, cement, non-ferrous metals and glass.
With a vertically integrated value chain, from raw materials to
refractory products and full performance-based solutions, RHI
Magnesita serves customers around the world, with around 13,000
employees in 35 main production sites and more than 70 sales
offices. RHI Magnesita intends to leverage its leadership in terms
of revenue, scale, product portfolio and diversified geographic
presence to target strategically those countries and regions
benefitting from more dynamic economic growth prospects.
Its shares have a premium listing on the London Stock Exchange
(symbol: RHIM) and are a constituent of the FTSE 250 index. For
more information please visit: www.rhimagnesita.com.
Appendix
Summary of Strategic Cost Savings Initiatives
Presented in EURm 2019 2020 2021 2022
---------------------------------------- ----- ----- ----- ----- -----------
Cumulative run rate EBITA improvement
from cost savings(3) 30 75 100
- Production Optimisation Plan
(POP) (announced at Capital Markets
Day in Nov 2019) 5 25 40
- Extension of POP (announced
today) - 5 15
- SG&A (announced in July 2020) 10 30 30
- Operational turnaround 15 15 15
----- ----- -----
Implementation costs - annual Cumulative
amounts EURm amount
---------------------------------------- ----- ----- ----- ----- -----------
- Capital Expenditure - 45 95 20 160
- Restructuring costs (exceptional)(4) 5 35 60 - 100
- Impairments 50 60 - - 110
The extension of the Production Optimisation Plan requires
capital expenditure of EUR25 million, taking total capital
expenditure for the strategic cost savings initiatives to EUR160
million by 2022. Exceptional restructuring costs will increase by
EUR15 million, amounting to EUR100 million by 2021. Impairments
will increase by EUR40 million, taking total impairments to EUR110
million.
1. Adjusted EBITA excludes other income and expenses
2. Current market expectation based on Company compiled consensus of EUR248 million
3. The total cost savings run rate excludes the 2020 short term
fixed-cost reduction of EUR50 million, taken as mitigating measures
against the impact of COVID-19. EUR10 million of these will be
maintained into 2021 in the form of lower depreciation.
4. Exceptional restructuring costs relate to the cash flow impact
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