2 May 2024
RHI Magnesita N.V.
("RHI Magnesita" or
"the Group")
Q1 2024 TRADING UPDATE
RHI Magnesita, the leading global supplier of
high-grade refractory products, systems and solutions, today
provides an update on trading for the three months to 31 March 2024
("Q1").
The trading outlook for 2024 remains in line
with the guidance issued at the 2023 full year results and the
Group is on track to meet analyst consensus expectations for
2024.
Q1
trading
As expected, continuing weakness in the key end
markets of construction and transportation resulted in subdued
customer demand during the first quarter, with weaker sales volumes
and lower pricing as expected, offset by M&A.
EBITA margin was in-line with the guidance for
c.11% for 2024. The EBITA contribution from the Group's raw
material assets remained at a very low level, due to weak market
prices for refractory raw materials, in line with the expected
contribution of approximately 1.0 ppt of EBITA margin for the year
as a whole.
Green steel
contract award
In April 2024 RHI Magnesita was awarded a major
new contract for the design and supply of refractory linings for
two DRI Open Bath Furnaces ("DRI-OBF") to be installed by SMS group
as the original equipment manufacturer ("OEM") as part of
Thyssenkrupp's flagship €2 billion, 2.3 Mtpa green steel project at
its Duisburg site in North Rhine-Westphalia, Germany. The Duisburg
project will produce steel from 2027, initially using natural gas
for direct reduction of iron ore and subsequently, through the use
of hydrogen, reducing CO2 emissions to close to
zero. RHI Magnesita's contract as the refractory supplier to the
OEM represents material new project revenue and validation of the
Group's strategy to position itself as the leading supplier of
refractory linings and services for OBF, EAF and BOF converters,
which are expected to be essential for the large-scale adoption of
green steel production globally.
Financial
position
Net debt reduced slightly from the €1.3 billion
level reported at the 2023 year end and leverage (Net Debt : Pro
Forma Adjusted EBITDA) remained stable at 2.3x. The acquisition of
Resco Group will be partially funded by a new €200 million
syndicated term loan.
Working capital was at similar levels to the
2023 year end. Working capital intensity increased slightly due to
lower revenues in Q1 compared to the prior quarter. Guidance for
working capital intensity of c.24% at the 2024 year end is
maintained.
M&A
update
The Group announced its intended acquisition of
Resco Group on 29 March 2024, for an enterprise value of up to $430
million. Completion of the transaction, which is conditional on US
merger control approval, is expected to occur in H2 2024. The
proposed acquisition of Resco continues the Group's strategic
growth trajectory in alumina-based refractories and in industrial
application segments. The transaction will increase RHI Magnesita's
local production footprint in the US and Canada, thus responding to
long standing customer wishes. Supply chain, production network,
logistics and working capital improvements will also be
implemented.
The Group has completed nine other acquisitions
in the period since December 2021 and the integration of each of
these is proceeding in line with expectations. The Group continues
to expect an Adjusted EBITDA contribution in 2024 of approximately
€80 million, from acquisitions made in 2023, which excludes
Resco.
Outlook
The Group continues to manage key operational
and commercial disciplines closely, including its pricing, costs,
production planning, inventories and customer credit exposures
through a period of cyclically weaker demand. Low plant utilisation
and consequent under-absorption of fixed costs create favourable
conditions to increase output into a recovery, with significant
operational gearing benefits to be realised once customer demand
returns. The timing of such recovery remains uncertain and is not
yet evident in customer behaviour. Weaker volumes and pricing in
the industrial segment, following a strong performance from the
industrial business in 2023, are expected to be offset by modest
growth in steel production in non-China markets in 2024.
Stefan Borgas, Chief Executive Officer of RHI
Magnesita, said:
"RHI Magnesita is navigating a challenging
demand landscape whilst progressing its strategic priority to grow
through consolidation in the fragmented global refractory
industry. Our broad addressable market extends to all high
temperature iron, steel and industrial processes and we have
expanded our business via a counter-cyclical M&A programme in
alumina-based refractories, industrial market segments and other
product areas and geographies where we have previously been
under-represented. We are the clear market leader in India, the
fastest growing refractory market in the world.
The Group has now committed approximately €1.2
billion of capital to acquisitions since December 2021, including
its recently announced intention to acquire Resco Group. We are
continuing to invest in our global production network and digital
systems to maintain our leadership position in innovation, services
and sustainability. Whilst the timing of recovery in other markets
is hard to predict and not yet evident, we are confident of being
well positioned to meet any increase in customer demand, with
significant operational gearing and vertical integration upside
potential in the event of a recovery."
Conference
call
A conference call for analysts will be held at 08:15
UK time to discuss the trading update:
AGM
Further to the Notice of Meeting issued on 21
March 2024, the Company will hold its Annual General Meeting
("AGM") today at 14:00 CET. Voting results from the AGM will be
made available shortly after the meeting.
For further enquiries, please
contact:
Chris Bucknall, Head of Investor
Relations
Tel +43 699 1870 6490
E‐mail: chris.bucknall@rhimagnesita.com
Media:
Hudson Sandler
Mark Garraway, Emily Dillon, Nick
Moore
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com
About RHI
Magnesita
RHI Magnesita is a leading global supplier of
high-grade refractory products, systems and solutions which are
critical for high-temperature processes exceeding 1,200°C 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 16,000 employees in 47 production sites, 8 recycling
facilities 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
Glossary
|
"BOF"
|
Basic oxygen furnace
|
|
"DRI"
|
Direct reduced sponge iron
|
|
"EAF"
|
Electric arc furnace
|
|
"OBF"
|
Open bath furnace, electrically powered furnace
for processing direct reduced sponge iron into hot metal before
transfer to the basic oxygen furnace
|
|
"OEM"
|
Original equipment manufacturer
|