TIDMRHIM
RNS Number : 3503U
RHI Magnesita N.V.
01 August 2022
1 August 2022
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or the "Group")
Strong first half earnings supported by price increases and
market share gains
RHI Magnesita, the leading global supplier of high-grade
refractory products, systems and solutions, today announces its
unaudited results for the six months ended 30 June 2022 ("H1 2022"
or the "Period").
Financial results
(EURm unless stated H1 2022 H1 2021 Change H1 2021 Change
otherwise) Constant Currency Constant
Adjusted(1) Currency
Adjusted(2)
Revenue 1,594 1,200 32.8% 1,273 25.3%
Adjusted EBITDA 245 179 36.6% 192 27.7%
Adjusted EBITA 188 128 47.0% 136 37.8%
Adjusted EBITA margin 11.8% 10.7% 110bps 10.7% 110bps
Adjusted EPS EUR2.58 EUR2.05
Net debt 1,238 812
Net debt to adjusted
LTM EBITDA 2.7x 2.2x
H1 2022 H1 2021
Reported
Revenue 1,594 1,200
Reported EBITA 177 136
Profit before tax 142 125
EPS EUR2.06 EUR2.01
Dividend per share EUR0.50 EUR0.50
(1) H1 2021 adjusted for constant currency for H1 2022 average
FX rates
(2) Adjustments of EUR11 million to reported EBITA include EUR4m
of write downs relating to the Russia/Ukraine conflict, and EUR2m
relating to power purchase agreement commitments
Operational highlights
-- Price increases of EUR293 million since H1 2021 successfully
executed, driving strong top line growth and offsetting cost
inflation from energy, raw materials and labour
-- Significant market share gains in steel following investment
in production network and inventory support earnings, as customers
continue to prioritise security of supply
-- Recycling rate increased to 9.3% (H1 2021: 6.1%) leading to
raw material supply and CO(2) emissions benefits following new
joint venture with Horn & Co
Financial highlights
-- Reported r evenue increased 33% to EUR1,594 million (H1 2021:
EUR1,200 million) and by 25% in constant currency terms (H1 2021:
EUR1,273 million)
-- Adjusted EBITA increased by 47% to EUR188 million (H1 2021:
EUR128 million), or 38% in constant currency
-- Net debt of EUR1,238 million (31 December 2021: EUR1,014
million) in line with management expectations and guidance, as
reduction in inventory volumes is offset by the increase in value
of inventories and accounts receivable due to cost inflation and
price increases
-- Interim dividend of EUR0.50 per share declared
Outlook
-- Expectations for full year earnings in 2022 unchanged, based
on strong demand in the year to date and order book for the second
half
-- Global growth outlook impacted by inflation and monetary
policy response, labour and energy market tightness and ongoing
supply chain disruption
-- Margins to be maintained through further price increases and
with support from strategic cost saving initiatives
-- Gearing expected to reduce in the second half, targeting Net
Debt : EBITDA towards 2.0x by year end depending on earnings
performance
Commenting on the results, Chief Executive Officer, Stefan
Borgas, said:
"In the first half of 2022 we further demonstrated the benefits
of prioritising customer deliveries in an environment of continued
supply chain volatility. Our investment in inventories to ensure
our customers remain supplied with essential refractories has
underlined the importance of supply reliability and has enabled us
to simultaneously increase prices and gain market share. Following
major investments in our production network, SG&A reduction and
progress on our sales strategies, the Group is in a strong position
to maintain its leadership position in the refractory industry and
to navigate future challenges."
A presentation for investors and analysts will be held today
starting at 8:15am UK time (9:15am CET). The presentation will be
webcast live and details can be found on:
https://ir.rhimagnesita.com/ . Alternatively the webcast can be
accessed here .
For further enquiries, please contact:
Investors: Chris Bucknall, Head of Investor Relations, +43 699
1870 6490
Media: Mark Garraway, Hudson Sandler, +44 777 1860 938
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 13,500
employees in 28 main production sites and more than 70 sales
offices. RHI Magnesita intends to build on its leadership in
revenue, scale, product portfolio and diversified geographic
presence to expand further in high growth markets.
The Group maintains a premium listing on the Official list of
the London Stock Exchange (symbol: RHIM) and is a constituent of
the FTSE 250 index, with a secondary listing on the Vienna Stock
Exchange (Wiener Börse). For more information please visit:
www.rhimagnesita.com
HEALTH AND SAFETY
The Group maintained high standards in occupational health and
safety, though there was some deterioration in injury frequency
rates since 2020. The lost time injury frequency rate remained
stable at 0.2 per 200,000 hours worked (H1 2021: 0.2). In 2022 the
priority areas for health and safety improvements are preventative
measures by tracking leading indicators and near misses as well as
specific campaigns focused on hand safety, tool use and lockout
procedures.
FINANCIAL OVERVIEW
Reported revenue increased by 33% to EUR1,594 million, as price
increases of EUR293 million were realised in the first half, with
additional costs from freight, energy, labour and raw materials
fully passed on to customers. Revenue increased by 25% on a
constant currency basis after adjusting for changes in foreign
exchange rates, notably the strengthening of the US dollar versus
the Euro which benefited revenues in the first half.
Adjusted EBITA increased by 47% to EUR188 million (H1 2021:
EUR128 million) representing a margin of 11.8% (H1 2021: 10.7%),
supported primarily by the price increase programme.
Freight, energy and raw material costs were respectively 18%,
60% and 12% higher in H1 2022 compared to H1 2021 on a constant
currency basis, reflecting significant global inflation in each
category due to supply chain disruption and energy shortages
resulting from the rapid recovery of global demand following the
COVID-19 pandemic, geopolitical instability and continuing
lockdowns affecting port capacity and logistics in key locations.
Cost inflation was most pronounced in the first quarter, before
easing in some areas in Q2. International containerised freight
prices peaked in January 2022 and have since stabilised at elevated
levels.
Net debt increased to EUR1,238 million (31 December 2021:
EUR1,014 million) despite a reduction in inventory volumes, as the
value of both raw material and finished goods inventories increased
and supply chain reliability remained poor. Accounts receivable
increased due to higher finished goods prices whilst accounts
payables reduced in line with lower capital expenditure on
production optimisation projects.
Working capital intensity of 29.3% remained above the
medium-term target range of 15-18% as the Group continues to
prioritise security of supply to its customers throughout a period
of ongoing global supply chain disruption.
Available liquidity was EUR1,043 million at the period end (31
December 2021: EUR1,181 million). The Group's gearing measured as
the ratio of Net Debt to Adjusted EBITDA increased slightly to 2.7x
(31 December 2021: 2.6x). Operating cash flow reduced to EUR(76)
million (H1 2021: EUR(55) million) with higher working capital
requirements offsetting the improvement in earnings due to price
increases.
In May 2022 RHIM refinanced the outstanding principal of EUR260m
of the EUR305 million OeKB Term Loan maturing in June 2023 and
increased the overall facility amount by signing an additional
OeKB-backed tranche of EUR90m. The total outstanding loan balance
as of 30 June 2022 was EUR350m and the refinanced loan now has a
final maturity in May 2027.
On 29 July 2022, the Group secured a new ESG linked EUR250
million term loan maturing in 2027 of which the proceeds will be
used to refinance the $200 million term loan maturing in 2023,
significantly improving the Group's debt maturity profile as well
as benefiting from a wholly euro denominated profile. The facility
was secured at very competitive interest rates and within the same
margin grid as the $200 million term loan through its core
relationship banks.
OUTLOOK
Order books for both the Steel and Industrial businesses remain
at normal levels, with six months of visibility in steel and
approaching one year for industrial. The outlook for global growth
faces challenges from inflation and monetary policy response,
labour and energy market tightness and ongoing supply chain
disruption.
More frequent and dynamic pricing discussions with customers
have restored margins to acceptable levels following the delays in
passing on cost increases in 2021. The Group is confident that any
further cost increases in 2022 can be passed on quickly to
customers, who continue to value security of supply over price.
Management is focused on reducing working capital in the second
half of the year with a target to reduce Net Debt : Adjusted
EBITDA, towards 2.0x by the year end depending on earnings
performance, as margins are maintained, higher cost inventory is
sold, overall inventory volumes are reduced, and further measures
are taken to reduce accounts receivable. Following investments in
its production network and progress on sales strategies, the Group
is well positioned to navigate future volatility with a lower cost
base and enhanced cash generating potential.
CAPITAL ALLOCATION AND SHAREHOLDER RETURNS
The Board's capital allocation policy remains to support the
long-term Group strategy, providing flexibility for both organic
and inorganic investment opportunities and delivering attractive
shareholder returns over the midterm. These opportunities will be
considered against a framework of strategic fit, risk profile,
rates of return, synergy potential and balance sheet strength.
The Group incurred EUR58 million of capital expenditure in H1
2022, comprising EUR36 million of project expenditure (H1 2021:
EUR70 million) and EUR22 million of maintenance capex (H1 2021:
EUR21 million).
Consistent with the Company's dividend policy to pay an interim
dividend equal to one third of the previous final dividend, the
Board has declared an interim dividend of EUR0.50 per share
representing EUR23.5 million in aggregate. The interim dividend
will be paid on 23 September 2022 to shareholders on the register
on 26 August 2022.
The acquisition of SÖRMA in Turkey announced in H2 2021 is on
track to complete in the second half of 2022. Further M&A
progress was made during the period with the acquisition and joint
venture established with Horn & Co. to accelerate the Group's
use of secondary raw materials in its refractory products. Whilst
the Group's priority in the second half will be to reduce gearing,
alongside the planned investment in ongoing strategic projects, it
will continue to assess bolt-on acquisition opportunities where the
value creation case is compelling.
SUSTAINABILITY
The Group has continued its leadership in the field of
Sustainability with a further increase in the use of secondary raw
material to 9.3% in the first half of 2022 (H1 2021: 6.1%).
Increasing the usage of recycled raw materials is the fastest route
for the Group to reduce its CO(2) emissions in the short term,
since residual refractory material has already been processed from
its raw carbonate form. Each tonne of recycled raw material used
avoids the release of approximately two tonnes of CO(2) which would
otherwise be emitted in the manufacturing process.
On 3 May 2022, RHI Magnesita agreed a new joint venture with
Horn & Co. Group to accelerate the Group's use of secondary raw
materials in its refractory products. The joint venture will give
RHI Magnesita access to additional quantities of secondary raw
material and improve productivity in the recycling process. In the
longer term it is intended to grow the business to become a leading
supplier of high quality recycled materials to the broader
refractory industry in Europe.
RHI Magnesita was awarded a 'Gold' ESG rating by EcoVadis in
June 2022, maintaining the high level of performance established in
2021 and reflecting the Group's industry leading capabilities and
transparency in sustainability.
REGIONALISATION
The Group adopted further regionalisation of its management
structures during the first half, including the creation of new
regional functions and the separation of the Americas business unit
into North and South America. The regionalisation programme is
intended to further strengthen our support to customers, increase
agility and responsiveness to changes in local market conditions,
advance the local-for-local supply strategy and encourage faster
decision making in response to ongoing supply chain volatility.
STRATEGIC INITIATIVES
In 2019, RHI Magnesita launched a series of strategic
initiatives aimed at generating a cumulative annual EBITA
contribution of EUR110 million from cost savings and EUR40-60
million from sales initiatives in flow control, new markets and
heat management solutions, enabled by digitalisation in 2023.
In the first half of 2022 the Group's EUR46 million investment
at Hochfilzen, Austria was completed, on-time and on-budget,
transforming the site it into a new European hub for low-cost
dolomite-based materials. Capacity was also transferred from Kruft
to the newly expanded Urmitz plant in Germany. The project is
on-budget and on-schedule, with the ramp up of production ongoing.
The Radenthein investment is delivering efficiency benefits with
further savings expected as the new systems are implemented during
2022.
In China, the Group has made good progress in H1 2022 in
developing its Dalian plant to increase capacity into flow control
products and magnesia shaped bricks. The construction of the tunnel
kiln and new plant in currently underway at Chongquing, the Group's
recent Joint Venture, currently targeting the cement sector but
with scope to expand into more industries.
In Brazil, design updates to the second stage of the Contagem
project are expected to be adopted to reflect changes in key
parameters including local inflation, exchange rates and freight
costs. Completion of the project is now scheduled for H2 2023. The
Brumado project has been impacted by construction delays and is now
scheduled for completion in H1 2023. It is anticipated that
Contagem and Brumado will require an additional 10-15% of capital
expenditure in 2022 and 2023.
Growth in new markets continued, with revenues increasing by 41%
and 32% in India and China, respectively. Flow control revenue
increased by 23% to EUR249 million (H1 2021: EUR203 million) and
solutions contracts accounted for 32% of revenue in the first half
of 2022 (H1 2021: 29%).
RAW MATERIALS
Raw material prices increased significantly in Q4 2021, before
stabilizing at elevated levels in H1 2022. Chinese suppliers
reduced production due to power shortages, energy rationing and
high energy costs. Global energy shortages have resulted in high
prices for materials which are energy intensive to produce, such as
fused alumina and fused magnesia.
RUSSIA AND UKRAINE
RHI Magnesita's activities have been impacted by the conflict in
Ukraine and sanctions applied to its customers in Russia. To date,
the Group has incurred write downs in inventory and accounts
receivables of around EUR4 million.
Uncertainty remains over the security of supply of natural gas
from Russia to Europe and contingency plans have been prepared,
intended to offset limited gas availability through switching to
alternative fuels, including Liquified Petroleum Gas and solid
fuels. The Group will incur approximately EUR6 million of
additional Capex in 2022 to prepare for potential gas supply
disruption.
STEEL
H1 2022 H1 2021 H1 2021 Change Change
(Reported) (Constant (Reported) (Constant
Steel currency) currency)
------------------ ------- ----------- ----------- ------------ -----------
Revenue (EURm) 1,150 855 911 34.5% 26.2%
Gross Profit
(EURm) 258 184 197 40.2% 31.0%
Gross margin 22.4% 21.5% 21.6% 90bps 80bps
Adj EBITA (EURm) 128 86 95 48.9% 34.7%
Adj EBITA margin 11.1% 10.1% 10.4% 100bps 70bps
Steel regions H1 2022 H1 2021 H1 2021 Change Change
by revenue
(EURm)
(Reported) (Constant (Reported) (Constant
currency) currency)
------------------ ------- ----------- ----------- ------------ ---------------
Europe, CIS,
Turkey 281 233 229 20.6% 22.7%
North America 327 236 259 38.6% 26.3%
South America 187 132 152 41.7% 23.0%
China and East
Asia 121 93 101 30.1% 19.8%
India, Africa,
West Asia 234 161 169 45.3% 38.5%
The steel sector accounts for around 70% of Group revenues with
market demand closely aligned to global steel production volumes.
Refractory products are used to line steel producing equipment to
protect against extreme temperatures of up to 1,800 degrees C. RHI
Magnesita offers a comprehensive product and service offering for
all steel applications, including primary iron and steel making as
well as ingot and continuous casting.
Revenue in the first six months of 2022 increased by 35% to
EUR1,150 million during the period (H1 2021: EUR855 million) and by
26% on a constant currency basis, driven by successful price
increases across the product range to offset inflationary pressures
in the supply chain.
The Steel division recorded a gross margin of 22.4%, an increase
of 90bps compared to H1 2021 of 21.5% as price increases were
reflected in margins. The steel business has a fast replacement
cycle, ranging from 20 minutes to 2 months depending on the
application, enabling faster implementation of new pricing.
Demand has continued to be strong and order book visibility
extends to the end of H2 2022, though there are indications of a
possible moderation of demand in FY 2023.
Europe, CIS and Turkey
Revenue in Europe, CIS and Turkey increased by 21% to EUR281
million (H1 2021: EUR233 million). On a constant currency basis,
revenue increased by 23%. World Steel Association data indicates
that steel production in Europe, CIS and Turkey decreased by 10% in
H1 2022 compared to H1 2021. RHI Magnesita's shipped refractory
volumes were broadly in line with H1 2021, representing an
outperformance against the market contraction.
Growth in flow control has been progressing well in the region
with several large orders realised following the completion of
trials. The region has also grown sales of a new cold-setting mixes
product range, which deliver higher than average margins as well as
significant energy savings for customers.
During the first half, RHI Magnesita signed a new three-year
solutions contract with a key customer in Spain. The contract
covers all refractory consumables including functional products and
mixes, machinery, equipment and technical on-site services.
North America
Revenue in North America increased by 39% to EUR327 million (H1
2021: EUR236 million), mostly due to increase in pricing. On a
constant currency basis, revenue increased by 26% over the period.
Reported revenue benefited from exchange rate movements as the US
dollar strengthened against the Euro during the period.
Shipped volumes were broadly flat, decreasing by 1% in H1 2022
compared to H1 2021, comparable to World Steel Association data
indicating that steel production in the region decreased by 2%.
Supply chain challenges including land and sea freight disruption
continued to affect customer deliveries.
Investments to optimize production at York, Pennsylvania, are
largely complete and are driving improved efficiency and increased
output of dolomite based refractories. Expanding production at York
reduces lead times, working capital requirements and reliance on
international freight whilst improving service levels for customers
in North America, in line with the Group's local-for-local
strategy. Other measures taken to mitigate restricted availability
of raw materials have included the development of alternative raw
materials for binder additives, developed by RHI Magnesita's own
R&D function.
Market share increased at several key customer sites in the flow
control segment as optimization of the Saybrook plant supported
sales growth.
A five year contract was signed with a key customer to provide
heat management solutions for electric arc furnace, argon oxygen
decarburization and ladle applications. Another major steel
customer also extended an existing solutions contract for seven
years, covering electric arc furnace refractories and automated
gunning machinery.
RHI Magnesita's range of digital products and customer portal
offer increased transparency for sales teams and customers. Several
clients in the region adopted the new customer portal and 'Gather'
application during the first half, which collates information from
plant inspections.
South America
Revenue in South America increased by 42% to EUR187 million (H1
2021: EUR132 million), due to an increase in average finished
product prices and market share gains. On a constant currency
basis, revenue increased by 23% as sales benefited from the
strengthening of the Brazilian real against the euro.
Steel production in South America contracted by 3% according to
the World Steel Association, whilst RHI Magnesita shipped volumes
increased by 2%.
The Group increased its proportion of revenue from solutions
contracts and a new five year contract commencing in March 2023 was
agreed with a major customer.
The region achieved a recycling rate of 9.3% in finished
products, a significant increase on the 6.8% rate delivered in H1
2021.
China and East Asia
China and East Asia revenue increased by 30% to EUR121 million
(H1 2021: EUR93 million), with China revenue up 28% and East Asia
31%. On a constant currency basis, regional revenue increased by
20% as reported revenue benefited from the strength of the Chinese
yuan and the US dollar against the euro. The revenue increase was
driven by both higher shipped volumes and price increases.
Steel output in the region declined by 6% over the period and by
a contraction of 6% in China, as slowing growth was compounded by
port and factory shutdowns due to Covid-19 related
restrictions.
The Group has continued to drive efficiency savings and expand
capacity in the region through its production optimisation
programme. A temper furnace was installed in the Dalian plant in
March 2022 to increase capacity of shaped magnesia products and
flow control production capacity at Dalian has also increased by
25%.
The Group has further strengthened its heat management solutions
business in the region with one major contract increased in scope
from EAF only to a solutions contract for the entire plant. A
solutions contract in Vietnam was also successfully extended for a
further three years.
As part of the Group's digitalisation strategy, a new
Manufacturing Execution System ("MES") has been developed to track,
control and optimise the refractory manufacturing processes from
raw material through to finished product. The new MES is in the
implementation phase in Dalian and is on track for completion in H2
2022. Continued success in digital product sales for customer use
was demonstrated by the installation of AGELLIS infrared camera
measurement technology at a major client's sites in Japan and New
Zealand.
India, West Asia and Africa
Revenue in the India, West Asia and Africa region increased by
45% to EUR234 million (H1 2021: EUR161 million). On a constant
currency basis, revenue increased by 38%, as reported revenue
benefited from a slight strengthening of the Indian rupee against
the euro.
The revenue increase was driven by both market share gain and
higher pricing, with shipped volumes increasing by 9% compared to a
4% increase in regional steel production recorded by the World
Steel Association.
As part of the Group's production optimization programme, the
Group has invested into expanding production at its Cuttack and
Vizag plants and output at these facilities has been ramping up
successfully in H1 2022.
The Group has continued to build its flow control presence in
India, converting several customer trials into regular orders with
key customers. Successful trials of slide gates, purgebeam and cold
setting tundish mixes were completed.
The first installation in the region of Electromagnetic Level
Identification ("EMLI") was completed during the first half, along
with Automated Process Optimisation ("APO") and SAR+ (Refractory
Application System) installations, which will collect data to
control refractory consumption.
During the period, the Group established a long term contract
with a major customer for processing spent refractories, under
which RHI Magnesita will sort, separate and segregate secondary raw
material in its Cuttack plant.
Steel outlook
The outlook for end markets has weakened against an uncertain
macroeconomic backdrop, with the construction and automotive
sectors facing ongoing supply chain constraints. Risks to demand in
Europe remain due to the ongoing conflict in Ukraine and the
possibility of energy market disruption in the second half of
2022.
In the US, steel production is expected to benefit from the $1
trillion infrastructure bill and new steel plant construction over
the period 2023-25.
In South America, pressure on current pricing levels from
competitors is anticipated in H2 and some customers are indicating
that they plan to reduce steel output in the remainder of the
year.
Steel production volumes in India have been impacted by the
imposition of a 15% export duty from 22 March, however order books
remain strong until the end of 2022.
INDUSTRIAL
H1 2022 H1 2021 H1 2021 Change Change
Reported (Constant (reported) (constant
currency)
Industrial currency)
---------------------- ------- --------- ---------- ----------- -----------
Revenue (EURm) 444 346 362 28.3% 22.7%
Gross Profit
(EURm) 115 87 89 32.2% 29.2%
Gross margin 25.9% 25.3% 24.6% 60bps 130bps
Adj EBITA (EURm) 60 42 42 42.9% 42.9%
Adj EBITA margin 13.6% 12.0% 11.5% 160bps 210bps
H1 2022 H1 2021 H1 2021 Change Change
Reported (Constant (reported) (constant
currency)
Industrial by currency)
segment by revenue
(EURm)
---------------------- ------- --------- ---------- ----------- -----------
Cement & Lime 181 163 171 11.0% 5.8%
Nonferrous metals 107 71 74 50.7% 44.6%
Process industries 156 112 117 39.3% 33.3%
The Industrial division serves customers in the cement, lime,
non-ferrous metals and process industries including glass,
foundries, aluminum and "EEC" (environment, energy and chemical
industries). Revenue in the first six months of 2022 increased by
28% to EUR444 million (H1 2021: EUR346 million). On a constant
currency basis, revenue increased by 23%. The Industrial division
recorded a gross margin of 25.9%, (H1 2021: 25.3%), an increase of
60bps, following the implementation of price increases to offset
higher production and delivery costs.
Cement & Lime
Revenue for Cement & Lime increased by 11.0% on a reported
basis to EUR181 million (H1 2021: EUR163 million) and by 5.8% on a
constant currency basis. Price increases implemented across the
division were largely offset by lower volumes in H1, with many of
the winter repair season deliveries taking place in Q4 2021 rather
than Q1 2022. Overall, market share has remained stable.
Following the successful roll out of the Automated Process
Optimisation ("APO") tool, used in the steel and non-ferrous metals
("NFM") industries to improve predictability of lining wear rates,
the Group has developed a similar tool for the Cement industry
which is being piloted in several locations.
The Group acquired a 51% ownership stake in a new joint venture
in Chongqing in December 2021 in return for initial consideration
of EUR5 million and an investment of EUR12 million in new
production capacity targeting the cement sector with scope to
expand into more industries. Civil works at the site have now
completed, with construction of the tunnel kiln and new plant
underway and the project is expected to complete by Q2 2023.
Nonferrous metals
Revenue for nonferrous metals increased by 51% in the period to
EUR107 million compared to the prior year (H1 2021: EUR71 million),
and by 45% on a constant currency basis. The increased revenue was
due to higher prices and the release of a backlog in projects built
up in 2021 following supply chain disruptions compounded by the
unscheduled maintenance at Radenthein in Q3 2021.
Process industries
Revenue for process industries increased by 39% on a reported
basis to EUR156 million (H1 2021: EUR112 million) and by 33% on a
constant currency basis. Revenue was substantially higher during
the period due to both price increases and a higher volume of
shipped finished products. Price increases are slower to implement
in the process industries segment given the longer replacement
cycles (5 - 10 years), and the Group therefore expects to recover
further margin in this segment in H2 2022.
As part of its digitalization strategy, the Group has
successfully trialed a webshop as an additional sales channel for
the process industries business which will be rolled out in
2023.
Industrial outlook
Demand has continued to be strong across the order book, with
visibility extending to 12 months. However, the medium term outlook
for end markets driving the industrial business has weakened due to
uncertain macroeconomic conditions.
FINANCE REVIEW
Reporting approach
The Company uses a number of alternative performance measures
("APMs"), in addition to those reported in accordance with IFRS,
which reflect the way in which the Board and the Executive
Management Team assesses the underlying performance of the
business. The Group's results are presented on an "adjusted" basis,
using APMs which are not defined or specified under the
requirements of IFRS, but are derived from the IFRS financial
statements. The APMs are used to improve the comparability of
information between reporting periods and to address investors'
requirements for clarity and transparency of the Group's underlying
financial performance. The APMs are used internally in the
management of our business performance, budgeting and forecasting.
A reconciliation of key metrics to the reported financials is
presented in the section titled APMs.
All references to comparative H1 2021 figures in this review are
on a reported basis, unless stated otherwise. Figures presented at
constant currency represent H1 2021 translated to average H1 2022
exchange rates of 1 Euro to 1.10 USD, 1 Euro to 7.11 CNY, 1 Euro to
5.63 BRL, 1 Euro to 83.37 INR, 1 Euro to 15.86 TRY.
Group performance
Revenue for the Period amounted to EUR1,594 million (H1 2021:
EUR1,200 million), up by 33%. On a constant currency basis, revenue
increased by 25% over the Period. The increase in revenue was
driven by a stronger steel business, where reported revenue
increased by 35% to EUR1,150 million (H1 2021: EUR855 million).
Industrial sector reported revenue increased by 29% to EUR444
million (H1 2021: EUR346 million).
The Group cost of goods sold over the Period amounted to
EUR1,221 million (H1 2021: EUR929 million), an increase of 31%
compared to the same period last year. On a constant currency
basis, cost of goods sold was 24% higher (H1 2021: EUR987 million).
Raw material costs increased by 12%, energy costs by 60%, freight
costs by 18% and labour costs by 11% on a constant currency basis,
contributed to the increase in cost of goods sold versus H1
2021.
The Group delivered gross margin of 23.4%, an increase of 80bps
compared to the same period last year (H1 2021: 22.6%). Gross
margin over the period for the Steel business increased by 90bps to
22.4% (H1 2021: 21.5%). The Industrial business gross margin was
stronger at 25.9%, increasing by 60bps (H1 2021: 25.3%).
Selling, General and Administrative ("SG&A") expenses,
excluding R&D expenses, amounted to EUR181 million in H1 2022
(H1 2021: EUR140 million), 29% higher than the comparative period.
SG&A as a percentage of revenue reduced to 11.4% (H1 2021:
11.7%). Higher SG&A in the period was mainly due to increased
personnel costs, including wage inflation, and strategic
investments into sales initiatives including digitalisation, supply
chain optimisation and sustainability.
Other income and expenses amounted to EUR(11) million in H1 2022
(H1 2021: EUR8 million), comprising a EUR(4) million write down of
receivables and inventories in Russia and Ukraine, EUR(2) million
relating to the amortisation of the Oberhausen provision and EUR(2)
million relating to plant closure costs at Dashiquo, China.
Adjusted EBITDA margin was 15.4%, compared to 14.9% in H1 2021,
increasing by 50bps. Adjusted EBITDA increased by 37% to EUR245
million (H1 2021: EUR179 million).
(EURm) H1 2022 H1 2021 H1 2021 % Change % Change
Reported at constant
currency
Reported at constant
currency
------- --------- ------------
Revenue 1,594 1,200 1,273 32.8% 25.3%
Cost of Sales -1,221 -929 987 23.7% 31.6%
Gross Profit 373 272 286 37.5% 30.5%
Gross margin 23.4% 22.6% 22.5% 80bps 90bps
SG&A -181 -140 -146 29.3% 23.9%
R&D expenses -18 -14 -15 23.7% 18.1%
OIE -10 8 9 (229)% (215)%
EBIT 164 126 134 30.9% 22.3%
Amortization -13 -10 -11 25.0% 17.6%
----------------- ------- --------- ------------ ---------- -------------
EBITA 177 136 146 30.4% 21.9%
Adjusted items 11 -8 -10 (238)% (210)%
----------------- ------- --------- ------------ ---------- -------------
Adjusted EBITA 188 128 136 47.0% 37.8%
----------------- ------- --------- ------------ ---------- -------------
Adjusted EBITA increased by 47% on a reported basis, to EUR188
million (H1 2021: EUR128 million), mainly due to price increases
which successfully offset higher production and distribution
costs.
The Group recorded an Adjusted EBITA margin of 11.8%, increasing
by 110bps compared to 10.7% for the same period last year. The
Refractory margin contributed 8.4% of Group EBITA margin (H1 2021:
7.6%) and the vertical integration contributed 3.4% (H1 2021:
3.1%).
Net financial expenses in H1 2022 amounted to EUR(22) million
(H1 2021: EUR(6.5) million), with net interest expenses of EUR(10)
million (H1 2021: EUR(2.7) million) and other net financial
expenses of EUR(16) million (H1 2021: EUR(10) million). Net
interest expenses in H1 2021 benefited from EUR5 million of
interest income following a Brazilian Supreme Court ruling that
resulted in a refund of revenue-based taxes previously overpaid
into interest income. Net interest expenses on borrowings increased
due to an increase in margin on the Group's debt facilities linked
to higher leverage levels, additional gross borrowings, and the
higher base rates on variable interest facilities.
Total foreign exchange and derivative variances amounted to a
EUR4.0 million positive contribution (H1 2021: EUR6.8 million).
Reported profit before tax amounts to EUR142 million (H1 2021:
EUR125 million). Total tax for H1 2022 in the income statement
amounted to EUR38 million (H1 2021: EUR26 million), representing a
27% reported effective tax rate (H1 2021: 21%). The reported
effective tax rate in the period was higher than the prior period
given the tax effect of extraordinary expenses in Austria and other
jurisdictions, most notably the recognition of profit of a swap
under local GAAP but not for IFRS purposes and the revaluation of
the deferred tax asset incurred at FY21 following the reduction of
Austrian corporation tax from 25% to 23%.
On a reported basis, the Group recorded a profit after tax of
EUR104 million (H1 2021: EUR99 million) and earnings per share of
EUR2.06 (H1 2021: EUR2.01).
Adjusted profit before tax amounts to EUR169 million (H1 2021:
EUR130 million), and the respective adjusted effective tax rate is
24% (H1 2021: 22%). On an adjusted basis, profit after tax was
EUR129 million (H1 2021: EUR101 million) and adjusted earnings per
share for H1 2022 were EUR2.58 (H1 2021: EUR2.05 per share), which
is stated after excluding other income and expenses and
restructuring charges (EUR11 million) and other financial income
and expenses (EUR3.1 million). The full year adjusted effective tax
rate is expected to be between 23-25% in 2022, due to the tax
effect of extraordinary expenses in Austria and, to a lesser
extent, in other jurisdictions, most notably the revaluation of the
deferred tax asset following the reduction of the Austrian
corporation tax rate from 25% to 23%.
Earnings per share H1 2022 Items excluded from H1 2022
Reported adjusted performance Adjusted
(EURm unless otherwise stated)
------------------------------------- ---------- ---------------------- ----------
EBITA 177 11 188
----------------------
Amortisation 13 13
----------------------
Net financial expenses (22) 3.1 (19)
----------------------
Result of profit in joint ventures
----------------------
Profit before tax 142 169
----------------------
Income tax (38) (41)
-------------------------------------- ---------- ---------------------- ----------
Profit after tax 104 129
-------------------------------------- ---------- ---------------------- ----------
Non-controlling interest 7.3 7.3
Profit attributable to shareholders 97 121
Shares outstanding (shares, m) 47.0 47.0
-------------------------------------- ---------- ---------------------- ----------
Earnings per share EUR2.06ps EUR2.58ps
-------------------------------------- ---------- ---------------------- ----------
Cash flow and working capital
Operating cash flow, which is presented to reflect net cash
inflow from operating activities before tax and net finance
expenses, was EUR(76) million for H1 2022 (H1 2021: EUR(55)
million), representing a net outflow given the increase in the
value of inventories since 31 December 2021.
Working capital increased to EUR999 million at H1 2022 (30 June
2021: EUR457 million) from EUR677 million at year end as cost
inflation increased the value of raw material and finished goods
inventories held. During H2 2021, the Group increased its volumes
of inventories, in response to the supply chain volatility and in
order to ensure security of supply. Inventories volumes increased
in H2 2021 but decreased somewhat in H1 2022 as the Group took
measures to reduce stocks of finished goods. Despite the reduction
in volumes, the value of inventories increased to EUR1,143 million
at 30 June 2022 (30 June 2021: EUR703 million), up from EUR977
million at the 2021 year end. Higher valuation of stock also drove
an increase in accounts receivable to EUR403 million at 30 June
2022 (30 June 2021: EUR251 million), and up from EUR349 million at
the 2021 year end. Accounts receivable is defined as trade
receivables plus contracts assets, less contract liabilities in
financial notes 6 and 8. Accounts payable was EUR547 million (30
June 2021: EUR497 million) compared to EUR649 million at the
year-end 2021 as capital expenditure on production optimisation
projects reduced.
Working capital intensity, measured as a percentage of the last
three months' annualised revenue (EUR3,416 million) increased by
10.8 ppt, to 29.3% (H1 2021: 18.5%). Accounts receivable intensity
was 11.8% (H1 2021: 10.1%) and accounts payable intensity was 16.0%
(H1 2021: 20.1%). As previously guided, working capital intensity
is not expected to reduce to the medium term target range of 15 -
18% during 2022, due to ongoing supply chain disruptions.
Working capital financing, used to provide low cost liquidity
and support the Group's commercial offering to customers, stood at
EUR321 million on 30 June 2022 (30 June 2021: EUR287 million),
comprising EUR209 million of accounts receivable financing
(factoring) and EUR111 million of accounts payable financing
(forfeiting). Working capital financing levels vary according to
business activity, and the Group's Board has set a ceiling of
EUR320 million.
An increase in working capital of EUR322 million since FY 2021
offset by a positive currency impact of EUR56 million resulted in a
net cash outflow of EUR267 million.
The Group incurred EUR58 million of capital expenditure (H1
2021: EUR91 million), of which EUR22 million was maintenance
related and EUR36 million was deployed in strategic projects. Full
year guidance for project related capital expenditure has been
increased to EUR115 million including the additional EUR6 million
allocated to mitigating natural gas supply disruption and EUR15
million due to unfavourable foreign exchange movements, with the
most material currency pair being the Euro against Brazilian real
and EUR10 million has been allocated from 2022 to 2023. Maintenance
capital expenditure of EUR85 million is unchanged. Capital
expenditure in 2023 has been increased by EUR10 million to EUR160
million, given the inflationary environment and anticipated
increased expenditure to complete the investment projects in
Brazil.
Net interest payments on net debt and further refinancing costs
amounted to EUR12 million in the Period (H1 2021: EUR 11
million).
Cash Flow
EURm H1 2022 H1 2021
------------------------------------- ------------ --------
Adjusted EBITA 188 128
Working Capital -266 -75
Changes in Other Assets/Liabilities 4 -68
Capital Expenditure -58 -91
Depreciation 57 51
------------------------------------- ------------ --------
Operating Cash Flow(1) -76 -55
------------------------------------- ------------ --------
Cash tax -36 -24
Net financial expenses -12 -11
Restructuring/Transaction
Costs -12 -33
Dividend payments -47 -35
Acquisitions of treasury
shares - -73
Acquisitions -18 -
Right of use assets -4 -1
Non-cash FX translation on
debt -3 -2
Realised FX -7 -9
Other -10 12
Free Cash Flow(1) -224 -232
------------------------------------- ------------ --------
(1) Further detail on the adjustments can be found in
Alternative Performance Measures section
Financial position
The Group's net debt at 30 June 2022 was EUR1,238 million,
comprising total debt of EUR1,627 million, leases of EUR54 million
and cash and cash equivalents and marketable securities of EUR443
million.
As at 30 June 2022, total leases amounted to EUR54 million (H1
2021: EUR51 million), which under IFRS 16 is included in the
Company's net debt position.
The Group's leverage position has increased to 2.7x net debt to
EBITDA (31 December 2021: 2.6x) and has increased by 0.5x since H1
2021. As previously guided, leverage is expected to reduce towards
2.0x during the second half of 2022.
Total liquidity for the Group at 30 June 2022 was EUR1,043
million, including undrawn committed facilities of EUR600
million.
The Group will have debt maturities of EUR122 million in the
second half of 2022 and EUR356 million in 2023, of which EUR80
million is payable in 2022 and EUR322 million in 2023.
In May 2022 RHIM refinanced the outstanding principal of EUR260m
of the EUR305 million OeKB Term Loan maturing in June 2023 and
increased the overall facility amount by signing an additional
OeKB-backed tranche of EUR90 million. The total outstanding loan
balance as of 30 June 2022 is EUR350 million and the refinanced
loan now matures in May 2027.
On 29 July 2022, the Group secured a new ESG linked EUR250
million term loan maturing in 2027 of which the proceeds will be
used to refinance the $200 million term loan maturing in 2023 at
very competitive interest rates and within the same margin grid as
the $200 million term loan.
Out of the total gross debt of EUR1,627 million, 87% is
denominated in Euro. The floating to fixed ratio of the gross debt
is 34% to 66% and the average interest rate is 1.53% (including
swaps).
Return on invested capital
Return on invested capital (ROIC) is used to assess the Group's
efficiency in executing its capital allocation strategy, which is
aimed at enabling organic growth, disciplined M&A and
shareholder returns.
Group ROIC in H1 2022 was 10.3% (H1 2021: 9.6%), from a total of
EUR2,692 million of invested capital (H1 2021: EUR2,296 million)
and EUR139 million recorded net operating profit after tax (NOPAT)
(H1 2021: EUR99 million). ROIC for raw materials assets was 16.9%
(H1 2021: 14.2%), from a total of EUR467 million of invested
capital (H1 2021: EUR430 million) and EUR40 million NOPAT (H1 2021:
EUR30 million). ROIC for refractory assets was 9.0% (H1 2021:
8.8%), from a total of EUR2,225 million of invested capital (H1
2021: EUR1,545 million) and EUR100 million NOPAT (H1 2021: EUR68
million).
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has an established risk management process based on a
formally approved framework and regular risk surveys among
functional and operational managers aimed at systematically
identifying, assessing and mitigating risks and uncertainties in
the Group.
Material and major risks with potentially high impacts on the
Group, its results or its ability to achieve its strategic
objectives are reviewed regularly by the Board.
The risks considered by the Board to be the principal risks were
presented in the 2021 Annual Report, which is available on the
Group's website at www.rhimagnesita.com.
The Board has reconsidered the principal risks and uncertainties
of the Group and assessed the broader macro and external risk
environment and has determined that those risks reported in the
2021 Annual Report remain relevant for the remaining half of the
2022 financial year.
The risk likelihood and/or potential impact of five out of the
eleven principal risks have changed during H1 2022, as highlighted
in the summary table below.
The risks arising from the current macro-economic environment
added additional attention to RHIM's management team. The war
between Russia and Ukraine generated uncertainties on energy supply
and energy prices. Additionally, the risk of recession is being
potentialized by high inflation and increasing interest rates. All
those factors brought further responsiveness from the Company's
management. The current macro-economic environment is being subject
to enhanced monitoring and mitigation.
The Company is experiencing an increase competitivity in regions
such as South America and Europe. Consequently, the principal risk
impacted by such challenges increased their potential to exceed the
risk appetite and are being subject to enhanced monitoring and
mitigation.
On the other hand, the Company has been effective in identifying
the need for price increases and passing them through to customers.
This has had a positive effect on the risk level associated with
this principal risk. The remaining six principal risks are largely
unchanged compared to the 2021 Annual Report - these are listed
below.
The risks may occur independently from each other or in
combination. In the event that they occur in combination, their
impact may be reinforced. The Group might be facing other risks
than the ones mentioned here, some of them being currently unknown
or not considered to be material.
The updated comprehensive analysis of the principal risks faced
by RHI Magnesita will be included in the 2022 Annual Report.
Macroeconomic environment Increased Increased risk of a weaker
and condition of customer macro-economic backdrop
industries leading to driving weaker customer
significant sales volume demand, high inflation
reductions. and higher interest rates,
including given the Russia/Ukraine
war driving high oil
and natural gas prices,
risk of further Covid
lockdowns in China and
Central Banks intervention
to reduce inflation.
The Group monitors various
leading indicators and
undertakes scenario planning,
defining a range of actions
to be taken in each scenario.
Supplier dependency risk Unchanged
---------- ------------------------------------
Inability to execute Unchanged
key strategic initiatives
---------- ------------------------------------
Significant changes in Increased RHIM's competitive position
the competitive environment could be impacted by
or speed of disruptive changes in freight costs,
innovation competitors reducing
prices, increased imported
competition, particularly
in Europe.
Externally driven costs
have been successfully
passed on to customers
in 2022, the Production
Optimisation plan is
structurally reducing
the Group's finished
goods and raw materials
cost position and customers
continue to value the
services, security of
supply and technologically
advanced products offered
by the Group.
---------- ------------------------------------
Reliability of the end-to-end Increased Due to ongoing logistics
value chain challenges, risk of further
Covid lockdowns in China,
risk of European gas
shortages and uncertain
future refractory demand,
it is more challenging
to determine the right
inventory levels. The
Group's focus remains
on seamlessly supplying
customers and it continues
to carry higher inventory
levels than normal.
---------- ------------------------------------
Sustainability - Environmental Unchanged
and climate risks
---------- ------------------------------------
Sustainability - Health Unchanged
& Safety risks
---------- ------------------------------------
Regulatory and compliance Unchanged
risks
---------- ------------------------------------
Cyber and information Unchanged
security risk
---------- ------------------------------------
Ability to predict and Decreased Externally driven costs
pass cost increases to have been successfully
customers passed on to customers
over past 9 months. The
process to identify the
need for price increases
and pass them through
is more mature. This
remains a key area of
management focus with
ongoing cost inflation
---------- ------------------------------------
Organizational capacity Increased Slightly increased given
to execute strategy, the increased difficulty
including demonstrating of attracting and retaining
Company cultural values talent, particularly
for mid-level positions.
Senior level retention
remains high in most
areas. Salary inflation
is being captured by
the salary benchmark
mechanism and is monitored
to react with a tailored
and fast approach in
case of changes.
---------- ------------------------------------
RELATED PARTY TRANSACTIONS
RHI Magnesita enters into arrangements with a number of its
subsidiaries and affiliated companies in the course of its
business. These arrangements relate to service transactions and
financing agreements and RHI Magnesita treat these arrangements as
related party transactions. Furthermore, RHI Magnesita includes
transactions with key management personnel as related party
transactions. As of the balance sheet date, 30 June 2022, there
have been no significant changes in the related party transactions
from those described in RHI Magnesita's 2021 Annual Report. More
information can be found in note 19 of the Condensed consolidated
interim financial statements.
GOING CONCERN
In considering the appropriateness of adopting the going concern
basis in preparing the interim condensed consolidated financial
statements, the Directors have assessed the potential cash
generation of the Group and considered a range of downside
scenarios that model different degrees of potential economic
downturn. This assessment covers the period of a minimum of 12
months from the date of signing the condensed consolidated
financial statements. This assessment considers the period up to
the subsequent financial year end, 31 December 2023, for any
indicators that the going concern preparation is not
appropriate.
The scenarios considered by the Directors include a severe but
plausible downside and a reverse stress test which determines how
much revenue could reduce before breaching the Group's debt
covenants. Further mitigating actions within management control
would be taken under each scenario, including fixed cost reduction
but these were not incorporated in the downside modelling.
The Directors have also considered the Group's current liquidity
and available facilities. As of 30 June 2022, the Group balance
sheet reflects cash and cash equivalents of EUR443.4 million. In
addition, the Group has access to a EUR600 million Revolving Credit
Facility (RCF), which is currently undrawn and not relied upon for
the purpose of the going concern assessment. The Group is in
compliance with the debt covenant.
In all scenarios assessed, taking into account liquidity and
available resources and before the inclusion of all mitigating
actions within management control, the Group was able to maintain
sufficient liquidity to continue trading. On the basis of the
assessment performed, the Directors consider it is appropriate to
continue to adopt the going concern basis in preparing the
condensed consolidated financial statements for the period ended 30
June 2022.
ALTERNATIVE PERFORMANCE MEASURE ("APM")
APMs used by the Group are reviewed below to provide a
definition from each non-IFRS APM to its IFRS equivalent, and to
explain the purpose and usefulness of each APM.
In general, APMs are presented externally to meet investors'
requirements for further clarity and transparency of the Group's
underlying financial performance. The APMs are also used internally
in the management of our business performance, budgeting and
forecasting.
APMs are non-IFRS measures. As a result, APMs allow investors
and other readers to review different kinds of revenue, profits and
costs and should not be used in isolation. Commentary within the
Year-End Results, including the Financial Review, as well as the
Consolidated Financial Statements and the accompanying notes,
should be referred to in order to fully appreciate all the factors
that affect our business. We strongly encourage readers not to rely
on any single financial measure, but to carefully review our
reporting in its entirety.
Adjusted results at a constant currency
H1 2021 figures presented at constant currency represent H1 2021
reported figures translated at average H1 2022 exchange rates.
EBITA
EBIT, as presented in Consolidated Statement of Profit and Loss,
excluding amortisation and impairments of goodwill and intangible
assets and reconciled in note (7) borrowings.
EBITDA
EBIT, as presented in Consolidated Statement of Profit and Loss,
excluding depreciation, amortisation and impairments and reconciled
in note (7) borrowings.
Adjusted EBITDA and EBITA
To provide further transparency and clarity to the ongoing,
underlying financial performance of the Group, adjusted EBITDA and
EBITA are used. Both measures exclude other income and expenses as
presented in Consolidated Statement of Profit or Loss and
reconciled in note (7) borrowings.
Adjusted earnings per share ("Adjusted EPS")
Adjusted EPS is used to assess the Company's operational
performance per ordinary share outstanding. It is calculated using
adjusted EBITA (as described above) and removes the impact of
certain foreign exchange effects, amortisation, one-off
restructuring expenses and impairments, other non-cash financial
income and expenses, that are not directly related to operational
performance. Effective tax rate for adjusted EPS is calculated by
applying the effective tax rate normalised for restructuring
expenses and impairments. A reconciliation of reported EPS from the
condensed consolidated statement of profit or loss can to adjusted
EPS can be found in the table 'Earnings per share' above.
Operating cash flow and free cash flow
Alternative measures for cash flow are presented to reflect net
cash inflow from operating activities before certain items. Free
cash flow is considered relevant to reflect the cash performance of
business operations after meeting the usual obligations of
financing and tax. It is therefore measured before all other
remaining cash flows, being those related to acquisitions and
disposals, other equity-related and debt-related funding movements,
and foreign exchange impacts on financing and investing activities.
A reconciliation can be found in the table 'cash flow' above.
Working capital
Working capital and intensity provides a measure how efficient
the Company is in managing operating cash conversion cycles.
Working capital is the sum of manageable working capital, composed
of inventories, trade receivables and trade payables, contract
assets and contract liabilities. Working capital intensity is
measured as a percentage of last three months annualised revenue
(EUR3,416 million).
Accounts receivable is defined as trade receivables plus
contracts assets, less contract liabilities in financial notes (6)
and (8). Accounts payable is defined at trade payables in financial
note (8).
Net debt
We present an alternative measure to bring together the various
funding sources that are included in the Consolidated Statement of
Financial Position and the accompanying notes. Net debt is a
measure defined in the Group's principal financing arrangements and
reflects the net indebtedness of the Group and includes; all cash,
cash equivalents and marketable securities (EUR443 million), any
debt or debt-like items (EUR1,627 million), and IFRS 16 leases
(EUR54 million). Net debt can be reconciled to note (7)
borrowings.
Return on invested capital
ROIC is calculated as adjusted net operating profit after tax
(NOPAT), divided by total invested capital for the year. Invested
capital is a sum of non-current assets including deferred tax
assets, trade and other current receivables, inventories and income
tax receivables less other non-current financial assets, deferred
tax liabilities, trade and other current liabilities, income tax
liabilities and current provisions. Adjusted net operating profit
after tax (NOPAT) is calculated as sum of Adjusted EBITA,
Amortisation expense and result from joint ventures and associates
less income taxes paid.
Liquidity
Liquidity comprises cash and cash equivalents EUR443 million and
unutilised credit facilities of EUR600 million. Liquidity can be
reconciled in the Going Concern section of note (1).
DEFINITIONS
RHI Magnesita or RHI Magnesita N.V. or RHI Magnesita N.V. and
the Company or its subsidiary undertakings, as appropriate
the Group
H1 2022 or the Six months ended 30 June 2022
Period
H1 2021 Six months ended 30 June 2021
FY 2021 Twelve months ended 31 December 2021
APMs Alternative performance measures
FORWARD LOOKING STATEMENTS
This announcement contains (or may contain) certain
forward-looking statements with respect to certain of the Company's
current expectations and projections about future events. These
statements, which sometimes use words such as "aim", "anticipate",
"believe", "intend", "plan", "estimate", "expect" and words of
similar meaning, reflect the directors' beliefs and expectations
and involve a number of risks, uncertainties and assumptions which
could cause actual results and performance to differ materially
from any expected future results or performance expressed or
implied by the forward-looking statement. Statements contained in
this announcement regarding past trends or activities should not be
taken as a representation that such trends or activities will
continue in the future. The information contained in this
announcement is subject to change without notice and, except as
required by applicable law, the Company does not assume any
responsibility or obligation to update publicly or review any of
the forward-looking statements contained in it and nor does it
intend to. You should not place undue reliance on forward-looking
statements, which apply only as of the date of this announcement.
No statement in this announcement is or is intended to be a profit
forecast or profit estimate or to imply that the earnings of the
Company for the current or future financial years will necessarily
match or exceed the historical or published earnings of the
Company. As a result of these risks, uncertainties and assumptions,
the recipient should not place undue reliance on these
forward-looking statements as a prediction of actual results or
otherwise. The Company has no obligation or undertaking to update
or revise the forward-looking statements contained in this
announcement to reflect any change in its expectations or any
change in events, conditions, or circumstances on which such
statements are based unless required to do so by applicable
regulations.
Condensed Consolidated Interim Financial Statements
as at 30.06.2022
Condensed Consolidated Statement of Financial Position
as at 30 June 2022
in EUR million Note 30.06.2022 31.12.2021
============================================= ===== =========== ===========
ASSETS
============================================= ===== =========== ===========
Non-current assets
============================================= ===== =========== ===========
Goodwill 126.0 114.4
Other intangible assets 311.3 282.6
Property, plant and equipment (4) 1,150.1 1,089.7
Investments in joint ventures and associates 5.9 5.7
Other non-current financial assets 27.5 14.6
Other non-current assets 50.7 41.2
Deferred tax assets 178.5 202.4
============================================= ===== =========== ===========
1,850.0 1,750.6
============================================= ===== =========== ===========
Current assets
============================================= ===== =========== ===========
Inventories (5) 1,143.3 976.5
Trade and other current receivables (6) 628.6 568.2
Income tax receivables 46.2 35.1
Other current financial assets 7.6 2.9
Cash and cash equivalents 443.4 580.8
============================================= ===== =========== ===========
2,269.1 2,163.5
============================================= ===== =========== ===========
4,119.1 3,914.1
============================================= ===== =========== ===========
EQUITY AND LIABILITIES
============================================= ===== =========== ===========
Equity
============================================= ===== =========== ===========
Share capital 49.5 49.5
Group reserves 959.0 736.4
----------- -----------
Equity attributable to shareholders of RHI
Magnesita N.V. 1,008.5 785.9
Non-controlling interests 43.8 36.3
============================================= ===== =========== ===========
1,052.3 822.2
============================================= ===== =========== ===========
Non-current liabilities
==================================================== =========== ===========
Borrowings (7) 1,349.8 1,321.0
Other non-current financial liabilities 105.3 106.0
Deferred tax liabilities 56.1 48.4
Provisions for pensions 222.2 269.0
Other personnel provisions 58.8 68.7
Other non-current provisions 76.7 63.6
Other non-current liabilities 5.5 5.9
============================================= ===== =========== ===========
1,874.4 1,882.6
============================================= ===== =========== ===========
Current liabilities
============================================= ===== =========== ===========
Borrowings (7) 277.2 218.1
Other current financial liabilities 25.7 19.2
Trade payables and other current liabilities (8) 797.9 878.8
Income tax liabilities 44.6 38.2
Current provisions (9) 47.0 55.0
============================================= ===== =========== ===========
1,192.4 1,209.3
============================================= ===== =========== ===========
4,119.1 3,914.1
============================================= ===== =========== ===========
Condensed Consolidated Statement of Profit or Loss
For the six months ended 30 June 2022
in EUR million for the six months ended 30
June Note 2022 2021
=========================================== ===== ========== ========
Revenue (14) 1,594.4 1,200.3
Cost of sales (1,221.0) (928.7)
=========================================== ===== ========== ========
Gross profit 373.4 271.6
=========================================== ===== ========== ========
Selling and marketing expenses (66.8) (52.2)
General and administrative expenses (131.8) (102.0)
Result from operating joint ventures and
associates 0.1 0.0
Restructuring (0.3) (3.0)
Other income 2.1 16.3
Other expenses (12.3) (5.1)
=========================================== ===== ========== ========
EBIT 164.4 125.6
=========================================== ===== ========== ========
Interest income 3.0 6.8
Interest expenses on borrowings (13.1) (9.5)
Net income on foreign exchange effects and
related derivatives (10) 4.0 6.8
Other net financial expenses (11) (15.9) (10.6)
=========================================== ===== ========== ========
Net finance costs (22.0) (6.5)
=========================================== ===== ========== ========
Result from joint ventures and associates 0.0 5.4
=========================================== ===== ========== ========
Profit before income tax 142.4 124.5
=========================================== ===== ========== ========
Income tax (12) (38.1) (25.9)
=========================================== ===== ========== ========
Profit after income tax 104.3 98.6
=========================================== ===== ========== ========
RHI Magnesita N.V. shareholders 97.0 97.1
Non-controlling interests 7.3 1.5
in EUR
Earnings per share - basic 2.06 2.01
Earnings per share - diluted 2.03 1.99
=========================================== ===== ========== ========
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2022
in EUR million for the six months ended 30
June Note 2022 2021
=============================================== ====== ======= ======
Profit after income tax 104.3 98.6
======================================================= ======= ======
Currency translation differences
Unrealised results from currency translation 135.3 57.4
Deferred taxes thereon (12.7) (5.7)
Current taxes thereon 1.3 0.3
Unrealised results from net investment hedge (14.7) (5.4)
Deferred taxes thereon 3.7 1.3
Reclassification to profit or loss - Disposal
subsidiaries 0.6 (8.6)
Cash flow hedges
Unrealised fair value changes 21.5 4.0
Deferred taxes thereon (5.4) (1.0)
======================================================= ======= ======
Items that will be reclassified subsequently
to profit or loss, if necessary 129.6 42.3
======================================================= ======= ======
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans 56.3 27.0
Deferred taxes thereon (15.3) (7.9)
======================================================= ======= ======
Items that will not be reclassified to profit
or loss 41.0 19.1
======================================================= ======= ======
Other comprehensive income after income tax 170.6 61.4
======================================================= ======= ======
Total comprehensive income 274.9 160.0
======================================================= ======= ======
RHI Magnesita N.V. shareholders 267.4 158.2
Non-controlling interests 7.5 1.8
======================================================= ======= ======
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2022
in EUR million for the six months ended 30
June Note 2022 2021
===================================================== ===== ======== ========
Cash (used in) from operations (13) (37.5) (4.1)
===================================================== ===== ======== ========
Income tax paid less refunds (35.7) (24.3)
===================================================== ===== ======== ========
Net cashflow from operating activities (73.2) (28.4)
===================================================== ===== ======== ========
Investments in property, plant and equipment
and intangible assets (57.6) (90.9)
Investments in subsidiaries net of cash acquired (18.3) 0.0
Cash flows from sale of subsidiaries net
of cash disposed of 0.0 (4.8)
Cash receipts from the sale of equity instruments
of interests in joint ventures 8.7 0.0
Cash inflows from the sale of property, plant
and equipment 0.8 6.1
Dividends received from joint ventures and
associates 0.0 0.4
Investment subsidies received 0.0 2.4
Interest received 3.2 1.7
Cash outflows / inflows from non-current
receivables 0.0 0.1
===================================================== ===== ======== ========
Net cash used in investing activities (63.2) (85.0)
===================================================== ===== ======== ========
Acquisition of treasury shares 0.0 (73.5)
Dividend payments to RHI Magnesita N.V. shareholders (47.0) (35.0)
Proceeds from borrowings and loans 90.0 65.0
Repayments of borrowings and loans (8.7) (82.6)
Changes in current borrowings (19.2) (12.3)
Interest payments (14.4) (11.7)
Repayment of lease obligations (8.8) (7.1)
Interest payments from lease obligations (0.6) (0.5)
Cash flows from derivatives (4.3) (2.2)
===================================================== ===== ======== ========
Net cash provided by (used in) financing
activities (13.0) (159.9)
===================================================== ===== ======== ========
Total cash flow (149.4) (273.3)
===================================================== ===== ======== ========
Change in cash and cash equivalents (149.4) (273.3)
===================================================== ===== ======== ========
Cash and cash equivalents at beginning of
period 580.8 589.2
Currency translation differences 12.0 16.2
Cash and cash equivalents at end of period 443.4 332.1
===================================================== ===== ======== ========
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2022
Group reserves
========= ======================= ==========================================
Accumulated other
comprehensive
income
===============================
Equity
attributable
to
shareholders
Additional Cash Defined of RHI
Share Treasury paid-in Mandatory Retained flow benefit Currency Magnesita Non-controlling Total
in EUR million capital shares capital reserve earnings hedges plans translation N.V. interests equity
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Note
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
31.12.2021 49.5 (117.0) 361.3 288.7 532.8 (7.1) (125.1) (197.2) 785.9 36.3 822.2
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Profit after
income tax - - - - 97.0 - - - 97.0 7.3 104.3
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Currency
translation
differences - - - - - - - 113.3 113.3 0.2 113.5
Market valuation
of cash
flow hedges - - - - - 16.1 - - 16.1 - 16.1
Remeasurement of
defined
benefit plans - - - - - - 41.0 - 41.0 - 41.0
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Other
comprehensive
income
after income tax - - - - - 16.1 41.0 113.3 170.4 0.2 170.6
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Total
comprehensive
income - - - - 97.0 16.1 41.0 113.3 267.4 7.5 274.9
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Dividends - - - - (47.0) - - - (47.0) - (47.0)
Change in
non-controlling
interests due to
addition
to consolidated
companies(1) - - - - - - - - - 6.1 6.1
Reclassification
of puttable
non-controlling
interests
without a change
of control(2) - - - - (1.9) - - - (1.9) (6.1) (8.0)
Share-based
payment expenses - - - - 4.1 - - - 4.1 - 4.1
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Transactions with
shareholders - - - - (44.8) - - - (44.8) - (44.8)
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
30.06.2022 49.5 (117.0) 361.3 288.7 585.0 9.0 (84.1) (83.9) 1,008.5 43.8 1,052.3
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
1) Further information is provided under Note (3).
2) Further information is provided under Note (3) and Note
(15).
Group reserves
========= ======================= ==========================================
Accumulated other
comprehensive income
===============================
Accumulated
other Equity
comprehensive attributable
income/ to
expenses shareholders
Additional Cash Defined relating of RHI
Share Treasury paid-in Mandatory Retained flow benefit Currency to disposal Magnesita Non-controlling Total
in EUR million capital shares capital reserve earnings hedges plans translation groups N.V. interests equity
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Note
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
31.12.2020 49.5 (21.5) 361.3 288.7 376.8 (13.7) (145.7) (257.1) 7.8 646.1 20.0 666.1
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Profit after
income
tax - - - - 97.1 - - - - 97.1 1.5 98.6
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Currency
translation
differences - - - - - - - 46.9 (7.9) 39.0 0.3 39.3
Market valuation
of
cash flow
hedges - - - - - 3.0 - - - 3.0 - 3.0
Remeasurement of
defined
benefit plans - - - - - - 19.0 - 0.1 19.1 - 19.1
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Other
comprehensive
income after
income
tax - - - - - 3.0 19.0 46.9 (7.8) 61.1 0.3 61.4
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Total
comprehensive
income - - - - 97.1 3.0 19.0 46.9 (7.8) 158.2 1.8 160.0
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Dividends - - - - (47.7) - - - - (47.7) - (47.7)
Shares
repurchased
(1) - (73.5) - - - - - - - (73.5) - (73.5)
Reclassification
of
puttable
non-controlling
interests
without
change of
control - - - - (1.6) - - 1.4 - (0.2) 9.0 8.8
Share-based
payment
expenses - - - - 3.1 - - - - 3.1 - 3.1
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
Transactions with
shareholders - (73.5) - - (46.2) - - 1.4 - (118.3) 9.0 (109.3)
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
30.06.2021 49.5 (95.0) 361.3 288.7 427.7 (10.7) (126.7) (208.8) 0.0 686.0 30.8 716.8
================= ======== ========= =========== ========== ========= ======= ======== ============ ============== ============= ================ ========
1) The share buyback programme initiated in December 2020 has
been completed in April 2021. The share buyback program was
subsequently extended in May 2021 and completed in August 2021.
Notes to the Condensed Consolidated Interim Financial Statements
Basis of preparation
1. General
RHI Magnesita N.V. (the "Company"), a public company with
limited liability under Dutch law 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
Kranichberggasse 6, 1120 Vienna, Austria.
The Condensed Consolidated Interim Financial Statements
("Interim Statements") of RHI Magnesita N.V ("the Company") and its
subsidiaries (collectively referred to as "RHI Magnesita / Group")
have been prepared in accordance with IAS 34 Interim Financial
Reporting as issued by the International Accounting Standards Board
("IASB") and on the basis of the same accounting principles as
those used in the Company's Annual Financial Statements for the
year ended 31 December 2021.
The Condensed Consolidated Interim Financial Statements do not
include all information and disclosures required in the Annual
Financial Statements and should therefore be read in conjunction
with RHI Magnesita's Consolidated Financial Statements as of 31
December 2021. All amounts in the explanatory notes and tables are
shown in EUR million, unless indicated otherwise. For computational
reasons, rounding differences may occur.
The Condensed Consolidated Interim Financial Statements as of 30
June 2022 were not audited but reviewed by PricewaterhouseCoopers
Accountants N.V.
Going concern
In considering the appropriateness of adopting the going concern
basis in preparing the interim condensed consolidated financial
statements, the Directors have assessed the potential cash
generation of the Group and considered a range of downside
scenarios that model different degrees of potential economic
downturn. This assessment covers the period of a minimum of 12
months from the date of signing the condensed consolidated
financial statements. This assessment considers the period up to
the subsequent financial year end, 31 December 2023, for any
indicators that the going concern preparation is not
appropriate.
The scenarios considered by the Directors include a severe but
plausible downside and a reverse stress test which determines how
much revenue could reduce before breaching the Group's debt
covenant. Further mitigating actions within management control
would be taken under each scenario, including fixed cost reduction
but these were not incorporated in the downside modelling.
The Directors have also considered the Group's current liquidity
and available facilities. As of 30 June 2022, the Group balance
sheet reflects cash and cash equivalents of EUR443.4 million. In
addition, the Group has access to a EUR600 million Revolving Credit
Facility (RCF), which is currently undrawn and not relied upon for
the purpose of the going concern assessment. The Group is in
compliance with the debt covenant.
In all scenarios assessed, taking into account liquidity and
available resources and before the inclusion of all mitigating
actions within management control, the Group was able to maintain
sufficient liquidity to continue trading. On the basis of the
assessment performed, the Directors consider it is appropriate to
continue to adopt the going concern basis in preparing the
condensed consolidated financial statements for the period ended 30
June 2022.
2. Principles of accounting and measurement
There were no changes regarding principles of accounting and
measurement compared to the Consolidated Financial Statements as of
31 December 2021.
Significant accounting judgements and estimates.
Impairment of property, plant and equipment, goodwill and other
intangible assets
No triggers for an impairment review as of 30 June 2022 were
identified.
Pensions and termination benefits
The Group's defined benefit plans are reviewed every six months
to determine any changes to the fair value of the plan assets or
present value of the defined benefit obligations. As a result of
the review during the first half of 2022, the Group's total net
defined benefit plan deficit as at 30 June 2022 is EUR255.0
million, compared to a deficit of EUR312.2 million at 31 December
2021. The movement for the first half principally reflects net
actuarial gains reported in other comprehensive income arising from
increases in discount rates in Brazil, the Euro zone and the US
which are partly offset by negative asset performance.
Ukraine
The war in Ukraine has led to increased global economic
uncertainty with sanctions imposed on Russia. Trade receivables of
EUR2.9 million from our clients in Ukraine and Russia and inventory
in the amount of EUR0.8 million have been fully written off in the
first half of 2022. As of 30 June 2022, the cash balance held in
Russia amounts to EUR5.7 million. There are no cash restrictions on
this balance. Payments of EUR1.1 million from sanctioned Russian
customers are held in an escrow like account and are shown as
restricted cash until approval is granted from OeNB (Austria
Central Bank). Property, plant and equipment in Russia amounts to
EUR0.8 million. This comprises the warehouse and the office
building. Both are still in use and not impaired. Further
information is provided in the Principial Risks and Uncertaintites
Note in the front section of the report.
3. Methods of consolidation
Subsidiaries
On 3 May 2022 RHI Magnesita Group acquired a 51% ownership stake
in Horn & Co. Group ("RHIMHORN") for a cash consideration of
EUR13.3 million in order to accelerate the Group's use of secondary
raw materials in its refractory production. In the short term the
arrangement will give RHI Magnesita access to additional quantities
of secondary raw material and improve productivity in the recycling
process. In the longer term the new business will make high quality
green raw materials available to the entire refractory industry in
Europe. New technologies for the automation of sorting, for new
cleaning purposes and for process automation are being developed
with research partners and at RHI Magnesita's own technology centre
in Leoben, Austria.
RHI Magnesita Group exercises control over RHIMHORN, as through
voting rights and management representation, it has the power to
steer the relevant activities of the business and can use this
power to affect the variable returns from the company that it is
exposed to. Therefore, RHIMHORN is accounted for as a fully
consolidated entity.
The fair values of the assets and liabilities recognised 'based
on the preliminary purchase price allocation' as a result of the
acquisition are presented as follows
Fair Value
in EUR million as at 03.05.2022
=========================================== ==================
Property, plant and equipment 6.2
Intangible assets: customer relationsships 12.1
Other non-current financial assets 2.4
Inventories 5.3
Trade and other receivables 1.3
Cash and cash equivalents 0.2
=========================================== ==================
Total assets acquired 27.5
=========================================== ==================
Non-current borrowings 2.8
Deferred tax liabilities 3.9
Non-current provisions 0.1
Current borrowings 4.2
Trade and other liabilities 3.6
Income tax liabilities 0.4
=========================================== ==================
Total liabilities assumed 15.0
=========================================== ==================
Net identifiable assets acquired 12.5
=========================================== ==================
Less: Non-controlling interests (6.1)
Goodwill 6.9
=========================================== ==================
Net assets acquired 13.3
=========================================== ==================
The fair value step-up that was identified in the course of the
preliminary purchase price allocation amounts to EUR13.1 million.
Thereof EUR1.1 million relate to land and EUR12.0 million relate to
customer relationships.
The goodwill of the preliminary purchase price allocation is
attributable to the improved productivity in recycling and an
enlarged product portfolio. The goodwill is fully deductible for
tax purposes.
The fair value of the acquried trade receivables amounting to
EUR0.7 million is equal to the gross contractual amount for trade
receivables.
The Group recognises non-controlling interests in an acquired
entity either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets. This decision is made on an acquisition-by-acquisition
basis. For the non-controlling interests in RHIMHORN, the Group
elected to recognise the non-controlling interests at its
proportionate share of the acquired net identifiable assets.
The non-controlling interests have the option to sell their
remaining equity stake to RHI Magnesita at any time by 2032. RHI
Magnesita opts to account for the non-controlling interests in
accordance with IFRS 10. Thus, the non-controlling interests are
initially recognised in accordance with IFRS 3 within equity while
the put option liability is initially recognised against the
non-controlling interest, reducing it to zero. The put option
liability is recognised as a financial liability in accordance with
IFRS 9. Further information on the fair value of the put option is
provided under Note (15).
4. Property, plant and equipment
In the first half of 2022 additions to property, plant and
equipment amount to EUR48.5 million (1-6/2021: EUR90.8 million) and
mainly refer to an expansion of a production plant in Austria and a
magnesite plant in Brazil as well as to production optimisation and
digitalisation projects.
5. Inventories
Inventories as presented in the Condensed Consolidated Statement
of Financial Position consist of the following items:
in EUR million 30.06.2022 31.12.2021
============================ =========== ===========
Raw materials and supplies 359.6 300.2
Work in progress 187.3 151.5
Finished products and goods 585.0 512.4
Prepayments made 11.4 12.4
============================ =========== ===========
Inventories 1,143.3 976.5
============================ =========== ===========
Inventories include EUR12.5 million (31.12.2021: 6.9 million)
carried at net realisable value. Net write-down expenses amount to
EUR8.2 million (2021: EUR 3.4 million).
The value of the Group's inventories has increased as a result
of higher costs of production including the purchase of raw
materials, energy, freight and labour costs.
6. Trade and other current receivables
Trade and other current receivables as presented in the
Condensed Consolidated Statement of Financial Position are
classified as follows:
in EUR million 30.06.2022 31.12.2021
=========================================================== =========== ===========
Trade receivables 468.7 403.7
Contract assets 5.0 3.6
Other taxes receivable 109.5 113.7
Receivables from employees 10.1 5.4
Prepaid expenses 4.7 3.9
Prepaid transaction costs related to financial liabilities 2.6 2.6
Receivables from joint ventures and associates and
non-consolidated subsidiaries 0.8 1.1
Receivables from property transactions 0.6 1.3
Emission rights 0.3 0.0
Receivables from dividends 0.0 8.7
Other current receivables 26.3 24.2
=========================================================== =========== ===========
Trade and other current receivables 628.6 568.2
=========================================================== =========== ===========
thereof financial assets 469.7 414.4
thereof non-financial assets 158.9 153.8
=========================================================== =========== ===========
RHI Magnesita entered into factoring agreements and sold trade
receivables to financial institutions. The balance sold totalled
EUR209.3 million as of 30 June 2022 (31.12.2021: EUR178.1 million).
The trade receivables have been derecognised as substantially all
risks and rewards as well as control have been transferred.
Payments received from customers in the period between the last
sale of receivables and the reporting date are recognised in
current borrowings.
Other taxes receivable include VAT credits and receivables from
energy tax refunds, research, education and apprentice
subsidies.
Other current receivables mainly relate to advances for
insurance, IT services as well as custom and import related
services and costs.
7. Borrowings
Borrowings include all interest-bearing liabilities due to
financial institutions and other lenders.
On 5 May 2022 the Group amended and extended its EUR305.0
million OeKB Term Loan maturing in June 2023, of which EUR260.0
million was outstanding as at 31 December 2021, increasing the
total loan amount outstanding to EUR350.0 million and extending the
final maturity to May 2027. The margin payable on the OeKB Term
Loan will be adjusted based on the Group's EcoVadis ESG rating
performance.
Net debt excluding lease liabilities/adjusted EBITDA is the main
financial covenant of the loan agreements. Compliance with the
covenants is measured on a semi-annual basis. Covenant ratio is
limited at 3.5x as at 30 June 2022. Breach of covenants leads to an
anticipated maturity of loans. During 2022 and 2021, the Group met
all covenant requirements.
The disclosures in this section include certain Alternative
Performance Measures (APMs). For more information on the APMs used
by the Group, including definitions, please refer to page 21. The
key performance indicator for net debt in the RHI Magnesita Group
is the Group leverage, which reflects the ratio of net debt to
adjusted EBITDA, including lease liabilities. Adjusted EBITDA is
calculated on a yearly basis, considering the last six months of
2021 and the first six months of 2022.
in EUR million 30.06.2022 30.06.2021
---------------------------------------------------- ----------- -----------
EBIT 252.7 144.3
Amortisation 28.7 19.9
Restructuring and write-down expenses 52.3 103.0
Other operating income and expenses 6.9 (12.3)
==================================================== =========== ===========
Adjusted EBITA 340.6 254.9
==================================================== =========== ===========
Depreciation 114.1 110.6
==================================================== =========== ===========
Adjusted EBITDA 454.7 365.5
==================================================== =========== ===========
Total debt 1,627.0 1,093.3
Lease liabilities 54.4 51.2
Cash and cash equivalents 443.4 332.1
==================================================== =========== ===========
Net debt 1,238.0 812.4
==================================================== =========== ===========
Net debt excluding IFRS 16 lease liabilities 1,183.6 761.2
==================================================== =========== ===========
Net debt to adjusted EBITDA 2.72x 2.22x
==================================================== =========== ===========
Net debt to adjusted EBITDA excluding IFRS 16 lease
liabilities 2.60x 2.08x
==================================================== =========== ===========
8. Trade payables and other current liabilities
Trade payables and other current liabilities included in the
Condensed Consolidated Statement of Financial Position consist of
the following items:
in EUR million 30.06.2022 31.12.2021
================================================================== =========== ===========
Trade payables 546.8 649.2
Contract liabilities 70.8 57.9
Liabilities to employees 98.2 80.9
Taxes other than income tax 34.8 29.3
Payables from property transactions 19.0 24.3
Payables from commissions 8.6 7.3
Liabilities to joint ventures and associates and non-consolidated
subsidiaries 0.7 2.0
Dividend liabilities 0.4 0.4
Other current liabilities 18.6 27.5
================================================================== =========== ===========
Trade payables and other current liabilities 797.9 878.8
================================================================== =========== ===========
thereof financial liabilities 575.8 688.5
thereof non-financial liabilities 222.1 190.3
================================================================== =========== ===========
Trade payables include an amount of EUR111.3 million
(31.12.2021: EUR142.0 million) for raw material purchases for
supply chain finance arrangements which reflect lower forfaiting
tonnage in the first half of 2022.
9. Current provisions
Provisions for restructuring costs amounting to EUR22.7 million
as of 30 June 2022 (31.12.2021: EUR33.5 million) primarily consist
of benefit obligations to employees due to termination of
employment and dismantling costs. The main driver for the movement
in the provision is the utilisation of the restructuring provision
as the programmes are rolled out. In the first half of 2022 EUR2.9
million (1-6/2021: EUR7.3 million) of provisions for restructuring
costs were reversed.
Provisions for contract obligations include the current portion
of the Oberhausen contract obligation amounting to EUR10.8 million
as of 30 June 2022 (31.12.2021: EUR8.0 million).
10. Foreign exchange effects and related derivatives
The net gain and expense on foreign exchange effects and related
derivatives consists of the following items:
in EUR million for the six months ended 30 June 2022 2021
============================================================= ======== ======
Foreign exchange gains 109.9 8.3
Gains from related derivative financial instruments 5.8 3.8
Foreign exchange losses (103.3) (0.3)
Losses from related derivative financial instruments (8.4) (5.0)
============================================================= ======== ======
Net gain on foreign exchange effects and related derivatives 4.0 6.8
============================================================= ======== ======
The net gain on foreign exchange effects in the current
reporting period resulted mainly from the revaluation of the US
Dollar against the Euro.
11. Other net financial expenses
Other net financial expenses consist of the following items:
in EUR million for the six months ended 30 June 2022 2021
================================================= ======= =======
Net interest expense personnel provisions (2.6) (2.6)
================================================= ======= =======
Unwinding of discount of provisions and payables (3.5) (3.5)
Interest expense on non-controlling interests (3.3) (1.8)
Impairment losses on securities (1.4) 0.0
Interest expense on lease liabilities (0.6) (0.5)
Reversal of impairment losses on securities 0.0 0.2
Income from the valuation of put options 0.0 1.1
Other interest and similar expenses (4.5) (3.5)
================================================= ======= =======
Other net financial expenses (15.9) (10.6)
================================================= ======= =======
12. Income tax
The effective tax rate of the first half of 2022 amounts to
26.8% (1-6/2021: 20.8%).
Total tax for the first half of 2022 in the Condensed
Consolidated Statement of Profit or Loss amounted to EUR38.1
million (1-6/ 2021: EUR25.9 million), which includes tax income for
prior years of EUR3.2 million (1-6/2021: tax income for prior years
of EUR1.9 million).
13. Cash used in operations
in EUR million for the six months ended 30
June 2022 2021
=================================================== ======== ========
Profit after income tax 104.3 98.6
Adjustments for
income tax 38.1 25.9
depreciation 56.9 51.4
amortisation 13.0 10.4
write-up of property, plant and equipment
and intangible assets (0.4) 0.0
income from the reversal of investment subsidies (0.3) (0.3)
write-ups / impairment losses on securities 1.4 (0.2)
losses/ (gains) from the disposal of property,
plant and equipment 0.8 (4.4)
losses/ (gains) from the disposal of subsidiaries 0.7 (6.8)
net interest expense and derivatives 22.0 12.0
result from joint ventures and associates (0.1) (5.4)
other non-cash changes (7.7) (14.5)
Changes in working capital
inventories (109.2) (209.4)
trade receivables (41.2) (29.1)
contract assets (1.4) (7.8)
trade payables (125.7) 166.9
contract liabilities 10.9 4.4
Changes in other assets and liabilities
other receivables and assets (1.1) (28.8)
provisions (12.9) (24.5)
other liabilities 14.4 (42.5)
==================================================== ======== ========
Cash used in operations (37.5) (4.1)
==================================================== ======== ========
The negative cashflow from operations is mainly due to the
weaker working capital performance in inventory which is largely
attributable to the constrained global logistics supply chain
alongside higher inventory costs for raw materials and finished
good.
14. Segment reporting
Segment reporting by operating company division
The following tables show the key financial information for the
operating segments for the first half of 2022 and the first half of
2021:
in EUR million for the six months ended 30
June 2022 Steel Industrial Group
============================================= ======== =========== ========
Revenue 1,150.1 444.3 1,594.4
============================================= ======== =========== ========
Gross profit 258.1 115.3 373.4
============================================= ======== =========== ========
EBIT 164.4
============================================= ======== =========== ========
Net finance costs (22.0)
============================================= ======== =========== ========
Profit before income tax 142.4
============================================= ======== =========== ========
Depreciation and amortisation charges (50.7) (19.2) (69.9)
Segment assets 30.06.2022 2,389.0 815.4 3,204.4
Investments in joint ventures and associates
30.06.2022 5.9
Reconciliation to total assets 908.8
4,119.1
============================================= ======== =========== ========
in EUR million for the six months ended 30
June 2021 Steel Industrial Group
================================================= ======== =========== ========
Revenue 854.7 345.6 1,200.3
================================================= ======== =========== ========
Gross profit 184.2 87.4 271.6
================================================= ======== =========== ========
EBIT 125.6
================================================= ======== =========== ========
Net finance costs (6.5)
Share of profit of joint ventures and associates 5.4
================================================= ======== =========== ========
Profit before income tax 124.5
================================================= ======== =========== ========
Depreciation and amortisation charges (43.4) (18.4) (61.8)
Segment assets 31.12.2021 2,146.3 724.2 2,870.5
Investments in joint ventures and associates
31.12.2021 5.7
Reconciliation to total assets 1,037.9
3,914.1
================================================= ======== =========== ========
When allocating revenue to product groups, a distinction is made
between shaped products (e.g. hydraulically pressed bricks, fused
cast bricks, isostatically pressed products), unshaped products
(e.g. repair mixes, construction mixes and castables), refractory
management services (e.g. full line service, contract business,
cost per performance) as well as other revenue. Other mainly
includes revenue from the sale of non-group refractory
products.
In the reporting year, revenue is classified by product group as
follows:
in EUR million for the six months ended 30
June 2022 Steel Industrial Group
=========================================== ======== =========== ========
Shaped products 540.0 323.6 863.6
Unshaped products 205.3 92.8 298.1
Management refractory services 372.6 0.0 372.6
Other 32.2 27.9 60.1
=========================================== ======== =========== ========
Revenue 1,150.1 444.3 1,594.4
=========================================== ======== =========== ========
In the comparable period in 2021, revenue was classified by
product group as follows:
in EUR million for the six months ended 30
June 2021 Steel Industrial Group
=========================================== ====== =========== ========
Shaped products 383.8 240.7 624.5
Unshaped products 160.2 72.4 232.6
Management refractory services 275.6 0.0 275.6
Other 35.1 32.5 67.6
=========================================== ====== =========== ========
Revenue 854.7 345.6 1,200.3
=========================================== ====== =========== ========
Total revenue includes revenue from Solution Business amounting
to EUR508.3 million (1-6/2021: EUR340.1 million). Thereof, EUR454.3
million (1-6/2021: EUR299.5 million) are attributable to Segment
Steel and EUR54.0 million (1-6/2021: EUR40.6 million) are
attributable to Segment Industrial. Solution Business is a customer
classification, where RHI Magnesita sums up all customer relations
in which we enable our customers to focus on their core
competences. It is typically characterised by sales of end-to-end
solutions covering large parts of the customer process chain.
Examples of this would be CPP/FLS, but also customers where we
focus on technological development of bespoke products or where we
are a strategic partner.
Revenue from shaped and unshaped products is transferred to the
customers at a point in time, whereas revenue from management
refractory services is transferred over time. Other revenue
amounting to EUR24.5 million (1-6/2021: EUR27.3 million) is
transferred over time and an amount of EUR35.6 million (1-6/2021:
EUR40.3 million) is transferred at a point of time.
Segment reporting by country
Revenue in the first half of 2022 and in the first half of 2021
is classified by customer sites as follows:
in EUR million for the six months ended 30
June 2022 Steel Industrial Group
============================================ ======== =========== ========
Netherlands 5.0 0.7 5.7
All other countries
USA 243.2 38.6 281.8
Brazil 132.6 52.0 184.6
India 145.7 22.6 168.3
PR China 44.8 61.9 106.7
Mexico 53.2 23.9 77.1
Germany 43.0 28.2 71.2
Italy 47.6 9.9 57.5
Canada 27.6 25.8 53.4
Saudi Arabia 32.3 4.7 37.0
Other countries, each below EUR34.1 million 375.1 176.0 551.1
============================================ ======== =========== ========
Revenue 1,150.1 444.3 1,594.4
============================================ ======== =========== ========
in EUR million for the six months ended 30
June 2021 Steel Industrial Group
============================================ ====== =========== ========
Netherlands 2.8 0.2 3.0
All other countries
USA 170.8 30.3 201.1
India 101.4 18.1 119.5
Brazil 85.2 28.9 114.1
PR China 35.0 45.6 80.6
Germany 40.2 23.0 63.2
Mexico 41.5 21.1 62.6
Canada 21.7 23.8 45.5
Italy 35.9 9.0 44.9
Russia 27.0 9.2 36.2
Other countries, each below EUR21.8 million 293.2 136.4 429.6
============================================ ====== =========== ========
Revenue 854.7 345.6 1,200.3
============================================ ====== =========== ========
15. 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.
30.06.2022 31.12.2021
======================================= ============================================= ======================
Measurement
category Carrying Carrying
in EUR million IFRS 9(1) Level amount Fair value amount Fair value
======================================== ============== ====== ========= =========== ========= ===========
Other non-current financial assets
Interests in subsidiaries not
consolidated FVPL 3 3.0 3.0 0.6 0.6
Marketable securities FVPL 1 11.8 11.8 13.2 13.2
Shares FVPL 3 0.5 0.5 0.5 0.5
Interest derivatives designated
as cash flow hedges - 2 11.9 11.9 0.0 0.0
Other non-current financial
receivables AC - 0.3 - 0.3 -
Trade and other current receivables AC - 469.7 - 414.4 -
Other current financial assets
Derivatives FVPL 2 7.4 7.4 2.5 2.5
Other current financial receivables AC - 0.2 - 0.4 -
Cash and cash equivalents(3) AC - 443.4 - 580.8 -
======================================== ============== ====== ========= =========== ========= ===========
Financial assets 948.2 1,012.7
======================================== ============== ====== ========= =========== ========= ===========
Non-current and current borrowings
Liabilities to financial institutions AC 2 1,622.4 1,607.8 1,534.1 1,551.6
Other financial liabilities AC 2 4.6 - 5.0 -
Non-current and current other
financial liabilities
Lease liabilities AC 2 54.5 - 55.5 -
Derivatives FVPL 2 3.3 3.3 0.1 0.1
Interest derivatives designated
as cash flow hedges - 2 0.0 0.0 9.6 9.6
Liabilities to fixed-term or
puttable non-controlling
interests(2) AC 2/3 73.2 73.2 60.0 60.0
Trade payables and other current
liabilities AC - 575.8 - 688.5 -
======================================== ============== ====== ========= =========== ========= ===========
Financial liabilities 2,333.8 2,352.8
======================================== ============== ====== ========= =========== ========= ===========
Aggregated according to measurement
category
======================================== ============== ====== ========= =========== ========= ===========
Financial assets measured at
FVPL 22.7 16.8
Financial assets measured at
amortised cost 913.6 995.9
Financial liabilities measured
at amortised cost 2,330.5 2,343.1
Financial liabilities measured
at FVPL 3.3 0.1
======================================== ============== ====== ========= =========== ========= ===========
1) FVPL: Financial assets/financial liabilities measured at fair
value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised
cost.
2) Including the put option for the acquired Horn Group
amounting to EUR8.0 million, see Note (3)
3) thereof EUR1.1 million relate to cash received from
sanctioned Russian customers. Further information is provided under
Note (2).
In the RHI Magnesita Group marketable securities, derivative
financial instruments, shares and interests in subsidiaries not
consolidated 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 based
2: 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 marketable securities, shares and interests in
subsidiaries not consolidated is based on price quotations at the
reporting date (Level 1), where such quotations exist. In other
cases, a valuation model (Level 3) would be used for such
instruments with the exception if such instruments are immaterial
to the Group, in which case amortised cost serves as an
approximation of fair value.
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).
The fair value of other derivative contracts 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. These derivatives are measured using quoted
forward rates that are currently observable (Level 2).
RHI Magnesita takes into account reclassifications in the
measurement hierarchy at the end of the reporting period in which
the changes occur. Other than those from the initial application of
IFRS 9, there were no shifts between the different measurement
levels in the two reporting periods.
Liabilities to financial institutions, other financial
liabilities, lease liabilities and liabilities to fixed-term or
puttable non-controlling interests are carried at amortised cost in
the Condensed Consolidated Statement of Financial Position. The
fair values of the liabilities to financial institutions are only
disclosed in the notes and calculated at the present value of the
discounted future cash flows using yield curves that are currently
observable (Level 2). The carrying amount of other financial
liabilities approximate their fair value at the reporting date. In
May 2022, RHI Magnesita recognised a put option liability related
to the newly acquired group company RHIMHORN (see Note 3),
amounting to EUR8.0 million. The fair value is based on the present
value of performance-related contractual cashflows with a maturity
in 2032. The principal valuation parameters are deemed to be
non-observable (Level 3). Other liabilities to fixed-term or
puttable non-controlling interests are valued at Level 2 of the
fair value hierarchy.
The carrying amounts of financial receivables approximately
correspond to their 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.
Trade and other current receivables and liabilities as well as
cash and cash equivalents are predominantly short-term. Therefore,
the carrying amounts of these items approximate fair value at the
reporting date.
No contractual netting agreement of financial assets and
liabilities were in place as at 30 June 2022 and 31 December
2021.
16. Dividend payments and proposed dividend
Based on a resolution adopted by the Annual General Meeting of
RHI Magnesita N.V. on 25 May 2022 the final dividend amounts to
EUR1.00 per share for the shareholders of RHI Magnesita N.V for
2021. The dividend was paid out in June 2022, amounting to EUR47.0
million.
In line with the Group's dividend policy the Board declared an
interim dividend of EUR0.50 per share for the first half of 2022 to
be paid out in September 2022.
17. Contingent liabilities
As of 30 June 2022, contingent liabilities amount to EUR61.0
million (31.12.2021: EUR52.5 million). Of this total, warranties,
performance guarantees and other guarantees account for EUR60.8
million (31.12.2021: EUR52.3 million).
Furthermore, Magnesita Refratários S.A., Contagem, Brazil, is
party to a public civil action for damages caused by overloaded
trucks in contravention with the Brazilian traffic legislation. The
potential loss from this proceeding amounts to EUR15.2 million as
at 30 June 2022 (31.12.2021: EUR11.6 million).
Uncertain tax treatments
The Group is subject to various material claims which arise in
the ordinary course of its business in Brazil in relation to
corporate income tax, mining royalties, VATs and social security
contributions. The Group is in formal dispute proceedings regarding
a number of these tax claims. The resolution of tax positions,
through negotiation with the relevant tax authorities or
litigation, can take several years to complete. In assessing
whether these claims should be provided for in the Interim
Statements, Management has considered them in the context of the
applicable laws in Brazil. Management has applied judgement in
assessing the likely outcome of the claims and has estimated the
financial impact based on external tax and legal advice and prior
experience of such claims.
RHI Magnesita is party to a number of tax proceedings in Brazil
with a total exposure of EUR241.2 million as of 30 June 2022
(31.12.2021: EUR200.8 million). The movement is mainly driven by
the appreciation of Brazilian Reais against Euro. The main dispute
relates to whether or not the Goodwill assessed in business
combinations is deductible and amortisable for Corporate Income Tax
purposes. The tax authorities issued assessments for 2011, 2016 and
2019 arguing that some of such transactions cannot generate
deductions as they do not fulfill the requirements provided by law.
The Group has partially won the cases for 2011 and 2016 and are now
waiting resolution in the Administrative Superior Court. In
relation to the 2019 case, the Group was notified in July 2021 on
the first level decision which upheld the tax assessment. The Group
has appealed to the Tax Court of Appeals and are awaiting the
outcome. Management continues to consider a negative outcome not
probable, which is supported on the evaluation from the external
legal counsel. Consequently, no provision has been recognised as of
30 June 2022.
18. Other financial commitments
As of 30 June 2022, the RHI Magnesita Group has commitments for
the purchase of property, plant and equipment in the amount of
EUR58.5 million (31.12.2021: EUR 35.5 million).
19. Disclosures on related parties
The nature of related party transactions as of 30 June 2022 are
in line with the transactions disclosed in Note (61) of the 2021
Group Financial Statements. All transactions with related parties
are conducted on an arm's length basis and in accordance with
normal business terms.
Related companies
No material transactions took place between the Group and
related companies and persons.
Related persons
There is a non-remunerated consultancy agreement in place
between RHI Magnesita and a close relative of a Non-Executive
Director to advise the Group on the economic and political
framework in countries in which it does not yet have strong
business links.
20. Material events after the reporting date 30.06.2022
On 29 July 2022 the Group refinanced its existing $200 million
USD loan maturing in August 2023 with a new EUR250 million EUR loan
with a maturity in July 2027.
After the reporting date on 30 June 2022, there were no other
events of significance which may have a material effect on the
financial position and performance of the RHI Magnesita Group.
Statement of the Board of Directors
We confirm to the best of our knowledge:
1. In connection with the statement ex Article 5:25d Paragraph 2
sub c Financial Markets Supervision Act ("Wet op het financieel
toezicht").
-The Condensed Consolidated Interim Financial Statements for the
six-month period ended 30 June 2022, which have been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the EU, give a true and fair view of the assets, liabilities,
financial position, and profit of RHI Magnesita N.V. and the
undertakings included in the consolidation as a whole;
-The management report for the six-month period ended 30 June
2022 as presented in the report on unaudited half year results
includes a fair view of the information required pursuant to
article 5:25d paragraphs 8 and 9 of the Dutch Financial Markets
supervision Act ("Wet op het financieel toezicht").
2. In connection with provisions of Disclosure Guidance and
Transparency Rules (DTR) 4.2 Half-yearly financial reports, as
adopted by the UK Financial Conduct Authority. This half-yearly
financial report includes a fair review of the information required
by the:
- DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
- DTR 4.2.8R of the Disclosure and Transparency Rules, being
related parties' transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period; and any changes in the related parties'
transactions described in the last annual report that could do
so.
Vienna, 31 July 2022
Executive Directors
Stefan Borgas Ian Botha
Non-Executive Directors
Herbert Cordt John Ramsay
Janet Ashdown David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein-Berleburg Fiona Paulus
Janice Brown Karl Sevelda
Marie-Hélène Ametsreiter Sigalia Heifetz
Wolfgang Ruttenstorfer
Employee Representative Directors
Karin Garcia Martin Kowatsch
Michael Schwarz
Independent auditor's review report
To: the board of directors of RHI Magnesita N.V.
Introduction
We have reviewed the accompanying condensed consolidated interim
financial information for the six-month period ended 30 June 2022
of RHI Magnesita N.V., ('the interim financial information'),
Arnhem, the Netherlands, which comprises the Condensed Consolidated
Statement of Financial Position as at 30 June 2022, the Condensed
Consolidated Statement of Profit or Loss, the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Changes in Equity, the Condensed
Consolidated Statement of Cash Flows for the period then ended and
the selected explanatory notes. The board of directors is
responsible for the preparation and presentation of this
(condensed) interim financial information in accordance with IAS
34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility is to express a conclusion on this interim
financial information based on our review.
Scope
We conducted our review in accordance with Dutch law including
standard 2410, Review of Interim Financial Information Performed by
the Independent Auditor of the entity. A review of interim
financial information consists of making inquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with auditing standards and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying condensed consolidated
interim financial information for the six-month period ended 30
June 2022 is not prepared, in all material respects, in accordance
with IAS 34, 'Interim Financial Reporting' as adopted by the
European Union.
Rotterdam,31 July 2022
PricewaterhouseCoopers Accountants N.V.
Original has been signed by A. F. Westerman RA
partner
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