REG - RHI Magnesita N.V. - 2023 Full Year Results
28/02/2024 12:00
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RNS Number : 8130E RHI Magnesita N.V. 28 February 2024
28 February 2024
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
2023 Full Year Results
"M&A, disciplined pricing and operational improvement deliver 7% growth in
Adjusted EBITA to €409 million"
RHI Magnesita, the leading global supplier of high-grade refractory products,
systems and solutions, today announces its final results for the year ended 31
December 2023 ("2023" or the "Year").
Financial results 2023 2022 Change 2022 (constant currency) Change (constant currency)
(Adjusted, €m unless stated otherwise)(1)
Revenue 3,572 3,317 8% 3,236 10%
Adjusted EBITDA 543 500 9% 502 8%
Adjusted EBITA 409 384 7% 388 5%
Adjusted EBITA margin 11.4% 11.6% (20)bps 12.0% (60)bps
Adjusted EPS (€/per share) 4.98 4.82 3%
Adjusted Operating Cash Flow 413 155 166%
Net debt(2) 1,304 1,168 12%
Net debt to Pro Forma Adjusted EBITDA(3) 2.3x 2.3x
(Reported, €m unless stated otherwise) 2023 2022
Revenue 3,572 3,317
Gross profit 857 763
EBITA 378 372
Profit before income tax 233 270
Profit after income tax 171 167
EPS (€/per share) 3.50 3.31
Dividend(4) (€/per share) 1.80 1.60
1. Adjusted figures are alternative performance measures "APMs" excluding
impairments, amortisation of intangibles and exceptional items to enable an
understanding of the underlying performance of the business. Full details are
shown in the APM section.
2. 2023 Net debt includes the impact of IFRS 16 of €70 million. 2022
adjusted Net debt figures are shown including the impact of IFRS 16 (€56
million) to facilitate comparison between reporting periods. For further
details see Note 34.
3. Pro Forma Adjusted EBITDA is used to assess financial gearing and
includes a full year of Adjusted EBITDA contribution from businesses acquired
during the year.
4. Recommended final dividend of €1.25 per share, subject to AGM approval
on 2 May 2024. Full year dividend of €1.80 per share includes the interim
dividend of €0.55 per share paid to shareholders on 22 September 2023.
Operational and strategic highlights
· Consistent improvement in operational KPIs underpins strong financial
results in a very difficult market environment
· Substantial M&A progress with six transactions completed since
January 2023 in high priority geographic or product markets with attractive
synergy potential. M&A contributed €56 million of Adjusted EBITDA in
2023, significantly exceeding guidance of c.€40 million
· Market leadership position established in India, the world's fastest
growing major refractory market, with nine production facilities and a
broad-based refractory business serving both steel and industrial customers
· Strategic cost saving and sales targets established in 2019 were
achieved in the first half of 2023
· Sustainability commitment demonstrated through continuing real
reduction in CO(2) emissions intensity, increased recycling rates and
investments into technology partnerships and R&D
Financial highlights
· 8% increase in revenues mainly driven by contribution from
acquisitions, offsetting a demand driven 5% decline in sales volumes in the
base business
· Resilient pricing supported Adjusted EBITA margin of 11.4% (2022:
11.6%) despite lower input costs for 'cost-plus' competitors which reduced
global refractory pricing during the year
· Record high refractory Adjusted EBITA margin of 9.7ppts offset
temporarily lower raw material contribution of 1.7ppts, demonstrating
structural improvement in cost position achieved during a period of very low
plant capacity utilisation
· Adjusted operating cash flow of €413 million (2022: €155 million)
as working capital release of €123 million in base business pre M&A
supported high EBITA cash conversion of 101% (2022: 40%)
· Net debt to Pro Forma EBITDA of 2.3x (2022: 2.3x) maintained within
the target range of 2.0-c.2.5x for compelling M&A, with €443 million of
capital allocated to M&A during 2023
· Increased final dividend of €1.25 per share recommended (2022:
€1.10), resulting in full year dividend of €1.80 per share (2022: €1.60)
Outlook and guidance
The key end markets of construction and transportation remain subdued in all
geographies except India, leading to temporarily reduced demand for
refractories from steel and cement customers. The strong contributions from
glass and non-ferrous projects will markedly reduce in 2024, creating
additional pressure on plant utilisation. The Group has taken pre-emptive
action to preserve margins and is well positioned to increase output into a
recovery, with significant operational gearing and fixed cost absorption
benefits to be realised once customer demand returns. The timing of such
recovery remains uncertain. Production is planned to increase in 2024 to match
sales volumes, as inventory coverage ratios have now been reduced to target
levels, counterbalancing the fixed cost under-absorption. Sales volumes in the
base business excluding M&A in 2024 are assumed to be in line with 2023,
whilst the full year effect of 2023 M&A should increase shipped volumes in
2024 by up to 10%. Acquisitions agreed or completed since January 2023 are
expected to contribute c.€80 million of Adjusted EBITDA or c.€65 million
of Adjusted EBITA in 2024.
Taking into account forecast sales volumes, even lower vertical integration
margin contribution and possible pressure on refractory pricing, Adjusted
EBITA in 2024 is guided to be at least in line with current analyst consensus
of approximately €410 million, at an Adjusted EBITA margin of around 11.0%.
The Group will target a working capital intensity of approximately 24% in 2024
and will seek to maintain Net debt to Pro Forma Adjusted EBITDA within the
guided range of 2.0-c.2.5x for periods of compelling M&A. Capital
expenditure will be shifted somewhat from fixed assets improvements to digital
architecture redesign, which will require elevated levels of spending over the
next three years at least.
Stefan Borgas, CEO said: "During a period of historic low demand from
customers and low raw material prices RHIM has demonstrated good resilience.
This was achieved by the focused investments of the past years into improving
productivity in our global production network, by the contributions of the
newly acquired businesses and by providing innovative solutions for our
customers in many regions and markets. The energy of our customers and the
passion of our employees and business partners will continue to support these
three value drivers in the next years. In the longer term we are committed to
developing technologies to reduce or eliminate CO(2) emissions from our
production process and to assist our customers in reducing their own
emissions, which will require significant capital investments."
For further enquiries, please contact:
Investors: Chris Bucknall, Head of Investor Relations, +43 699 1870 6490,
chris.bucknall@rhimagnesita.com (mailto:chris.bucknall@rhimagnesita.com)
Media: Hudson Sandler, +44 020 7796 4133, rhimagnesita@hudsonsandler.com
(mailto:rhimagnesita@hudsonsandler.com)
Conference call
A presentation for analysts will be held at 14:00 UK time (15:00 CET) on 28
February 2024 at the offices of Hudson Sandler, 25 Charterhouse Square, London
EC1M 6AE. The analyst presentation will be broadcast live via webcast and
conference call.
The webcast can be accessed using the following link:
https://www.investis-live.com/rhimagnesita/65b0de267f77220c00d6eb3f/yjye
(https://www.investis-live.com/rhimagnesita/65b0de267f77220c00d6eb3f/yjye)
A replay will be available on the same link shortly after event.
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 1,200°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 main production sites, 8 recycling facilities and more than 70
sales offices. RHI Magnesita intends to leverage its leadership in terms of
revenue, scale, product portfolio and diversified geographic presence to
target strategically those countries and regions benefitting from more dynamic
economic growth prospects.
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 prime segment of the Vienna Stock Exchange (Wiener
Börse). For more information please visit: www.rhimagnesita.com
(http://www.rhimagnesita.com)
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. The numbers presented throughout this announcement may
not sum precisely to the totals provided and percentages may not precisely
reflect the absolute figures, due to rounding.
CEO REVIEW
RHI Magnesita delivered a strong financial performance in 2023 despite
challenging market conditions. Our achievements have been based on stepwise
improvements in operations, prioritising the needs of our customers at all
times, sustainability leadership, acquisitions and strategic delivery. During
the year we made significant progress on both our M&A strategy and
delivering the strategic cost savings and sales initiatives targets that were
set in 2019.
In 2023 the key challenge for us has been to maintain momentum whilst managing
our operations through a very weak demand environment. To achieve targeted
inventory coverage levels, average plant utilisation across the year was
reduced to 76% in the second half and production volumes lagged sales volumes
throughout the year, with implications for low fixed cost absorption.
I am pleased to report that we successfully navigated these and many other
challenges in 2023, delivering a 7% increase in Adjusted EBITA to €409
million (2022: €384 million), as M&A, cost saving initiatives and
resilient pricing offset the underlying weakness in customer demand.
Health & Safety
It is with deep regret and sorrow that we report that two fatal incidents
occurred at our plants in Austria in 2023 and early 2024. Thorough
investigations of the root causes of these incidents have been or are being
carried out and procedural changes will be implemented worldwide. A step-up of
the safety culture among all RHI Magnesita business partners will come along
with these new measures.
The health and safety of our employees in the workplace is a core value for
RHI Magnesita. The Group's lost time injury frequency rate remained below our
target of 0.50 per 200,000 hours and was the lowest rate recorded by the Group
since listing in 2017, excluding the pandemic, at 0.16 per 200,000 hours
(2022: 0.20). We are now adopting a lower target of 0.30, in line with leading
peers in the broader industrial sector.
Key safety initiatives implemented during the year included improved
inductions and safety training for new joiners, integration of safety topics
into shift-start meetings and hand and finger safety communications campaigns.
Operational agility
The investments we have made in our production network since 2019 combined
with further actions taken in response to global supply chain and energy
market volatility in 2022 have created a more agile and responsive business.
The ongoing focus on operational excellence, planning, logistics, inventory
management and customer satisfaction are the key foundations of the improved
operating performance that has been delivered in 2023. Customer surveys
reported strong improvements in our net promoter score. To further improve
operations, increase productivity, reduce inventory and improve customer
experience, RHI Magnesita is now embarking on rebuilding its business
processes and radically modernising its IT architecture. This investment will
last three years at a cost of approximately €100 million.
Working capital intensity was maintained at the target level of 25%, with
inventories held at the optimal level to ensure reliable deliveries to our
customers. Consistency and reliability are the foundations for maintaining
pricing, even whilst input costs have been falling across the refractory
industry. Further investments in our planning processes and systems as well as
a complete overhaul of our digital architecture in the next three years is
aimed to further improve RHI Magnesita's operational delivery capabilities and
customer service.
Strategic progress
The €130 million annual EBITA contribution from cost saving and sales
initiatives set out in our 2019 strategic targets was realised in the first
half of 2023, following investments in the rationalisation of our production
network, growth in flow control revenues and M&A led growth in India,
China and Türkiye.
During the year we made significant progress on our M&A strategy with the
completion of six acquisitions, bringing the total number of businesses
acquired since December 2021 to nine. Our strategy has been to focus on
complementary product areas and geographies in which we are under-represented.
We have broadened our customer offering through acquisitions in the
alumina-based refractories, process industries and flow control segments.
The two acquisitions we completed in India are of great importance due to the
unique growth environment for refractories in this region. The acquisition of
Hi-Tech in Jamshedpur and the Indian refractory business of DBRL have
substantially improved the Group's regional footprint. The expanded plant
network and immediately available low-cost production capacity in India will
increase RHI Magnesita's competitiveness in the region for both local sales
and potential new export opportunities in West Asia, Africa and the Middle
East.
A continuation of this M&A strategy to further complement our global
business is underway, prioritising portfolio additions before deleveraging.
Sustainability performance
A core element of our strategy is to be the sustainability leader in the
refractory and refractory raw materials industries. We committed to six
sustainability targets to be met by 2025 which are in alignment with the UN
sustainable development goals. We are progressing well in each of the target
areas, although further work is now required to maintain improvements in
energy consumption and CO(2) intensity following the recent acquisitions.
We have been leading the industry in the recycling of refractory raw materials
since we identified this as a key lever to quickly and permanently reduce
CO(2) emissions. In 2023 we recorded a recycling rate of 12.6% (2022: 10.5%)
and we have now increased our target to achieve a recycling rate of 15% by
2025 (previously 10%). The speed with which we can continue to increase
overall Group recycling rates from this point may moderate due to the dilution
impact from new acquisitions where recycling rates are low or zero and as we
reach technical limits or bottlenecks in the availability of suitable waste
material. Since we began our recycling journey in 2018 and adjusting the
baseline for M&A we have reduced our annual CO(2) emissions from 6.2 Mt to
4.6 Mt and improved our CO(2) emissions intensity per tonne of product shipped
from 1.84t to 1.62t, with the majority of these emissions savings delivered by
recycling.
We continue to invest in the research and development of new technologies to
reduce CO(2) emissions in the refractory production process. During 2023 we
decided to invest a further €5 million in MCi Carbon, an Australia based
developer of mineralisation technology which can efficiently bind CO(2) into
saleable solid carbon-negative materials, permanently removing emissions from
the atmosphere. We are assessing the viability of this technology at our
operational sites in Europe. We are also conducting nine other pilot projects
and trials of alternative technologies, any combination of which will help us
to progress our decarbonisation pathway. Such technologies may have wider
applications beyond the refractory industry and if successful will help the
Group to adapt to the consequences of the Carbon Border Adjustment Mechanism
in Europe, which will be progressively introduced over the period 2026-2034
and will significantly increase the cost of Scope 1 CO(2) emissions in our
European plants.
We remain committed to investing in the development of new technologies to
deliver decarbonisation, to offering our customers low or zero CO(2) footprint
refractory products and providing them with information to make sustainable
procurement decisions. It is clear that this will require significant new
capex in only a few years from now starting in Europe and subsequently in
other geographies. Ultimately, the necessary investment to achieve
decarbonisation would be very large. We will continue to lobby governments to
provide the necessary infrastructure support for the development of renewable
energy sources, hydrogen networks and CO(2) transport and sequestration
solutions, whilst working with partners in the private sector worldwide to
deliver permanent reductions in CO(2) emissions from energy intensive
industrial processes. The cities of the future could be built without CO(2)
emissions if we and our customers are successful.
Our people
Our strong operational and strategic delivery in 2023 represents the hard work
of thousands of individuals working towards the RHI Magnesita vision
worldwide. We materially increased the size of the business in 2023 through
six acquisitions and I am excited to welcome into the Group the diverse range
of talented and experienced people who have joined us this year. It is
heartwarming to experience the passion, knowledge and new perspectives that
our new colleagues have already brought into the Group. We have learned a
great deal from each other in a short space of time and I am sure that the
benefits from integrating our businesses will continue to deliver value in the
years ahead.
Financial performance
A combination of delivering for our customers, agility and operational
excellence in 2023 enabled us to beat our initial guidance for financial
performance. The Group delivered an Adjusted EBITA margin of 11.4% compared to
an initial expectation of 10% at the beginning of the year, resulting in a 7%
increase in Adjusted EBITA to €409 million (2022:€384 million). This was
achieved despite the weakest demand for refractory products in 15 years in
most regions and a market-driven 5% decline in sales volumes pre-M&A.
We also generated significant cash flow, with Adjusted operating cash flow
increasing to €413 million (2022: €155 million). Strong cash flow and
growth in EBITDA enabled us to maintain gearing within our guided range of
2.0-c.2.5x whilst allocating €443 million of capital to acquisitions. The
full year annualisation of earnings from M&A plus synergies will support
financial performance in 2024 and beyond as we integrate these new businesses
into our global network.
Outlook
Construction and transportation industries are the main drivers of customer
demand and both end markets remain subdued at present in all geographies
except India. Investment projects, especially in the glass and non-ferrous
markets have peaked in 2023 and deliveries will decline in 2024 and beyond.
RHI Magnesita has taken pre-emptive action to preserve margins and is well
positioned to increase output into a recovery, with significant operational
gearing and fixed cost absorption benefits to be realised when customer demand
returns. The timing of such recovery remains uncertain. Production is planned
to increase in 2024 to match sales volumes, as inventory coverage ratios are
now at target levels. Sales volumes in the base business excluding M&A in
2024 are assumed to be in line with 2023, whilst the full year effect of 2023
M&A should increase shipped volumes in 2024 by up to 10%. RHI Magnesita
has navigated significant challenges in 2023 whilst also continuing to build a
stronger business through M&A and efficiency improvements, which will be
capable of delivering significant value in a normal demand environment.
FINANCIAL REVIEW
Reporting approach
The Company uses a number of alternative performance measures (APMs) in
addition to measures reported in accordance with International Financial
reporting Standards as adopted by the European Union ("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 that 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 2022 numbers in this review are on a reported
basis, unless stated otherwise. Figures presented at constant currency
represent 2022 translated numbers against average 2023 exchange rates as
disclosed in Note 3 to the Consolidated Financial Statements. All reported
volume changes year-on-year are excluding mineral sales, which is reported
under the Industrials segment.
Revenue
The Group recorded revenues of €3,572 million, a 10% increase from the
previous year's revenue of €3,236 million on a constant currency basis.
Shipped volumes in the base business decreased by 5% as expected but increased
by 11% including the contribution from M&A to 2.6 Mt (2022: 2.3 Mt).
On a reported basis, the increase in revenue was 8% (2022: €3,317 million),
mainly due to the depreciation of three key currencies against the euro (the
US dollar, Chinese yuan and Indian rupee). Foreign exchange effects impacted
revenues in euro terms by €81 million. The Brazilian real strengthened
slightly against the euro, with a small positive impact on revenue but
resulting in a net negative impact on EBITA, due to the increased euro value
of the local cost base in Brazil, where the Group is a net exporter.
2023 2022 reported 2022 (constant currency) Change Change (constant currency)
Steel
Revenue (€m) 2,461 2,371 2,311 4% 6%
Gross profit (€m) 550 521 527 6% 4%
Gross margin 22.3% 22.0% 22.8% 30bps (50)bps
Adjusted EBITA (€m) 240 255 243 (6)% (1)%
Adjusted EBITA margin 9.7% 10.8% 10.5% (110)bps (80)bps
Industrial
Revenue (€m) 1,111 946 923 17% 20%
Gross profit (€m) 307 242 232 27% 32%
Gross margin 27.7% 25.6% 25.1% 210bps 260bps
Adjusted EBITA (€m) 169 128 113 32% 50%
Adjusted EBITA margin 15.2% 13.6% 12.2% 160bps 300bps
Steel revenues increased to €2,461 million, an increase of 4% on a reported
basis (2022: €2,371 million) and 6% on a constant currency basis (2022:
€2,311 million), representing 69% of Group revenue in 2023. The main driver
behind the increase in revenues in the financial year 2023 was growth via
M&A in the China & East Asia, Europe, CIS & Türkiye and India,
West Asia & Africa regions. Sales volumes and revenues in North America
decreased by 5% and 3%, respectively. In South America sales volumes reduced
by 6% whilst revenues increased by 1% supported by FX and higher pricing.
Industrial revenues increased by 17% to €1,111 million (2022: €946
million) and by 20% in constant currency terms (2022: €923 million),
outperforming steel revenue growth due to the later cycle nature of the
business. Cement and lime revenues increased by 12% to €424 million (2022:
€378 million), while non-ferrous metal revenues increased by 28% to €280
million (2022: €219 million) due to strong volume increases and pricing
dynamics. Revenues in the glass business increased by 18% to €182 million
(2022: €154 million) and revenues from industrial applications increased by
40% to €143 million (2022: €102 million).
Industrial revenues includes revenue from mineral sales of €80 million,
which were 10.8% lower than the prior year (2022: €92 million), due to lower
market prices for refractory raw materials.
Cost of goods sold
Cost of goods sold increased by 6% to €2,714 million from €2,554 million
in 2022 and by 10% on a constant currency basis, due to M&A. The cost of
purchased raw materials increased by 10% to €1,166 million (2022: €1,064
million). Plant-related labour costs increased significantly by 25% during
2023 from €368 million to €461 million, due to M&A and as the Group
responded to higher costs of living with wage increases for its staff.
Following a period of disruption and high inflation in 2022, freight and
energy costs decreased by 19% and 10% respectively in 2023, as both markets
returned to a period of relative stability prior to disruption of Red Sea
shipping lanes in December 2023. Unit costs in 2023 were impacted negatively
by low production capacity utilisation, leading to under-absorption of fixed
costs. Expenditure on general supplies including pallets, packaging and spare
parts remained stable at €174 million compared to €171 million in 2022,
despite the increase in shipped volumes.
Raw material prices
Raw material prices decreased in 2023, with the price of high-grade dead
burned magnesia (DBM) from China decreasing by 21% from the beginning of the
year and by 14% on average for medium grade DBM from China. Lower raw material
prices usually result in lower finished goods pricing for refractories
worldwide, as production costs for non-vertically integrated competitors are
reduced. The cost of production of refractory raw materials for suppliers in
China remained low due to availability of low-cost energy, whilst the cost of
production of raw material remained comparatively higher for the Group, in
particular for DBM production in Türkiye. As guided in the half year results,
the EBITA contribution from vertical integration remained at approximately the
same level as of the first half of 2023, at 1.7ppts.
Gross profit
The Group recorded gross profit of €857 million (2022: €763 million), an
increase of 12% on a reported basis and 12% in constant currency terms. Gross
margins increased by 100bps to 24.0% (2022: 23.0%), mainly due to resilient
pricing in key customer markets.
On a divisional basis, gross profit excluding M&A in the Steel segment was
stable at €500 million (2022: €521 million) despite the 5% decline in
shipped volumes, as higher margins offset reduced sales. The Industrial
segment recorded a strong increase in gross profit excluding M&A to €266
million (2022: €242 million) with increased margins of 30.3%, 290bps higher
compared to the prior year. Profitability in the Industrial segment was
supported by strong pricing dynamics in glass, non-ferrous metal and
industrial applications markets and the later cycle nature of trading
conditions compared to Steel.
(€m) 2023 2022 reported 2022 (constant currency) Change Change (constant currency)
Revenue 3,572 3,317 3,236 8% 10%
Cost of sales (2,714) (2,554) (2,474) 6% 10%
Gross profit 857 763 762 12% 12%
SG&A (449) (375) (371) 20% 21%
R&D expenses (43) (33) (33) 30% 30%
OIE (31) (11) (11) 182% 182%
EBIT 334 344 348 (3)% (4)%
Amortisation (44) (29) (29) 52% 52%
EBITA 378 372 377 2% 0%
Adjusted items 31 11 11 182% 182%
Adjusted EBITA 409 384 388 7% 5%
Refractory EBITA 348 303 - 15%
Vertical integration EBITA 61 81 - (25)%
SG&A
Selling, general and administrative expenses (SG&A), before
R&D-related expenses, amounted to €449 million in 2023, a 20% increase
compared to the prior year (2022: €375 million), driven by broad-based
inflation in particular in the cost of labour and M&A additions. Personnel
and personnel-related expenses increased by €20 million. The Group undertook
a review of its SG&A expenditures and implemented a focused reduction in
SG&A headcount during the year, resulting in non-recurring restructuring
costs of €11 million and estimated annual cost savings of €14 million.
SG&A was negatively impacted by additions to bad debt provision of €18
million. The Group takes a prudent approach towards writing down bad debt in
the periods in which they are incurred but continues to actively pursue
repayment.
Depreciation and amortisation
Depreciation increased by 16% to €134 million (2022: €116 million),
including €14 million of depreciation relating to assets acquired during the
year. The increase in depreciation was mainly due to M&A carried out
during the period, with fixed assets increasing to €1,830 million at 31
December 2023 (31 December 2022: €1,886 million). Depreciation in 2024 is
expected to be around €140 million.
Amortisation of intangible assets amounted to €44 million in 2023 (2022:
€29 million) and is expected to be approximately €40 million in 2024.
Adjusted EBITDA
The Group recorded Adjusted EBITDA of €543 million, a 9% increase compared
to the prior year (2022: €500 million). Adjusted EBITDA margin increased to
15.2% (2022: 15.1%) an increase of 10bps, reflecting higher gross margins
partially offset by increased SG&A. Adjusted EBITDA margin decreased by
20bps on a constant currency basis.
Adjusted EBITA
Adjusted EBITA increased to €409 million from €384 million in 2022, in
line with the increase in Adjusted EBITDA. Adjusted EBITA from businesses
acquired during the year amounted to €42 million, with the base business
excluding M&A recording a reduction in Adjusted EBITA, mainly due to lower
like for like sales volumes.
Adjusted EBITA margin reduced slightly to 11.4% (2022: 11.6%) as price
increases and higher gross margins were offset by the increase in SG&A
expenses and higher depreciation charges on the Group's enlarged asset base.
Vertical integration contributed 1.7ppts of the total Adjusted EBITA margin of
11.4%, lower than the 2.5ppts contribution from vertical integration in 2022,
primarily due to the decline in the price of key refractory raw materials
during the period. Lower raw material prices negatively impact the calculation
of the contribution from the Group's raw material assets, which is based on
the theoretical cost of acquiring those raw materials in the open market. The
Group continues to expect a contribution of 2.5ppts to 3.5ppts from its
vertical integration over the longer term due to the competitive cost position
of its raw material assets.
The Group's refractory business contributed 9.7ppts towards the total Adjusted
EBITA margin of 11.4%, an increase of 70 bps compared to the 9.1ppts
contribution in 2022, reflecting resilient refractory pricing, lower freight
and energy input costs and the benefits of structural cost reductions
resulting from the Group's strategic cost-saving initiatives.
Adjusted EBITA and Adjusted EBITDA both exclude €31 million of Items
excluded from adjusted performance (2022: €11 million), including
restructuring costs, M&A-related costs and other expenses as set out in
"Items excluded from adjusted performance" below.
Net finance expenses
Net finance expenses, which includes interest payable on borrowings net of
interest income on cash balances, gains and losses relating to foreign
exchange, pension expenses, present value adjustments, factoring costs and
non-controlling interest expenses, increased to €101 million (2022: €73
million).
Net interest expenses increased to €39 million (2022: €19 million) due to
higher base rates on variable interest rate facilities, higher gross
borrowings and interest costs associated with M&A bridge financing used to
finance acquisitions in India in the first half of 2023 of €143 million.
Interest expenses on borrowings of €58 million (2022: €27 million) were
offset by €20 million of interest income on cash balances on deposit (2022:
€8 million).
Other net financial expenses amounted to €32 million (2022: €31 million)
including factoring costs of €12 million (2022: €7 million), pension
charges of €12 million (2022: €6 million) and present value adjustments of
€8 million (2022: €9 million).
Foreign exchange losses of €30 million were incurred in 2023 (2022: €23
million), including gains on embedded currency derivatives in sales contracts
of €11 million (2022: €(13) million) and net exchange losses on
translation of monetary assets and liabilities of €41 million (2022: €10
million), largely attributable to currency movements in Argentina and
Türkiye.
Net interest expenses in 2024 are expected to be approximately €50 million
(2023: €39 million) mainly due to higher interest rates on floating
facilities and higher gross borrowings. Other adjusted net financial expenses
are guided to be approximately €35 million in 2024, resulting in €85
million of adjusted net finance expenses for 2024.
(€m) 2023 2022
Net interest expenses (39) (19)
Interest income 20 8
Interest expenses (58) (27)
FX effects (30) (23)
Balance sheet translation (41) (10)
Derivatives 11 (13)
Other net financial expenses (32) (31)
Present value adjustment (8) (9)
Factoring costs (12) (7)
Pension charges (12) (6)
Non-controlling interest expenses 0 (1)
Capitalization of borrowing costs 8 0
Interest expense - Transaction costs (1) 0
Other (6) (8)
Total net finance expenses (101) (73)
Items excluded from adjusted performance
In order to accurately assess the underlying performance of the business, the
Group excludes certain items from Adjusted EBITA:
· €20 million recorded in "restructuring and write-down expenses",
including €15 million of internal business restructuring and plant closure
expenses;
· €8 million of expenses related to M&A activities;
· €4 million of costs relating to the tender offer from Rhône
Capital launched on 30 May 2023; and
· €44 million amortisation of intangible assets.
Net finance costs are adjusted for €9 million of other net financial income
including a €6 million credit on the unwinding of the discount used to value
the Group's obligation under the Oberhausen provision, for further details see
Note 31. Adjusted net interest expense was €35 million (2022: €19 million)
after deducting €4 million of M&A bridge financing costs.
Adjusting for the above items results in a €14 million tax effect which is
deducted from the adjusted performance metrics.
Taxation
Total tax for 2023 in the income statement amounted to €62 million (2022:
104 million), representing a 27% reported effective tax rate (2022: 38%). The
effective tax rate in 2023 decreased compared to the tax rate in 2022 as the
prior year was impacted by non-cash one-off items including restructuring,
charges following agreements with tax authorities and a reduction in the
deferred tax asset valuation following the reduction in the Austrian tax rate.
See Note 14 to the financial statements for further details.
Reported profit before tax amounted to €233 million (2022: €270 million).
Adjusted profit before tax amounted to €317 million (2022: €318 million),
with an adjusted effective tax rate of 24% (2022: 25%). Adjusted items include
tax expenses related to one-off restructuring or unrelated business items.
The adjusted effective tax rate guidance is between 23-25% for 2024.
Profit after tax
On a reported basis the Group recorded profit after tax of €171 million
(2022: €167 million), profit attributable to shareholders of €165 million
(2022: €156 million) and earnings per share of € 3.50 (2022: € 3.31).
Adjusted profit after tax increased to €241 million (2022: €237 million)
and Adjusted earnings per share was €4.98 (2022: €4.82). A full
reconciliation of EBITA to EPS and Adjusted EBITA to Adjusted EPS can be found
in the table in the APMs section.
Profit attributable to shareholders is stated after non-controlling interests
of €7 million (2022: €11 million). The Group, holding a majority stake of
56% in RHI Magnesita India Ltd., attributes most of its non-controlling
interests to the earnings consolidated from this subsidiary. The Group's
shareholding in RHI Magnesita India Ltd. decreased from 70% at 31 December
2022 to 56% at 31 December 2023 following the issuance of shares in RHI
Magnesita India Ltd. via a QIP in April 2023 to partially fund the
acquisitions of DBRL and Hi-Tech.
Guidance for non-controlling interest expense in 2024 is approximately €10
million.
(€m) 2023 Items excluded from adjusted performance 2023 adjusted 2022 reported Items excluded from adjusted performance 2022 adjusted
EBITA 378 31 409 372 11 384
Amortisation (44) 44 - (29) 29 -
Net financial expenses (101) 9 (92) (73) 7 (66)
Result of profit in joint ventures - - - - - -
Profit before tax 233 84 317 270 47 318
Income tax (62) -14 (76) (104) 24 (80)
Profit after tax 171 70 241 167 70 237
Non-controlling interest 7 - 7 11 - 11
Profit attributable to shareholders 165 - 235 156 70 226
Shares outstanding 47 - 47 47 - 47
Earnings per share 3.50 - 4.98 3.31 1.51 4.82
(€ per share)
Earnings guidance
The Group's outlook for revenue, EBITDA and EBITA in 2024 is in line with
current analyst consensus.
Refractory sales volumes in 2024 are expected to be broadly in line with 2023,
excluding the positive contribution from M&A due to the full year
contribution from businesses acquired during 2023, which should increase
shipped volumes in 2024 by up to 10%. Acquisitions agreed or completed since
January 2023 are expected to contribute c.€80 million of Adjusted EBITDA or
c.€65 million of Adjusted EBITA in 2024.
Finished goods pricing in 2024 is forecast to be up to 5% lower compared to
2023 as non-vertically integrated competitors benefit from lower input prices.
The Group continues to be impacted at a unit cost level by low fixed cost
absorption, with plants running at 74% of production capacity in the fourth
quarter of 2023. However, production is planned to increase in 2024 to match
sales volumes, as inventory coverage ratios have now been successfully reduced
to target levels, reducing fixed cost under-absorption.
The historically low vertical integration EBITA margin contribution of 1.7ppts
recorded 2023 is expected to reduce to approximately 1.0ppts in 2024 due to
continuing low market prices for magnesite- and dolomite-based raw materials.
Refractory EBITA margins are targeted to be maintained at 10.0ppts, resulting
in guidance for an Adjusted EBITA margin of approximately 11% in 2024 (2023:
11.4%).
Whilst the timing and extent of the current period of reduced demand for
refractories is difficult to forecast, the Group is well positioned for any
recovery in demand in its end markets and customer industries, with
significant operational gearing and potential upside from higher raw material
and finished goods prices combined with improved fixed cost absorption if
demand returns to prior levels.
Taking into account forecast sales volumes, lower vertical integration margin
contribution and expected pressure on refractory pricing, Adjusted EBITA in
2024 is guided to be at least in line with current analyst consensus of
approximately €410 million.
Working capital
Working capital excluding M&A decreased to €794 million (31 December
2022: €918 million) driven by a decrease in inventories. Including
additional working capital resulting from M&A in 2023, working capital
increased to €974 million.
Working capital intensity excluding M&A, measured as a percentage of the
last three months' annualised revenue, decreased to 23.0% (2022: 25.4%).
Accounts receivable intensity excluding M&A was 10.6% (2022: 10.4%),
accounts payable intensity was 11.8% (2022: 14.0%) and inventory intensity
reduced to 24.3% (2022: 29.0%). Including the impact of M&A, working
capital intensity stood at 24.2%, slightly below levels recorded the previous
year.
Inventories excluding M&A decreased to €837 million (31 December 2022:
€1,049 million), as the Group successfully reduced inventory volumes and
production costs decreased. Production lagged sales throughout the year to
achieve targeted inventory coverage ratios based on reduced customer demand.
Inventory volumes excluding M&A decreased to 505kt from 606kt at 31
December 2022. Including the effect of M&A, inventories were €996
million.
Accounts receivable excluding M&A decreased to €366 million (31 December
2022: €375 million), reflecting successful initiatives implemented to reduce
overdue customer payments during the year. Accounts receivable is calculated
as trade receivables excluding factoring plus contract assets less contract
liabilities and downpayments received, and a full reconciliation can be found
in the APMs section. Including M&A, accounts receivable increased to
€477 million.
Accounts payable excluding M&A reduced to €409 million (31 December
2022: €507 million) due to lower volumes and pricing of raw materials
purchased, reflecting the subdued demand environment. Including M&A,
accounts payable decreased to €498 million.
Working capital financing, used to provide low-cost liquidity and support the
Group's commercial offering to customers, was €298 million on 31 December
2023 (31 December 2022: €314 million), comprising €259 million of accounts
receivable financing (factoring) and €39 million of accounts payable
financing (forfaiting). Working capital financing levels vary according to
business activity, and the Board has set an internal limit of €320 million
on its use.
The increase in overall working capital of €57 million versus 31 December
2022 was driven by the first-time consolidation and short-term working capital
requirements of newly acquired businesses of €180 million, offset by a
€123 million reduction in working capital in the base business prior to
M&A.
Working capital intensity is targeted to be approximately 24% in 2024.
Other assets and liabilities
Cash flows from other assets and liabilities amounted to €(12) million
(2022: €(2) million) comprising indirect and other tax rebates of €14
million (2022: €29 million), employee pension pay outs and pension provision
movements of €(19) million (2022: €(25) million), employee variable
remuneration and employee-related provisions of €29 million (2022: €16
million) and other cash flows of €(36) million (2022: € (21) million).
Capital expenditure
The Group incurred €180 million of capital expenditure (2022: €157
million), of which €86 million was maintenance related (2022: €77
million), €74 million was expansionary capital expenditure (2022: €79
million) and €19 million of maintenance and integration capital expenditure
was incurred at newly acquired businesses.
Capital expenditure in 2024 is expected to be around €170 million, closer to
the forecast level of depreciation of €140 million, as the Group completes
the final stages of its Production Optimisation Plan launched in 2019.
Maintenance capital expenditure in the base business is expected to be
approximately €60 million, with expansionary capital expenditure of €80
million (including €10 million carried over from 2023) and maintenance and
integration capital expenditure in newly acquired businesses of €30 million.
Capital expenditure will be shifted from fixed assets improvements to digital
architecture redesign, which will require elevated levels of spending over the
next three years at least.
Acquisitions
The Group invested €443 million in acquisitions in 2023, comprising cash
consideration of €325 million, working capital investments of €30 million
and Net debt assumed on acquisition of €88 million. Expenditure on
acquisitions was partly funded by the proceeds of an equity issuance by RHI
Magnesita India Ltd, raising approximately €100 million via a QIP in April
2023. Following the QIP, an equity investment of €22 million by the Group in
RHI Magnesita India Ltd via a Preferential Issue was concluded in the third
quarter of 2023.
Acquisitions agreed or completed since January 2023 are expected to contribute
€80 million of Adjusted EBITDA in 2024.
Cash flow
Adjusted operating cash flow increased significantly to €413 million (2022:
€155 million) representing cash flow conversion from Adjusted EBITA of 101%
(2022: 40%). The increase in cash conversion was supported by the increase in
Adjusted EBITDA and a release of working capital of €53 million, compared to
the €195 million increase in working capital in 2022, when inventories were
raised as a result of and in response to global supply chain disruption.
Free cash flow increased to €258 million (2022: €43 million) supported by
the higher level of Adjusted operating cash flow, offset by increased cash tax
and interest payments. Cash income tax payments were €60 million (2022:
€54 million) whilst net interest paid increased to €56 million (2022:
€(36) million) as a result of higher average interest rates and borrowings.
The Group incurred €355 million of cash outflow on six acquisitions
completed in 2023 including cash consideration of €325 million and working
capital investments of €30 million, partially funded by the equity raise via
QIP in India of approximately €100 million.
Cash dividends paid in 2023 amounted to €78 million (2022: €71 million)
and the cash change in Net debt was a decrease of €41 million (2022: €82
million). Net debt increased by a further €141 million of non-cash items
comprising €87 million of debt in acquired businesses (2022: €19 million),
new lease obligations of €15 million (2022: €20 million) and foreign
exchange impacts of €1 million (2022: €33 million).
Cash flow €m 2023 2022
Adjusted EBITDA 543 500
Share based payments - gross non-cash 9 8
Working capital changes 53 (195)
Changes in other assets and liabilities (12) (2)
Investments in PPE, IA (180) (157)
Adjusted operating cash flow 413 155
Income taxes paid (60) (54)
Cash effects of other income/expenses and restructuring (32) (24)
Investments in financial assets (14) 0
Cash inflows from the sale of PPE, IA 4 2
Cash inflows from the sale of financial assets 0 3
Investment subsidies received 0 1
Cash inflow from joint ventures and associates 0 0
Net interest paid/received (56) (36)
Net derivative cash inflow/outflow 5 (2)
Dividend payments to NCI (3) (2)
Other investing activities 2 0
Free cash flow 258 43
Investment in subsidiaries net of cash (313) (65)
Cash in from sales of subsidiaries net of cash 0 9
Capital contribution NCI 100 0
Investments in NCI (8) 0
Payment for share issue costs (3) 0
Treasury stock 0 0
Dividend payments (78) (71)
Change financial receivables from joint ventures & associates 3 2
Cash change in net debt (41) (82)
Debt from acquisitions (87) (19)
New lease obligations (15) (20)
Exchange effects 1 (33)
Actual change in net debt (141) (154)
Financial position
Net debt increased to €1,304 million, comprising total debt of €1,949
million, leases of €70 million and cash and cash equivalents of €704
million.
Total leases of €70 million (2022: €64 million) are included in the
Group's Net debt position as required by IFRS 16.
The Group's leverage position was 2.3x Net debt to Pro Forma Adjusted EBITDA
(31 December 2022: 2.3x), within the Group's gearing target range of between
2.0-c.2.5x EBITDA for compelling M&A opportunities. The main driver of the
increase in gearing was the Group's M&A activity in 2023, with six
acquisitions resulting in cash payments to sellers of €325 million, working
capital investments in acquired businesses of €30 million and Net debt from
acquired businesses as at 31 December 2023 of €88 million. Gearing was
impacted by a 12% increase in Net debt, offset by a 9% increase in Adjusted
EBITDA to €543 million and a 12% increase in Pro Forma Adjusted EBITDA,
which includes 12 months of contribution from businesses acquired during the
year, to €561 million(2022: €500 million).
The Group was able to maintain gearing within the guided range despite
investing €443 million in M&A during the period due to a significant
increase in Adjusted operating cash flow and the successful QIP raising €100
million in India.
Available liquidity at 31 December 2023 was €1,304 million, comprising
undrawn committed facilities of €600 million and cash and cash equivalents
of €704 million.
The Group refinanced a total of €676 million of new or existing debt
facilities in 2023 to maintain liquidity levels, extend debt maturities and
further establish links to the Group's sustainability performance. In April
2023, the Group issued a €170 million ESG-linked Schuldschein bond with
average maturity of five years and refinanced an existing bilateral Term Loan,
increasing the total loan amount from €115 million to €150 million and
extending the maturity date to 2026. The refinanced Term Loan is now also
ESG-linked. In November 2023 the Group signed a €200 million bilateral OeKB
Term Loan with a final maturity date in March 2029 and with a variable margin
linked to its ESG performance.
The Group has debt maturities of €149 million scheduled in 2024, of which
€60 million is short-term debt that can be rolled into 2025, and €239
million of maturities in 2025. Out of the total gross debt of €1,949
million, 98% is denominated in euro. The floating to fixed ratio of the gross
debt is 31% floating to 69% fixed and the weighted average cost of debt as of
31 December 2023 was 3.34%, including swaps.
The Group will seek to maintain the ratio of Net debt to Pro Forma Adjusted
EBITDA within the guided range of 2.0-2.5x or above for periods of compelling
M&A.
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. ROIC is an APM, see the APM section for full
details of how ROIC reconciles to IFRS metrics.
Following significant M&A activity in 2023, fixed assets have increased by
€310 million, Goodwill has increased by €202 million and acquired
businesses added €180 million to working capital. Whilst the balance sheet
effects of M&A are captured in the year end calculation of Invested
Capital, earnings from businesses acquired during the year are not
consolidated prior to the date of completion under the existing definition of
ROIC. The Group is therefore amending its definition of ROIC to use average
invested capital, being the average of the level of invested capital at the
beginning and end of the financial year.
Under the new definition, ROIC was 10.7% in 2023 (2022: 12.3%) based on
average invested capital of €2,854 million (2022: €2,439 million) and
NOPAT of €305 million (2022: €301 million). ROIC generated by the Group's
Raw material assets was 8.9% (2022: 14.1%) and ROIC from the Refractory
business was 11.0% (2022: 11.9%).
M&A
The Group aims to expand its presence through acquisitions in geographic
markets where it is under-represented, such as in India, China, and Türkiye
and other countries in South-East Asia. An additional focus of the Group's
M&A strategy is to diversify its product portfolio by targeting new
product segments, such as the non-basic or alumina-based refractory segment.
On 5 January 2023, the Group completed the acquisition of the Indian
refractory business of Dalmia Bharat Refractories Ltd. ("DBRL") via a Share
Swap Agreement, in exchange for 27 million shares in RHI Magnesita India Ltd.,
a 56% owned subsidiary of the Group which is listed on the Bombay Stock
Exchange and National Stock Exchange of India. DBRL is one of the leading
refractory producers in India with production capacity of over 300kpta from
five refractory plants. Following the acquisition and prior to the QIP, the
Group's shareholding in RHI Magnesita Ltd. reduced from 70% to 60% and the
Dalmia Bharat Group and minority shareholders in DBRL received a combined 14%
stake in RHI Magnesita India Ltd.. Based on the closing share price of RHI
Magnesita India Ltd. on 18 November 2022 of ₹645 per share, the
Consideration Shares had a value of approximately ₹17,424 million (€212
million). DBRL recorded EBITDA of ₹683 million (€8 million) in the year to
31 March 2022.
On 13 January 2023, the Group entered into an agreement to acquire a 65%
shareholding in Jinan New Emei, a company registered in China, for a cash
consideration of €23 million plus assumed net debt and other liabilities of
€17 million, with the payment of €3 million of cash consideration deferred
to 2024.
On 31 January 2023, the Group, through its listed subsidiary in India, RHI
Magnesita India Ltd., completed the acquisition of the flow control refractory
business of Hi-Tech Chemicals Ltd. ("Hi-Tech") for a consideration of €87
million. The acquisition was funded through a combination of intercompany
loans from the Group and local bank lending.
On 29 March 2023, RHI Magnesita announced the acquisition of Dalmia GSB
Refractories GmbH ("Dalmia GSB") for a cash consideration of approximately
€13 million. Dalmia GSB recorded profit before tax of €1.7 million in the
year to 31 March 2022 and had gross assets of €18 million at 31 March
2022.
On 21 April 2023, the Group announced the acquisition of the Europe, India and
US operations of Seven Refractories for a cash consideration on completion of
approximately €84 million.
On 3 October 2023, the Group announced the acquisition of the Germany, Czech
Republic and Slovenia based refractory businesses of the Preiss-Daimler Group
("P-D Refractories") for a cash consideration of approximately €45 million.
Adjusted EBITDA contribution from the nine businesses acquired during the
period December 2021 to December 2023 (i.e. Chongqing, SÖRMAS, MIRECO and all
businesses acquired during 2023) was €56 million, exceeding guidance for
approximately €40 million of contribution from M&A.
The full year Adjusted EBITDA contribution from businesses acquired during
2023 (i.e. DBRL, Jinan New Emei, Hi-Tech, Dalmia GSB, Seven Refractories and
P-D Refractories) is expected to be approximately €80 million in 2024, or
€65 million of EBITA.
Returns to shareholders
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 medium
term. These opportunities are assessed against a framework of strategic fit,
risk profile, rates of return, synergy potential and balance sheet strength.
In 2023, the Group invested €74 million in expansionary capital expenditure,
including expenditure incurred in relation to the integration of newly
acquired businesses. The Group's total capital expenditure for the year 2023
amounted to €180 million.
Following the strong profitability, cash generation and strategic progress
delivered in 2023, the Board has recommended a final dividend of €1.25 per
share for the full financial year, and €85 million in aggregate. This
represents a dividend cover of 2.8x Adjusted earnings per share. Subject to
approval at the AGM on 2 May 2024, the final dividend will be payable on 13
June 2024 to shareholders on the register at the close of trading on 17 May
2024. The ex-dividend date will be 16 May 2024. Together with the interim
dividend of €0.55 per share paid on 22 September 2023, the recommended final
dividend represents a full year dividend of €1.80 per share in respect of
the 2023 financial year.
The Board's dividend policy remains to target a dividend cover of below 3.0x
adjusted earnings over the medium term. Dividends will be paid on a
semi-annual basis with one third of the prior year's full year dividend being
paid at the interim.
OPERATIONAL REVIEW
Steel overview
Steel 2023 2022 reported 2022 (constant currency) Change Change (constant currency)
Revenue (€m) 2,461 2,371 2,311 4% 6%
Gross profit (€m) 550 521 527 6% 4%
Gross margin 22.3% 22.0% 22.8% 30bps (50)bps
Supplying refractory products and services to the steel industry accounted for
69% of RHI Magnesita's revenues in 2023 and the Group retained its leading
position globally with a 13% market share, or 21% excluding China and East
Asia. Refractory products are required to protect steel making equipment from
extremely high temperatures of up to 1,800°C, chemical corrosion and
abrasion. Refractory product applications include iron making (blast furnace
or direct reduction), primary steel-making (basic oxygen furnace or electric
arc furnace) as well as ingot and continuous casting. RHI Magnesita offers a
complete range of products and solutions for the steel making process. The
lifespan of refractory products in the steel making process can range from
hours to months depending on the application, for example a slide gate is a
consumable item that may need to be replaced every four hours whilst the
lining of a primary steel making furnace could require re-lining at six month
intervals. Refractory consumption in steel making is therefore classified as
an operating expense by steel producers and usually accounts for around 2-3%
of operating costs, on average.
Steel segment revenues increased by 4% to €2,461 million (2022:
€2,371million) and by 6% in constant currency terms (2022: €2,311 million)
as a 3% reduction in volumes excluding M&A, due to reduced demand in
Europe, China and South America, was offset by resilient pricing and
additional revenue from M&A. Average price per tonne increased by 7%
compared to 2022.
The 3% reduction in the Group's shipped volume of steel refractories excluding
M&A compares to World Steel Association data, which indicates a small
decrease of 0.1% in global steel output in 2023, due to the weighting of the
Group's business towards Europe, North American and South America where steel
production declined by more than the global average.
Global steel demand in all regions excluding India, West Asia & Africa and
other emerging markets declined in 2023 due to weakness in the key end markets
of construction, transportation and consumer goods. High inflation and
interest rate rises impacted consumer demand and the cost of financing for new
capital projects in many economies. In India, high levels of domestic economic
growth resulted in a 11.8% increase in steel production compared to the prior
year, reflecting strong conditions in construction and infrastructure markets.
Conditions in freight, energy and refractory raw materials markets eased with
input costs in each category reducing versus the prior year, reflecting lower
overall global demand and relative stability in supply chains, compared to the
disruption in 2021 and 2022.
Industrial overview
Industrial 2023 2022 reported 2022 (constant currency) Change Change (constant currency)
Revenue (€m) 1,111 946 923 17% 20%
Gross profit (€m) 307 242 232 27% 32%
Gross margin 27.7% 25.6% 25.1% 210bps 260bps
RHI Magnesita is a leading supplier of refractory products and services to
customers in the cement and lime, non-ferrous metals, glass, energy,
environmental and chemicals industries. These Industrial customers accounted
for 31% of Group revenues in 2023 and have longer replacement cycles compared
to Steel customers, ranging from one to 20 years. Refractories are classified
as capital expenditure by Industrial customers and represent between 0.2% and
1.5% of total costs over the life cycle of a facility. RHI Magnesita has a
c.30% market share globally in cement refractories, c.25% market share in
non-ferrous metals applications, 15% in the glass industry and 3% in other
industrial applications such as energy, environment, chemicals and foundry.
The Industrial segment increased revenues by 17% to €1,111 million (2022:
€946 million) or 20% in constant currency terms, with shipped volumes
increasing by 17%. The longer lead time for Industrial projects and later
cycle nature of the business supported pricing in 2023 as the Group realised
the benefit of price increases for orders negotiated in prior periods.
Cement and lime revenues of €424 million represented 12% of Group revenues
in 2023 (2022: €378 million) as price increases offset lower shipped volumes
in all regions excluding India. The acquisition of DBRL in India was the main
driver of a 25% increase in the shipped volume of cement and lime refractories
versus 2022.
Demand for non-ferrous metals refractories remained at high levels in 2023,
supported by high prices for non-ferrous metals, underlying green energy and
transportation demand drivers and scrap production capacity additions.
Non-ferrous metal refractory revenues increased by 28% to €280 million
(2022: €219 million), driven by a 14% increase in volumes and higher
pricing. The non-ferrous metal business remained the highest margin segment
for the Group, with a gross margin of 42% in 2023 (2022: 37%).
Glass refractory shipped volumes increased by 7% in 2023, contributing to an
increase in revenues of 18% from €154 million to €182 million in 2022.
Revenues from other industrial applications, including energy, environment,
chemicals, foundry and aluminium increased by 40% to €143 million (2022:
€102 million).
Minerals
The Group consumed 39% of its internally produced raw materials by value, in
line with its vertical integration strategy. Raw materials not utilised
internally are sold in the open market and reported under Minerals within the
Industrial segment, generating revenues of €80 million in 2023 (2022: €92
million). Mineral sales volumes increased by 0.7% but revenues reduced due to
lower market prices for raw materials.
Regional business units
In 2022 RHI Magnesita established an operational governance structure
consisting of five regional business units, which continued in 2023. Managing
the business through a regional structure enables the Group to serve its
customers better through faster local decision making and improved
accountability, supporting our local for local production strategy.
Revenue 2023 2022 reported 2022 (constant currency) % change (reported) % change (constant currency)
Europe, CIS & Türkiye 895 819 803 9% 11%
Steel 575 571 556 1% 3%
Industrial 320 248 247 29% 30%
North America 894 874 861 2% 4%
Steel 673 694 686 (3)% (2)%
Industrial 221 179 175 23% 26%
India, West Asia & Africa 762 617 594 24% 28%
Steel 582 486 464 20% 25%
Industrial 180 131 130 37% 38%
South America 522 505 495 3% 5%
Steel 393 389 383 1% 3%
Industrial 129 116 112 12% 15%
China & East Asia 418 410 391 2% 7%
Steel 239 231 222 3% 8%
Industrial 179 179 168 0% 7%
Minerals 80 92 90 (13)% (11)%
Total 3,572 3,317 3,234 8% 10%
Europe, CIS & Türkiye
Europe, CIS & Türkiye revenues increased by 9% to €895 million (2022:
€819 million), or by 11% in constant currency terms, due to price increases
and a 5% increase in sales volumes driven by M&A. Revenue per tonne
increased by 4%.
Gross profit increased by 2% to €177 million (2022: €173 million) with
lower gross margins of 19.8% (2022: 21.1%) due to higher unit costs
resulting from low capacity utilisation.
Steel revenues increased by 3% in constant currency on 2% higher shipped
volumes, as M&A supported growth against a backdrop of reduced customer
demand. Steel production in the European Union decreased by 7.4% and in
Türkiye by 4.0% according to WSA data, reflecting high energy and other
production costs leading to temporary plant suspensions and reduced end market
demand from the construction industry.
Industrial segment volumes increased by 14% and revenues by 30% in constant
currency terms, supported by the acquisition of process industries focused P-D
Refractories in the fourth quarter and strong cement sales year on year, with
22% higher shipped volumes in cement and lime. Industrial customers outside of
cement reduced capital expenditure and postponed major projects to focus more
on repair and maintenance.
Plant capacity utilisation was 81% on average in the first half of the year
and decreased to 71% in the fourth quarter as the region successfully reduced
finished goods inventory to optimum levels, in line with customer demand. This
led to significant under-absorption of fixed costs, offset by lower energy and
raw material prices. Key operational KPIs including PIFOT and customer net
promoter scores improved during the year. Close management of receivables
supported regional cash flows, with improved payment term control and reduced
overdues in the base business, excluding M&A.
New customer wins in the waste to energy market were achieved, in line with
the regional strategy. New product sales initiatives were focused on high
recycling content product ranges, to further improve sustainability
performance. A key driver of recycling rates during the year was the
successful launch of a high-recycling content gunning repair mix for steel
customers, utilising reclaimed material from cement rotary kiln linings. The
Group continues to develop its automated sorting capabilities which are
expected to further improve recycling productivity when implemented.
The Europe, CIS & Türkiye region has acquired and commenced the
integration of five business in the last two years, comprising SÖRMAS,
MIRECO, Dalmia GSB, Seven Refractories and P-D Refractories. Integration
projects are proceeding in line with or ahead of expectations and these
businesses together contributed EBITDA of €25 million in 2023, accounting
for almost half of Group EBITDA from M&A of €56 million.
North America
Revenues in North America increased by 2% to €894 million (2022: €874
million) or by 4% in constant currency terms, as higher pricing offset a 5%
decline in sales volumes. Revenue per tonne increased by 8% due to higher
pricing year on year, however pricing pressure was evident towards the end of
the period and is expected to continue 2024.
Gross profit increased to €250 million (2022: €236 million) at a margin of
27.9% (2022: 27.0%) as freight and other input costs reduced. Freight rates
per tonne were 17% lower than 2022.
Two large steel customers idled operations during the year, contributing to
the decline in shipped volumes and a bad debt reserve relating to €8 million
of receivables from a major customer in Mexico was recorded. Sales of BOF
refractories declined year on year but were offset by deliveries to greenfield
steel projects, with new plant installations continuing despite the current
low level of steel plant capacity utilisation, estimated at 75%.
RHI Magnesita's plant utilisation in Q4 2023 averaged 75% in the region to
match customer demand and reduce inventory volumes to optimum levels,
resulting in fixed cost under-absorption.
In the Industrial segment, cement and lime sales volumes declined but gross
margins increased significantly, to 27.4% (2022: 21.4%) due to higher pricing
and lower freight costs. New customers and applications in non-ferrous metals
and aluminium projects were secured and will support sales into 2024.
The regional recycling rate increased to 8.3% (2022: 5.2%) as the Group seeks
to replicate its success in the European market in other regions, with
consumption of secondary raw materials increasing to 25 kt (2022: 16 kt).
New product developments and launches included fast-to-cast tundish mixes
which allow shorter pre-heat and lower consumption than existing technology,
two new high-recycling magnesia carbon brands and new fused magnesia brick
formulations. Market share gains were realised in Thin Slab Isostatic products
and the Group installed its first monotube changer in the USA, from the
Interstop Systems product range, with further conversions planned in the near
future.
In July 2023 the Group completed the acquisition of Seven Refractories, which
included the Seven Lakeway site in Ohio.
RHI Magnesita received three awards in North America in recognition of
innovation and sustainability: the Manufacturer's Association of Pennsylvania
2023 Manufacturing Innovator Award; the American Ceramic Society Corporate
Environmental Achievement Award; and the World Refractories Association Safety
Recognition Award.
India, West Asia & Africa
Revenues in the India, West Asia & Africa region increased by 24% to
€762 million (2022: €617 million) or by 28% in constant currency, driven
by M&A and organic volume growth. Acquisitions accounted for around 19% of
the revenue increase with the remainder driven by organic demand growth.
Revenue per tonne decreased by 13%, primarily due to a change in product mix
resulting from M&A.
Gross profit increased by 40% to €187 million (2022: €133 million) with
increased gross margins of 24.5% (2022: 21.6%) supported by lower input costs,
including freight and purchased raw materials.
Steel revenues increased by 25% in constant currency terms, with the majority
of the increase contributed by M&A completed during the year. Steel
revenue per tonne reduced by 9% due to a reduced weighting of flow control
product sales following the M&A and some increased competition from China
based suppliers and domestic producers. Gross margin in steel increased to
22.8% (2022: 20.1%), reflecting lower input costs.
Steel production in India grew by 11.8% in 2023 according to WSA data,
supporting strong organic sales growth. New steel plant projects under
construction by JSW Group, JSPL Group, Arcelor Mittal, Tata and NMDC support
further growth in steel output into 2024 and beyond, including 'green steel'
projects seeking to reduce CO(2) emissions in the steel making process. Local
refractory producers are increasing output to meet demand and RHI Magnesita is
seeking to differentiate its offering through solutions contracts, competitive
pricing and a focus on sustainability. In Africa, the Group was awarded lead
supplier status to a greenfield steel project in Morocco and expanded its
sales in Egypt, Kenya and South Africa.
The Group's steel flow control market position improved following the
acquisition of Hi-Tech, with production network benefits, as well as the
addition of alternative isostatic products and a cost-effective nozzle filling
compound to the product range.
Industrial revenues increased by 37% to €180 million (2022: €131 million)
largely due to the contribution of the DBRL acquisition, which led to an 89%
increase in shipped volumes of industrial refractories and a 111% increase in
cement refractory sales volumes. Industrial gross margin increased to 30.3%
(2022: 27.1%). Non-ferrous metals sales were also strong, with a 43% increase
in volumes driven by new projects and repairs in India, West Asia &
Africa, including a major new copper customer in Gujarat, India. Gross margins
in the Industrial segment increased to 30.3% (2022: 27.1%) due to resilient
pricing and a favourable industry mix as higher margin non-ferrous metals
sales increased.
The integration of the Hi-Tech and DBRL acquisitions has progressed in line
with expectations, with sales operations now unified following a 'one face to
the customer' principle. Production of various product ranges has been
relocated within the enlarged network, to optimise between existing and
acquired plants. The capacity of the Cuttack plant was successfully increased
from 18 ktpa to 30 ktpa.
Supply chain reliability improved considerably compared to 2022, allowing
inventory coverage to be reduced to targeted levels without impacting customer
deliveries. However, disruption to Red Sea freight lanes in the fourth quarter
of 2023 continues and may lead to higher costs and logistical impacts for the
India, West Asia & Africa region in 2024. PIFOT increased to a record 81%
by the end of 2023, reflecting production and logistics planning and
forecasting improvements.
South America
Revenues in South America increased by 3% to €522 million (2022: €505
million) or by 5% in constant currency terms, as higher pricing offset a 6%
decline in sales volumes. Revenue per tonne increased by 10% due to higher
pricing. Gross profit increased to €146 million (2022: €130 million) at a
margin of 28.0% (2022: 25.7%).
Steel revenues increased by 3% in constant currency terms to €393 million as
price increases broadly offset a 6% reduction in shipped volumes, which was in
line with the reduction in steel output for the region. Steel gross margin
improved to 24.5% (2022: 23.5%) due to better pricing and a reduction in key
input costs, notably freight, energy, raw materials. New long-term contracts
were signed with two key steel customers in the region and revenue derived
from long-term contracts represented 54% of the total for the region in 2023.
Industrial revenues increased by 15% in constant currency terms, driven by
significantly higher sales volumes of glass refractories and higher pricing
and volumes in non-ferrous metals. Cement sales volumes decreased by 11% but
price increases delivered a 6% increase in revenues in constant currency
terms. Industrial segment gross margins increased to 38.7% (2022: 33.1%),
largely due to strong price realisation in glass and non-ferrous metals.
Significant price increases in Argentina resulted in loss of purchase power in
local currency which lead to the application of hyperinflation accounting at
Group level in 2023 in line with IAS 29. The Group is undertaking a review of
its operating model to optimise profitability and ensure the long-term
sustainability of its business in Argentina, where it is a key supplier for
its customers.
China & East Asia
Revenues in China & East Asia increased to €418 million (2022: €410
million), an increase of 2% or 7% in constant currency terms, as the
acquisition of Jinan New Emei offset volume and revenue decline in steel due
to reduced local demand. Gross profit increased to €88 million (2022: €83
million) reflecting the revenue increase and higher gross margin of 21.0%
(2022: 20.0%).
Shipped volumes of steel refractories excluding M&A in China reduced by
6%, compared to flat China steel output year on year according to WSA data, as
weakness in construction was balanced by growth in the autos and shipping end
markets. Shipped volumes of refractories in East Asia reduced by 15%, due to
inventory de-stocking and the temporary closure of a key plant by a steel
customer during the year. Several conventional steelmakers in the region are
planning new EAF projects, which is a positive development due to the Group's
market leadership position in EAF refractories.
Industrial sales volumes increased by 2% and higher pricing supported revenue
growth of 7%, mainly due to strong demand for glass and non-ferrous metals
refractories in China. Industrial gross margin in the region increased
slightly to 28.0% (2022: 27.5%).
The Group's priority in its China & East Asia business is to increase
margins to higher levels that are closer to the average for the Group
worldwide. Pricing is therefore being prioritised ahead of seeking to build
further market share at this stage in the development of the business.
Refractory tenders are highly competitive, with bids from multiple low-cost
competitors and cost pressures on steel producers holding down overall pricing
levels. The Group's strategy is to focus on higher value-added products and
services to differentiate against lower quality competing suppliers. The
region achieved the highest net promoter score globally from its customers in
internal surveys and operational excellence was further demonstrated by the
achievement of zero LTIF, PIFOT improvement and exceeding targets for scrap
rates.
A 65% stake in Jinan New Emei, a Shandong based producer of steel flow control
refractories, was acquired in May 2023 and contributed €49 million of
revenue in the year. Multiple customer trials are underway in China & East
Asia for Jinan New Emei products which could lead to sales growth in 2024.
Production of alumina-based refractories at the Group's newly constructed
facility in Chongqing commenced during 2023, supporting cement sales during
the period and with potential for further ramp up and sales to other
industrial segments in 2024.
Half year 2023 balance sheet correction
In the Group's unaudited half year results for the six month period to 30 June
2023 ("H1 2023 results") the initial consolidation of the Acquisition of
Dalmia OCL and Dalmia Seven Refractories Ltd was incomplete because the
purchase price allocation and the measurement of assets and liabilities had
not been finalised by the reporting date and a preliminary purchase price
allocation was provided. The Group funded its acquisition of Dalmia OCL
through the issuance of 27 million shares in its listed Indian subsidiary, RHI
Magnesita India Ltd., reducing its shareholding in RHI Magnesita India Ltd.
from 70% to 60% in January 2023, and subsequently to 56% following a QIP in
April 2023 and Preferential Issue in June 2023.
In the unaudited consolidated balance sheet dated 30 June 2023 that was
published on 26 July 2023, non-controlling interests relating to RHI Magnesita
India Ltd. was under-stated by €106 million and equity attributable to
shareholders of RHI Magnesita N.V. was over-stated by the same amount. A
correction to the half year balance sheet will be issued together with the
Group's half year results for the six month period to 30 June 2024. There is
no change to total equity or any item in the profit and loss or cash flow
statements as a result of this correction.
ALTERNATIVE PERFORMANCE MEASURES (APMs)
Definitions of APMs used by the Group are set out below. The purpose and
usefulness of each APM and a reconciliation to the nearest IFRS equivalent
measure, or a reference to a reconciliation appearing elsewhere in this
document. In general, APMs are presented externally to meet investor and
analyst requirements for clarity and transparency of the Group's underlying
financial performance. APMs are also used internally in the management of the
Group's business performance, budgeting and forecasting. APMs are non-IFRS
measures which enable investors and other readers to review alternative
measurements of financial performance, but they should not be used in
isolation from the main financial statements. Commentary within the Annual
Report, including the Financial Review, the Consolidated Financial Statements
and the accompanying notes, should be referred to in order to fully appreciate
all the factors and context affecting the Group's financial performance.
Readers are strongly encouraged not to rely on any single financial measure
and to carefully review the Group's reporting in its entirety.
Performance APMs
Adjusted EBITDA
Adjusted EBITDA is a key non-IFRS measure that the Executive Management Team
(EMT) and Directors use internally to assess the underlying financial
performance of the Group and is viewed as relevant to capital intensive
industries. The ratio of Net Debt to Adjusted EBITDA is used as a measure of
financial gearing.
Adjusted EBITDA is defined as EBIT, as presented in the Condensed Consolidated
Statement of Profit or Loss, before amortisation, depreciation, and Excluded
Items (see definition below).
Pro Forma Adjusted EBITDA
Pro Forma Adjusted EBITDA is used to assess financial gearing and includes a
full year of Adjusted EBITDA contribution from businesses acquired during the
year.
Adjusted EBITA
Adjusted EBITA is a key non-IFRS measure that the EMT and Directors use
internally to assess the underlying performance of the Group.
Adjusted EBITA is determined consistently with Adjusted EBITDA, but includes
depreciation expense of property, plant and equipment to reflect the wear and
tear cost and future replacement of productive assets.
Adjusted EPS
Adjusted EPS is a key non-IFRS measure and one of the Group's KPIs. Adjusted
EPS is used to assess the Group's underlying operational performance, post tax
and non-controlling interests on a per share basis.
This measure is based on Adjusted EBITA after finance income and expenses,
taxes, share of profit or loss from associates and joint ventures and
non-controlling interest. Share of profit or loss from associates and joint
ventures is adjusted to exclude impairments and gains or losses recognised on
disposals.
Adjusted EPS excludes finance income and expenses and certain foreign exchange
effects, that are not directly related to operational performance. This
includes the non-cash present value adjustments for the Oberhausen provision.
Taxes are calculated by applying the effective tax rate normalised for
restructuring expenses and impairments.
Excluded items
Items that are excluded (Excluded Items) in arriving at the Group's Adjusted
measures of Adjusted EBITA, EBITDA and EPS include:
Other income, other expenses and restructuring expenses as reflected on the
Consolidated Statement of Profit or Loss as well as gains and losses within
interest income, interest expenses and other net financial expenses that are
non-recurring in nature and not reflective of the underlying operational
performance of the business. Excluded items include restructuring related
provisions, costs in relation to corporate transactions and other
non-recurring costs. The tax impacts of the above Excluded Items are also
adjusted for.
Cash flow performance measures
Adjusted operating cash flow and Free cash flow
Adjusted operating cash flow is a key non-IFRS measure used by the EMT and the
Directors to reflect the operational cash generation capacity of the Group
before the cash impacts of Excluded Items (see definition above).
Adjusted operating cash flow is defined as Adjusted EBITDA adjusted for
working capital items, changes in other assets and liabilities and capital
expenditure and other non-cash items, such as share based payments. This APM
is reconciled to Net Cash flow from operating activities as follows:
€m 2023 2022
Adjusted operating cash flow (APM) 413 155
Capital expenditure(1) 180 157
Income Taxes paid(1) (60) (54)
Other income/expenses and restructuring items(1) (32) (24)
Net cash flow from operating activities(1) 500 234
1. As reflected in the Consolidated Statement of Cash Flows
Free cash flow is determined from the IFRS measures of Net cash flow from
operating activities, net cash used in investing activities and net cash (used
in)/provided by financing activities and excludes the cash impacts of
purchases and disposals of business and subsidiaries, dividends paid to equity
shareholders of the Group, share capital transactions with shareholders,
proceeds and repayment of borrowings and current borrowings and repayment of
leases.
Free cash flow is reconciled to Cash changes in Net debt in the table in the
Cash flow and working capital section. Cash changes in Net debt is reconciled
to Change in cash and cash equivalents in the Net Debt APM reconciliation.
Balance sheet
Liquidity
Liquidity comprises cash and cash equivalents, short term marketable
securities and undrawn committed credit facilities.
€m 2023 2022
Cash and cash equivalents(1) 704 521
Revolving credit facility 600 600
Liquidity (APM) 1,304 1,121
1. As reflected in the Consolidated Statement of Financial
Position
Net Debt
Net Debt is the excess of current and non-current borrowings, associated debt
derivatives for which hedge accounting is applied and lease liabilities over
cash and cash equivalents and short-term marketable securities. The Board uses
this measure for the purpose of capital management. A reconciliation of Net
Debt is included in Note 34 to the Condensed Consolidated Interim Financial
Statements.
€m 2023 2022
Cash changes in Net debt (41) (82)
Proceeds from borrowings(1) 336 344
Repayment of borrowings(1) (16) (278)
Change in current borrowings(1) (63) (14)
Repayment of lease obligations(1) (20) (21)
Change in cash and cash equivalents(1) 196 (50)
1. As reflected in the Consolidated Statement of Cash Flows
Working capital
Working capital consists of inventories plus trade receivables and other
receivables minus trade payables and other payables. Working capital intensity
provides a measure of how efficient the Company is in managing operating cash
conversion cycles. It is measured as Working capital divided by trailing
three-month revenues (annualised) and is expressed as a percentage.
€m 2023 2022
Inventories (Note 21) 996 1,049
Trade receivables (Note 22) 538 433
Contract assets (Note 22) 4 4
Contract liabilities (Note 32) (65) (62)
Accounts receivable 477 375
Trade payables (Note 32) (498) (507)
Total working capital 974 918
1. As reflected in the Consolidated Statement of Financial
Position
Return on invested capital (ROIC)
ROIC reflects the annualised return on invested capital of the Group. The
Group has amended its definition of ROIC to use Average Invested Capital,
being the average of the level of Invested Capital at the beginning and end of
the financial year. ROIC is calculated as NOPAT (net operating profit after
tax) divided by average invested capital of the year.
€m 2023 2022
Revenue(1) 3,572 3,317
Cost of sales(1) (2,714) (2,554)
Selling and marketing expenses(1) (153) (131)
General and administrative expenses(1) (339) (277)
Income taxes paid(2) (60) (54)
NOPAT 305 301
€m 2023 2022
Goodwill(3) 339 137
Other intangible assets(3) 470 317
Property, plant and equipment(3) 1,360 1,204
Investments in joint ventures and associates(3) 6 6
Other non-current assets(3) 37 40
Deferred tax assets(3) 152 128
Inventories(3) 996 1,049
Trade and other receivables(3) 686 579
Income tax receivables(3) 43 39
Deferred tax liabilities(3) (63) (62)
Trade and other current liabilities(3) (820) (780)
Income tax liabilities(3) (51) (38)
Current provisions(3) (34) (30)
Invested capital 3,122 2,587
Average invested capital 2,854 2,439
Return on invested capital(4) 10.7% 12.3%
1. As reflected in the Consolidated Statement of Profit and
Loss
2. As reflected in the Consolidated Statement of Cash Flows
3. As reflected in the Consolidated Statement of Financial
Position
4. NOPAT divided by average invested capital of the year.
Invest Capital in 2021 €2,291 million
GLOSSARY
CEO Chief Executive Officer
CFO Chief Financial Officer
CO2 Carbon dioxide
CoGS Cost of Goods Sold
DBM Dead Burned Magnesia
DBRL Dalmia Bharat Refractories Limited
DGSB Dalmia GSB Refractories GmbH
DSR Dalmia Seven Refractories Ltd
EAF Electric Arc Furnace
EBIT Earnings Before Interest and Taxes
EBITA Earnings Before Interest, Taxes and Amortisation
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation
EEC Environment, Energy and Chemicals
EMT Executive Management Team
EPS Earnings Per Share
EU European Union
FX Foreign Exchange
Hi-Tech Hi-Tech Chemicals Ltd
IAS International Accounting Standards
IFRS International Financial Reporting Standards
Jinan New Emei Jinan New Emei Industries Co. Ltd
NOPAT Net Operating Profit After Tax
OCF Operating Cash Flow
Oberhausen provision Unfavourable contract required to satisfy EU remedies at the time of the
combination of RHI and Magnesita to form RHI Magnesita
OIE Other Income and Expenses
P-D Refractories P-D Refractories CZ a.s.
PIFOT Process In Full On Time
PPE Property, Plants & Equipment / Personal Protective Equipment
QIP Qualified Institutional Placement, a mechanism used for equity issuance in
India
ROIC Return On Invested Capital
Seven Refractories Seven Refractories d.o.o.
SG&A Selling, General and Administrative Expenses
SÖRMAŞ Söğüt Refrakter Malzemeleri Anonim Şirketi
UK United Kingdom
WSA World Steel Association
Consolidated Financial Statements 2023
Consolidated Statement of Profit or Loss
for the year ended 31 December 2023
in € million Note 2023 2022
Revenue (5) 3,571.8 3,317.2
Cost of sales (5) (2,714.4) (2,553.8)
Gross profit 857.4 763.4
Selling and marketing expenses (153.0) (131.3)
General and administrative expenses (339.2) (277.2)
Result from operating joint ventures and associates 0.1 0.1
Restructuring (6) (19.6) 6.8
Other income (7) 27.1 4.8
Other expenses (8) (38.9) (23.0)
EBIT 333.9 343.6
Interest income (11) 19.7 8.3
Interest expenses on borrowings (58.2) (27.4)
Net expense on foreign currency effects (12) (30.4) (23.3)
Other net financial expenses (13) (31.7) (30.7)
Net finance costs (100.6) (73.1)
Profit before income tax 233.3 270.5
Income tax (14) (62.0) (103.7)
Profit after income tax 171.3 166.8
RHI Magnesita N.V. shareholders 164.6 155.7
Non-controlling interests (26) 6.7 11.1
in €
Earnings per share - basic (15) 3.50 3.31
Earnings per share - diluted (15) 3.42 3.26
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
in € million Note 2023 2022
Profit after income tax 171.3 166.8
Currency translation differences
Unrealised results from currency translation (22.5) 49.9
Unrealised results from net investment hedge and foreign operations (10.4) (5.4)
Deferred taxes thereon (14) 0.4 (3.2)
Current taxes thereon (14) 0.0 4.1
Reclassification to profit or loss - Disposal subsidiaries (0.6) 0.7
Cash flow hedges
Unrealised fair value changes (36) (25.2) 58.0
Reclassification to profit or loss (10.0) (7.2)
Deferred taxes thereon (14) 8.0 (11.9)
Items that may be reclassified to profit or loss in later periods (60.3) 85.0
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans (29) (22.5) 58.0
Deferred taxes thereon (14) 6.1 (18.5)
Items that are not reclassified to profit or loss in later periods (16.4) 39.5
Other comprehensive (loss)/income after income tax (76.7) 124.5
Total comprehensive income 94.6 291.3
RHI Magnesita N.V. shareholders 97.9 282.7
Non-controlling interests (26) (3.3) 8.6
Consolidated Statement of Financial Position
as at 31 December 2023
in € million Note 31.12.2023 31.12.2022
ASSETS
Non-current assets
Goodwill (17) 339.2 136.9
Other intangible assets (18) 469.8 316.6
Property, plant and equipment (19) 1,360.1 1,203.7
Investments in joint ventures and associates 6.2 5.7
Other non-current financial assets (35) 43.4 55.1
Other non-current assets (20) 36.7 40.0
Deferred tax assets (14) 152.0 128.2
2,407.4 1,886.2
Current assets
Inventories (21) 995.9 1,049.1
Trade and other current receivables (22) 685.7 578.9
Income tax receivables (14) 43.5 38.7
Other current financial assets (35) 13.6 1.3
Cash and cash equivalents (23) 703.5 520.7
2,442.2 2,188.7
4,849.6 4,074.9
EQUITY AND LIABILITIES
Equity
Share capital (24) 49.5 49.5
Group reserves (25) 1,152.2 951.7
Equity attributable to shareholders of RHI Magnesita N.V. 1,201.7 1,001.2
Non-controlling interests (26) 161.8 47.4
1,363.5 1,048.6
Non-current liabilities
Borrowings (27) 1,799.5 1,404.9
Other non-current financial liabilities (28) 133.4 92.8
Deferred tax liabilities (14) 62.5 62.0
Provisions for pensions (29) 241.5 214.7
Other personnel provisions (30) 55.2 51.7
Other non-current provisions (31) 91.6 80.0
Other non-current liabilities 7.3 6.3
2,391.0 1,912.4
Current liabilities
Borrowings (27) 149.3 215.1
Other current financial liabilities (28) 40.9 50.1
Trade payables and other current liabilities (32) 820.2 780.3
Income tax liabilities (14) 50.8 38.3
Current provisions (31) 33.9 30.1
1,095.1 1,113.9
4,849.6 4,074.9
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
in € million Note 2023 2022
Cash generated from operations (33) 560.1 287.5
Income tax paid less refunds (60.4) (53.7)
Net cash flow from operating activities 499.7 233.8
Investments in property, plant and equipment and intangible assets (179.5) (156.7)
Investments in subsidiaries net of cash acquired (313.3) (63.2)
Cash receipts from the sale of equity instruments of interests in joint 0.0 8.7
ventures
Cash inflows from the sale of property, plant and equipment 3.6 1.8
(Cash outflows) / Cash inflows from investments/ from the sale of financial (13.8) 2.8
assets
Dividends received from non-consolidated entities, joint ventures and 0.5 0.0
associates
Investment subsidies received and cash inflows from non-current receivables 1.9 0.8
Interest received 18.9 6.1
Net cash used in investing activities (481.7) (199.7)
Payment for share issue costs in subsidiary (2.6) 0.0
Proceeds from share issue in subsidiary 100.2 0.0
Acquisition of non-controlling interests (8.2) (1.4)
Dividends paid to RHI Magnesita N.V. shareholders (77.7) (70.5)
Dividend paid to non-controlling interests (2.9) (1.5)
Proceeds from long-term financing 336.0 344.4
Repayments of long-term financing (15.9) (278.0)
Changes in current borrowings and financial liabilities to joint ventures and (60.6) (12.2)
associates
Interest payments (72.7) (41.0)
Repayment of lease obligations (20.3) (20.6)
Interest payments from lease obligations (2.4) (1.3)
Cash flows from derivatives 5.1 (1.8)
Net cash provided by/(used in) financing activities (34) 178.0 (83.9)
Total cash flow 196.0 (49.8)
Change in cash and cash equivalents 196.0 (49.8)
Cash and cash equivalents at beginning of period 520.7 580.8
Reclassification of Cash and Cash equivalents (23) (9.3) 0.0
Foreign exchange impact (3.9) (10.3)
Cash and cash equivalents at end of period (23) 703.5 520.7
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
Group reserves
Accumulated other comprehensive income
in € million Share Treasury shares Additional Mandatory reserve Retained earnings Cash flow hedges Defined Currency translation Equity attributable Non-controlling interests Total equity
capital
paid-in
benefit plans
to shareholders
capital
of RHI Magnesita N.V.
Note (24) (25) (25) (25) (25), (26) (25) (25) (25) (26), (42)
31.12.2022 49.5 (116.1) 361.3 288.7 620.2 31.8 (85.6) (148.6) 1,001.2 47.4 1,048.6
Profit after income tax - - - - 164.6 - - - 164.6 6.7 171.3
Currency translation differences - - - - - - - (23.2) (23.2) (9.9) (33.1)
Cash flow hedges - - - - - (27.2) - - (27.2) - (27.2)
Defined benefit plans - - - - - - (16.3) - (16.3) (0.1) (16.4)
Other comprehensive income after income tax - - - - - (27.2) (16.3) (23.2) (66.7) (10.0) (76.7)
Total comprehensive income - - - - 164.6 (27.2) (16.3) (23.2) 97.9 (3.3) 94.6
Hedging gains and losses and costs of hedging transferred to the carrying - - - - - 1.4 - - 1.4 - 1.4
value of inventory purchased during the year
Dividends - - - - (77.7) - - - (77.7) (3.0) (80.7)
Share transfer/vested LTIP - 5.4 - - (5.4) - - - - - -
Additions to consolidated companies and change of non-controlling interests - - - - 147.7 - - - 147.7 53.7 201.4
without a change of control
Change of non-controlling interests without a change of control - - - - 36.2 - - - 36.2 63.8 100.0
Change of non-controlling interests without a change of control - - - - 3.2 - - - 3.2 (3.2) -
Change of non-controlling interests without a change of control - - - - (3.4) - - - (3.4) (3.5) (6.9)
Hyperinflation adjustment - - - - - - - 9.2 9.2 - 9.2
Other changes(1)) - - - - (22.7) - - - (22.7) 9.9 (12.8)
Share-based payment expenses - - - - 8.7 - - - 8.7 - 8.7
- 5.4 - - 86.6 1.4 - 9.2 102.6 117.7 220.3
31.12.2023 49.5 (110.7) 361.3 288.7 871.4 6.0 (101.9) (162.6) 1,201.7 161.8 1,363.5
1) Mainly relating to the recognition of the financial liability and
derecognition of the non-controlling interests related to the acquisition of
Jinan New Emei, the recognition of the non-controlling interests related to
the acquisition of Seven Refractories Group
as well as PD Group and the impacts of the fair value changes resulting from
the completion of purchase price allocation related to the acquisition of
Sörmaş, see Note (42).
Group reserves
Accumulated other comprehensive income
in € million Share Treasury shares Additional Mandatory reserve Retained earnings Cash flow hedges Defined Currency translation Equity attributable Non-controlling interests Total equity
capital
paid-in
benefit plans
to shareholders
capital
of RHI Magnesita N.V.
Note (24) (25) (25) (25) (25) (25) (25) (25) (26)
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 - - - - 155.7 - - - 155.7 11.1 166.8
Currency translation differences - - - - - - - 48.6 48.6 (2.5) 46.1
Cash flow hedges - - - - - 38.9 - - 38.9 - 38.9
Defined benefit plans - - - - - - 39.5 - 39.5 - 39.5
Other comprehensive income after income tax - - - - - 38.9 39.5 48.6 127.0 (2.5) 124.5
Total comprehensive income - - - - 155.7 38.9 39.5 48.6 282.7 8.6 291.3
Transactions with shareholders
Dividends - - - - (70.5) - - - (70.5) (1.5) (72.0)
Share transfer/vested LTIP - 0.9 - - (0.9) - - - - - -
Change in non-controlling interests due to addition to consolidated companies - - - - - - - - - 6.1 6.1
Reclassification of puttable non-controlling interests without a change of - - - - (4.8) - - - (4.8) (6.1) (10.9)
control
Change in non-controlling interests due to addition to consolidated companies - - - - - - - - - 5.0 5.0
Change in non-controlling interests without a change of control - - - - (0.4) - - - (0.4) (1.0) (1.4)
Share-based payment expenses - - - - 8.3 - - - 8.3 - 8.3
Transactions with shareholders - 0.9 - - (68.3) - - - (67.4) 2.5 (64.9)
31.12.2022 49.5 (116.1) 361.3 288.7 620.2 31.8 (85.6) (148.6) 1,001.2 47.4 1,048.6
Notes
to the Consolidated Financial Statements 2023
Principles and Methods
1. Authorisation of Financial Statements and Statement of Compliance with
International Financial Reporting Standards
The Consolidated Financial Statements of RHI Magnesita N.V. and its
subsidiaries (collectively referred to as "RHIM" or "the Group" for the year
ended 31 December 2023, were approved and authorised for issue by the Board of
Directors on 28 February 2024 and will be submitted for adoption to the Annual
General Meeting of shareholders in May 2024. RHIM is a public limited company
incorporated under the laws of the Netherlands (naamloze vennootschap), having
its official seat (statutaire zetel) in Arnhem, the Netherlands, and its
office at Kranichberggasse 6, 1120 Vienna, Austria, registered with the Dutch
Trade Register under number 68991665 and listed on the London Stock Exchange,
with a secondary listing on the Vienna Stock Exchange (Wiener Börse).
The Group is a global industrial group whose core activities include the
development and production, sale, installation and maintenance of high-grade
refractory products and systems used in industrial high-temperature processes
exceeding 1,200°C.
Basis for preparation
The Consolidated Financial Statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union. The Consolidated Financial Statements also comply with
the financial reporting requirements included in Title 9 of Book 2 of the
Dutch Civil Code.
The accounting policies that follow have been consistently applied to all
years presented, except where otherwise indicated. With the exception of
specific items such as derivative financial instruments, plan assets for
defined benefit obligations, financial assets measured at Fair Value through
Profit or Loss (FVPL) or Other Comprehensive Income (FVOCI) and financial
liabilities measured at FVPL, the Consolidated Financial Statements are
prepared on a historical cost basis.
The financial year of RHI Magnesita N.V. and the Group corresponds to the
calendar year. Subsidiaries with a financial year different to the Group, due
to local legal requirements, provide financial information to allow
consolidation consistent with the Group's financial year. The Consolidated
Financial Statements are presented in Euros and all values are rounded to the
nearest € million with one decimal, except where otherwise indicated. The
Group has availed of the exemption provided by section 264 paragraph 3 HGB of
the German Commercial Code for the following entities: RHI Urmitz AG & Co.
KG (Koblenz), Magnesita Refractories GmbH (Wiesbaden), RHI Magnesita Sales
Germany GmbH (Wiesbaden), RHI Refractories Site Services GmbH (Wiesbaden), RHI
Magnesita Deutschland AG (Wiesbaden), RHI Magnesita Wetro GmbH (Puschwitz) and
RHI Magnesita Bochum GmbH (Bochum). According to this provision, the mentioned
companies are exempt from preparing statutory financial statements, if
required by the German Commercial Code, since they are included in the
Consolidated Financial Statements of the Group.
Basis of consolidation
The Consolidated Financial Statements consolidate the Financial Statements of
the Group. Subsidiaries are consolidated from the date on which the Group
obtains control, including when control is obtained via potential voting
rights, and continue to be consolidated until the date that control ceases.
The financial information of subsidiaries is prepared for the same reporting
year as the parent company, using consistent accounting policies. When the
Group ceases to have control, any retained interest in the entity is
remeasured to its fair value, with the change in carrying amount recognised in
the Statement of Profit or Loss. The fair value is the initial carrying amount
for the purposes of subsequently accounting for the retained interest as an
associate, joint venture or financial asset. In addition, any amounts
previously recognised in Other Comprehensive Income (OCI) in respect of that
entity are accounted for as if the Group had directly disposed of the related
assets or liabilities. This treatment may mean that amounts previously
recognised in OCI are recycled through the Statement of Profit or Loss.
Intercompany balances and transactions, including unrealised profits arising
from intragroup transactions, are eliminated in full. Unrealised losses are
eliminated in the same way as unrealised gains except that they are only
eliminated to the extent that there is no evidence of impairment.
Non-controlling interests represent the equity in subsidiaries that is not
attributable, directly or indirectly, to the Group's shareholders.
Please refer to the Company Financial Statements of RHI Magnesita N.V. for a
list of the Company's subsidiaries, joint ventures and associates in which it
holds more than 20%.
Going concern
In considering the appropriateness of adopting the going concern basis in
preparing the 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, using
the same model performed for the viability assessment. This assessment covers
the period to 31 December 2025.
The scenarios considered by the Directors include a severe but plausible
downside and a reverse stress test which determines the level of EBITDA that
could breach the Group's debt covenant. Further mitigating actions within
management control would be undertaken in such scenarios, including but not
limited to: working capital and SG&A reduction, deferring capital
expenditure, or reducing or cancelling the dividend, but these were not
incorporated in the downside modelling.
The Directors have also considered the Group's current liquidity and available
facilities. As of 31 December 2023, the Consolidated Statement of Financial
Position reflects cash and cash equivalents of €703.5 million (2022:
€520.7 million). In addition, the Group has access to a €600.0 million
(2022: €600.0 million) Revolving Credit Facility (RCF), which is currently
undrawn and not relied upon for the purpose of the going concern assessment.
The Group has complied with the financial covenants of the Group's loan
agreements (refer to Note (27)).
In the scenarios assessed and taking into account liquidity, available
resources and before the inclusion of all mitigating actions, the Directors
consider it is appropriate to continue to adopt the going concern basis in
preparing the Consolidated Financial Statements for the period ended 31
December 2023.
2. Impact of new financial reporting standards and interpretations
Management has assessed the impact of new or amended IFRS and interpretations
issued by the IASB and IFRS endorsed by the European Union effective on or
after 1 January 2023. Management assessed that application of these has not
had a material impact on the Consolidated Financial Statements for 2023. Refer
to Note (3) on the results of the impact analysis on the implementation of a
minimum taxation for income taxes under the new Pillar II legislation.
Furthermore, management has assessed the impact of new or amended IFRS and
interpretations issued by the IASB that have not yet become effective. No new
or amended IFRS or interpretations have been early adopted. Except for the
amendments to IAS 7 & IFRS 7 covering new disclosure requirements for the
Group's existing liabilities related to supply finance arrangements,
management does not anticipate any significant impact on the Consolidated
Financial Statements in the period of initial application after the adoption
of these amendments.
Since supplier financing arrangements related to trade payables (see Note
(32)) exist in the Group, and are expected to continue in the coming years,
the amendments to IAS 7 & IFRS 7 will bring additional disclosures on the
effects of these arrangements on the Group's liabilities, cash flows and
exposure to liquidity risk. The Group is analysing the impacts of the
additional disclosures in terms of content and scope.
3. Significant Accounting Policies, Judgements and Estimates
Interests in other entities
Business combinations
Business combinations are accounted for using the acquisition method. The
identifiable assets acquired and liabilities assumed, including any contingent
consideration, are recognised at their fair values at the acquisition date.
The amount of the purchase consideration and value of non-controlling interest
on acquisition, if any, above the fair value of assets and liabilities is
recognised as goodwill. A bargain purchase gain, if any, is recognised within
other income immediately. Transaction costs related to a business combination
are expensed as incurred. The acquisition of a non-controlling interest in a
subsidiary and the sale of an interest are accounted for as transactions
within equity unless they result in the loss of control. Sales of interests
accounted for as equity transactions also include share issues in subsidiaries
which dilute RHI Magnesita N.V.'s share in the subsidiary's net assets and
where the dilution does not result in the loss of control. The difference
between the purchase consideration or sale proceeds after tax and the relevant
proportion of the non-controlling interest, measured by reference to the
carrying amount of the interest's net assets at the date of acquisition or
sale, is recognised in retained earnings as a movement in equity attributable
to the shareholders of RHI Magnesita N.V.
Where the Group acquires less than 100% of shares in a business combination,
IFRS 3 'Business Combinations' allows an accounting policy choice whereby
non-controlling interest is either reflected at the proportionate share of the
acquired identifiable net assets (excluding goodwill) or at fair value. This
accounting policy choice can be exercised individually for each acquisition.
If a non-wholly owned subsidiary of RHI Magnesita N.V. is the deemed acquirer
in a business combination, goodwill is measured either as the excess of the
full consideration transferred plus non-controlling interests, if any, over
the acquired identifiable net assets or as the excess of RHI Magnesita N.V.'s
share in the consideration transferred plus non-controlling interests, if any,
over the acquired identifiable net assets. This accounting policy choice can
be exercised individually for each acquisition too. For business combinations
achieved in stages, the Group's previously held equity interest is remeasured
to fair value at the acquisition date. Any gains and losses arising from such
remeasurement are recognised in profit or loss.
Net assets of subsidiaries not attributable to the Group are shown separately
in equity as non-controlling interests.
As part of a business acquisition or subsequently, the Group may enter into
agreements with non-controlling interests in the form of a call option, a put
option or a forward contract to acquire the outstanding shares. A call option
provides the Group with the right to acquire the outstanding shares not
already owned, while a written put option allows the non-controlling interest
to sell their shares to the Group. A forward contract creates a commitment for
the Group to purchase and for the non-controlling interest to sell the
outstanding shares at a later date. The option or forward price may be based
on an earnings multiple such as EBITDA subject to contractual limits, if any,
or may be fixed and exercisable at a future date. A financial liability is
recognised on the written put option at the present value of the estimated
redemption amount. Where the option is assessed to result in the
non-controlling interest transferring the risks and rewards of ownership to
the Group, on acquisition, the financial liability forms part of the purchase
consideration with no value assigned to non-controlling interests. For fixed
price call and put options, the risks and rewards of ownership relating to the
outstanding shares are assumed to have transferred to the Group.
Where the risks and rewards of ownership under the option are not transferred
to the Group, the financial liability is not considered as part of the
purchase consideration and a non-controlling interest is recognised on
acquisition. The financial liability is initially recognised against equity
attributable to shareholders of RHI Magnesita N.V. The Group applies the
provisions of IAS 32 'Financial Instruments: Presentation' and subsequently
derecognises the non-controlling interest to the extent that it is equal or
less than the financial liability, against equity attributable to shareholders
of RHI Magnesita N.V.
The subsequent measurement of the financial liability is conditional on the
nature of the underlying cash consideration. If the option or forward contract
will be settled at a fixed cash consideration, the financial liability is
subsequently measured at amortised cost. If the option or forward contract
will be settled at a variable cash consideration (e.g. EBITDA multiple or
similar P&L measures) the financial liability is subsequently measured at
fair value through profit or loss (FVPL). Fair value changes resulting from
the remeasurement of the financial liability are reflected within other net
financial expenses.
Dividends paid to non-controlling interest with a fixed price or option are
reflected as an expense within other finance expenses unless there is a
contractual right to reduce the liability.
Goodwill may also arise upon investments in joint ventures and associates,
being the surplus of the cost of investment over the Group's share of the net
fair value of the identifiable net assets. Any such goodwill is recorded
within the corresponding investment in joint ventures and associates.
Significant judgement: Recognition of non-controlling interest of Jinan New Emei
The acquisition of Jinan New Emei Industries Co Ltd. includes a commitment for
the Group to acquire the outstanding shares (35%), see Note (42). The Group
has concluded, based on the terms and pricing of the commitment, that the
risks and rewards of ownership associated with the outstanding shares have not
been transferred to the Group. Therefore, the financial liability was not
considered as part of the purchase consideration and a non-controlling
interest was recognised on acquisition. The financial liability arising from
the commitment has been recognised in accordance with the Group's accounting
policy related to fixed-term or puttable non-controlling interests. Being that
the financial liability was initially recognised against equity attributable
to shareholders of RHI Magnesita N.V, while the said non-controlling interests
were derecognised to zero - also against equity attributable to shareholders
of RHI Magnesita N.V.
Significant estimate: Measurement of assets acquired and liabilities assumed in business combinations
Estimates relating to the calculation of fair values of acquired assets,
liabilities and contingent liabilities are required within the context of
business combinations disclosed in Note (42).
Where intangible assets are identified, estimates are necessary for the
determination of fair values by means of discounted cash flows, including the
duration, amount of future cash flows, and discount rate. Fair values of
physical assets are estimated with reference to comparable assets in the
market.
When making estimates in the context of purchase price allocations on major
acquisitions, the Group consults with independent experts who accompany the
execution of the discretionary decisions and record this in appraisal
documents. The Group has a period of one year from the date of control of the
acquired businesses to update initial fair value estimates. The Group does not
expect changes in these fair value estimates to have a significant impact on
the recognised assets and liabilities over the remaining measurement period.
Goodwill and Other intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets, liabilities and contingent liabilities of a subsidiary at the date of
acquisition. Goodwill is initially recognised at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill recognised
as an asset is reviewed for impairment at least annually.
On disposal of a subsidiary, the attributable amount of goodwill is included
in the determination of the profit or loss on disposal.
Other intangible assets
Mining rights
Mining rights were recognised in the course of the purchase price allocation
for former Magnesita Group and are amortised based on the depletion of the
related mines. Depletion is calculated based on the volume mined in the period
in proportion to the total estimated economically viable volume.
Customer relationships
Customer relationships arise from the acquisition of business and are measured
at assigned fair values on acquisition, less accumulated amortisation and
impairments. These intangibles are amortised on a straight-line basis over
their expected useful lives.
Development costs
Research costs are expensed in the year incurred and included in general and
administrative expenses. Development costs, including internally developed
software, are only capitalised if the costs can be measured reliably and are
expected to result in future economic benefits either through use or sale.
Capitalisation will also only arise when the product or process development
can be clearly defined and is feasible in technical, economic and capacity
terms. For internally developed software, costs are capitalised when these can
be directly and conclusively allocated to individual programmes and represent
a significant extension or improvement on existing software. All other
internally developed software costs are expensed. Development costs are
amortised on a straight-line basis over their expected useful lives of up to
ten years, with internally developed software amortised over a period of up to
four years. Amortisation is recognised in cost of sales.
Other intangible assets
These mainly represent purchased third-party software, land-use rights and
patent fees and are recognised when future associated economic benefits are
expected to accrue to the Group. These intangibles are initially measured at
their acquisition cost and amortised over their expected useful lives.
The useful lives of the Group's main classes of intangible assets are:
Customer relationships 6 to 20 years
Internally generated intangible assets 4 to 18 years
Other intangible assets 4 to 65 years
The useful economic lives of intangible assets are reviewed regularly and
adjusted if necessary.
The carrying value of other intangible assets are assessed at each reporting
period for indicators of impairments. See below for the accounting policy
relating to impairment of non-current assets other than goodwill and
intangible assets with indefinite useful life.
Significant judgement: Measurement of mining rights
Management has assessed that given the few or no viable alternatives for the
Group's refractory products, which are extracted from the Group's mines and
used in the construction and automotive industries, together with their
continued use in the transition to a green economy, no indicators of
impairment have arisen and as a consequence the useful lives remain unchanged.
Property, plant and equipment
Property, plant and equipment is measured at acquisition or construction cost,
less accumulated depreciation and accumulated impairment losses. These assets
are depreciated on a straight-line basis over their expected useful life to
their estimated residual values and from when they are available for use in
the manner intended by management.
Construction costs of assets comprise of direct costs as well as a
proportionate share of capitalisable overhead costs and borrowing costs. If
borrowed funds are directly attributable to an investment, borrowing costs are
capitalised as a cost of the assets. If no direct connection between an
investment and borrowed funds can be demonstrated, the average rate on
borrowed capital of the Group is used as the capitalisation rate due to the
central funding of the Group.
Expected demolition and disposal costs at the end of an asset's useful life
are capitalised as part of its acquisition cost and recorded as a provision.
The recognition criteria are a legal or constructive obligation towards a
third-party and the ability to reliably estimate future cost.
Land and plant under construction are not depreciated. Depreciation of
property, plant and equipment is based on the following useful lives:
Real estate, land and buildings 8 to 60 years
Technical equipment and machinery 8 to 50 years
Other plant, office equipment, furniture and fixtures 3 to 35 years
The carrying value of property, plant and equipment is assessed at each
reporting period for indicators of impairments. See below for accounting
policy relating to impairment of non-current assets other than goodwill and
intangible assets with indefinite useful life.
The residual values and economic useful lives of property, plant and
equipment, are reviewed regularly and adjusted if necessary.
When components of plant or equipment have to be replaced at regular
intervals, the relevant replacement costs are capitalised when economic
benefits are expected to arise for the Group. The carrying amount of the
replaced components is derecognised. Regular maintenance and repair costs are
expensed as incurred.
Gains or losses from the disposal of property, plant and equipment, which
result from the difference between the net realisable value and the carrying
amount, are recognised as income or expense in the Consolidated Statement of
Profit or Loss.
Significant estimate: Useful lives of property, plant and equipment and intangible assets
Management uses its experience to estimate the remaining useful life of an
asset. The actual useful life of an asset may be impacted by an unexpected
event that may result in an adjustment to the carrying amount of the asset. No
such events are expected to arise which would have a material impact on
carrying values within 12 months from the balance sheet date.
Leases
A contract, or part of a contract, that conveys the right to control the use
of an identified asset for a period of time in exchange for payments to be
made to the owners (lessors) is accounted for as a lease. Contracts are
assessed to determine whether it is or contains, a lease at inception or when
the terms and conditions of a contract are significantly changed. The lease
term is the non-cancellable period of a lease, together with contractual
options to extend or to terminate the lease early, where it is reasonably
certain that an extension option will be exercised, or a termination option
will not be exercised. At the commencement of a lease contract, a right-of-use
asset and a corresponding lease liability are recognised, except for low-value
items or for lease terms of less than 12 months. The commencement date of a
lease is the date on which the underlying asset is made available for use. The
lease liability is measured at an amount equal to the present value of the
lease payments during the lease term that are not paid at that date. The lease
liability includes contingent rentals and variable lease payments that depend
on an index, rate, or where they are fixed payments in substance.
The lease liability is remeasured when the contractual cash flows of variable
lease payments change due to a change in an index or rate when the lease term
changes following a reassessment. Lease payments are discounted using the
interest rate implicit in the lease. If that rate is not readily available,
the incremental borrowing rate is applied. The incremental borrowing rate
reflects the rate of interest that the lessee would have to pay to borrow over
a similar term and similar security, the funds necessary to obtain an asset of
a similar nature and value to the right-of-use asset in a similar economic
environment.
In general, a corresponding right-of-use asset is recognised for an amount
equal to each lease liability, adjusted by the amount of any pre-paid lease
payment relating to the specific lease contract, less any lease incentives,
and for any estimated restoration and removal costs. The depreciation on
right-of-use assets is recognised in the Statement of Profit or Loss.
Right-of-use assets are assessed for impairment indicators (see accounting
policy on impairment of non-current assets).
Impairment of goodwill, property, plant and equipment and other intangible assets
Goodwill
Goodwill is reviewed at least annually for impairment. Any impairment loss is
recognised as an expense immediately. For the purpose of impairment testing,
goodwill is allocated to groups of individual Cash-Generating Units (CGUs)
expected to benefit from the combination. If the recoverable amount of the CGU
is less than the carrying amount of the CGU (including goodwill) allocated to
it, the resulting impairment loss is applied first to the allocated goodwill
and then to the other assets on a pro-rata basis of the carrying amount of
each asset. Reversals of impairment losses on goodwill are not permitted. The
cash flows used to determine the recoverable amount of the CGU, including
goodwill, is consistent with the description provided below for property,
plant and equipment and other intangibles.
Significant estimate: Determination of recoverable amounts of CGUs which include goodwill
Management makes use of various estimates and assumptions in determining the
cash flow forecasts used to determine the recoverable amounts of CGUs to which
goodwill is allocated for the annual impairment test. Key assumptions include
discount rates used to discount cash flows, the perpetual annuity growth rate,
projected revenue and projected EBIT margin of the associated CGU. For further
details on impairment tests for CGUs which include goodwill, refer to Note
(17).
Property, plant and equipment and other intangibles
Property, plant and equipment, including right-of-use assets and intangible
assets are tested for impairment if there is any indication that the value of
these items may be impaired. An asset is considered to be impaired if its
recoverable amount is less than its carrying amount. In the Group, individual
assets do not generate cash inflows independent of one another and assets are
combined in CGUs, which largely generate independent cash inflows. These CGUs
are combined in strategic business units and reflect the market presence and
appearance and drive cash inflows. The organisational structures of the Group
reflect these units. In addition to the joint management and control of the
business activities in each unit, the sales know-how, the knowledge of the
long-standing customer relationships or knowledge of the customer's production
facilities and processes further support these units. Product knowledge is
manifested in the application-oriented knowledge of chemical, physical and
thermal properties of RHI Magnesita products. The services offered extend over
the life cycle of products at the customer's plant, from the appropriate
installation and support of optimal operations, to environmentally sound
disposal with the customer or sustainable reuse in the Group's production
process. These factors determine cash inflow to a significant extent and
consequently form the basis for the CGU structures.
The CGUs of the strategic business unit Steel are Linings and Flow Control.
These two CGUs are determined according to the production stages in the
process of steel production. In the Industrial business unit, each industry
line of business (Glass, Cement/Lime, Non-Ferrous Metals and Environment,
Energy, Chemicals) forms a separate CGU. All raw material producing facilities
are combined in one CGU.
According to IAS 36 'Impairment of Assets' the recoverable amount of a CGU is
defined as the higher of its fair value less costs of disposal and its value
in use (present value of future cash flows). For the purpose of testing CGUs
for impairment the Group determines the recoverable amount of the CGUs solely
on the basis of value in use. In assessing value in use, the estimated future
cash flows of the CGU in its present condition are discounted to their present
value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks, including country, specific to the
CGU.
The cash flows projections used for impairment testing are based on the
strategic business and financial planning model of the Group including the
2024 budget, as approved by the Board, and the Long-Term Plan covering a
four-year period. The terminal value is based on a growth rate derived from
the difference of the current and the possible degree of utilisation of the
assets. To forecast the CGUs' cash flows, management predicts the growth rate
using external sources for the development of the customers' industries and
expert assumptions, including forecasts about the regional growth of steel
production and the output of the non-steel clients. Growth rates are also
influenced by the development of the specific refractory consumption patterns,
including technological improvements.
If the carrying amount is higher than the recoverable amount, an impairment
loss equivalent to the resulting difference is recognised in the Statement of
Profit or Loss. If the reason for an impairment loss recognised in the past
for property, plant and equipment or for other intangible assets ceases to
exist, a reversal of the impairment is recognised in profit or loss. An
impairment loss is reversed only to the extent that the CGUs carrying amount
does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised in
prior years.
Significant judgement: Identification of impairment indicators related to CGUs without goodwill
Management reviewed CGUs for indicators of impairment. These indicators
included both external factors affecting the CGUs, such as laws and
regulations in specific countries and global and local economic conditions and
internal factors, including but not limited to, useful lives of assets, major
breakdowns or decisions to divest from certain businesses. Based on the
impairment indicator review, no impairment indicators were identified at any
of the CGUs, that did not have goodwill allocated to them.
Additionally, management has assessed the useful lives of assets and these
continue to be appropriate due to the limited refractory and other product
alternatives available and as the steel and industrial sectors in which the
Group operates, continue to play a significant part in the transition towards
sustainable output and the transition to a green economy.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
In general, financial instruments can be classified to be measured
subsequently at amortised cost, fair value through profit or loss or fair
value through other comprehensive income. Classification of financial assets
depends on the contractual terms of the cash flows as well as on the entity's
business model for managing the financial assets. The business model
determines whether cash flows will result from collecting contractual cash
flows, selling the financial assets, or both.
Financial assets are classified as amortised cost, if the contractual cash
flows include solely payments of principal and interest and which are held in
order to collect the contractual cash flows. If the contractual cash flows
include solely payments of principal and interest, but are held to collect
both the contractual cash flows and sell the financial asset, then they are
classified as fair value through other comprehensive income. If the
contractual cash flows do not solely include payments of principal and
interest, then they are classified as fair value through profit or loss.
The Group initially recognises securities on the trading date when it becomes
a party to the contractual provisions of the instruments. All other financial
assets and financial liabilities are initially recognised on the date when
they are originated. Financial instruments, except for trade receivables, are
initially recognised at fair value. Financial assets are derecognised if the
entity transfers substantially all the risks and rewards or if the entity
neither transfers nor retains substantially all the risks and rewards and has
not retained control. Financial liabilities are derecognised when the
contractual obligations are settled, withdrawn or have expired.
Investments in debt securities are subsequently measured at fair value through
profit and loss if the contractual terms of cash flows do not solely include
payments of principal and interest. Otherwise, they are subsequently carried
at amortised cost.
Investments in equity securities, including non-consolidated subsidiaries, are
of minor importance and recognised and measured either at fair value through
profit or loss, or at fair value through OCI, if the latter option was
exercised.
Financial assets at amortised costs are measured by applying the effective
interest method.
Trade and other current receivables
Trade receivables are recognised initially at the amount of consideration that
is unconditional, unless they contain significant financing components when
they are recognised at fair value and, depending on the business model,
subsequently carried either at amortised cost minus any valuation allowances
or at fair value through other comprehensive income minus any valuation
allowances for expected or incurred credit losses. Irrespective of the
measurement category, any impairment losses are recognised in the Statement of
Profit or Loss. Valuation allowances for expected credit losses are calculated
in accordance with the simplified approach of the impairment model for
financial instruments (see accounting policy on impairment of financial assets
below).
The Group sells trade receivables to financial institutions in the scope of
factoring arrangements on a recurring basis based on its liquidity needs.
Prospectively, the extent and the specific trade receivables impacted by
future sales cannot be identified. Therefore, trade receivables which qualify
for a future sale under the terms of existing factoring agreements are
allocated to a portfolio whose objective is collecting the contractual cash
flows and selling them. These trade receivables are carried at fair value
through other comprehensive income minus any valuation allowances. Whereas
trade receivables which do not qualify for a future sale under the terms of
existing factoring agreements are allocated to a portfolio whose objective is
only to collect the contractual cash flows and are therefore carried at
amortised cost minus any valuation allowances.
In factoring arrangements, trade receivables are derecognised where the Group
transfers substantially all the risks and rewards associated with the
financial assets. Payments received from customers following the sale are
recognised in current borrowings until repaid to the factorer.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, cheques received, cash at
banks and short-term cash deposits with an original term of up to three
months. Moreover, investments in money market funds exposed to insignificant
value fluctuations due to their high credit rating and investments in
short-term money market instruments that can be converted to defined cash
amounts within a few days at any time, are also reflected as cash equivalents.
Borrowings
Financial liabilities include liabilities to financial institutions and other
lenders and are measured at fair value less directly attributable transaction
costs at initial recognition. In subsequent periods, these liabilities are
measured at amortised cost applying the effective interest rate method.
A financial liability is derecognised when the obligation under the liability
is discharged (by payment or legal release), cancelled or expires.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new
liability. The terms are substantially different if the discounted present
value of the cash flows under the new terms, including any fees paid net of
any fees received and discounted using the original effective interest rate,
is at least 10% different from the discounted present value of the remaining
cash flows of the original financial liability. The difference in the
respective carrying amounts is subsequently recognised in the Statement of
Profit or Loss, including any costs or fees.
Trade payables and other current liabilities
These liabilities are initially recognised at fair value, and subsequently
measured at amortised cost. The Group may participate in supply chain finance
arrangements whereby suppliers may elect to receive a discounted early payment
of their invoice from a bank as opposed to the agreed contractual payment
terms. Where this arises, the Group settles the amount owed to the bank. The
invoice due date as well as the value of the original liability remains
unaltered. Financial liabilities subject to supply chain finance arrangements
continue to be classified as trade payables since they represent liabilities
to pay for goods or services, are invoiced or formally agreed with the
supplier and are part of the working capital used in the Group's normal
operating cycle.
Derivative financial instruments and hedging activities
Derivative financial instruments not designated as hedges
Derivative contracts are used in the management of interest rate risk,
commodity price risk and foreign currency risk. These derivative financial
instruments, which are not designated in an effective hedging relationship in
accordance with IFRS 9 'Financial Instruments', are recognised initially at
fair value on the date on which a derivative contract is entered into and
subsequently remeasured at fair value with changes in fair value reflected in
the Statement of Profit or Loss. Derivatives are carried as assets when the
fair value is positive and as liabilities when the fair value is negative.
Derivative financial instruments include forward exchange contracts and
embedded derivatives in open orders denominated in a currency other than the
functional currency of either contracting party, with the assessment made on a
case-by-case basis at the respective forward rate on the reporting date. These
forward rates are based on spot rates, including forward premiums and
discounts. Unrealised valuation gains or losses and results from the
realisation are recognised in the Statement of Profit or Loss in net expense
of foreign exchange effects and related derivatives.
Forward purchase or sale arrangements for the physical delivery of
non-financial assets that are entered into in line with the Group's expected
purchase, sale or usage requirements ("own use") and are normally entered into
to hedge the associated price risk are not recognised or measured at fair
value. These forward contracts are assessed to be off-balance-sheet executory
contracts due to their own use features. If the own use exemption is not met,
the forwards will be recognised at fair value, with fair value remeasurement
recorded in the Statement of Profit or Loss.
Significant Judgement: Own use exemption on gas and power forward purchase and physical delivery CO(2)-certificate forwards
Due to the reduction of free CO(2) emission certificates and the expected
increase in CO(2) market prices, the Group hedges the associated price risk by
use of physical delivery forward purchases for own use. The Group also enters
into fixed price and quantity forward gas and power contracts to secure supply
for its production process and reduce price volatility. The own use exemption
does not require fair value recognition and measurement of the forward
purchases and thus volatility in the Statement of Profit of Loss can be
avoided. The own use exemption requires contracts to be entered into and
continued to be held for delivery and usage requirements of the Group. The
Group settles the forwards through physical delivery and does not expect to
sell any (unexpected) surplus of either gas, power or CO(2) emission
certificates. Management have judged that these forward purchases based on
current and expected future requirements satisfy the own use exemption and
have not applied fair value recognition and measurement.
Derivative financial instruments designated as cash flow hedges
For derivative financial instruments which are designated as an effective cash
flow hedge in accordance with IFRS 9 'Financial Instruments', hedge accounting
is applied. The hedging instruments, used to hedge the underlying items, are
measured at fair value with the effective part of the fair value changes
recorded in OCI as an unrealised gain or loss. At the time of the realisation
of the underlying transaction, the fair value changes of the hedging
instrument recognised in OCI is recycled to the Statement of Profit or Loss.
Ineffective parts of the cash flow hedges are recognised immediately in the
Statement of Profit or Loss. Where the hedged item is a non-financial asset or
liability, the amount accumulated in OCI is transferred to the initial
carrying amount of the asset or liability. If the hedged transaction is no
longer expected to take place, the accumulated amount recorded in OCI is
reclassified to the Statement of Profit or Loss. All relationships between
hedging instruments and hedged items are documented, as well as risk
management objectives and strategies for undertaking hedge transactions. The
effectiveness of hedges is also continually assessed and hedge accounting is
discontinued when there is a change in the risk management strategy.
Net investment hedge
Hedges of net investments in foreign operations are accounted for similarly to
cash flow hedges. Any gain or loss on the hedging instrument relating to the
effective portion of the hedge are recognised in OCI and presented in the
currency translation difference reserve within equity while any gains or
losses relating to the ineffective portion are recognised in the Statement of
Profit or Loss. On disposal of the foreign operation, the cumulative amount of
any such gains or losses in OCI is reclassified to the Statement of Profit or
Loss.
Impairment of financial assets
Impairment of certain financial assets is based on expected credit losses
(ECL). ECL is defined as the difference between all contractual cash flows the
entity is entitled under the contract and the cash flows expected to be
received. The measurement of expected credit losses is generally a function of
the probability of default, loss given default and the exposure at default.
Loss allowance is measured for expected credit losses on debt instruments,
trade receivables and contract assets measured at amortised cost. The amount
of ECL is updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument.
The Group recognises lifetime ECL for trade receivables and contract assets by
applying the simplified approach. The ECL on these financial assets are
generally estimated using a provision matrix based on the Group's historical
credit loss experience for customer groups located in different geographic
regions. Forward-looking information is incorporated in the determination of
the applicable loss rates for trade receivables. For the Group, the general
economic development of the countries in which it sells its goods and services
is relevant in determining if the adjustment of the historical loss rates is
necessary.
For all other financial instruments, the Group recognises lifetime ECL when
there has been a significant increase in credit risk since initial
recognition. However, if the credit risk on the financial instrument has not
increased significantly since initial recognition, the Group measures the loss
allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all
possible default events over the expected life of a financial instrument. In
contrast, 12-month ECL represents the portion of lifetime ECL that is expected
to result from default events on a financial instrument that are possible
within 12 months after the reporting date.
The Group makes use of the practical expedient for financial instruments with
an 'investment grade' rating that it is assumed to be of low credit risk and
with no significant increase in the credit risk. Under the practical
expedient, the expected credit loss is calculated using the 12-month ECL.
Among other factors, the Group considers a significant increase in credit risk
to have taken place when contractual payments are more than 30 days past due.
The Group assumes that a default event has occurred when trade receivables are
180 days past due unless reasonable and supportable information confirms
otherwise. For those financial instruments where objective evidence of default
is present, an individual assessment of ECL takes place.
Generally, financial instruments are written off when there is no reasonable
expectation of recovering amounts due.
Inventories
Inventories are stated at the lower of cost or net realisable value as of the
reporting date. The determination of acquisition cost of purchased materials
is based on the average cost. Finished goods and work in progress are valued
at fixed and variable production cost. The net realisable value is the
estimated selling price in the ordinary course of business minus any estimated
cost to complete and to sell the goods. Impairments due to reduced usability
are reflected in the calculation of the net realisable value.
Provisions and contingent liabilities
Provisions are recognised when the Group incurs a legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources will be required to meet this obligation, and the amount of the
obligation can be reliably estimated.
Provisions for warranties are created for individual contracts at the time of
the sale of goods or after the service has been provided. The amounts of the
provisions are based on the expected or actual warranty claims.
Provisions for restructuring are recognised once a detailed formal
restructuring plan has been developed and announced prior to the reporting
date or whose implementation was commenced prior to the reporting date.
The Group recognises provisions for demolition and disposal costs and
environmental damages. The Group's facilities and its refractory, exploration
and mining operations are subject to environmental and governmental laws and
regulations in each of the jurisdictions in which it operates. These laws
govern, among other things, reclamation or restoration of the environment in
mined areas and the clean-up of contaminated properties. These provisions
include the estimated demolition and disposal costs of plants and buildings as
well as environmental restoration costs arising from mining activities, based
on the present value of estimated cash flows of the expected costs. The
estimated future costs of asset retirements are reviewed annually and
adjusted, if appropriate.
A provision for an onerous or unfavourable contract is recognised when the
expected benefits to be derived from a contract are lower than the unavoidable
cost of meeting its obligations under the contract. Provisions are measured at
the present value of the unavoidable costs of meeting the obligation under the
contract which exceed the economic benefits expected to arise from that
contract.
Provisions for labour and civil contingencies are recognised for all risks
referring to legal proceedings that represent a probable loss. Assessment of
the likelihood of loss includes an analysis of available evidence, including
the opinion of internal and external legal advisors of the Group.
Provisions are measured at their discounted settlement value as of the
reporting date if the discounting effect is material.
If maturities cannot be estimated, they are shown within current provisions.
Significant estimate: Measurement of other provisions
The recognition and measurement of other provisions disclosed in Note (31) are
based on best estimates using the information available at the reporting date.
The estimates take into account the underlying legal or constructive
obligation and are performed by internal experts or, when appropriate, also by
external experts. Despite the best possible assumptions and estimates, cash
outflows expected at the reporting date may deviate from actual cash outflows.
As soon as additional information is available, the estimates made are
reviewed and provisions are also adjusted. The majority of other provisions
refers to an unfavourable contract which was recognised in the course of the
acquisition of former Magnesita Group and is mainly based on an estimate of
forgone profit margins compared to market conditions. Moreover, restructuring
provisions and provisions related the rehabilitation and restoration of the
mining sites or for environmental damages are recorded within other
provisions. These are subject to measurement uncertainties in terms of the
estimated costs to settle the obligation, estimated term until rehabilitation
and restoration, discount rate and inflation rate. Changes in these parameters
may result in higher or lower provisions.
A contingent liability is disclosed, where material, if the existence of the
obligation will only be confirmed by future events or where the amount of the
obligation cannot be measured with reasonable reliability. A contingent
liability is not disclosed if the likelihood of a material cash outflow is
considered remote. The Group's contingent liabilities are reviewed on a
regular basis.
Employee related benefits
Provisions for post-employment benefits
Pension plans
With respect to post-employment benefits relating to pensions, a
differentiation is made between defined contribution and defined benefit
plans.
Defined contribution plans limit the Group's obligation to the agreed
contributions to earmarked pension schemes. The contributions are expensed as
incurred.
Defined benefit plans require the Group to provide agreed benefits to active
and former employees and their dependents.
Pension obligations are measured using the projected unit credit method and is
netted against the fair value of the plan assets, if any. If the plan assets
are not sufficient to cover the obligation, the net obligation is recognised
as a liability. However, if the plan assets exceed the obligations, the net
surplus recognised is limited to reductions of future contribution payments to
the plan and is presented as other non-current assets in the Statement of
Financial Position. The Group applies the requirements of IFRIC 14 and
restricts recognition of the net surplus by applying an asset recognition
ceiling where the Group does not have an unconditional right to a refund,
assuming full settlement of the liabilities. Changes in the asset ceiling are
recorded in OCI.
The present value of defined benefit obligations is determined separately for
each plan, annually, by independent qualified actuaries. The present value of
future benefits is based on the length of service, expected wage/salary
developments and pension adjustments.
The expense to be recognised in a period includes current and past service
costs, settlement gains and losses, interest expenses from the interest
accrued on obligations, interest income from plan assets and administration
costs paid from plan assets. The net interest expense is shown separately in
net finance costs. All other expenses related to defined benefit plans are
allocated to the costs of the relevant functional areas.
Actuarial assumptions required to calculate these obligations include the
discount rate, increases in wages/salaries and pensions, retirement starting
age and probability of employee turnover and actual claims. The calculation is
based on local demographic parameters.
Interest rates, which are based on high-quality corporate bonds issued with
comparable maturities and currencies, are applied to determine the present
value of pension obligations. In countries where there is not a sufficiently
liquid market for high-quality corporate bonds, the returns on government
bonds are used as a basis.
The rates of increase for wages/salaries are based on an average of past
years, which is also considered to be realistic for the future, while the
retirement age is based on the respective statutory provisions of the country
concerned.
Remeasurement gains and losses are recorded net of deferred taxes under OCI in
the period incurred.
Other post-employment benefits
Includes provisions for termination benefits primarily related to obligations
to employees whose employment is subject to Austrian law.
Employees who joined an Austrian company before 31 December 2002 receive a
one-off lump-sum termination benefit as defined by the Austrian labour
legislation if the employer terminates the employment or when the employee
retires. It is regarded as a post employment benefit and classified as a
defined benefit plan under IAS 19 'Employee Benefits'. The termination payment
depends on the relevant salary at the time of the termination as well as the
number of years of service and ranges between two and 12 monthly salaries.
These defined benefit obligations are measured using the projected unit credit
method applying an accumulation period of 25 years. Remeasurement gains and
losses are recorded directly to OCI after considering tax effects.
For employees who joined an Austrian company after 31 December 2002,
employers are required to make regular contributions equal to 1.53% of the
monthly wage/salary to a statutory termination benefit scheme. The Company has
no further obligations. Claims by employees to termination benefits are filed
with the statutory termination benefit scheme, while the continuous
contributions are treated as defined contribution plans and included in the
personnel expenses of the functional areas.
Significant estimate: Pension plans and other post-employment benefits
classified as defined benefit plans
The measurement of defined benefit obligation and plan assets requires use of
estimates such as discount rates, mortality rates, salary increases and
inflation. These estimates are reviewed and update when a valuation is
performed by third-party experts. Further details of the estimates and
assumptions together with sensitivities on changes to assumptions is reflected
in Note (29). Changes in these assumptions may result in differences between
cash outflows expected at the reporting date and actual cash outflows.
Other employee benefits
This includes service anniversary bonuses, payments to semi-retirees and
lump-sum settlements.
Service anniversary bonuses are one-time special payments that are dependent
on the employee's wage/salary and length of service. The employer is required
by collective bargaining agreements or company agreements to make these
payments after an employee has reached a certain number of years of
uninterrupted service with the same company. Obligations are mainly related to
service anniversary bonuses in Austrian and German group companies. Provisions
for service anniversary bonuses are calculated based on the projected unit
credit method. Remeasurement gains or losses are recorded in the personnel
costs of the functional areas.
Local labour laws and other similar regulations require individual group
companies to create provisions for semi-retirement obligations. The
obligations are partially covered by qualified plan assets and are reported on
a net basis in the Statement of Financial Position.
Income taxes
Income tax expense represents the sum of current tax and deferred tax.
Income tax is recognised in the Statement of Profit or Loss, except to the
extent that it relates to items recognised in OCI or directly in equity,
including tax-related impacts.
Current tax is based on the taxable profit for the period and is determined in
accordance with the rules applicable in the relevant jurisdictions and
includes taxes relating to prior periods. The liability for current tax is
calculated using tax rates and laws that have been enacted or substantively
enacted at the balance sheet date.
Deferred tax is provided, using the liability method, on temporary differences
at the balance sheet date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes. Deferred tax
liabilities are recognised for all taxable temporary differences except:
• Where the deferred tax liability arises on initial recognition of goodwill
• Where the deferred tax liability arises on the initial recognition of an
asset or liability in a transaction that is not a business combination, at the
time of the transaction, affects neither accounting profit nor taxable profit
or loss and, at the time of the transaction, does not give rise to equal
taxable and deductible temporary differences
• In respect of taxable temporary differences associated with investments in
subsidiaries and associates and interest in joint arrangements, where the
Group is able to control the timing of the reversal of the temporary
differences and it is probable that the temporary differences will not reverse
in the foreseeable future
• For financial instruments which were issued by subsidiaries to
non-controlling interests and which are classified as a financial liability in
accordance with IFRS
Deferred tax assets are recognised for deductible temporary differences,
carry-forward of unused tax credits and unused tax losses, to the extent that
it is probable that taxable profit will be available against which these can
be utilised, except where the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a
business combination and at the time of the transaction, affects neither
accounting profit nor taxable profit and loss and, at the time of the
transaction, does not give rise to equal taxable and deductible temporary
differences.
In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interest in joint arrangements, deferred tax
assets are recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable or increased to
the extent that it is probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period when the asset is realised or the liability is
settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date. Deferred taxes of the Group's
Austrian subsidiaries are determined at the corporation tax rate which is
expected to be applicable when the temporary differences reverse (24.0% if the
temporary difference is reversing in 2023 and 23.0% if the temporary
difference reverses in 2024 or later). Deferred tax assets and liabilities of
the Group's Brazilian subsidiaries are measured at 34.0%.
Deferred tax assets and liabilities are offset only when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the
current tax assets and liabilities on a net basis or to realise the assets and
settle the liabilities simultaneously.
Where tax legislation may not be clear or result in uncertainty, the Group
will determine its tax obligations and resulting income tax expense using an
approach which it believes has a probable chance of being accepted by the tax
authorities based on historical experience, legal advice and communication
with the tax authorities, as appropriate. Where the Group adopts an approach
to an uncertain tax position that it regards as having a less than probable
chance of being accepted by the tax authorities, the income tax expense and
resulting income and deferred tax balances are adjusted to reflect this
uncertainty using either the most likely outcome method or the expected value
method.
Based on the Organisation for Economic Co-operation and Development (OECD)
initiative, numerous jurisdictions are in the process of introducing a global
minimum tax whose aim is to ensure that multinational groups with revenue of
over €750.0 million are subject to a minimum taxation of 15%. The Pillar Two
legislation was enacted in Austria in 2023 and is coming into effect for
financial years starting after 31 December 2023. If the Pillar Two legislation
were effective as per the reporting date, a top-up tax of maximum €0.3m
would be required in relation to one subsidiary. In addition, there are
subsidiaries operating in other countries which might qualify as low tax
jurisdictions but are not included in the above estimate since they have
incurred an IFRS loss before taxes in 2023. Even if these companies had
generated reasonably estimated IFRS profits before taxes the estimated top-up
tax would not have exceeded €0.5 million in 2023. With regards to deferred
taxes the Group has applied the accounting policy according to the amendment
of not recognising or disclosing information about deferred tax assets and
liabilities as a result of the Pillar Two legislation.
Significant judgement: Uncertain tax treatments and recognition of deferred tax assets
Management makes judgements in relation to the recognition of current and
deferred income taxes. In making judgements, management believes that the tax
positions the Group adopts are in line with the applicable legislation and
reflect the probable outcome. The tax obligations and receivables, upon audit
by the tax authorities at a future date, may differ as a result of differing
interpretations. These interpretations may impact the expected timing and
quantum of taxes payable and recoverable.
Significant estimates: Recognition of deferred tax assets
Income tax expense is based on the tax laws applicable in the individual
countries. Due to their complexity, the tax items presented may be subject to
different interpretations by local tax authorities. When determining the
amount of the deferred tax assets to be recognised, mainly relating to tax
losses, an estimate is required of future taxable income which is influenced
by factors such as prices, gross profit margins and interest rates. A 10%
change in the future taxable profit from the assumption made on the reporting
date within the planning period defined for the accounting and measurement of
deferred taxes would not result in a significant change in the carrying amount
of deferred tax assets on recognised tax losses, over a 12-month period from
the date of these Consolidated Financial Statements. Refer to Note (14) for
details on recognised deferred tax assets.
Revenue, income and expenses
Revenue from contracts with customers
Revenue from the sale of goods and services is recognised at an amount that
reflects the consideration to which the Group expects to be entitled in
exchange for those goods or services. Revenue is recognised to the extent that
it is highly probable that there will not be a significant reversal of revenue
in future periods. If the consideration in a contract includes a variable
amount, the Group estimates the amount of consideration to which it will be
entitled at inception and limits the recognition of revenue subject to the
variability, until it is highly probable that a significant reversal of
cumulative revenue recognised will not occur. The Group applies the practical
expedient in IFRS 15 'Revenue from Contracts with Customers' and does not
recognise the impact of financing for payment terms as the average credit
terms is currently 60 days. At contract inception, the Group identifies the
goods or services promised in the contract and assesses which of the promised
goods or services shall be identified as separate performance obligation.
Promised goods or services give rise to separate performance obligations if
they are capable of being distinct. Revenue is recognised as control is
transferred, either over time or at a point of time. Control is defined as the
ability to direct the use of and obtain substantially all of the economic
benefits from an asset.
For the delivery of refractory products, the goods promised are distinct and
control of the goods is passed to the customer typically when physical
possession has been transferred. The transport service does not give rise to a
separate performance obligation to which a part of revenue would have to be
allocated, as this service is usually performed before control of the products
is transferred to the customer.
In consignment arrangements, the Group retains control of the goods generally
until a withdrawal of the products from the consignment occurs. Most of the
products within consignment arrangements have a high stock turnover rate.
The Group provides services (e.g. supervision, installation) that are either
sold separately or bundled together with the sale of products to a customer.
Contracts for bundled sales of products and installation services usually
comprise of two performance obligations being (1) the promise to transfer
products and (2) provide services which are capable of being distinct and
separately identifiable in the context of the contract. Accordingly, the
transaction price is allocated based on the relative stand-alone selling
prices of the product and service. Revenue from services is recognised over
time using an input method to measure progress towards completion of the
service as the customer simultaneously receives and consumes the benefits
provided by the Group.
Contracts for bundled sales of refractory products and non-refractory products
(e.g. machines) provided to the customer free of charge comprise two
performance obligations that are separately identifiable. Consequently, the
Group allocates the transaction price based on the relative stand-alone
selling prices of these performance obligations and allocates revenue to the
non-refractory product which is delivered free of charge.
Expected penalty fees from guaranteed durabilities on refractory products are
considered as a variable consideration in the form of a contract or a refund
liability. However, the estimation of the variable consideration is not
subject to a constraint as the Group has significant experience with promising
durabilities and as a consequence does not expect significant reversal of
revenue recognised in prior periods. All other product warranties issued by
the Group guarantee that the transferred products correspond to the
contractually agreed specifications and are classified as assurance type
warranties. Consequently, no separate distinct performance obligation to the
customer exists.
If transfer of goods or services to a customer is performed before the
customer pays consideration or before payment is due and is conditional on
something other than the passage of time, a contract asset, excluding any
amounts presented as a receivable, is recognised.
If a customer pays consideration before the entity transfers a good or service
to the customer, the entity shall present the contract as a contract liability
when the payment is made.
Contract costs, which are defined as the incremental costs of obtaining a
contract, are recognised as an asset where the Group expects to recover those
costs, except for those costs which are expected to be recovered within 12
months.
As the term of customer contracts is less than one year, the Group adopted the
practical expedient not to disclose performance obligations for contracts with
original expected duration of less than one year.
Significant Judgement: Revenue recognition
For customer contracts in the Steel segment with variable payment arrangements
where the transaction price depends on the customer's production performance,
(e.g. quantity of steel produced) management has determined that the
commitment to transfer each of the products and services to the customer is
not separately identifiable from the other commitments in the context of such
contracts. The customer expects complete refractory management for the agreed
product areas in the steel plant in order to enable steel production. Thus,
only one performance obligation, being the performance of a management
refractory service, exists.
Cost of sales
Cost of sales comprises the production cost of goods sold as well as the
purchase price of merchandise sold. In addition to direct material and
production costs, it also includes overheads including depreciation charges on
production equipment, amortisation charges of intangible assets as well as
impairment losses and reversals of impairment losses of inventories. Moreover,
cost of sales also includes the costs of services provided by the Group or
services received.
Selling and marketing expenses
This item includes personnel expenses for the sales staff as well as
depreciation charges and other operating expenses related to the market and
sales processes.
General and administrative expenses
General and administrative expenses primarily consist of personnel expenses
for the administrative functions, legal and other consulting costs, expenses
for research and non-capitalisable development costs.
Interest income and expenses
Interest income and expenses are recognised in accordance with the effective
interest method.
Dividends
Dividends from investments that are not accounted for using the equity method
are recognised in the Statement of Profit or Loss at the time the legal claim
arises.
Foreign currency translation and hyperinflation accounting
Functional currency and presentation currency
The Consolidated Financial Statements are presented in Euro, which represents
the functional and presentation currency of RHI Magnesita N.V.
Consolidated subsidiary financial information is based on the currency of the
primary economic environment in which it operates (functional currency).
Hyperinflation accounting
Financial Statements of subsidiaries which operate in a country whose
functional currency is considered hyperinflationary are restated for the
changes in the general purchasing power before translation to the reporting
currency of the Group and before consolidation in order to reflect the same
value of money for all items. The Group has started to account for the
restatements required by IAS 29 'Financial Reporting in Hyperinflationary
Economies' on the Financial Statements of the subsidiary operating in
Argentina as from the current reporting period, as the cumulative impact of
applying this Standard has become material in 2023.
The cumulative impact from changes in the general purchasing power of its
functional currency until 1 January 2023 on the opening balances of
non-monetary items has been recorded directly in equity attributable to the
shareholders of RHI Magnesita N.V.
In 2023, the closing balances of the non-monetary items as well as all items
of the Statement of Profit of Loss are restated for the changes in the general
purchasing power of its functional currency in 2023 as follows. Items
recognised in the Statement of Financial Position which are not measured at
the applicable year-end measuring unit are restated based on the general price
index. All non-monetary items measured at cost or amortised cost are restated
for the changes in the general price index from the later of transaction date
or the first-time application date to the reporting date. Monetary items are
not restated. All items of the Statement of Profit of Loss are restated for
the change in a general price index from the date of initial recognition to
the reporting date. Gains and losses resulting from the net-position of
monetary items are reported in the Consolidated Statement of Profit or Loss in
Net finance costs. The Financial Statements of the subsidiary in Argentina are
therefore reported at the applicable measuring unit on the reporting date.
The price index IPIM published by the Argentinian "National Institute of
Statistics and Censuses (INDEC)" is applied to determine the changes in the
general purchasing power. The following table provides the level and changes
of the price index for the current and the previous reporting period:
31.12.2023 31.12.2022
Price level 3,533.19 1,134.59
Index movement (in %) 211.41 94.79
Foreign currency transactions and balances
In individual subsidiaries, joint ventures and associates, transactions in
foreign currency are translated into the functional currency at the rate of
exchange prevailing on the dates of the transaction. Gains and losses arising
from the settlement of such transactions and the measurement of monetary
assets and liabilities in foreign currencies at the closing rate are
recognised in the Statement of Profit or Loss under net expense on foreign
exchange effects and related derivatives. Unrealised currency translation
differences from monetary items which form part of a net investment in a
foreign operation are recognised in OCI in equity. When a non-derivative
financial instrument is designated as the hedging instrument in a net
investment hedge in a foreign operation, the effective portion of the foreign
exchange gains and losses is recognised in the currency translation difference
reserve within equity. Non-monetary items, other than those measured at fair
value, are carried at historical rates and not retranslated subsequent to
initial recognition.
Group companies
Financial information of foreign subsidiaries with a functional currency
different to the Euro are translated as follows:
Assets and liabilities of foreign subsidiaries outside the scope of
hyperinflation accounting under IAS 29 are translated at the closing rate on
the reporting date of the Group, while monthly income and expenses and
consequently the profit or loss for the year as presented in the Statement of
Profit or Loss are translated at the respective closing rates of the previous
month. Differences resulting from this translation process and differences
resulting from the translation of amounts carried forward from the prior year
are recorded under OCI without recognition to profit or loss. Monthly cash
flows are translated at the respective closing rates of the previous month.
Goodwill and adjustments to the fair value of assets and liabilities related
to the purchase price allocations of a subsidiary outside the European
currency area are recognised as assets and liabilities of the respective
subsidiary and translated at the closing rate.
Assets and liabilities of foreign subsidiaries in the scope of hyperinflation
accounting under IAS 29 as well as income and expenses and consequently the
profit or loss for the year are translated at the respective closing rate on
the reporting date of the Group.
On disposal of a non-Euro functional currency subsidiary, joint venture or
associate, the related accumulated exchange gains and losses recognised in
equity are reclassified to the Statement of Profit or Loss. In addition, when
monetary items cease to form part of a net investment in a foreign operation
or when in case of a net investment hedge the foreign operation is disposed,
the currency translation differences previously recognised in OCI are
reclassified to profit or loss.
The Euro exchange rates of the currencies of the Group's significant
operations are shown in the following table:
Closing rate Average rate(1))
Currencies 1 € = 31.12.2023 31.12.2022 2023 2022
Brazilian Real BRL 5.37 5.63 5.42 5.47
Canadian Dollar CAD 1.46 1.45 1.46 1.37
Chinese Renminbi Yuan CNY 7.87 7.42 7.65 7.09
Indian Rupee INR 92.58 88.26 89.20 82.50
US Dollar USD 1.11 1.07 1.08 1.06
1) Arithmetic mean of the monthly closing rates.
4. Climate change and energy transition
In 2019 the Group announced its commitment to reduce Scope 1, 2 and 3 (raw
materials) CO(2) emissions intensity by 15% by 2025, compared to a 2018
baseline. The below describes how the Group has considered climate related
impacts in some key areas of the Consolidated Financial Statements and how
this translates into the valuation of its assets and measurement of
liabilities, as progress is made in reducing its own CO(2) emissions and RHIM
prepares for the energy transition and technological changes that are likely
to affect its customer industries.
Note (3) includes the significant accounting estimates, judgements and key
sources of estimation uncertainties and how those uncertainties have the
potential to have a material effect on the Consolidated Statement of Financial
Position in the next 12 months. This note describes the key areas of climate
impacts that potentially have longer-term effects on amounts recognised at 31
December 2023.
Financial planning assumptions
As disclosed in the Sustainability section on page 58, climate-related risks
faced by the Group include physical and transitional risks. The most material
transitional risk impact is expected to be higher operating costs due to an
increase in the level or scope of carbon pricing and changes to regulatory
frameworks. This risk is most prominent in Europe where the existing system of
allowances is to be replaced by the Carbon Border Adjustment Mechanism
('CBAM'), with all existing CO(2) emissions allowances to be progressively
phased out by 2034. The Group has also identified climate-related
opportunities, such as increased demand for its products arising from the
transition by its customers to lower-carbon emitting industrial processes and
increased demand for refractory products that are produced with a lower-carbon
footprint.
The Consolidated Financial Statements are based on reasonable and supportable
assumptions that represent management's current best estimate of the range of
economic conditions that may exist in the foreseeable future. The Group has
performed an assessment of the potential future impact of climate change on
key elements of its Consolidated Financial Statements utilising the
Paris-aligned Mitigation and Hot House World Limited mitigation scenarios. The
largest impact from higher carbon prices as contained in these scenarios is
from 2026 onwards. The negative impacts are concentrated within the Group's
assets located in Europe whilst opportunities are expected to be global in
nature.
The Group is investing in the research and development of new technologies for
the manufacturing of refractories which may enable it over the long term to
avoid or capture its CO(2) emissions and thereby mitigate the impact of higher
carbon prices.
Impairment of CGUs and goodwill
The nominal growth rate used in the value in use determination is equal to the
long-term rate of growth in steel/cement and/or inflation (depending on the
country and business involved) and in any case no higher than the average
long-term growth rate of the reference market. The Group has also taken
account of the long-term impact of climate change, in particular by
considering in the estimation of the terminal value a long-term growth rate in
line with the change in steel/cement demand in 2030-2050 based on the specific
characteristics of the businesses involved.
The Group is currently already subject to the first phase ('Transitional
Period') of the CBAM. Imported minor consumables made out of steel (<1% of
revenue) are currently covered and RHIM complies with existing regulations and
follows their development. Management is pursuing a number of strategies to
accommodate the impact of CBAM to the EU assets, such as integrating carbon
pricing in our financial planning, actively managing a hedging programme to
fix future prices, increase the use of secondary raw materials and investing
in fuel switching, renewable energy and energy efficiency. Absent to any
mitigating action by management, it is expected that the gross profit could
reduce by 23% from 2030, on average across the EU assets and increase by 17%
in regions outside the EU.
Restoration provisions
Management recognises liabilities that are expected to be incurred in relation
to rehabilitation and restoration of the mining sites. As of the balance sheet
date, the Group's mines have an expected life between 8 and 100 years. The
introduction of more stringent legislation could result in our mining
operations becoming uneconomical earlier than anticipated, thus affecting the
timing of our restoration liabilities. The discount rate used to measure asset
restoration provisions is between 8-37 years term, in line with available
government bond rates.
Management does not expect any reasonably possible change in the expected
timing of restoration of our mines to have a material effect on the Group
total provisions, assuming cash flows remain unchanged.
Deferred tax assets
In jurisdictions where new or additional climate change related legislation is
enacted, our taxable profits could be affected thereby impacting the
recoverability of deferred tax assets. It is expected that sufficient deferred
tax liabilities and forecasted taxable profits are available for recovery of
the deferred tax assets recognised at 31 December 2023. The assessment of
deferred taxes is described in Note (14). For certain deferred tax assets
recognised in Brazil, the period extends beyond 5 years. Currently, no
legislation is in place in Brazil that could limit the timing and, or the
extent of the recognised deferred tax assets.
ESG-linked loans
The Group has taken out loans from financial institutions based on terms which
are linked to Group EcoVadis ESG rating performance. On the reporting date the
carrying amount of such ESG-linked financial liabilities amounts to €1,512.0
million. The financing costs may increase or decrease depending on future
changes in the Group's ESG rating. The ESG rating is determined by multiple
criteria covering not only the climate-related aspects but also sustainability
and governance related aspects. The Group's ESG rating on the reporting date
shows a considerable headroom to the ESG rating assumed in a worst case
scenario.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Segmental analysis
The Group comprises two reportable segments Steel and Industrial which have
been determined by aggregation of the underlying operating segments for Steel
and Industrial. The segmentation of the business activities reflects the
internal control and reporting structures and is regularly monitored by the
Chief Executive Officer (Chief Operating Decision Maker (CODM)), who has the
responsibility over allocation of resources and evaluates the performance of
each segment.
The reportable segment Steel specialises in supporting customers in the
steel-producing and steel-processing industry. The reportable segment
Industrial serves customers in the glass, cement/lime, non-ferrous metals and
environment, energy and chemicals industries. The main activities of the two
segments consist of market development, global sales of high-grade refractory
bricks, mixes and special products as well as providing services at the
customers' sites and are described in detail in the Strategic Report.
The globally located manufacturing sites, which extract and process raw
materials, are combined in one strategic business unit. The allocation of
manufacturing cost of the production plants to the Steel and Industrial
segments is based on the supply flow.
Statements of Profit or Loss up to gross profit are available for each
segment. Revenues and Gross profit are the key internal performance measures
provided to and used by the CODM. Selling and marketing expenses, general and
administrative expenses, restructuring and write-down expenses, other income
and expenses, profit of joint ventures, net finance costs and income taxes are
managed centrally and separately and thus not allocated to the segments.
Segment assets include trade receivables and inventories, which are available
to the operating segments and are reported to the CODM for control and
measurement; property, plant and equipment, goodwill and other intangible
assets, are allocated to the segments based on the capacity of the productive
assets base. All other assets are not allocated.
The following tables show the financial information for the reportable
segments for the year 2023 and the previous year:
2023 in € million Steel Industrial Group 2023
Revenue 2,460.7 1,111.1 3,571.8
Gross profit 549.9 307.5 857.4
EBIT 333.9
Net finance costs (100.6)
Profit before income tax 233.3
Depreciation and amortisation charges (125.7) (51.8) (177.5)
Segment assets 31.12.2023 2,607.1 1,099.0 3,706.1
Investments in joint ventures and associates 31.12.2023 6.2
Reconciliation to total assets 1,137.3
Total assets 4,849.6
Additions to property, plant and equipment and intangible assets 128.9 66.1 195.0
2022 in € million Steel Industrial Group 2022
Revenue 2,371.4 945.8 3,317.2
Gross profit 521.0 242.4 763.4
EBIT 343.6
Net finance costs (73.1)
Profit before income tax 270.5
Depreciation and amortisation charges (101.2) (43.3) (144.5)
Segment assets 31.12.2022 2,231.9 911.3 3,143.2
Investments in joint ventures and associates 31.12.2022 5.7
Reconciliation to total assets 926.0
Total assets 4,074.9
Additions to property, plant and equipment and intangible assets 128.6 68.8 197.4
No single customer contributed 10% or more to consolidated revenue in 2023 and
in 2022. Companies that are known to be part of a group are treated as one
customer.
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), management refractory 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 € million Steel Industrial Group 2023
Shaped products 1,142.9 815.1 1,958.0
Unshaped products 530.3 212.0 742.3
Management refractory services 712.2 8.3 720.5
Other 75.3 75.7 151.0
Revenue 2,460.7 1,111.1 3,571.8
In 2022, revenue was classified by product group as follows:
in € million Steel Industrial Group 2022
Shaped products 1,100.4 692.6 1,793.0
Unshaped products 449.3 192.1 641.4
Management refractory services 755.7 0.2 755.9
Other 66.0 60.9 126.9
Revenue 2,371.4 945.8 3,317.2
Segment reporting by country
The Revenue is based on the locations of the customers.
In € million 2023 2022
Netherlands 14.0 11.2
USA 612.2 586.5
India 476.6 344.0
Brazil 371.1 367.8
PR China 259.5 221.6
Other countries 1,838.4 1,786.1
Revenue 3,571.8 3,317.2
The carrying amounts of goodwill, other intangible assets and property, plant
and equipment are classified based on the location of the Group companies:
in € million 31.12.2023 31.12.2022
Brazil 502.7 464.8
India 383.2 69.7
Austria 368.5 352.9
USA 224.6 234.1
Germany 212.3 187.1
PR China 200.5 171.4
Other countries 277.2 177.2
Goodwill, intangible assets and property, plant and equipment 2,169.0 1,657.2
6. Restructuring
Summary of restructuring and write-down expenses/income recognised as follows:
in € million 2023 2022
Restructuring (expenses)/income (19.6) 6.8
2023
Restructuring includes €11.5 million of termination costs following the
transfer of certain global functions to the regions. In addition, it includes
€4.9 million of plant closure costs, which mainly reflect €2.0 million of
costs in Dashiqiao plant, China.
In Brazil, an impairment loss was recognised on fixed assets of €1.3 million
which was partially caused by a flood at the Contagem plant.
2022
Following the approval by the regional government in Germany for the repair,
upgrade and connection of the railway infrastructure to the Mainzlar plant,
the Group committed to continue with its operations. The commitment was
regarded as an indicator of an impairment reversal, following the write down
of the non-current assets in 2020 of €7.7 million. The reversal of the write
down amounted to €5.3 million in 2022. Additionally, around €6.4 million
in employee restructuring and plant dismantling provisions were reversed.
The Group decided to close the operations at the plant in Dashiqiao, China,
resulting in employee restructuring expenses of €2.2 million. Plant idling
costs incurred during 2022 of €3.4 million were included within
restructuring expenses. The Group continues its negotiations with the joint
venture partner to exit its share of the net assets and amounts due of €22.9
million, see Note (28).
7. Other income
in € million 2023 2022
Net amortisation of Oberhausen provision 10.8 2.0
Bargain purchase gain 7.5 0.0
Income from the disposal of non-current assets 3.4 0.5
Miscellaneous income 5.4 2.3
Other income 27.1 4.8
The net amortisation of the Oberhausen provision mainly includes a release of
€9.6 million (2022: €9.2 million) following a reassessment. €7.5 million
refers to the preliminary bargain purchase gain from acquisition of P-D
Refractories. Miscellaneous income mainly includes non-operational gains from
the disposal of a joint venture as well as reimbursement of the stamp duty tax
from Chile.
8. Other expenses
in € million 2023 2022
Expenses for strategic projects (16.0) (10.1)
Losses from the disposal of non-current assets (6.7) (1.7)
Miscellaneous expenses (16.2) (11.2)
Other expenses (38.9) (23.0)
Expenses for strategic projects amounting to €16.0 million (2022: €10.1
million) mainly include legal and consulting fees related to business
development activities as well as costs related to integrate the newly
acquired companies. Miscellaneous expenses mainly consist of increase in
onerous provisions in Austria and Türkiye as well as legal and consultancy
fees paid to evaluate Rhône Capital's Partial Offer for Shares in the
Company.
9. Expense categories
The presentation of the Consolidated Statement of Profit or Loss is based on
the function of expenses. The following table shows a classification by
expense category for 2023 and the previous year:
in € million 2023 2022
Cost of materials (1,374.5) (1,365.0)
Personnel costs (747.3) (627.8)
Energy costs (256.8) (285.7)
Freight expenses (229.0) (285.3)
Depreciation and amortisation charges (177.5) (144.5)
External services (164.1) (136.7)
Changes in inventories, own work capitalised (53.6) 64.3
Write-down expenses (1.4) 0.0
Other income and expenses (233.8) (193.0)
Total expenses (3,238.0) (2,973.7)
Cost of materials includes expenses for raw materials and supplies and
purchased goods of €1,310.4 million (2022: €1,317.6 million) and expenses
for services received amounting to €64.1 million (2022: €47.4 million).
Research and development costs amounted to €51.0million (2022: €41.9
million), of which €8.1 million (2022: €8.6 million) in development costs
were capitalised. Amortisation and impairment of development costs recognised
within cost of sales was €3.1 million (2022: €3.5 million).
Payments associated with short-term leases of equipment and vehicles and all
leases of low-value assets are recognised as an expense in the Consolidated
Statement of Profit or Loss. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT equipment, office furniture
and other small items. Expenses for short-term, low-value and variable lease
payments in 2023 amount to €5.3 million (2022: €3.5 million).
Other income and expenses include other income of €35.5 million (2022:
€27.1 million); this is mainly comprised of: a preliminary bargain purchase
gain of €7.5 million (2022: €0.0 million), income from research grants
which amounted to €4.2 million (2022: €4.3 million), profit on disposal of
non-current assets, insurance reimbursements and amortisation of grants
related to assets. Other expenses mainly include commissions, repairs and
maintenance, travel costs, external consulting and information technology
costs.
10. Personnel costs
Personnel costs consist of the following components:
in € million 2023 2022
Wages and salaries (579.5) (478.5)
Social security contribution (113.0) (99.2)
Fringe benefits (33.4) (28.7)
Pension and other post-employment benefits
Defined contribution plans (10.9) (11.4)
Defined benefit plans (3.6) (4.8)
Other expenses termination benefits (6.9) (5.2)
Personnel expenses (without interest expenses) (747.3) (627.8)
Average employee numbers
The average number of employees of the Group based on full time equivalents
amounts to:
2023 2022
Salaried employees 7,063 6,391
Waged workers 7,953 7,119
Number of employees on annual average 15,016 13,510
120 full time equivalents of salaried employees work in the Netherlands (2022:
124 employees). Total includes average employees of newly acquired businesses
from the date of acquisition.
11. Interest income
Includes interest income on cash at banks and similar income amounting to
€19.3 million (2022: €8.0 million).
12. Net expense on foreign currency effects
The net expense comprising the foreign currency effects from translating
foreign currency balances into the functional currency, the results from
forward exchange contracts and derivatives in open orders as well as the gain
on the net monetary position related to hyperinflation accounting (IAS 29)
consists of the following items:
in € million 2023 2022
Foreign currency losses (43.6) (10.0)
Gains/(losses) on forward exchange contracts and derivatives in open orders 10.7 (13.3)
Gain on net monetary position 2.5 0.0
Net expense on foreign currency effects (30.4) (23.3)
The foreign currency losses in the current reporting period mainly result from
the appreciation of the functional currencies against major foreign currencies
related to subsidiaries with a net asset foreign currency exposure and the
devaluation of the functional currencies against major foreign currencies
related to subsidiaries with a net liability foreign currency exposure.
Moreover, the restatement of foreign currency losses in accordance with
hyperinflation accounting (IAS 29) has increased the reported foreign currency
losses of the subsidiary in Argentina.
13. Other net financial expenses
Other net financial expenses consist of the following items:
in € million 2023 2022
Net interest expense relating to personnel provisions (12.4) (5.7)
Unwinding of discount of provisions and payables (7.7) (8.5)
Interest expense on non-controlling interest liabilities (6.5) (5.3)
Interest expense on lease liabilities (2.4) (1.3)
Income from the revaluation of NCI put options 6.6 4.7
Other interest and similar income and expenses(1)) (9.3) (14.6)
Other net financial expenses (31.7) (30.7)
1) Mainly includes costs associated with the trade receivables factoring
programme of €11.7 million (2022: €7.2 million).
14. Taxation
Income tax
Income tax consists of the following items:
in € million 2023 2022
Current tax expense (66.7) (52.7)
Deferred tax (expense)/income relating to
temporary differences 8.6 (11.9)
tax loss carryforwards (3.9) (39.1)
4.7 (51.0)
Income tax (62.0) (103.7)
The current tax expense includes net income tax expense for previous periods
of €4.5 million (2022: €2.3 million net income).
In recognising deferred tax assets, the Group has considered (i) the impacts
of the global economic environment in which it operates, (ii) uncertainties
and potential adverse effects of economic volatility and (iii) the Group's
latest forecasts and assumptions used for goodwill impairment testing and
viability statement assessment. The Group's forecasted period is four years
with the fifth year being the final year, consistent with goodwill impairment
testing. In Brazil, a longer time frame is used due to the annual limitation
for use of losses (30% of the taxable profits of the relevant year) which
requires a longer-term prediction. Information on tax contingencies is
provided under Note (39).
In addition to the income taxes recognised in the Consolidated Statement of
Profit or Loss, a tax income of €14.5 million (2022: €29.5 million income
tax expense), was recognised in OCI mainly relating to cash flow hedges and
measurement gains and losses on employee post-employment benefits.
A reconciliation of the difference between the income tax expense, which would
result from the application of the Austrian corporate tax rate of 24% on the
profit before income tax (the Austrian tax rate being used as holding company
RHI Magnesita N.V. is tax resident in Austria), and the income tax reported is
shown below:
in € million 2023 2022
Profit before income tax 233.3 270.5
Income tax expense calculated at 24% (2022: 25%) 56.0 67.6
Different foreign tax rates 2.1 5.9
Expenses not deductible for tax purposes, non-creditable taxes 28.0 21.4
Non-taxable income and tax benefits (27.9) (25.7)
Tax losses and temporary differences of the financial year not recognised 1.2 2.3
Utilisation of previously unrecognised loss carryforwards and temporary (1.0) 0.0
differences
Recognition of previously unrecognised loss carryforwards and temporary (0.2) (3.1)
differences
Change in write down of deferred tax assets 0.0 3.0
Deferred tax expense due to tax rate changes 2.0 2.7
Deferred tax assets derecognised 0.0 23.6
Deferred income tax relating to prior periods (6.9) 5.2
Income tax relating to foreign currency translation of local currency to 4.0 2.8
functional currency
Current income tax relating to prior periods 4.5 (2.3)
Other 0.2 0.3
Recognised tax expense 62.0 103.7
Effective tax rate (in %) 26.6% 38.4%
Below is the summary of major effects on the effective tax rate
reconciliation:
In 2023, expenses not deductible for tax purposes mainly includes: transfer
pricing adjustments and inventory revaluations in Brazil of €5.4 million
(2022: €3.4 million); share-based payments and other employee costs and
write up of treasury shares in Austria of €5.1 million (2022: €2.9
million); inflation, inventory and FX adjustments, asset impairment and exempt
income in South America of €4.1 million (2022: €5.0 million);
non-creditable withholding taxes in Austria of €1.6 million (2022: €2.4
million); non-deductible expense for debt waivers of €1.2 million (2022:
€0.0 million) and non-deductible subsidiary recharged expenses of €1.1
million (2022: €1.2 million).
In 2023, non-taxable income and tax benefits mainly include: tax incentives in
Brazil of €7.9 million (2022: €7.4 million); additional tax depreciation
in Austria of €7.2 million (€2022: €7.5 million) relating to historical
acquisitions; non-taxable preliminary bargain purchase gain in newly acquired
companies of €2.2 million (2022: €0.0 million); income of foreign
permanent establishments in Austria of €0.6 million (2022: €1.0 million);
and inflationary adjustments in South America of €4.0 million (2022: €3.1
million). Furthermore, other non-taxable income in 2022 includes non-taxable
income from the write up of shares of €2.1 million in Austria.
The change in the tax rate in Austria from 25% to 24% in 2023 and 23% in 2024,
resulted in a deferred tax income of €0.3 million from deferred taxes on
taxable and deductible temporary differences (2022: €2.4 million deferred
tax expense). In the United States a change in the tax rate from 25.65% to
24.19% led to a deferred tax income of €0.6 million (2022: deferred tax
expense due to a tax rate change from 24.15% to 25.65% amounting to €0.9
million). In Türkiye an increase of the tax rate from 20% to 25% led to a
deferred tax expense of €2.3 million (2022: deferred tax income due to a tax
rate change from 22% to 20% of €0.3 million).
Deferred taxes expense relating to prior periods based on information obtained
in the reporting period, arises mainly from Mexico amounting to a deferred tax
expense of €1.0 million (2022: deferred tax expense of €4.6 million). In
Germany there is a deferred tax income relating to prior periods amounting to
€7.3 million (2022: deferred tax expense of €2.3 million). Deferred income
tax relating to foreign currency translation of local currency tax base is due
to the devaluation of the Turkish Lira against the Euro of €4.0 million
(2022: €2.8 million).
The current income tax expense relating to prior periods of €4.5 million
arose mainly in Austria of €2.6 million (2022: current income tax income of
€2.2 million) and the United States of €1.2 million (2022: income tax
expense of €1.0 million). In 2022 there was an additional charge of €1.4
million following the allocation of certain Group functions and
responsibilities to Austria.
In 2022 deferred tax assets derecognised pursuant to a tax position
reassessment of €23.6 million included an income adjustment following
agreement with the tax authorities on the allocation of certain Group
functions, including €8.7 million adjustment in relation to an intercompany
debt waiver. These tax impacts had the primary effect of reducing previously
recognised tax losses and the cash tax impact was €1.4 million. The Group's
effective tax rate was 38.3%. Drivers for the 2022 effective tax rate were
mainly the non-cash (€23.6 million) and cash (€1.4 million) tax impacts as
mentioned above, deferred tax adjustments from Mexico of €4.6 million and
the lower income tax rate in Austria of €2.7 million. In 2023, the Group's
effective tax rate was not showing such big one-off effects, decreasing it to
26.6%.
Deferred taxes
Deferred taxes are related to the following significant balance sheet items
and tax loss carryforwards:
31.12.2023 2023 31.12.2022 2022
in € million Deferred tax assets Deferred tax liabilities (Expense)/Income Deferred tax assets Deferred tax liabilities (Expense)/Income
Property, plant and equipment, intangible assets 29.2 119.8 3.1 25.1 113.3 (6.1)
Inventories 24.3 10.1 0.1 20.8 9.0 6.3
Trade receivables, other assets 12.0 9.2 11.5 11.0 21.1 (17.2)
Pensions and other personnel provisions 45.0 0.3 (4.8) 41.9 0.3 (4.6)
Other provisions 29.6 0.4 1.6 27.4 0.6 0.2
Trade payables, other liabilities 27.9 6.0 (2.9) 22.2 6.7 9.5
Tax loss carried forward 67.3 0.0 (3.9) 68.8 0.0 (39.1)
Offsetting (83.3) (83.3) 0.0 (89.0) (89.0) 0.0
Deferred taxes 152.0 62.5 4.7 128.2 62.0 (51.0)
For temporary differences and tax loss carryforwards of subsidiaries which
have generated tax losses either in the current or previous reporting period
deferred tax assets amounting to €5.3 million (2022: €1.9 million) have
been recognised in the Consolidated Statement of Financial Position, as
sufficient taxable income is expected to be generated in the future.
Tax loss carryforwards totalled €401.9 million at 31 December 2023 (2022:
€407.7 million). A significant part of the tax loss carryforwards originated
in Brazil and Austria where their deduction can be carried forward
indefinitely. Furthermore, there are tax loss carryforwards in China expiring
within the next five years. The annual utilisation of tax loss carryforwards
is limited to 75% in Austria and 30% in Brazil of their respective taxable
profits. Deferred tax assets were not recognised on tax losses and tax loss
carryforwards of €181.0 million (2022: €179.2 million). Thereof €60.7
million (2022: €53.4 million) relate to Brazil, €60.7 million (2022:
€63.7 million) relate to Luxembourg, €23.6 million (2022: €23.2 million)
relate to China, €19.4 million (2022: €18.8 million) relate to the UK,
€3.6 million (2022: €5.9 million) relate to Dubai, €5.9 million (2022:
5.9 million) relate to Germany, €4.4 million (2022: €3.6 million) relate
to France, €0.0 million (2022: €2.0 million) relate to Denmark and €2.7
million (2022: €2.7 million) relate to other countries.
in € million 31.12.2023 31.12.2022
Year of expiry
2022 0.0 0.4
2023 0.0 0.2
2024 5.9 7.4
2025 1.7 1.8
2026 2.0 2.1
2027 8.4 11.9
2028 5.8 0.8
2029 or later 0.5 0.0
Not subject to expiration 156.7 154.6
Total unrecognised tax losses 181.0 179.2
No deferred tax assets were recognised on temporary differences totalling
€176.2 million (2022: €209.0 million), which are expected to reverse by
2034. Thereof €150.8 million (2022: €180.9 million) relate to Austria,
€24.9 million (2022: €26.2 million) relate to China and €0.5 million
(2022: €1.9 million) relate to other countries.
Taxable temporary differences of €1,240.6 million (2022: €1,113.7 million)
and temporary deductible differences of €49.9 million (2022: €7.2 million)
were not recognised on shares in subsidiaries as the distributions of profit
or the sale of the investments are controlled by the Group.
Income tax receivables
Income tax receivables amounting to €43.5 million (2022: €38.7 million)
are mainly related to tax prepayments and deductible withholding taxes.
Income tax liabilities
Income tax liabilities amounting to €50.8 million (2022: €38.3 million)
primarily include income taxes for the current year and previous years.
15. Earnings per share
Earnings per share is calculated by dividing the profit or loss attributable
to the shareholders of the Group by the weighted average number of shares
outstanding during the financial year.
2023 2022
Profit after income tax attributable to RHI Magnesita N.V. shareholders (in 164.6 155.7
€ million)
Weighted average number of shares for basic EPS 47,078,254 47,000,708
Effects of dilution from share options 1,014,964 793,302
Weighted average number of shares for dilutive EPS 48,093,218 47,794,010
Earnings per share basic (in €) 3.50 3.31
Earnings per share diluted (in €) 3.42 3.26
The weighted average number of shares for basic and dilutive EPS considers the
weighted average effect of the newly issued ordinary shares as well the effect
of changes in treasury shares during the reporting period. As of 31 December
2023, there are 1,049,347 diluting options (2022: 849,046).
16. Dividend payments and proposed dividend
The final proposed dividend is subject to the approval of the Annual General
Meeting in May 2024 and was not recognised as a liability in these
Consolidated Financial Statements. The final proposed dividend for 2023 will
amount to €1.25 per share (2022: €1.10 per share).
In line with the Group's dividend policy, the Board paid out an interim
dividend in September 2023 of €0.55 per share for the first half of 2023
amounting to €26.0 million. The total dividend for 2023, which includes the
proposed final dividend, yet to be approved by shareholders, amounts to
€1.80 per share (2022: €1.60 per share).
Based on a resolution adopted by the Annual General Meeting of RHI Magnesita
N.V. on 24 May 2023, the final dividend for 2022 amounted to €1.10 per share
and was paid out in July 2023, amounting to €51.7 million. The total
dividend for 2022 amounted to €1.60 per share.
17. Goodwill
in € million 2023 2022
Carrying amount at beginning of the year 136.9 114.4
Newly acquired businesses 197.0 20.6
Currency translation (1.6) 1.9
Hyperinflation adjustment 6.9 0.0
Carrying amount at year-end 339.2 136.9
Impairment of CGUs with significant goodwill
Goodwill is tested for impairment at least annually based on the CGU to which
it is allocated. The Group's significant goodwill is assigned to the Steel
CGUs and to the Industrial Cement & Lime CGU as shown in the table below.
The impairment test is based on the value in use; the recoverable amount is
determined using the discounted cash flow method and incorporates the terminal
value. The Group is subject to environmental and other laws and regulations
and has established environmental policies and procedures aimed at compliance
with these laws. Impairment testing incorporated considerations for increased
energy and raw material prices in its budget and the Long-Term Plan and
estimates the total increase in investments in research and development costs
at approximately €47.8 million. Current technology used by the customer
industries requiring advanced heat-resistant materials for their production
depend on refractory materials and in our view will remain in use in the
observable future.
The cash flows projections used for impairment testing are based on the
strategic business and financial planning model of the Group including the
2024 budget, as approved by the Board, and the Long-Term Plan, covering a
four-year period. The cash flows are geared to a steady-state business
development, which balances out possible economic or other non-sustainable
fluctuations in the detailed planning period and forms the basis for the
calculation of the terminal value.
The key assumptions used in determining the value in use are:
• Revenue: projected sales were built up with reference to markets and
product categories. incorporating projections of developments in key markets.
• EBIT margin: projected margins reflect historical performance, our
expectations for future cost inflation and the impact of all completed
projects to improve operational efficiency.
• Discount rate before tax: a discount rate that is calculated taking into
account the weighted average cost of capital of comparable companies; the
corresponding parameters are derived from capital market information. In
addition, country-specific risk premiums are considered in the weighted
average cost of capital.
• Perpetual annuity growth rate: for the purposes of the Group's value in
use calculations, a long-term growth rate into perpetuity was applied
immediately at the end of the fifth-year detailed planning period comprising
the 2024 budget and the subsequent four-year period covered by the Long-Term
Plan. As in the previous year, the terminal value is based on a growth rate
derived from the difference between the current and possible degree of asset
capacity and utilisation.
Forecast EBIT has been projected using:
• Expected future sales are based on the strategic plan, which was
constructed at a market level with input from regional commercial managers. An
assessment of the market using external sources for the development of the
customer's industries; regional growth rates of the steel production and
output of the non-steel clients in combination with the development of the
specific refractory consumption including technological improvements.
• Current cost structure and production capacity, which include our
expectations for future cost inflation. The assumptions were updated
considering the latest economic developments, including energy, freight and
raw material prices. The forecasts include cash flows from future investments
related to capacity maintenance while expansion investments are excluded.
Working capital is included in the carrying amount of the CGUs; therefore, the
recoverable amount only takes into account changes in working capital.
The following table shows the perpetual annuity growth rates and discount
rates before tax applied in the value in use determination for CGUs to which
significant goodwill is allocated:
2023 2022
Discount rate before Tax Perpetual annuity growth rate Goodwill Discount rate before Tax Perpetual annuity growth rate Goodwill
in € million
in € million
Steel - Linings 9.9% 0.9% 212.8 10.8% 0.9% 107.2
Steel - Flow Control 10.0% 0.9% 66.5 11.1% 0.9% 28.5
Industrial - Cement & Lime 10.5% 0.9% 55.1 11.2% 0.9% 0.1
As a sensitivity, the effect of the following downside scenarios to the key
assumptions would, in isolation, not result in an impairment of goodwill:
• increase of the estimated discount rate by 10%
• decrease of the perpetual annuity growth rate by 50%
• decrease of revenue by 5%
• decrease of EBIT margin by 10%.
18. Other intangible assets
in € million Mining rights Customer relationship Internally generated intangible assets Other intangible assets Prepayments made and intangible assets under construction Total
Cost at 31.12.2022 151.9 132.1 78.5 156.8 0.0 519.3
Currency translation 1.5 (5.1) (0.1) (2.4) (0.2) (6.3)
Additions 0.0 0.0 8.0 2.0 0.1 10.1
Additions initial consolidation 0.0 158.9 0.0 6.4 8.0 173.3
Retirements and disposals (1.0) 0.2 (0.6) (1.0) 0.0 (2.4)
Reclassifications 0.0 (1.8) 0.0 8.4 14.2 20.8
Cost at 31.12.2023 152.4 284.3 85.8 170.2 22.1 714.8
Accumulated amortisation 31.12.2022 14.5 45.4 48.8 94.0 0.0 202.7
Currency translation 0.0 (0.5) 0.0 0.5 0.0 0.0
Amortisation charges 2.5 20.2 3.6 17.3 0.0 43.6
Retirements and disposals 0.0 0.2 (0.2) (0.3) 0.0 (0.3)
Reclassifications 0.0 (0.5) 0.0 (0.5) 0.0 (1.0)
Accumulated amortisation 31.12.2023 17.0 64.8 52.2 111.0 0.0 245.0
Carrying amounts at 31.12.2023 135.4 219.5 33.6 59.2 22.1 469.8
in € million Mining rights Customer relationship Internally generated intangible assets Other intangible assets Total
Cost at 31.12.2021 139.3 99.2 70.9 145.4 454.8
Currency translation 12.6 4.4 0.1 1.0 18.1
Additions 0.0 0.0 8.7 7.2 15.9
Additions initial consolidation 0.0 28.5 0.0 0.0 28.5
Retirements and disposals 0.0 0.0 (0.8) (0.7) (1.5)
Reclassifications 0.0 0.0 (0.4) 3.9 3.5
Cost at 31.12.2022 151.9 132.1 78.5 156.8 519.3
Accumulated amortisation 31.12.2021 11.1 35.3 44.8 81.0 172.2
Currency translation 0.9 0.7 0.0 0.3 1.9
Amortisation charges 2.5 9.4 4.0 13.0 28.9
Retirements and disposals 0.0 0.0 0.0 (0.7) (0.7)
Reclassifications 0.0 0.0 0.0 0.4 0.4
Accumulated amortisation 31.12.2022 14.5 45.4 48.8 94.0 202.7
Carrying amounts at 31.12.2022 137.4 86.7 29.7 62.8 316.6
Internally generated intangible assets comprise capitalised software and
product development costs.
The intangible assets resulting from customer relationships of former
Magnesita Group have a carrying amount of €55.0 million (2022:
€61.1 million) and a remaining useful life between five to nine years.
Information on the customer relationships of the acquired entities in 2023 is
provided in Note (42).
Other intangible assets include in particular acquired patents, trademark
rights, software, and land-use rights. The land-use rights have a carrying
amount of €23.8 million (2022: €20.9 million) and a remaining useful life
between 14 to 54 years.
There are no restrictions on the sale of intangible assets.
19. Property, plant and equipment
in € million Real Technical Other plant, furniture and fixtures Prepayments Right-of-use assets Total
estate,
equipment,
made and
land and
machinery
plant under
buildings
construction
Cost at 31.12.2022 712.2 1,143.1 392.7 231.6 112.4 2,592.0
Currency translation (0.6) (1.5) 1.2 3.0 0.2 2.3
Additions(1)) 13.5 18.6 10.9 127.1 14.8 184.9
Additions initial consolidation 52.3 51.0 6.3 5.8 21.8 137.2
Retirements and disposals (35.0) (23.9) (15.0) 0.0 (14.7) (88.6)
Reclassifications 15.5 43.7 20.5 (100.5) 0.0 (20.8)
Cost at 31.12.2023 757.9 1,231.0 416.6 267.0 134.5 2,807.0
Accumulated depreciation 31.12.2022 317.4 767.5 252.1 1.3 50.0 1,388.3
Currency translation (0.4) 0.5 0.0 0.0 0.7 0.8
Depreciation charges 16.9 66.5 29.7 0.0 20.8 133.9
Impairment charges 0.0 0.4 1.0 0.0 0.0 1.4
Reversal of impairment charges 0.0 0.0 0.0 0.0 (0.4) (0.4)
Retirements and disposals (30.1) (21.0) (12.9) 0.0 (13.8) (77.8)
Reclassifications 0.0 0.2 0.5 0.0 0.0 0.7
Accumulated depreciation 31.12.2023 303.8 814.1 270.4 1.3 57.3 1,446.9
Carrying amounts at 31.12.2023 454.1 416.9 146.2 265.7 77.2 1,360.1
1) Including €7.9 million capitalised borrowing costs.
in € million Real Technical Other plant, furniture and fixtures Prepayments Right-of-use assets Total
estate,
equipment,
made and
land and
machinery
plant under
buildings
construction(1))
Cost at 31.12.2021 670.3 1,143.6 379.4 209.7 87.1 2,490.1
Currency translation 11.0 13.2 4.9 11.2 2.6 42.9
Additions(2)) 8.2 14.9 15.1 122.6 20.7 181.5
Additions initial consolidation 6.0 2.9 0.6 0.3 7.0 16.8
Retirements and disposals (10.8) (85.0) (34.5) (0.5) (5.0) (135.8)
Reclassifications 27.5 53.5 27.2 (111.7) 0.0 (3.5)
Cost at 31.12.2022 712.2 1,143.1 392.7 231.6 112.4 2,592.0
Accumulated depreciation 31.12.2021 311.5 793.4 260.3 1.5 33.7 1,400.4
Currency translation 0.3 5.7 1.1 0.1 1.2 8.4
Depreciation charges 15.1 54.1 26.2 0.0 20.2 115.6
Reversal of impairment charges (1.5) (3.0) (0.9) (0.3) (0.3) (6.0)
Retirements and disposals (8.0) (82.7) (34.2) 0.0 (4.8) (129.7)
Reclassifications 0.0 0.0 (0.4) 0.0 0.0 (0.4)
Accumulated depreciation 31.12.2022 317.4 767.5 252.1 1.3 50.0 1,388.3
Carrying amounts at 31.12.2022 394.8 375.6 140.6 230.3 62.4 1,203.7
1) Prepayments made and plant under construction include €10.2 million
relating to intangible assets. €3.5 million was transferred to intangibles
assets during the year.
2) Including €1.5 million capitalised borrowing costs.
Prepayments made and plant under construction includes €258.7 million (2022:
€212.0 million) mainly relating to the expansion and production optimisation
of the plants in Brazil during 2023. The spent in 2022 mainly related to the
expansion of a production plant in Austria and a magnesite plant in Brazil.
Please refer to Note (27) for the restrictions on the sale of property, plant
and equipment.
The Right-of-use assets per category developed as follows as of 31 December
2023:
in € million Right-of-use assets Right-of-use assets Right-of-use assets Total
land and buildings
technical equipment and machinery
other equipment, furniture and fixtures
Cost at 31.12.2022 68.8 33.0 10.6 112.4
Currency translation (0.3) 0.4 0.1 0.2
Additions 8.7 0.8 5.3 14.8
Additions initial consolidation 20.9 0.7 0.2 21.8
Retirements and disposals (7.5) (4.8) (2.4) (14.7)
Cost at 31.12.2023 90.6 30.1 13.8 134.5
Accumulated depreciation 31.12.2022 25.3 19.2 5.5 50.0
Currency translation 0.0 0.5 0.2 0.7
Depreciation charges 11.9 5.3 3.6 20.8
Reversal of impairment charges 0.0 (0.4) 0.0 (0.4)
Retirements and disposals (7.2) (4.6) (2.0) (13.8)
Accumulated depreciation 31.12.2023 30.0 20.0 7.3 57.3
Carrying amounts at 31.12.2023 60.6 10.1 6.5 77.2
The Right-of-use assets per category developed as follows as of 31 December
2022:
in € million Right-of-use assets Right-of-use assets Right-of-use assets Total
land and buildings
technical equipment and machinery
other equipment, furniture and fixtures
Cost at 31.12.2021 47.8 31.9 7.4 87.1
Currency translation 1.0 1.5 0.1 2.6
Additions 16.7 1.2 2.8 20.7
Additions initial consolidation 5.1 0.1 1.8 7.0
Retirements and disposals (1.8) (1.7) (1.5) (5.0)
Cost at 31.12.2022 68.8 33.0 10.6 112.4
Accumulated depreciation 31.12.2021 15.4 14.4 3.9 33.7
Currency translation 0.4 0.6 0.2 1.2
Depreciation charges 11.2 6.1 2.9 20.2
Reversal of impairment charges 0.0 (0.2) (0.1) (0.3)
Retirements and disposals (1.7) (1.7) (1.4) (4.8)
The average lease term is 11 years for land and buildings, six years for
technical equipment and three years for other equipment, furniture and
fixtures. Impacts resulting from extension and termination options, as well as
residual value guarantees are immaterial. Detail on lease liabilities is in
Note (28).
20. Other non-current assets
in € million 31.12.2023 31.12.2022
Tax receivables 13.9 18.7
Other non-current assets 22.8 21.3
Other non-current assets 36.7 40.0
Tax receivables relate to input tax credits, which are expected to be utilised
in the medium term. Other non-current assets mainly include deferred mine
stripping costs.
21. Inventories
in € million 31.12.2023 31.12.2022
Raw materials and supplies 274.0 303.3
Work in progress 220.5 206.7
Finished products and goods 488.6 526.3
Prepayments made 12.8 12.8
Inventories 995.9 1,049.1
Net write-down expenses amount to €11.6 million (2022: €8.0 million).
Please refer to Note (27) for the restrictions of the disposal of inventories.
22. Trade and other current receivables
in € million 31.12.2023 31.12.2022
Trade receivables 537.6 433.4
Contract assets 3.5 3.5
Other tax receivables 95.4 106.4
Prepaid expenses 8.4 5.9
Other current receivables 40.8 29.7
Trade and other current receivables 685.7 578.9
thereof financial assets 541.4 433.9
thereof non-financial assets 144.3 145.0
The Group enters into factoring agreements and sells trade receivables to
financial institutions. Trade receivables sold at the end of the year was
€259.4 million (2022: €245.1 million). These have been derecognised as
substantially all risks and rewards as well as control have been transferred.
Payments received from customers following the sale are recognised in current
borrowings until repaid to the factorer.
Other tax receivables include primarily VAT, as well as receivables from
energy tax refunds, and tax research subsidies.
Other current receivables mainly relate to advances for insurance, IT services
as well as custom and import-related services and costs.
23. Cash and cash equivalents
in € million 31.12.2023 31.12.2022
Cash at banks and in hand 644.4 471.8
Money market funds 59.1 48.9
Cash and cash equivalents 703.5 520.7
Cash and cash equivalents include amounts not available for use by the Group
totalling €9.9 million at 31 December 2023 (2022: €23.2 million). Cash
not available for use by the Group is mainly related to deposits for bank
guarantees.
Money market funds with an opening balance of €9.3 million have been
reclassified to other current financial assets since their value has
significantly changed in the current reporting period and thus do no longer
meet the definition of cash equivalents. The reclassification is shown
separately in the Consolidated Statement of Cash Flows.
24. Share capital
At 31 December 2023, the authorised share capital of RHI Magnesita N.V.
amounts to €100,000,000 divided into 100,000,000 ordinary shares unchanged
to prior year. Thereof 47,130,338 (2022: 47,017,695) fully paid-in ordinary
shares are issued. In addition, there are 2,347,367 (2022: 2,460,010) treasury
shares held by the Company. All issued RHI Magnesita shares grant the same
rights. The shareholders are entitled to dividends and have one voting right
per share at the Annual General Meeting. There are no shares with special
control rights.
25. Group reserves
Treasury shares
At 31 December 2023, RHI Magnesita treasury shares amount to 2,347,367 (2022:
2,460,010).
Additional paid-in capital
At 31 December 2023, as well as at 31 December 2022, additional paid-in
capital comprised premiums on the issue of shares less issue costs by RHI
Magnesita N.V.
Mandatory reserve
The Articles of Association stipulate a mandatory reserve of €288,699,230.59
which was created in connection with the merger between former RHI Group and
former Magnesita Group in 2017. No distributions, allocations or additions may
be made and no losses of the Company may be allocated to the mandatory
reserve.
Retained earnings
Retained earnings includes the result of the financial year and results that
were earned by consolidated companies during prior periods, but not
distributed. The difference between the purchase consideration or sale
proceeds after tax and the relevant proportion of the non-controlling
interest, measured by reference to the carrying amount of the interest's net
assets at the date of acquisition or sale, is recognised in retained earnings
too.
Accumulated other comprehensive income
Cash flow hedge reserves includes gains and losses from the effective part of
cash flow hedges less tax effects. The accumulated gain or loss from the hedge
allocated to reserves is only reclassified to the Statement of Profit or Loss
if the hedged transaction also influences the result or is terminated.
Reserves for defined benefit plans include the gains and losses from the
remeasurement of defined benefit pension and termination benefit plans taking
into account tax effects. No reclassification of these amounts to the
Statement of Profit or Loss will be made in future periods.
Currency translation includes the accumulated currency translation differences
from translating the Financial Statements of foreign subsidiaries, unrealised
currency translation differences from monetary items which are part of a net
investment in a foreign operation, net of related income taxes, as well as the
effective portion of foreign exchange gains or losses when a financial
instrument is designated as the hedging instrument in net investment hedge in
a foreign operation.
26. Non-controlling interests
Subsidiaries with material non-controlling interests
RHI Magnesita India Ltd., based in New Delhi, India is a listed company on the
BSE Limited and NSE Limited. RHI Magnesita India Ltd., including the acquired
Hi-Tech business, is the (direct or ultimate) parent company of Dalmia OCL
Ltd. (Dalmia OCL), Dalmia Seven Refractories Ltd. and Intermetal which
together form the Subgroup India. This Subgroup India is included in the Steel
and Industrial segments and the share of the non-controlling interests amounts
to 43.9% (2022: 29.8%). Aggregated financial information of Subgroup India as
of 31 December 2023 is provided below:
in € million 31.12.2023 31.12.2022(1))
Non-current assets 420.3 50.4
Current assets 257.9 168.3
Non-current liabilities (18.4) (2.5)
Current liabilities (151.8) (71.7)
Net assets before intragroup eliminations 508.0 144.5
Intragroup eliminations (1.6) 0.1
Net assets 506.4 144.6
Carrying amount of non-controlling interests 148.6 43.1
1) The disclosed financial information as of 31 December 2022 only relates to
RHI Magnesita India Ltd. which is why it is not comparable to this year's
financial information.
The aggregated Statement of Profit or Loss and Statement of Comprehensive
Income of Subgroup India for financial year 2023 are shown below:
in € million 2023 2022(1))
Revenue 426.9 294.6
Operating expenses, net finance costs and income tax (410.3) (257.4)
Profit after income tax before intragroup eliminations 16.6 37.2
Intragroup eliminations (1.8) 0.6
Profit after income tax 14.8 37.8
thereof attributable to non-controlling interests 6.6 11.3
in € million 2023 2022(1))
Profit after income tax 14.8 37.8
Other comprehensive (expense)/income (32.7) (8.2)
Total comprehensive income (17.9) 29.6
thereof attributable to non-controlling interests (7.9) 8.8
1) The disclosed financial information for 2022 only relates to RHI Magnesita
India Ltd. which is why it is not comparable to this year's financial
information.
The following table shows the summarised Statement of Cash Flows of Subgroup
India for financial year 2023:
in € million 2023 2022(1))
Net cash flow from operating activities 38.2 21.5
Net cash flow from investing activities (123.0) (6.9)
Net cash flow from financing activities 75.3 (6.4)
Total cash flow (9.5) 8.2
1) The disclosed financial information for 2022 only relates to RHI Magnesita
India Ltd. which is why it is not comparable to this year's financial
information.
Net cash flow from financing activities includes dividend payments to
non-controlling interests amounting to €2.6million (2022: €1.5 million).
Change of non-controlling interests without a change of control
In 2023 the Group has acquired 100% of the shares of Dalmia OCL Ltd, India,
through the non-wholly owned subsidiary RHI Magnesita India Ltd. and 51% of
the shares of Dalmia Seven Refractories Ltd ('DSR'), India, in exchange for
27,000,000 newly issued equity shares in RHI Magnesita India Ltd. worth
€270.0 million and a cash consideration worth €55.2 million (see Note
(42)).
The share issue which has diluted the Group's share in RHI Magnesita India
Ltd. resulted in an increase of non-controlling interests by €122.3 million
and has created a dilution gain of €147.7 million reported within equity
attributable to shareholders of RHI Magnesita N.V. The share issue is a
non-cash transaction which had no impact on the Consolidated Statement of Cash
Flows.
Subsequently, the increase of non-controlling interests because of the share
issue was offset with the decrease of non-controlling interests as result of
acquisition of Dalmia OCL and DSR of €68.8 million (refer to Note (42))
resulting in a net increase of non-controlling interests of €53.7 million as
presented in the Consolidated Statement of Changes in Equity.
In April 2023, RHI Magnesita India Ltd. issued 15,715,034 equity shares
through a Qualified Institutional Placement which raised cash proceeds
amounting to €100.0 million. The share issue which has diluted the Group's
share in RHI Magnesita India Ltd. resulted in an increase of non-controlling
interests by €63.8 million and has created a dilution gain amounting to
€36.2 million reported within equity attributable to shareholders of RHI
Magnesita N.V. The cash inflow from this share issue is reported within the
cash flow from financing activities in the Consolidated Statement of Cash
Flows.
in € million January 2023 April 2023
Consideration received 270.0 100.0
Carrying value of the sold interest in RHI Magnesita India Ltd. 122.3 63.8
Dilution gain recognised in retained earnings 147.7 36.2
In June 2023, RHI Magnesita India Ltd. issued 2,790,061 equity shares on a
preferential basis which raised cash proceeds amounting to €22.5 million.
The share issue has diluted the non-controlling shareholder's share in RHI
Magnesita India Ltd. and insofar a purchase of non-controlling interests
occurred which has decreased non-controlling interests by €3.2 million and
increased equity attributable to shareholders of RHI Magnesita N.V. by the
same amount. The share issue had no impact on the Consolidated Statement of
Cash Flows since the cash proceeds were fully funded by the Group.
Following the acquisition of 51% of the shares of Dalmia Seven Refractories
Ltd in January 2023 (see Note (42)) the company was renamed to RHI Magnesita
Seven Refractories Ltd. Within the Seven Refractories' business combination
which was closed on 24 July 2023, the Group acquired the remaining shares
(49%) of RHI Magnesita Seven Refractories Ltd held by the non-controlling
shareholders for a cash consideration of €6.9 million (including directly
attributable transaction costs of €0.8 million). The difference between the
carrying amount of the non-controlling interests' portion of equity acquired
and the consideration paid was recorded in retained earnings within equity.
In addition, the Group has acquired non-controlling interests of Seven
Refractories' Group and Söğüt Refrakter Malzemeleri Anonim Şirketi
(Sörmaş) for a cash consideration of €1.3 million with the difference
between the carrying amount of the non-controlling interests' portion of
equity acquired and the consideration paid recorded in retained earnings
within equity.
27. Borrowings
Borrowings include all interest-bearing liabilities due to financial
institutions and other lenders.
In April 2023, the Group successfully issued a Bonded loan
("Schuldscheindarlehen") in the amount of €170.0 million with an average
tenor of five years and at competitive pricing. Additionally, the Group has
successfully refinanced a bilateral Term Loan, increasing the total loan
amount from €115.0 million to €150.0 million and extending the maturity
date to 2026.
In November 2023, the Group has issued a new €200.0 million bilateral
OeKB-backed Term Loan with final maturity in March 2029, to partially
refinance a €70.0 million Term Loan otherwise maturing in February 2024.
All above mentioned instruments are ESG-linked and the margin payable is
adjusted based on the Group's EcoVadis ESG rating performance. The proceeds of
the new instruments will be used for general corporate purposes, including
refinancing and acquisitions.
To further support acquisition financing, the Group has additionally entered
into two bilateral Term Loans in December 2022 and January 2023 amounting to
INR 13.25 billion (€149.1 million) and which are fully repaid as at 31
December 2023, to fund the Group's acquisition of Hi-Tech and Dalmia OCL
(renamed to RHI Magnesita India Refractories Ltd.).
Net debt excluding lease liabilities/Adjusted EBITDA is the key financial
covenant of the loan agreements and is shown under Note (38). Compliance with
the covenants is measured on a semi-annual basis. In line with the covenant
requirements, net debt excluding lease liabilities to Adjusted EBITDA cannot
exceed 3.5x. Breach of covenants leads to an anticipated maturity of loans.
During 2023 and 2022, the Group met all covenant requirements.
The breakdown of borrowings is presented in the following table:
Total
in € million 31.12.2023 current non-current
Syndicated & Term Loan 1,114.1 45.5 1,068.6
Bonded loans ("Schuldscheindarlehen") 755.0 35.0 720.0
Other credit lines and other loans 62.9 60.3 2.6
Total liabilities to financial institutions 1,932.0 140.8 1,791.2
Other financial liabilities 18.3 8.9 9.4
Capitalised transaction costs (1.5) (0.4) (1.1)
Borrowings 1,948.8 149.3 1,799.5
Total
in € million 31.12.2022 current non-current
Syndicated & Term Loan 942.4 130.7 811.7
Bonded loans ("Schuldscheindarlehen") 585.0 0.0 585.0
Other credit lines and other loans 84.6 84.6 0.0
Total liabilities to financial institutions 1,612.0 215.3 1,396.7
Other financial liabilities 9.0 0.1 8.9
Capitalised transaction costs (1.0) (0.3) (0.7)
Borrowings 1,620.0 215.1 1,404.9
Considering interest swaps, 69% (2022: 73%) of the liabilities to financial
institutions carry fixed interest and 31% (2022: 27%) carry variable interest.
The following table shows fixed interest terms and conditions, taking into
account interest rate swaps, without liabilities from deferred interest:
Interest terms fixed until Effective annual interest rate Currency 31.12.2023 Interest terms fixed until Effective annual interest rate Currency 31.12.2022
Carrying amount
Carrying amount
in € million
in € million
2024 EURIBOR + margin EUR 573.6 2023 EURIBOR + margin EUR 372.3
3.10% EUR 35.0 Variable rate + margin EUR 34.0
Various - Variable rate Various 34.3 Various - Variable rate Various 27.4
2025 0.50% EUR 150.0 0.25% EUR 115.0
2026 3.63% EUR 264.0 2024 3.10% EUR 35.0
2027 2.44% EUR 743.6 2025 0.59% EUR 177.0
2028 1.90% EUR 118.5 2027 2.72% EUR 751.8
2029 1.52% EUR 8.0 2028 0.92% EUR 86.5
2031 1.28% EUR 5.0 2029 1.52% EUR 8.0
2031 1.28% EUR 5.0
1,932.0 1,612.0
The table above shows how long the interest rates are fixed, rather than the
maturity of the underlying instruments.
Property, plant and equipment and inventories in the amount of €6.9 million
(2022: €0.0 million) have been pledged as security for loans.
28. Other financial liabilities
Other financial liabilities include the negative fair value of derivative
financial instruments as well as lease liabilities and fixed-term and puttable
non-controlling interests payable in Group companies. Additional explanation
on derivative financial instruments is provided under Note (36).
31.12.2023 31.12.2022
in € million Current Non-current Total Current Non-current Total
Forward exchange contracts 0.8 0.0 0.8 0.6 0.0 0.6
Interest rate derivatives 0.0 2.4 2.4 0.0 0.0 0.0
Commodity swaps 1.1 9.9 11.0 0.9 0.2 1.1
Derivatives in open orders 2.9 0.0 2.9 9.5 0.0 9.5
Derivative financial liabilities 4.8 12.3 17.1 11.0 0.2 11.2
Lease liabilities 18.1 51.8 69.9 17.5 46.4 63.9
Fixed-term or puttable non-controlling interests 18.0 69.3 87.3 21.6 46.2 67.8
Other financial liabilities 40.9 133.4 174.3 50.1 92.8 142.9
In line with the Group's accounting policy, the carrying amount of
non-controlling interest is reduced to nil and replaced with a financial
liability where the Group has provided a written put option (usually together
with a call option) or has entered into a forward contract to acquire the
shares not controlled by the Group. The carrying amount of the financial
liabilities represents the discounted value of the expected settlement for the
following non-controlling interest:
Ownership interest held by NCI in € million 31.12.2023 31.12.2022
Horn & Co. Minerals Recovery GmbH & Co.KG 49.00% 7.7 8.4
RHI Magnesita (Chongqing) Refractory Materials Co., Ltd. 49.00% 15.2 21.3
Jinan New Emei Industries Co. Ltd. 35.00% 30.9 0.0
Liaoning RHI Jinding Magnesia Co., Ltd. 16.67% 22.9 26.4
RHI Refractories Liaoning Co., Ltd. 34.00% 10.6 11.7
Other financial liabilities 87.3 67.8
During the period, €6.5 million (2022: €5.3 million) was recognised as an
interest expense on the liability and €6.6 million income (2022: €4.7
million income) was recognised within other net financial expenses as an
adjustment to the amount payable where the written put option price or forward
price is based on earnings multiple or is affected by a change in the discount
rate. See Note (13). Dividends paid to non-controlling interest amounting to
€7.4 million (2022: €2.1 million) have reduced the liability in the
current reporting period since there is a contractual right to reduce the
liability.
29. Provisions for pensions
The net liability from pension obligations in the Consolidated Statement of
Financial Position is as follows:
in € million 31.12.2023 31.12.2022
Present value of pension obligations 420.7 395.5
Fair value of plan assets (186.4) (186.6)
Deficit of funded plans 234.3 208.9
Asset ceiling 5.2 3.8
Net liability from pension obligations 239.5 212.7
Overfunded pension plans 2.0 2.0
Other pension plans 241.5 214.7
The present value of pension obligations by beneficiary groups is as follows:
in € million 31.12.2023 31.12.2022
Active beneficiaries 61.5 64.2
Vested terminated beneficiaries 44.0 43.4
Retirees 315.2 287.9
Present value of pension obligations 420.7 395.5
The pension obligations are measured using the following actuarial assumptions
for the key countries in which the Group operates:
in % 31.12.2023 31.12.2022
Interest rate
Austria and Germany 3.3% 3.8%
Brazil 10.1% 10.5%
United Kingdom 4.5% 4.8%
USA 4.8% 5.0%
Future salary increase
Austria 3.9% 4.5%
Germany 2.5% 2.5%
Brazil 4.5% 4.3%
United Kingdom(1)) n/a 3.3%
USA 3.3% 3.3%
Future pension increase
Austria 5.3% 3.0%
Germany 2.2% 2.2%
Brazil 4.5% 4.3%
United Kingdom 3.0% 3.4%
USA 2.0% 2.0%
1) No active plan members at 31.12.2023.
These are average values which were weighted with the present value of the
respective pension obligation.
The calculation of the actuarial interest rate for the Eurozone countries is
based on a yield curve for returns of high-quality corporate bonds denominated
in EUR with an average rating of AA, which is derived from pooled index
values. The calculation of the actuarial interest rate for the USD and GBP
currency area is based on a yield curve for returns of high-quality corporate
bonds denominated in USD and GBP with an average rating of AA, which is
derived from pooled index values. Where there are very long-term maturities,
the yield curve follows the performance of bonds without credit default risk.
The interest rate is calculated annually at 31 December, taking into account
the expected future cash flows which were determined based on the current
personal and commitment data.
The calculation in Austria was based on the AVÖ 2018-P demographic
calculation principles for salaried employees from the Actuarial Association
of Austria. In Germany, the Heubeck Richttaffeln 2018 G actuarial tables were
used as a basis. In the other countries, country-specific mortality tables
were applied.
The main pension regulations are described below:
The Austrian group companies account for €80.3 million (2022: €81.2
million) of the present value of pension obligations and for €8.8 million
(2022: €18.1 million) of the plan assets. The agreed benefits include
pensions, invalidity benefits and benefits for surviving dependents.
Commitments in the form of company or individual agreements depend on the
length of service and the salary at the time of retirement. For the majority
of commitments, the amount of the pension subsidy is limited to 75% of the
final remuneration including a pension pursuant to the General Social
Insurance Act (ASVG). The Group has concluded pension reinsurance policies for
part of the commitments. The pension claims of the beneficiaries are limited
to the coverage capital required for these commitments. Pensions are
predominantly paid in the form of annuities and are partially indexed. For
employees joining the company after 1 January 1984, no defined benefits were
granted. Rather, a defined contribution pension model is in place. In
addition, there are commitments based on the deferred compensation principle,
which are fully covered by pension reinsurance policies and commitments for
preretirement benefits for employees in mining operations.
The pension plans of the German group companies account for €107.2 million
(2022: €107.7 million) of the present value of pension obligations and for
€0.7 million (2022: €0.7 million) of the plan assets. The benefits
included in company agreements comprise pensions, invalidity benefits and
benefits for surviving dependents. The amount of the pension depends on the
length of service for the majority of the commitments and is calculated as a
percentage of the average monthly wage/salary of the last 12 months prior to
retirement. In some cases, commitments to fixed benefits per year of service
have been made. The pensions are predominantly paid in the form of annuities
and are adjusted in accordance with the development of the consumer price
index for Germany. The pension plans are closed for new entrants, except one
contribution-based plan. There is no defined contribution model on a voluntary
basis. Individual commitments have been made, with major part of them being
retired beneficiaries.
The pension plan of the US group company Magnesita Refractories Company, York,
USA, accounts for €71.2 million (2022: €71.6 million) of the present
value of pension obligations and for €63.0 million (2022: €63.3 million)
of the plan assets. The pension plan is a non-contributory defined benefit
plan covering a portion of the employees of the company. The plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA). Effective 21 June 1999, the company offered the participants the
opportunity to elect to participate in a single enhanced defined contribution
plan. Participants who made this election are no longer eligible for future
accruals under this plan. All benefits accrued as of the date of transfer will
be retained. Employees hired after 21 June 1999 and employees that did not
meet the plan's eligibility requirements as of 21 June 1999 are not eligible
for this plan. The pensions are predominantly paid in the form of annuities
and are adjusted annually based on the US consumer price index. The company's
contributions for the year ended 31 December 2021 met, or exceeded, the
minimum funding requirements of ERISA.
The pension plan of the UK group company Magnesita Refractories Ltd.,
Dinnington, United Kingdom, accounts for €41.2 million (2022:
€39.0 million) of the present value of pension obligations and holds
€45.7 million (2022: €41.2 million) of assets, although no plan assets are
reflected on the balance sheet due to the application of International
Financial Reporting Interpretations Committee 14 (IFRIC 14) (asset ceiling).
The company sponsors a funded defined benefit pension plan for qualifying UK
employees. The plan is administered by a separate Board of Trustees which is
legally separate from the company. The trustees are composed of
representatives of both the employer and employees, plus an independent
professional trustee. The trustees are required by law to act in the interest
of all relevant beneficiaries and are responsible for the investment policy
with regard to the assets plus the day-to-day administration of the benefits.
Under the plan, employees are entitled to annual pensions on retirement at age
65. During 2022, the Board of Trustees agreed to a buy-in of the defined
benefit obligation with a third-party insurer in the United Kingdom. In terms
of the buy-in, the insurer assumed the obligations relating to the plan from
July 2022 while the plan assets were liquidated and transferred to the insurer
at a value of around €61.7 million. Until the defined benefit scheme is
wound up (the buy-out), the Group will continue to recognise the pension
obligation and the value of the insurance policy as a plan asset equal to the
pension obligation. The surplus plan assets of €4.5 million, at 31 December
2023 are not recognised due to the application of IFRIC 14 and the asset
ceiling requirements. It is expected that the remaining surplus, net of
adjustments, tax payments and other minor expenses will be refunded to the
Group once the plan will be wound up.
The pension liabilities of the Brazilian group company Magnesita Refratários
S.A. account for €54.9 million (2022: €49.9 million) of the present value
of pension obligations and for €30.6 million (2022: €29.1 million) of the
plan assets. The pension plan qualifies as an optional benefit plan. Employees
are entitled to contribute to the plan, with the company contributing 1.5
times this value. The agreed benefits include pensions, invalidity benefits
and benefits for surviving dependents. Commitments in the form of company or
individual agreements depend on the length of service and salary at the time
of retirement. For the majority of commitments, the amount of the company
pension obligation is limited to 75% of the final remuneration. At retirement,
the employee may choose to receive up to 25% of his/her amount at once or
receive it on a pro-rata base with different options of monthly quotes.
The following table shows the development of net liability from pension
obligations:
in € million 2023 2022
Net liability from pension obligations at beginning of year 212.7 268.1
Currency translation 2.1 4.5
Additions initial consolidation 11.3 0.0
Pension cost 11.8 8.8
Remeasurement losses/(gains) 22.5 (48.1)
Benefits paid (16.8) (17.3)
Employers' contributions to external funds (4.1) (3.3)
Net liability from pension obligations at year-end 239.5 212.7
The present value of pension obligations developed as follows:
in € million 2023 2022
Present value of pension obligations at beginning of year 395.5 495.0
Currency translation 4.0 11.7
Additions initial consolidation 11.3 0.0
Current service cost 2.2 3.4
Interest cost 19.3 11.8
Remeasurement losses/(gains)
from changes in demographic assumptions (0.5) 0.0
from changes in financial assumptions 27.7 (107.5)
due to experience adjustments (3.1) 13.5
Benefits paid (35.2) (33.0)
Employee contributions to external funds 0.6 0.6
Plan amendments (1.1) 0.0
Present value of pension obligations at year-end 420.7 395.5
The movement in plan assets is shown in the table below:
in € million 2023 2022
Fair value of plan assets at beginning of year 186.6 255.5
Currency translation 2.0 6.2
Interest income 9.3 6.8
Administrative costs (paid from plan assets) (0.4) (0.4)
Gains/(losses) on plan assets less interest income 2.6 (69.7)
Benefits paid (18.4) (15.7)
Employers' contributions to external funds 4.1 3.3
Employee contributions to external funds 0.6 0.6
Fair value of plan assets at year-end 186.4 186.6
The changes in the asset ceiling are shown below:
in € million 2023 2022
Asset ceiling at beginning of year 3.8 28.6
Currency translation 0.1 (0.9)
Interest expense 0.1 0.0
Losses/(gains) from changes in asset ceiling less interest expense 1.2 (23.9)
Asset ceiling at year-end 5.2 3.8
At 31 December 2023, the weighted average duration of pension obligations
amounts to 10.5 years (2022: 10.5 years).
The following amounts were recorded in the Consolidated Statement of Profit or
Loss:
in € million 2023 2022
Current service cost 1.2 3.4
Interest cost 19.4 11.8
Interest income (9.3) (6.8)
Interest expense from asset ceiling 0.1 0.0
Administrative costs (paid from plan assets) 0.4 0.4
Pension expense recognised in profit or loss 11.8 8.8
The remeasurement results recognised in OCI are shown in the table below:
in € million 2023 2022
Accumulated remeasurement losses at beginning of year 95.4 143.6
Remeasurement losses/(gains) on present value of pension obligations 24.1 (94.0)
(Gains)/losses on plan assets less interest income (2.6) 69.7
Losses/(gains) from changes in asset ceiling less interest expense 1.2 (23.9)
Accumulated remeasurement losses at year-end 118.1 95.4
The present value of plan assets is distributed to the following classes of
investments:
31.12.2023 31.12.2022
in € million Active market No active market Total Active market No active market Total
Insurances 22.0 54.9 76.9 0.0 82.1 82.1
Equity instruments 39.9 0.0 39.9 34.4 0.0 34.4
Debt instruments 44.0 0.4 44.4 22.0 2.5 24.5
Cash and cash equivalents 9.5 0.9 10.4 11.8 0.7 12.5
Other assets 14.6 0.2 14.8 32.0 1.1 33.1
Fair value of plan assets 130.0 56.4 186.4 100.2 86.4 186.6
The present value of the insurances to cover the Austrian pension plans
corresponds to the coverage capital. Insurance companies predominantly invest
in debt instruments and to a low extent in equity instruments and properties.
Plan assets do not include own financial instruments or assets utilised by the
Group.
The Group works with professional fund managers for the investment of plan
assets. They act on the basis of specific investment guidelines adopted by the
pension fund committee of the respective pension plans. The committees consist
of management staff of the finance department and other qualified executives.
They meet regularly in order to approve the target portfolio with the support
of independent actuarial experts and to review the risks and the performance
of the investments. In addition, they approve the selection or the extension
of contracts of external fund managers.
The largest part of the other assets is invested in pension reinsurance, which
creates a low counterparty risk towards insurance companies. In addition, the
Group is exposed to interest risks and longevity risks resulting from defined
benefit commitments.
The Group generally endows the pension funds with the amount necessary to meet
the legal minimum allocation requirements of the country in which the fund is
based. Moreover, the Group makes additional allocations at its discretion from
time to time. In the financial year 2024, the Group expects employer
contributions to external plan assets to amount to €5.1 million and direct
payments to entitled beneficiaries to €17.3 million. In the previous year,
employer contributions of €3.1 million and direct pension payments of
€16.2 million had been expected for the financial year 2023.
The following sensitivity analysis shows the change in present value of the
pension and termination benefit obligations if one key parameter changes,
while the other influences are maintained constant. In reality, it is rather
unlikely that these influences do not correlate. The present value of the
pension obligations for the sensitivities shown was calculated using the same
method as for the actual present value of the pension obligations (projected
unit credit method).
31.12.2023 31.12.2022
in € million Change of assumption Pension plans Termination benefits Pension plans Termination benefits
in percentage points
or years
Present value of the obligations 420.7 36.2 395.5 31.5
Interest rate +0.25 (9.6) (0.9) (9.7) (1.4)
(0.25) 10.2 0.9 10.1 0.5
Salary increase +0.25 0.6 0.9 0.3 0.5
(0.25) (0.1) (0.9) (0.3) (1.4)
Pension increase +0.25 7.8 0.0 8.0 0.0
(0.25) (6.6) 0.0 (7.4) 0.0
Life expectancy + 1 year 2.7 0.0 9.1 0.0
(1) year (1.9) 0.0 (8.1) 0.0
These changes would have no immediate effect on the result of the period as
remeasurement gains and losses are recorded in OCI without impact on profit or
loss. The assumptions regarding the interest rate are reviewed semi-annually;
all other assumptions are reviewed at the end of the year.
30. Other personnel provisions
in € million 31.12.2023 31.12.2022
Termination benefits 33.8 31.5
Service anniversary bonuses 18.7 17.9
Semi-retirements 2.7 2.3
Other personnel provisions 55.2 51.7
Provisions for termination benefits
The provision for termination benefits relates mainly to employees that joined
an Austrian company before 1 January 2003 and are subject to a one-off
lump-sum termination benefit under Austrian legislation. This is regarded as a
post-employment benefit and accounted for consistently with pensions benefits
described above.
Provision for the Austrian termination benefits, which accounts for over 80.0%
of the balance (2022: 90.0%) were based on the following measurement
assumptions:
in % 31.12.2023 31.12.2022
Interest rate 3.3% 3.8%
Future salary increase 3.3% 3.9%
The interest rate for the measurement of termination benefit obligations in
the Euro area was determined taking into account the Company specific duration
of the portfolio.
Provisions for termination benefits developed as follows:
in € million 2023 2022
Provisions for termination benefits at beginning of year 31.5 44.1
Currency translation 0.0 0.1
Additions initial consolidation 2.0 0.4
Current service cost 1.9 1.0
Interest cost 1.6 0.5
Remeasurement (gains) (0.1) (9.9)
Benefits paid (3.1) (4.7)
Provisions for termination benefits at year-end 33.8 31.5
Payments for termination benefits are expected to amount to €2.4 million in
the year 2024. In the previous year, the payments for termination benefits
expected for 2023 amounted to €1.3 million.
The following remeasurement gains and losses were recognised in OCI:
in € million 2023 2022
Accumulated remeasurement losses at beginning of year 17.8 27.7
Remeasurement (gains) (0.1) (9.9)
Accumulated remeasurement losses at year-end 17.7 17.8
At 31 December 2023 the average duration of termination benefit obligations
amounted to 10.6 years (2022: 12.6 years).
Provisions for service anniversary bonuses
The measurement of provisions for service anniversary bonuses relating to
employees in Austria and Germany is based on an interest rate of 3.3% (2022:
3.8%) in Austria and 4.2% (2022: 3.8%) in Germany and considers salary
increases of 5.2% (2022: 5.6%) in Austria and 2.5% in Germany (2022: 2.5%).
Provisions for semi-retirement
The funded status of provisions for obligations to employees with
semi-retirement contracts is shown in the table below:
in € million 31.12.2023 31.12.2022
Present value of semi-retirement obligations 4.2 5.8
Fair value of plan assets (1.5) (3.4)
Provisions for semi-retirement obligations 2.7 2.4
External plan assets are ring-fenced from all creditors and exclusively serve
to meet semi-retirement obligations.
31. Other Provisions
The development of provisions is shown in the tables below for 2023 and 2022:
in € million Onerous/unfavourable contracts Labour and civil contingencies Demolition/disposal costs, Restructuring costs Other Total
environmental damages
31.12.2022 62.3 8.4 23.2 12.0 4.2 110.1
Currency translation 2.8 0.4 (0.3) 0.0 0.0 2.9
Reversals (2.0) (2.6) (1.0) (0.7) (1.3) (7.6)
Additions 11.4 6.3 7.7 3.1 7.5 36.0
Additions interest 5.6 1.1 1.0 0.0 0.0 7.7
Use (12.6) (1.8) (1.0) (5.7) (1.9) (23.0)
Reclassifications 0.0 (0.6) 0.0 0.0 0.0 (0.6)
31.12.2023 67.5 11.2 29.6 8.7 8.5 125.5
non-current 52.4 11.2 28.0 0.0 0.0 91.6
current 15.1 0.0 1.6 8.7 8.5 33.9
in € million Onerous/unfavourable contracts Labour and civil contingencies Demolition/disposal costs, Restructuring costs Other Total
environmental damages
31.12.2021 53.9 7.1 19.5 33.5 4.6 118.6
Currency translation 5.8 0.9 0.5 0.0 (0.1) 7.1
Reversals (2.6) (2.4) (0.4) (10.5) 0.0 (15.9)
Additions 9.4 5.8 4.3 3.5 1.4 24.4
Additions interest 6.0 1.0 1.4 0.0 0.1 8.5
Use (10.2) (5.2) (2.5) (14.2) (1.7) (33.8)
Reclassifications 0.0 1.2 0.4 (0.3) (0.1) 1.2
31.12.2022 62.3 8.4 23.2 12.0 4.2 110.1
non-current 49.9 8.4 21.7 0.0 0.0 80.0
current 12.4 0.0 1.5 12.0 4.2 30.1
In November 2017, the Group sold a plant located in Oberhausen, Germany, in
order to satisfy the conditions imposed by the European Commission in their
approval of the merger of RHI Refractories and Magnesita. Under the terms, the
Group remains obligated to provide raw materials at cost and recognised a
provision for unfavourable contracts as part of the purchase price allocation
to reflect the foregone profit margin and is reflected within
onerous/unfavourable contracts. The non-current portion of this contract
obligation amounts to €47.7 million as of 31 December 2023 (2022: €49.9
million) and the current portion to €10.6 million (2022: €10.7 million).
The unwinding of the discount led to a credit of €5.6 million in 2023 (2022:
€6.0 million). In addition, provisions for other unfavourable contracts
amount to €9.1 million (2022: €1.7 million), the increase was driven by
additional onerous contracts identified mainly in Türkiye, China and Europe.
The provision for labour and civil contingencies primarily comprises labour
and civil litigation amounting to €7.8 million (2022: €3.6 million)
arising mainly in Brazil.
The provision for demolition and disposal costs and environmental damages
primarily includes provisions for the estimated costs of mining site
restoration of several mines in Brazil amounting to €9.4 million (2022:
€4.7 million) and various sites in the USA amounting to €6.2 million
(2022: €7.2 million).
Provisions for restructuring costs amounting to €8.7 million at 31 December
2023 (2022: €12.0 million) primarily consist of estimated benefit
obligations to employees due to termination of employment and dismantling
costs. €2.8 million (2022: €6.2 million) relates to the remaining
redundancy costs at Mainzlar, Germany for employees not subject to the restart
of operations, €3.2 million (2022: €3.5 million) relates to the plant
closure in Trieben, Austria and €2.0 million (2022: €0.0 million) pertains
to the termination of employment as a result of the Group's reorganisation of
certain global functions to regional ones.
Other consists mainly of provisions for claims arising from warranties and
other similar obligations from the sale of refractory products.
32. Trade payables and other current liabilities
in € million 31.12.2023 31.12.2022
Trade payables 497.9 506.5
Contract liabilities 64.6 61.8
Liabilities to employees 136.4 97.2
Capital expenditure payable 33.0 43.1
Taxes other than income tax 32.6 35.0
Payables from commissions 9.4 7.7
Other current liabilities 46.3 29.0
Trade payables and other current liabilities 820.2 780.3
thereof financial liabilities 561.2 566.4
thereof non-financial liabilities 259.0 213.9
Trade payables include an amount of €84.1 million (2022:
€68.8 million) for raw material purchases subject to supply chain finance
arrangements.
Contract liabilities mainly consist of prepayments received on orders. In 2023
€61.8 million (2022: €57.9 million) revenue was recognised that was
included in the contract liability balance at the beginning of the period.
The item liabilities to employees primarily consists of obligations for wages
and salaries, payroll taxes and employee-related duties, performance bonuses,
unused vacation and flextime credits. The increase in liabilities to employees
is primarily driven by the newly acquired entities, higher bonus accruals and
underlying inflationary effects in wages and salaries.
33. Cash generated from/(used in) operations
in € million 2023 2022
Profit after income tax 171.3 166.8
Adjustments for
income tax 62.0 103.7
depreciation 133.9 115.6
amortisation 43.6 28.9
write down/(write-up) of property, plant and equipment and intangible assets 1.0 (6.0)
income from the reversal of investment subsidies (1.3) (0.7)
(write ups)/impairment losses/loss from sale on securities (22.5) 1.5
losses from the disposal of property, plant and equipment 4.4 2.4
losses from the disposal of subsidiaries 0.6 1.1
net interest expense, derivatives and valuation call/put options 58.3 47.3
result from disposal of joint ventures and associates (2.7) (0.2)
other non-cash changes 46.0 26.1
Changes in working capital
inventories 182.7 (30.0)
trade receivables 1.7 (12.5)
contract assets 0.0 0.0
trade payables (118.0) (156.8)
contract liabilities (13.9) 4.5
Changes in other assets and liabilities
other receivables and assets 13.1 25.7
provisions (24.6) (49.4)
other liabilities 24.5 19.5
Cash generated from operations 560.1 287.5
Other non-cash changes include: expenses of the employee long-term incentive
programme of €8.7 million (2022: €8.3 million); net interest expenses for
defined benefit pension plans amounting to €12.4 million (2022: €5.7
million) and net remeasurement gains of monetary foreign currency positions
and derivative financial instruments of €35.6 million (2022:
€13.2 million).
34. Net cash flow from financing activities
The reconciliation of movements of financial liabilities and assets to cash
flows arising from financing activities for the current and the prior year is
shown in the tables below:
Cash changes Non-cash changes
in € million 31.12.2022 Changes in foreign exchange rates Interest and other fair value changes Reclassifications Additions from initial consolidation Additions and modifications of leases (IFRS 16) 31.12.2023
Borrowings(1)) (1,620.0) (257.0) 0.9 0.6 0.0 (73.3) 0.0 (1,948.8)
Lease liabilities (63.9) 22.7 0.7 (2.4) 0.0 (12.2) (14.8) (69.9)
Cash and cash equivalents 520.7 196.0 (3.9) 0.0 (9.3) 0.0 0.0 703.5
Net debt (1,163.2) (38.3) (2.3) (1.8) (9.3) (85.5) (14.8) (1,315.2)
Liabilities to fixed-term or puttable non-controlling interests (67.8) 7.4 4.3 0.3 0.0 (31.5) 0.0 (87.3)
1) As from 1 January 2023 "Borrowings" excludes "financial liabilities from
accrued interest" which are now presented under "other current liabilities".
Prior period comparatives have been revised to conform with current year
presentation.
Cash changes Non-cash changes
in € million 31.12.2021 Changes in foreign exchange rates Interest and other fair value changes Reclassifications Additions from initial consolidation Additions and modifications of leases (IFRS 16) 31.12.2022
Borrowings(1)) (1,534.7) (52.5) (19.5) (1.3) 0.0 (12.0) 0.0 (1,620.0)
Lease liabilities (55.5) 20.6 (1.3) 0.0 0.0 (7.0) (20.7) (63.9)
Cash and cash equivalents 580.8 (49.8) (10.3) 0.0 0.0 0.0 0.0 520.7
Net debt (1,009.4) (81.7) (31.1) (1.3) 0.0 (19.0) (20.7) (1,163.2)
Liabilities to fixed-term or puttable non-controlling interests (60.0) 2.1 1.6 (0.6) 0.0 (10.9) 0.0 (67.8)
1) As from 1 January 2023 "Borrowings" excludes "financial liabilities from
accrued interest" which are now presented under "other current liabilities".
Prior period comparatives have been revised to conform with current year
presentation.
35. 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 addition, carrying amounts are shown aggregated
according to measurement category.
31.12.2023 31.12.2022
in € million Measurement category Level Carrying amount Fair value Carrying amount Fair value
IFRS 9(1))
Non-current financial assets
Marketable securities FVPL 1 11.8 11.8 9.0 9.0
Shares FVPL 3 0.5 0.5 0.5 0.5
Shares FVOCI 3 4.6 4.6 0.0 0.0
Interest rate derivatives and commodity swaps designated as cash flow hedges - 2 20.5 20.5 42.4 42.4
Investments in non-consolidated subsidiaries FVPL - 2.4 2.4 3.0 3.0
Other non-current financial assets AC - 3.6 0.2
Trade and other current receivables AC - 510.4 387.7
Trade and other current receivables FVOCI - 31.0 31.0 46.2 46.2
Current financial assets
Marketable securities FVPL 1 11.3 11.3 0.0 0.0
Derivatives in open orders and Forward exchange contracts FVPL 2 0.4 0.4 1.1 1.1
Commodity swaps designated as cash flow hedges - 2 0.4 0.4 0.0 0.0
Other current financial receivables AC - 1.6 0.2
Cash and cash equivalents AC - 703.5 520.7
Financial assets 1,302.0 1,011.0
Non-current and current borrowings
Liabilities to financial institutions AC 2 1,932.0 1,919.8 1,612.0 1,578.1
Other financial liabilities AC - 16.8 8.0
Non-current and current other financial liabilities
Lease liabilities - - 69.9 63.9
Commodity swaps designated as cash flow hedges - 2 11.0 11.0 1.1 1.1
Derivatives in open orders and Forward exchange contracts FVPL 2 3.8 3.8 10.1 10.1
Interest rate derivatives designated as cash flow hedges - 2 2.4 2.4 0.0 0.0
Liabilities to fixed-term or puttable non-controlling interests AC 2/3 33.5 33.5 38.1 38.1
Liabilities to fixed-term or puttable non-controlling interests FVPL 3 53.7 53.7 29.7 29.7
Trade payables and other current liabilities AC - 561.2 566.4
Financial liabilities 2,684.3 2,329.3
Aggregated according to measurement category
Financial assets measured at amortised cost 1,219.1 908.8
Financial assets measured at FVOCI 35.6 46.2
Financial assets measured at FVPL 26.4 13.6
Financial liabilities measured at amortised cost 2,543.5 2,224.5
Financial liabilities measured at FVPL 57.5 39.8
1) FVPL: Financial assets/financial liabilities measured at fair value
through profit or loss.
FVOCI: Financial assets measured at fair value through other
comprehensive income.
AC: Financial assets/financial liabilities measured at amortised
cost.
In the Group, marketable securities, derivative financial instruments and
shares are measured at fair value. Interests in subsidiaries not consolidated
are recognised at cost, which due to materiality reasons, is considered a
reasonable approximation of 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. The Group
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.
The Group 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 2: Measurement techniques in which all important data used are based on
observable market data.
Level 3: Measurement techniques in which at least one significant parameter is based on
non-observable market data.
The fair value of securities and shares 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 an exception
if such instruments are immaterial to the Group, in which case 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 foreign currency derivative contracts correspond 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).
The fair value of commodity swaps for natural gas reflects the difference
between the fixed contract price and the closing quotation of the natural gas
price (EEX Base) as of the respective due date of the transaction. The closing
price on the stock exchange is used as the input (Level 2).
Liabilities to financial institutions and other financial liabilities are
carried at amortised cost in the Consolidated Statement of Financial Position.
Liabilities related to fixed-term or puttable non-controlling interests based
on a fixed consideration are recognised at amortised cost whereas those
liabilities based on a variable consideration are recognised at fair value.
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 April 2023, the Group recognised a liability
related to the commitment to acquire the remaining shares in Jinan New Emei
held by other shareholders (see Note 42), amounting to €31.5 million, which
will be due in 2026 at the earliest. The fair value is based on the present
value of Jinan New Emei's EBITDA performance and certain other variables (see
Note 42). The principal valuation parameters are deemed to be non-observable
(Level 3).
The carrying amounts of other financial assets approximately correspond to
their fair value. Due to the low amounts 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 31 December 2023 and 31 December 2022.
Net results by measurement category in accordance with IFRS 9
The effect of financial instruments on the income and expenses recognised in
2023 and 2022 is shown in the following table, classified according to the
measurement categories defined in IFRS 9:
in € million 2023 2022
Net gain/(loss) from financial assets and liabilities measured at fair value 18.1 (14.6)
through profit or loss
Net (loss)/gain from financial assets and liabilities measured at amortised (4.1) 4.6
cost
The net gain from financial assets and liabilities measured at fair value
through profit or loss includes income from securities and shares, income from
the disposal of securities and shares, impairment losses and income from
reversals of impairment losses, fair value gains and losses on the measurement
of liabilities to fixed-term or puttable non-controlling interests, fair value
gains and losses and realised results of derivative financial instruments
outside the scope of hedge accounting.
The net loss from financial assets and liabilities measured at amortised cost
includes changes in valuation allowances and losses on derecognitions. Net
finance costs include interest income amounting to €19.7 million (2022:
€8.3 million) and interest expenses of €75.2 million (2022:
€47.5 million), which result from financial assets and liabilities measured
at amortised cost.
Other non-current financial assets
Other non-current financial assets consist of the following items:
in € million 31.12.2023 31.12.2022
Interest rate derivatives and commodity swaps 20.5 42.4
Marketable securities and shares 16.9 9.5
Non-current portion of restricted cash 3.4 0.0
Interests in subsidiaries not consolidated 2.4 3.0
Non-current portion of non-current loans 0.2 0.2
Other non-current financial assets 43.4 55.1
Accumulated impairments on investments, securities and shares amount to €3.7
million (2022: €4.3 million). The increase in marketable securities and
shares includes a €4.6 million investment representing a minority stake in
MCi Carbon Pty Ltd.
Other current financial assets
This item of the Consolidated Statement of Financial Position consists of the
following components:
in € million 31.12.2023 31.12.2022
Marketable securities(1)) 11.3 0.0
Derivatives in open orders and forward exchange contracts 0.7 1.1
Current portion of non-current loans 1.3 0.2
Current portion of restricted cash 0.3 0.0
Other current financial assets 13.6 1.3
1) Money market funds held for trading have been reclassified to other current
financial assets in 2023. Refer to Note (23) for details.
36. Derivative financial instruments
Interest rate derivatives
The Group has concluded interest rate swaps and one interest rate collar to
hedge the cash flow risk associated with financial liabilities carrying
variable interest rates. The combination of the interest rate swaps and the
variable interest debt instruments creates synthetic fixed interest debt
instruments without exposure to variability in cash flows due to changes of
interest rates. The combination of the interest rate collar and the variable
interest debt instruments limits the variability of the debt instruments' cash
flows due to changes of interest rates to a predetermined range. The Group has
designated all interest rate swaps and the interest rate collar as hedging
instruments with the variable interest cash flows of the debt instruments as
hedged items in individual hedging relationships recognised as cash flow
hedges. The economic relationship between the hedging instrument and the
hedged item is determined by comparing the critical terms (nominal value,
currency, interest payment date, interest reset dates, etc.) of both items. If
the critical terms of the hedging instrument and the hedged item are either
the same or closely aligned an economic relationship is assumed to exist. The
Group has established a hedge ratio of 1:1 and the cash flow changes of the
underlying hedged items are balanced out by the cash flow changes of the
hedging instruments. Potential hedge ineffectiveness could arise out of
differences in critical terms between the hedging instruments and hedged
items. Credit risk may affect hedge effectiveness. However, this risk is
assessed to be very low as only international banks with high credit ratings
are the counterparties to the hedging instruments.
The fair value of all interest rate derivatives was €17.9 million at the
reporting date (2022: €42.4 million) and is shown in other non-current
financial assets (liabilities) in the Consolidated Statement of Financial
Position. For the reporting period of 2023, €14.5 million loss (2022:
€59.1 million gain) has been recognised in OCI as fair value movements of
the hedging instrument and €10.0 million (2022: €7.2 million) has been
reclassified from OCI to profit or loss and recognised within other net
financial expenses reflecting the settlement of the hedging instrument when
interest on the underlying debt instrument is paid. No ineffectiveness has
been recognised in the Consolidated Statement of Profit or Loss.
The financial effect of the hedged item and the hedging instrument for the
year 2023 and 2022 is shown as follows:
in € million Carrying amount Statement of Financial Position Change in fair value recognised in Other Comprehensive Income Nominal amount
2023 17.9 Other non-current (14.5) EUR 1,081.1 million
financial assets (liabilities)
2022 42.4 Other non-current 59.1 EUR 709.2 million
financial assets
in € million Cash flow hedge reserve within Equity Balance net of deferred tax
2023 17.9 13.8
2022 42.4 32.7
Commodity swaps
To hedge the cash flow risk associated with commodity price of gas and oil the
Group has entered into financial commodity swaps. The Group has designated all
commodity swaps as hedging instruments with expected purchases of commodities
used in the production as hedged items in individual hedging relationships
recognised as cash flow hedges. The economic relationship between the hedged
item and the hedging instrument is deemed upright based on the expectations
that the values of the hedged item and the hedging instrument will typically
move in opposite directions in response to the hedged risk determined by
comparing the critical terms (nominal value, currency, commodity purchase
date, commodity swaps settlement dates, etc.) of both items. If the critical
terms of the hedging instrument and the hedged item are either the same or
closely aligned an economic relationship is assumed to exist. The Group has
established a hedge ratio of 1:1 and the cash flow changes of the underlying
hedged items are balanced out by the cash flow changes of the hedging
instruments. Potential hedge ineffectiveness could arise out of differences in
critical terms between the hedging instruments and the hedged items. For oil
hedges a source of potential ineffectiveness is different but similar
underlyings (crude oil vs fuel oil). Credit risk may affect hedge
effectiveness. However, this risk is assessed to be very low as only
international banks with high credit ratings are the counterparties to the
hedging instruments.
The fair value of all commodity swaps was €10.5 million loss at the
reporting date and is shown in other non-current and current financial assets
(liabilities) in the Consolidated Statement of Financial Position. For the
reporting period of 2023, €10.8 million loss has been recognised in OCI as
fair value movements of the hedging instrument and €1.4 million has been
removed from cash flow hedge reserve and included directly in the carrying
amount of the inventory reflecting the net settlement of the hedging
instrument when the underlying inventory is purchased. No ineffectiveness has
been recognised in the Consolidated Statement of Profit or Loss.
The financial effect of the hedged items and the hedging instruments for the
year 2023 is shown as follows:
in € million Carrying amount Statement of Financial Position Change in fair value recognised in Other Comprehensive Income Nominal amount
2023 (10.5) Other current and non-current (10.8) Gas 1,141 GWh
financial assets (liabilities)
Oil 700,297 bbl
in € million Cash flow hedge reserve within Equity Balance net of deferred tax
2023 (10.5) (7.9)
Forward exchange contracts
Foreign exchange forward contracts are entered into to reduce the Group's cash
flow exposure to currency movements based on the internal risk assessment and
analysis conducted. Hedge accounting is not applied to these economic hedges.
The nominal value and fair value of forward exchange contracts as of
31 December 2023 are shown in the table below:
31.12.2023
Purchase Sale Nominal in Nominal value Fair value
in million
in € million
EUR ZAR ZAR 175.0 0.0
MXN USD MXN 670.0 0.0
USD INR USD 20.0 (0.1)
EUR USD USD 150.0 (0.6)
BRL USD USD 30.0 (0.1)
CLP USD USD 18.5 0.2
EUR INR EUR 33.0 (0.1)
CZK EUR EUR 16.0 0.2
Forward exchange contracts (0.5)
The nominal value and fair value of forward exchange contracts as of
31 December 2022 are shown in the table below:
31.12.2022
Purchase Sale Nominal in Nominal value Fair value
in million
in € million
EUR USD EUR 25.0 0.1
USD INR USD 8.5 0.0
INR EUR INR 4,000.0 (0.6)
Forward exchange contracts (0.5)
37. Financial risk management
Financial risks are incorporated in the Group's corporate risk management
framework and are centrally controlled by Corporate Treasury.
None of the following risks have a significant influence on the going concern
premise of the Group.
Credit risks
The maximum credit risk from recognised financial assets amounts to €1,302.0
million (2022: €1,011.0 million) and is primarily related to investments
with banks and receivables due from customers.
The credit risk with banks related to investments (especially cash and cash
equivalents) is reduced as business transactions are only carried out with
prime financial institutions with a good credit rating. Individual counterpart
exposures limits are assigned to each financial institution based on a matrix
composed of the credit rating (S&P or Moody's) and balance sheet assets.
Trade Receivables are hedged as far as possible through credit insurance and
collateral arranged through banks (guarantees, letters of credit) in order to
mitigate credit and default risk. Credit and default risks are monitored
continuously, and valuation allowance are recognised for risks that have
occurred and are identifiable.
This credit risk from trade receivables and contract assets, which is hedged
by existing credit insurance and letters of credit, is shown by customer
segment in the following table:
in € million 31.12.2023 31.12.2022
Steel 360.0 284.6
Industrial 181.1 148.8
Gross credit exposure 541.1 433.4
Credit insurance and letters of credit (235.4) (214.5)
Net credit exposure 305.7 218.9
The movement in the valuation allowance in respect of trade receivables and
contract assets during the year and the previous year was as follows:
in € million 2023 2022
Individually assessed - Collectively assessed - Individually assessed - Collectively assessed -
credit impaired
not credit impaired
credit impaired
not credit impaired
Accumulated valuation allowance at beginning of year 29.4 0.9 23.2 0.6
Currency translation 0.1 - 0.8 -
Additions initial consolidation 9.1 - 0.3 -
Addition 18.4 - 7.0 0.3
Use (4.3) - (1.3) -
Reversal (0.7) (0.1) (0.6) -
Accumulated valuation allowance at year-end 52.0 0.8 29.4 0.9
The increase in the valuation allowance in 2023 is mainly driven by €13.4
million from acquired entities in 2023.
For trade receivables and contract assets, for which no objective evidence of
impairment exists, lifetime expected credit losses have been calculated using
a provision matrix as shown below. To measure the expected credit losses,
trade receivables and contract assets have been grouped based on shared
credit risk characteristics and the days past due.
in € million Trade receivables and contract assets
31.12.2023 not past due less than 30 days more than 31 days Collectively assessed - Individually assessed - Total
not credit impaired
credit impaired
Expected credit loss rate in % 0.01 - 0.57% 0.05-1.22% 0.30 - 59.13%
Gross carrying amount invoiced 414.2 27.8 17.0 459.0 89.5 548.5
Lifetime expected credit loss (0.6) (0.1) (0.1) - - (0.8)
Valuation allowance - credit impaired - - - - (52.0) (52.0)
Carrying amount with either expected credit loss or incurred loss allowance - - - - - 495.7
Carrying amount without expected credit loss or incurred loss allowance - - - - - 45.4
Total trade receivables and contract assets 541.1
in € million Trade receivables and contract assets
31.12.2022 not past due less than 30 days more than 31 days Collectively assessed - Individually assessed - Total
not credit impaired
credit impaired
Expected credit loss rate in % 0.02 - 0.34% 0.07-0.81% 0.31-49.48%
Gross carrying amount invoiced 385.6 10.8 3.0 399.4 30.1 429.5
Lifetime expected credit loss (0.5) (0.1) (0.4) - - (1.0)
Valuation allowance - credit impaired - - - - (29.3) (29.3)
Carrying amount with either expected credit loss or incurred loss allowance - - - - - 399.2
Carrying amount without expected credit loss or incurred loss allowance - - - - - 37.7
Total trade receivables and contract assets 436.9
Liquidity risk
Liquidity risk refers to the risk that financial obligations cannot be met
when due. The Group's financial policy is based on long-term financial
planning and is centrally controlled and monitored continuously at the Group.
The liquidity requirements resulting from budget and medium-term planning are
secured by concluding appropriate financing agreements. As of 31 December
2023, the Group has a committed Revolving Credit Facility (RCF) of
€600.0 million, which was unutilised (2022: committed RCF was
€600.0 million and was also unutilised). The RCF is a syndicated facility
with multiple international banks and matures in 2028. The liquidity of the
Group's subsidiaries is managed regionally but with central steering. Access
to liquidity and optimised cash levels is ensured by Corporate Treasury, which
supports business needs and lowers borrowing costs. Refer to Note (27) for a
description of the consequences if financial covenants embedded in loan
agreements are breached. Refer to Note (4) for a description of the potential
impacts on the finance costs of ESG-linked loans if the Group's ESG rating
gets downgraded.
Non-derivative financial liabilities
An analysis of the terms of non-derivative financial liabilities based on
undiscounted cash flows including the related interest payments shows the
following expected cash outflows:
Remaining term
in € million Carrying amount 31.12.2023 Cash up to 1 year 2 to 5 years over 5 years
outflows
Borrowings
fixed interest 433.1 454.5 48.4 391.0 15.1
variable interest 1,498.9 1,736.0 154.5 1,363.8 217.7
Other financial liabilities 16.8 22.5 13.7 8.8 0.0
Lease liabilities 69.9 77.2 17.9 33.8 25.5
Liabilities to fixed-term or puttable non-controlling interests 87.3 181.2 18.0 13.1 150.1
Trade payables and other current liabilities 561.2 561.2 561.2 0.0 0.0
Non-derivative financial liabilities 2,667.2 3,032.6 813.7 1,810.5 408.4
Remaining term
in € million Carrying amount 31.12.2022 Cash up to 1 year 2 to 5 years over 5 years
outflows
Borrowings
fixed interest 469.0 481.4 118.5 274.3 88.6
variable interest 1,143.1 1,284.7 132.9 1,129.1 22.7
Other financial liabilities 8.0 8.1 (0.2) 8.3 0.0
Lease liabilities 63.9 70.2 18.5 33.6 18.1
Liabilities to fixed-term or puttable non-controlling interests 67.8 182.8 21.6 15.7 145.5
Trade payables and other current liabilities 506.5 506.5 506.5 0.0 0.0
Non-derivative financial liabilities 2,258.3 2,533.7 797.8 1,461.0 274.9
Derivative financial instruments
The remaining terms of derivative financial instruments as of 31 December
2023 and 31 December 2022 are shown in the table below:
Remaining term
in € million Carrying amount 31.12.2023 Cash flows up to 1 year 2 to 5 years over 5 years
Receivables from derivatives with net settlement
Interest rate derivatives 20.3 20.3 0.0 20.3 0.0
Commodity swaps 0.5 0.5 0.4 0.1 0.0
Forward exchange contracts 0.4 0.4 0.4 0.0 0.0
Liabilities from derivatives with net settlement
Commodity swaps 11.0 11.0 1.1 9.9 0.0
Derivatives in open orders 2.9 2.9 2.9 0.0 0.0
Interest rate derivatives 2.4 2.4 0.0 1.5 0.9
Remaining term
in € million Carrying amount 31.12.2022 Cash flows up to 1 year 2 to 5 years over 5 years
Receivables from derivatives with net settlement
Interest rate swaps 42.4 42.4 0.0 40.6 1.8
Forward exchange contracts 0.1 0.1 0.1 0.0 0.0
Derivatives in open orders 1.0 1.0 1.0 0.0 0.0
Liabilities from derivatives with net settlement
Derivatives in open orders 9.5 9.5 9.5 0.0 0.0
Foreign currency risks
Foreign currency risks arise where business transactions (operating
activities, investments, financing) are conducted in a currency other than the
functional currency of a company. They are monitored at Group level and
analysed with respect to hedging options. Usually, the net position of the
Group in the respective currency serves as the basis for decisions regarding
the use of hedging instruments.
Foreign currency risks arise in financial instruments which are denominated in
a currency other than the functional currency and are monetary in nature.
These include trade receivables and payables, cash and cash equivalents as
well as financial liabilities as shown in the Consolidated Statement of
Financial Position. Investments in equity instruments are not of a monetary
nature, and therefore not linked to a foreign currency risk in accordance with
IFRS 7 'Financial Instruments: Disclosures'.
The majority of foreign currency financial instruments in the Group result
from operating activities and intragroup financing transactions. The Group may
designate intragroup balances as part of a net investment hedge in accordance
with IAS 21 'The Effects of Changes in Foreign Exchange Rates' with the
effective portion of exchange gains and losses recognised in equity.
Significant provisions denominated in foreign currencies are also included in
the analysis of risk.
The following table shows the foreign currency positions in the Group's major
currencies as of 31 December 2023 and 31 December 2022:
in € million USD EUR GBP INR Other Total
Financial assets 729.3 59.6 8.2 2.6 47.8 847.5
Financial liabilities, provisions (469.8) (95.3) (14.8) (0.8) (22.4) (603.1)
Net foreign currency position 259.5 (35.7) (6.6) 1.8 25.4 244.4
in € million USD EUR GBP INR Other Total
Financial assets 813.3 69.5 11.2 5.2 60.3 959.5
Financial liabilities, provisions (664.5) (100.7) (15.4) (0.4) (28.7) (809.7)
Net foreign currency position 148.8 (31.2) (4.2) 4.8 31.6 149.8
The disclosures required by IFRS 7 for foreign exchange risks include a
sensitivity analysis that shows the effects of hypothetical changes in the
relevant risk variables on profit or loss and equity. In general, all
non-functional currencies in which Group companies enter into financial
instruments are considered to be relevant risk variables. The effects on a
particular reporting period are determined by applying the hypothetical
changes in these risk variables to the financial instruments held by the Group
as of the reporting date. It is assumed that the positions on the reporting
date are representative for the entire year. The sensitivity analysis does not
include the foreign exchange differences that result from translating the net
asset positions of the group companies with a functional currency other than
Euro into the Group's reporting currency, the Euro.
A 10% appreciation or devaluation of the relevant functional currency against
the following major currencies as of 31 December 2023 would have had the
following effect on profit or loss and equity (both excluding income tax):
Appreciation of 10% Devaluation of 10%
in € million (Loss)/gain Equity Gain/(loss) Equity
US Dollar (22.0) (20.3) 26.8 24.9
Euro 1.5 6.1 (1.9) (7.4)
Indian Rupee (0.2) (0.2) 0.2 0.2
Other currencies (1.7) (1.7) 2.1 2.1
The effect in equity also includes the exchange effects recorded directly in
OCI in line with the Group's policy.
The hypothetical effect on profit or loss and on equity at 31 December 2022
can be summarised as follows:
Appreciation of 10% Devaluation of 10%
in € million (Loss)/gain Equity Gain/(loss) Equity
US Dollar (12.9) (12.9) 15.8 15.8
Euro 1.3 5.9 (1.6) (7.2)
Indian Rupee (0.4) (0.4) 0.5 0.5
Other currencies (2.5) (2.5) 3.0 3.0
The effect in equity also includes the exchange effects recorded directly in
OCI in line with the Group's policy.
Interest rate risks
The interest rate risk in the Group is primarily related to debt instruments
carrying variable interest rates, which may lead to fluctuations in results
and cash flows. At 31 December 2023, one interest rate collar with a nominal
value of €180.0 million and interest rate swaps with a nominal value of
€901.1 million (2022: €709.2 million) existed with the interest rate
swaps converting the variable interest rate of the hedged debt instrument into
a fixed interest rate. Further information is provided in Note (36).
The exposure to interest rate risks is presented through sensitivity analysis
in accordance with IFRS 7. This analysis show the effects of changes in market
interest rates on interest payments, interest income and interest expense and
on equity.
The Group measures fixed interest financial assets and financial liabilities
at amortised cost and did not use the fair value option - a hypothetical
change in the market interest rates for these financial instruments at the
reporting date would have had no effect on profit and loss or equity.
Changes in market interest rates on debt instruments designated as cash flow
hedges to protect against interest rate-related payment fluctuations within
the scope of hedge accounting have an effect on equity and are therefore
included in the equity-related sensitivity analysis. If the market interest
rate as of 31 December 2023 had been 25 basis points higher or lower, equity
would have been €1.7 million (2022: €1.1 million) higher or lower
considering tax effects.
Changes in market interest rates have an effect on the interest result of
primary variable interest debt instruments whose interest payments are not
designated as hedged items as a part of cash flow hedge relationships against
interest rate risks and are therefore included in the calculation of the
result-related sensitivities. If the market interest rate as of 31 December
2023 had been 25 basis points higher or lower, the interest result would have
been €0.2 million (2022: €0.1 million) lower or higher.
Commodity price risk
The Group manages its exposure to commodity prices, namely gas and electricity
purchases in Europe, by entering into forward fixed price take or pay
contracts with various suppliers to mitigate and reduce the impact of price
volatility and secure the energy supply for its production process. These
contracts are accounted for as executory contracts as the commodities
purchases are for own use purposes. The Group's Energy Risk policy sets out
thresholds for fixing quantities based on the expected usage which is usually
over a five-year period with lower levels of forward purchases in the outer
years.
In line with the above strategy, the Group may also enter into financial
commodity swap contracts to fix prices for expected purchases not covered by
the fixed price take or pay contracts within the overall defined thresholds.
Further information is provided under Note (36).
Other market price risk
The Group holds certificates in an investment fund amounting to €11.8
million (2022: €9.0 million) in order to provide the legally required
coverage of personnel provisions of its Austrian subsidiaries. The market
value of these certificates is influenced by fluctuations of the worldwide
volatile stock and bond markets.
38. Capital management
The objectives of the capital management strategy of the Group are to continue
as a going concern and to provide a capital base from which to finance growth
and investments, to service debt, and to increase shareholders value,
including the payment of dividends to shareholders.
The Group manages its capital structure through careful monitoring and
assessment of the overall economic framework conditions, credit, interest rate
and foreign exchange risks and the requirements and risks related to
operations and strategic projects.
31.12.2023 31.12.2022
Net debt (in € million)(1)2)) 1,303.9 1,163.2
Net gearing ratio (in %) 95.6% 110.9%
Net debt to Adjusted EBITDA 2.40x 2.33x
1) Further information is provided under Note (34).
2) As from 1 January 2023 "Net debt" excludes "financial liabilities from
accrued interest" which are now presented under "other current liabilities".
Prior period comparatives have been revised to conform with current year
presentation.
Net debt, which reflects borrowings and lease liabilities net of cash and cash
equivalents and short-term marketable securities held for trading, is managed
by Corporate Treasury. The main task of the Corporate Treasury department is
to execute the capital management strategy as well as to secure liquidity to
support business operations on a sustainable basis, to use banking and
financial services efficiently and to limit financial risks while at the same
time optimising earnings and costs.
The net gearing ratio is the ratio of net debt to total equity.
Net debt excluding lease liabilities/Adjusted EBITDA is the main financial
covenant of loan agreements. The key performance indicator for net debt in the
Group is the group leverage, which reflects the ratio of Net debt to Adjusted
EBITDA, including lease liabilities. It is calculated as follows:
in € million 31.12.2023 31.12.2022
EBIT 333.9 343.6
Amortisation 43.6 28.9
Restructuring and write-down expenses 19.6 (6.8)
Other operating income and expenses 11.8 18.2
Adjusted EBITA 408.9 383.9
Depreciation 133.9 115.6
Adjusted EBITDA 542.8 499.5
Total debt(1)) 1,948.8 1,620.0
Lease liabilities 69.9 63.9
Less: Cash and cash equivalents 703.5 520.7
Less: Marketable securities 11.3 0.0
Net debt(1)) 1,303.9 1,163.2
Net debt excluding IFRS 16 lease liabilities 1,234.0 1,099.3
Net debt to Adjusted EBITDA 2.40x 2.33x
Net debt to Adjusted EBITDA excluding IFRS 16 lease liabilities 2.27x 2.20x
1) As from 1 January 2023 "Net debt" excludes "financial liabilities from
accrued interest" which are now presented under "other current liabilities".
Prior period comparatives have been revised to conform with current year
presentation.
In both 2023 and 2022, all externally imposed financial covenants have been
complied with. The Group has sufficient liquidity headroom within its
committed debt facilities.
39. Contingent liabilities
At 31 December 2023, warranties, performance guarantees and other guarantees
amount to €70.9 million (2022: €61.9 million). Contingent liabilities have
a remaining term of between two months and three years. Based on past
experience, the probability that contingent liabilities are realised is
considered to be low.
The Group is subject to lawsuits and disputes in the normal course of the
business; the Group has assessed these positions and recorded provisions where
necessary.
Uncertain tax treatments
The calculation of income taxes is based on the tax laws applicable in the
individual countries in which the Group operates. Due to their complexity, the
tax items presented in the Consolidated Financial Statements may be subject to
different interpretations by local finance authorities. In this context it
should be noted that a tax provision is generally recognised when the Group
has a present obligation as a result of a past event, and when it is
considered probable that there will be a future outflow of funds.
The Group is continually adapting its global presence to improve customer
service and maintain its competitive advantage, and leads open discussions
with tax authorities about, for example, transfer of functions and related
profit between related parties and exit taxation. In this regard, disputes may
arise, where the Group management's understanding differs from the positions
of the local tax authorities. In such cases, where an appeal is available,
management's judgements are based on a likely outcome approach, taking into
consideration advice from professional firms and previous experiences when
assessing the risks.
The Group is party to several tax proceedings in Brazil which involve
estimated contingent liabilities amounting to €271.8 million (2022: €243.0
million). These tax proceedings are as follows:
Income Tax relating to historical corporate transactions
There are three proceedings in which Brazilian Federal Tax Authorities issued
tax assessments which rejected the deduction of goodwill generated in two
corporate transactions that were undertaken 2007 and 2008, for Corporate
Income Taxes. The tax authorities issued assessments arguing that such
transactions cannot generate deductions as they do not fulfil the requirements
provided by law. Although the Group has been broadly successful, the tax
authorities have appealed those outcomes. The final outcome of these
proceedings is expected within one and three years. The exposure of €177.2
million (2022: €157.0 million) is limited to the fiscal tax years ended 2018
at which stage all available goodwill tax deductions had been made.
Royalties
The Group is party to 38 proceedings where the Brazilian Mining Authorities
("ANM") challenged the criteria used for calculating and paying the Financial
Compensation for Exploration of Mineral Resources ("CFEM"), which are mining
royalties payable by every mining company. The authorities have mainly
disputed the basis of production costs estimates used in the determination of
the royalties that are payable. The claims relate to fiscal years up to 2017,
following which the legislation for royalties was changed. The Group, together
with its technical and legal advisors continues to challenge ANM assessments.
Most of the procedures are ongoing within the ANM administrative courts. Final
decisions of the first cases are expected within four to five years. As of
31.12.2023, the potential risk amounts to €31.5 million (2022: €28.2
million), including interest and penalties.
Corporate income and other taxes
There are several tax audits ongoing in Brazil mainly relating to: offsetting
federal tax payables and receivables, social security contributions, as well
as offsetting certain federal tax debts with corporate income tax credits. The
potential cash outflow resulting from the outcome of these tax audits amount
to €63.1 million (2022: €57.8 million).
Civil litigation contingencies
Magnesita Refratários S.A., Contagem, Brazil, is party to a public civil
action for damages allegedly caused by overloaded trucks in contravention of
Brazilian traffic legislation. In 2017, a decision was rendered in favour of
Magnesita Refratários S.A. in the trial court. The decision is being appealed
by the Public Attorney of Minas Gerais which requested the suspension of the
proceeding until the Brazilian Superior Court of Justice can assess other
similar cases. The potential loss from this proceeding amounts to €18.3
million as of 31 December 2023 (2022: €15.5 million).
There are other minor proceedings and lawsuits in which subsidiaries are
involved that have no significant impact on the financial position and
performance of the Group.
40. Other financial commitments
Capital commitments amount to €9.3 million at 31 December 2023 (2022:
€20.4 million) and are exclusively due to third parties. They are shown at
nominal value.
In addition, the Group has purchase commitments related to the supply of raw
materials, especially for electricity, natural gas, strategic raw materials as
well as for the transport of raw materials within the Group. This results in
other financial commitments of the nominal value of €307.9 million at the
reporting date (2022: €399.7 million). The remaining terms of the contracts
amount to up to four years. Purchases from these arrangements are recognised
in accordance with the usual course of business. Purchase contracts are
regularly reviewed for imminent losses, which may occur, for example, when
requirements fall below the agreed minimum purchase volume or when
contractually agreed prices deviate from the current market price level.
41. Independent Auditor's remuneration
in € million 2023 2022
Fees in respect of the audit of the Consolidated and Parent Company Financial (1.1) (1.1)
Statements(1))
Other audit fees, in respect of subsidiaries' audit, to PwC network firms (2.0) (1.8)
Total audit fees (3.1) (2.9)
Non-audit services - Interim review(1)) (0.2) (0.2)
Other non-audit services (0.3) 0.0
Total fees (3.6) (3.1)
1) Total fees to PricewaterhouseCoopers Accountants N.V. totalled €1.3
million (2022: €1.3 million).
42. Business Combinations
The aggregated transaction costs expensed in the Consolidated Statement of
Profit or Loss relating to all business combinations closed in 2023 amounted
to €4.5 million.
Acquisition of Horn & Co Minerals Recovery Group (MIRECO)
The purchase price allocation was finalised in 2023 and did not materially
differ from the preliminary purchase price allocation disclosed in the last
year's Consolidated Financial Statements.
Acquisition of Sörmaş
Last year the Group completed the acquisition of Sörmaş. The preliminary
amounts recognised for the acquired assets and liabilities at the acquisition
date have been adjusted compared to the Consolidated Financial Statements 2022
during the measurement period in accordance with IFRS 3. The final amounts
recognised for each major class of assets and liabilities as a result of this
acquisition are the following:
in € million preliminary value fair value adjustments final value
Property plant and equipment 3.6 16.7 20.3
Intangible assets: Customer relationships 10.5 (3.0) 7.5
Intangible assets: Order backlogs 5.9 (1.1) 4.8
Inventories 14.1 0.7 14.8
Other assets 16.2 0.0 16.2
Total assets acquired 50.3 13.3 63.6
Deferred tax liabilities 3.8 3.0 6.8
Other liabilities 8.9 0.3 9.2
Total liabilities assumed 12.7 3.3 16.0
Net identifiable assets acquired 37.6 10.0 47.6
Less: Non-controlling interests (5.0) (1.6) (6.6)
Goodwill 13.8 (8.4) 5.4
Consideration paid 46.4 46.4
Compared to the preliminary valuation a positive fair value adjustment on
property, plant and equipment has been recognised which mainly results from
the reassessment of the useful lives of machinery & equipment in use with
a carrying amount of close to zero at the acquisition date. The machinery
& equipment's fair value was measured using the replacement cost approach
based on current cost obtained from third parties and internal information.
The negative fair value adjustments related to the order backlog and the
customer relationships result from an increase in contributory asset charges
associated with the fair value adjustment on property, plant and equipment
compared to the preliminary valuation.
Acquisition of Dalmia OCL
In November 2022, the Group signed a share swap agreement stipulating its
acquisition of 100% of the shares of Dalmia OCL Ltd, India, through the
non-wholly owned subsidiary RHI Magnesita India Ltd. Dalmia OCL owns 51% of
the shares of Dalmia Seven Refractories Ltd ('DSR'), India, which were also
acquired in the scope of this business combination. The acquisition was closed
on 5 January 2023 which is the acquisition date. The remaining 49% of DSR's
shares were acquired on 24 July 2023 by the Group, see Note (26). After the
acquisition, Dalmia OCL was renamed to RHI Magnesita India Refractories Ltd.
and Dalmia Seven Refractories Ltd. ('DSR') was renamed to RHI Magnesita Seven
Refractories Ltd.
The acquired companies are one of the leading refractory producers in India
engaged in the business of manufacturing and selling alumina bricks as well as
basic bricks, non-basic bricks and flow control products with a focus on
customers in the Industrial and Steel segments. Dalmia OCL and DSR have five
manufacturing facilities.
The acquisition enables the Group to increase its presence in the high growth
Indian refractory market considering a forecast steel production growth in
India of 12% per annum and a compound annual growth rate of 7-8% until 2030.
The production footprint and product offering of the acquired companies is
highly complementary to the Group's existing plant locations (four plants) and
product range with focus in the Industrial segment, where the Group had been
under-represented. Moreover, significant synergies are expected through
network benefits and additional production capacities in important industrial
locations in the south and west of India, where the Group had no assets.
The consideration transferred amounting to €325.2 million comprises two
elements: issued equity shares and cash. RHI Magnesita India Ltd. issued
27,000,000 equity shares with a fair value equivalent of €270.0 million
based on the quoted share price (Level 1). The cash consideration amounts to
€55.2 million.
The following table shows the final amounts recognised for each major class of
assets and liabilities and the fair value adjustments as a result of the
acquisition:
in € million book value fair value (adjusted) value
adjustments
Property plant and equipment and other intangible assets 30.1 17.5 47.6
Intangible assets: Customer relationships 0.0 106.9 106.9
Intangible assets: prepayments on mining rights 0.0 8.0 8.0
Inventories 42.7 0.0 42.7
Trade and other receivables (gross contractual amounts: €42.2 million) 38.8 0.0 38.8
Cash and cash equivalents 0.1 0.0 0.1
Total assets acquired 111.7 132.4 244.1
Trade and other liabilities 53.3 0.0 53.3
Lease Liabilities 9.9 0.0 9.9
Provisions and deferred tax liabilities 1.6 0.0 1.6
Borrowings 19.7 0.0 19.7
Total liabilities assumed 84.5 0.0 84.5
Net identifiable assets acquired 27.2 132.4 159.6
Plus: net decrease in non-controlling interests(1)) 68.8
Goodwill 96.8
Consideration 325.2
Consideration paid, net of cash acquired for purposes of the Consolidated 55.1
Statement of Cash Flows
Equity shares issued and transferred 270.0
1) The net decrease in non-controlling interests is explained below.
The fair value of the customer relationships was measured using the
multi-period excess earnings method. Under this method, the fair value of the
customer relationships is calculated by determining the present value of
earnings after tax attributable to the acquired companies' existing customers.
The customer relationships in the Industrial segment are amortised over the
estimated useful life of 10 years, while the customer relationships in the
Steel segment are amortised over the estimated useful life of 20 years.
The goodwill recognised as a result of this acquisition is attributable to the
expected synergies mentioned above and is not tax deductible.
The Group measures goodwill as the excess of RHI Magnesita N.V.'s share in the
consideration transferred plus non-controlling interests over the acquired
identifiable net assets. RHI Magnesita N.V.'s share in the consideration
transferred amounts to €189.2 million which has been determined on the basis
of its calculated ownership interests in Dalmia OCL and DSR under a
'look-through' approach immediately after the share swap. Accordingly, RHI
Magnesita N.V.'s share of the consideration attributable to Dalmia OCL amounts
to 60.11%, whereas its share of the consideration attributable to DSR amounts
to 30.66%.
Consistent with the 'look-through' approach the Group recognises
non-controlling interests for this acquisition amounting to €67.2 million
which were measured at the calculated share in Dalmia OCL's and DSR's net
assets attributable to the non-controlling shareholders (39.89% for Dalmia OCL
and 69.34% for DSR). The consideration transferred attributable to the
non-controlling shareholders amounting to €136.0 million is eliminated
against non-controlling interests. Both the recognition and the elimination
have decreased non-controlling interests on acquisition by €68.8 million.
The impact of the share swap on the non-controlling interests in RHI Magnesita
India Ltd. is described in Note (26).
Since the date of inclusion of the acquired companies in the Group's
Consolidated Financial Statements, revenues have increased by €115.3
million, Adjusted EBITA has increased by €9.5 million and net income has
decreased by €2.8 million. The acquired companies form part of the Steel and
Industrial reportable segments.
Acquisition of Hi-Tech
In October 2022, the Group signed an agreement stipulating its acquisition of
the refractory business of Hi-Tech Chemicals Ltd ('Hi-Tech'), India, via an
asset deal. The acquisition was closed on 31 January 2023 which is the
acquisition date.
Hi-Tech is a leading specialty refractory producer in India engaged in the
business of manufacturing and selling of premium flow control products like
ISO, slide-gate plates, shrouds, plugs apart from castables, nozzle opening
compound or tundish monolithics with a focus on customers in the Steel
segment. Hi-Tech operates a state-of-the-art manufacturing facility in the
city of Jamshedpur, India.
This acquisition enables the Group to expand its presence and participate in
the high growth refractory market in India and the wider region considering a
forecast steel production growth in India of 12% per annum and a compound
annual growth rate of 7-8% until 2030. Through the acquisition the Group can
expand its flow control product offering and enlarge its production capacities
based on a low cost and semi-automised production. Moreover, substantial
synergies are expected through economies of scale and additional production
capacities for a strategic market segment.
The cash consideration paid upon closing of the acquisition amounts to €87.0
million.
The following table shows the final amounts recognised for each major class of
assets and liabilities and the fair value adjustments as a result of the
acquisition:
in € million book value fair value (adjusted) value
adjustments
Property plant and equipment 11.7 10.7 22.4
Intangible assets: Customer relationships 0.0 23.8 23.8
Inventories 7.8 0.0 7.8
Trade and other receivables 0.1 0.0 0.1
Total assets acquired 19.6 34.5 54.1
Trade and other liabilities 0.3 0.0 0.3
Deferred tax liabilities 0.0 1.9 1.9
Total liabilities assumed 0.3 1.9 2.2
Net identifiable assets acquired 19.3 32.6 51.9
Goodwill 35.1
Consideration 87.0
Consideration paid, net of cash acquired for purposes of the Consolidated 87.0
Statement of Cash Flows
The fair value of the customer relationships was measured using the
multi-period excess earnings method. Under this method, the fair value of the
customer relationships is calculated by determining the present value of
earnings after tax attributable to the acquired refractory business' existing
customers. The customer relationships are amortised over the estimated useful
life of 20 years.
The goodwill recognised as a result of this acquisition is attributable to the
expected synergies mentioned above and is not tax deductible.
Since the date of inclusion of the acquired refractory business in the
Consolidated Financial Statements, revenues have increased by €25.8 million,
Adjusted EBITA has increased by €2.8 million and net income has increased by
€0.6 million. The acquired refractory business forms part of the Steel
reportable segment.
Acquisition of Jinan New Emei
In January 2023, the Group signed a share purchase agreement stipulating its
acquisition of 65% of the shares of Jinan New Emei Industries Co Ltd. ('Jinan
New Emei'), China. Jinan New Emei owns 100% of the shares of Jinan Emei
Metallurgical Materials Co Ltd ('JEMM'), China, which were also acquired in
the scope of this acquisition. The acquisition was closed on 26 April 2023
which is the acquisition date.
The acquired companies are leading manufacturers of refractory slide gate
plates and systems, nozzles and mixes for steel flow control applications
serving customers in the Steel segment. The recently commissioned
state-of-the-art and highly automated plant in Laiwu, Shandong province, is a
major part of the acquisition.
The acquisition enables the Group to expand its flow control product range and
its solutions contract offering in the Chinese domestic market, both of which
are key strategic priorities. Moreover, the acquisition gives access to
substantial new customer relationships in China and deliver additional
production capacity for increasing supply of refractories in both China and
the wider East Asia region.
The consideration payable in cash amounts to €22.9 million. Thereof an
amount of €19.8 million was paid upon closing of the acquisition. The
remaining amount of €3.1 million is a liability towards the former owner
which reflects deferred cash consideration and estimated post-closing
adjustments related to working capital and net debt, payable one year after
the closing date.
The following table shows the final amounts recognised for each major class of
assets and liabilities and the fair value adjustments as a result of the
acquisition:
in € million book value fair value (adjusted) value
adjustments
Property plant and equipment 19.3 0.3 19.6
Intangible assets: Customer relationships 0.0 5.9 5.9
Other intangible assets 4.8 0.0 4.8
Inventories 16.4 (0.3) 16.1
Trade and other receivables (gross contractual amounts: €64.8 million) 64.5 (3.9) 60.6
Cash and cash equivalents 5.7 0.0 5.7
Total assets acquired 110.7 2.0 112.7
Trade and other liabilities 66.4 2.7 69.1
Borrowings 15.2 0.0 15.2
Total liabilities assumed 81.6 2.7 84.3
Net identifiable assets acquired 29.1 (0.7) 28.4
Less: Non-controlling interests (9.9)
Goodwill 4.4
Consideration 22.9
Consideration paid, net of cash acquired for purposes of the Consolidated 14.1
Statement of Cash Flows
Liability towards former owner 3.1
The fair value of the customer relationships was measured using the
multi-period excess earnings method. Under this method, the fair value of the
customer relationships is calculated by determining the present value of
earnings after tax attributable to the acquired companies' existing customers.
The customer relationships are amortised over the estimated useful life of
around eight years.
The goodwill recognised as a result of this acquisition is attributable to
synergies resulting from the integration of the acquired companies into the
existing refractories business in China and is not tax deductible.
The Group recognises non-controlling interests for this acquisition measured
at the present ownership instruments' proportionate share in Jinan New Emei's
net assets. These were derecognised to zero in line with the Group's
accounting policy related to fixed term or puttable non-controlling interests,
see Note (3).
Since the date of inclusion of the acquired companies in the Consolidated
Financial Statements, revenues have increased by €49.3 million, Adjusted
EBITA has decreased by €1.1 million and net income has decreased by €0.9
million. Had the inclusion of the acquired companies taken place as of 1
January 2023, revenues would have increased by €74.8 million, Adjusted EBITA
would have increased by €0.1 million and net income would have decreased by
€1.7 million. The acquired companies form part of the Steel reportable
segment.
The Group has also signed a commitment to purchase the remaining shares (35%)
of Jinan New Emei in exchange for a contingent consideration. The purchase may
be executed no earlier than three years after the closing date and no later
than four years after the closing date. The contingent consideration is
calculated based on an agreed multiple of the average annual EBITDA delivered
by Jinan New Emei over the three-year period from 2023 to 2025 (assuming that
the purchase is executed in 2026), its future net debt and its future working
capital compared to a target working capital. Due to a contractual cap the
contingent consideration cannot exceed an amount equivalent to €127.8
million (CNY 1 billion).
For this contingent consideration on the closing date the Group recognised a
financial liability amounting to €31.5 million, subsequently measured at
fair value through profit or loss and payable in 2026 at the earliest. The
Group has concluded, based on the terms and pricing of the commitment, that
the risks and rewards of ownership associated with the outstanding shares have
not been transferred to the Group; refer to Note (3).
Acquisition of Dalmia GSB
In March 2023, the Group signed an agreement stipulating its acquisition of
100% of the shares of Dalmia GSB Refractories GmbH ('Dalmia GSB'), Germany.
The acquisition was closed on 28 April 2023 which is the acquisition date.
Dalmia GSB is a leading supplier of monolithic lances and other precast
products to European steel customers for use in the desulphurisation and
homogenisation of molten steel, based in Bochum, Germany.
The acquisition enables the Group to expand its product range offered to
customers in the Steel segment and to gain a market share in the European
lances market. Moreover, attractive potential synergies are expected to be
realised through the inclusion of additional products within the Group's heat
management solutions offering and from cross-selling, procurement and
logistics benefits.
The consideration paid in cash amounts to €13.1 million. Additionally, the
Group repaid borrowings on behalf of Dalmia GSB in the amount of €7.2
million upon closing of the acquisition. Since under the purchase agreement
the Group is obliged to repay the borrowings, the repaid amounts are included
in the net cash outflow related to the acquisition which after deduction of
the cash acquired amounts to €18.1 million.
The fair value adjustments of assets and liabilities based on the final
purchase price allocation as a result of the acquisition have decreased the
net assets of Dalmia GSB from €1.6 million to €-1.7 million. The
difference between the consideration paid and the (adjusted) negative net
assets is allocated to goodwill amounting to €14.8 million. The goodwill
recognised as a result of this acquisition reflects the acquired market share
and expected synergies mentioned above and is allocated to the Steel segment.
The goodwill is not tax deductible. The acquired company forms part of the
Steel reportable segment.
Acquisition of Seven Refractories Group
In April 2023, the Group signed a share purchase agreement for the acquisition
of 75.5% of the shares of Seven Refractories Deutschland GmbH, Germany and
100% of the shares of Seven Refractories d.o.o, Slovenia. Seven Refractories
d.o.o owns equity investments with non-controlling interests in six companies
located in Italy, Cyprus, the USA and the United Kingdom which were also
acquired in the scope of this business combination.
The acquisition was closed on 17 July 2023 which is the acquisition date.
Seven Refractories Group is a specialist supplier of non-basic monolithic
refractory mixes serving customers in the Industrial and Steel segments.
Products offered by Seven Refractories Group range from low temperature
fireclay to ultra-high temperature zircon mixes, high-grade alumina mixes and
sustainable taphole clay with a low CO(2) footprint. Seven Refractories Group
has three production sites in Slovenia, India and the US and sales offices and
service centres in Cyprus, Germany, Italy and the United Kingdom.
The acquisition will enable the Group to offer a broader range of non-basic
refractory mixes and is expected to be highly complementary to the Group's
existing non-basic portfolio. Attractive potential synergies are expected
through cross-selling opportunities, logistics improvements, increased
recycling usage, procurement efficiencies and low capital intensity brownfield
expansion projects. Lastly, the acquisition gives access to substantial new
customer relationships in 45 countries.
The consideration paid in cash amounts to €84.4 million.
Until the date the Consolidated Financial Statements were authorised for
issue, the initial consolidation is incomplete because the purchase price
allocation and the measurement of assets and liabilities has not been
finalised. The outstanding measurement considerations mainly relate to
customer relationships and trade receivables. The fair value adjustments of
assets and liabilities based on the preliminary purchase price allocation as a
result of the acquisition are the following:
in € million book value fair value (adjusted) value
adjustments
Property plant and equipment and other intangible assets 10.5 0.0 10.5
Intangible assets: Customer relationships 0.0 26.4 26.4
Loan receivables 8.9 (7.6) 1.3
Inventories 11.0 0.0 11.0
Trade and other receivables 34.2 0.0 34.2
Cash and cash equivalents 6.7 0.0 6.7
Total assets acquired 71.3 18.8 90.1
Trade and other liabilities 22.6 0.0 22.6
Deferred tax liabilities 0.1 5.1 5.2
Borrowings 29.6 0.0 29.6
Total liabilities assumed 52.3 5.1 57.4
Net identifiable assets acquired 19.0 13.7 32.7
Less: Non-controlling interests (3.0)
Goodwill 54.7
Consideration 84.4
Consideration paid, net of cash acquired for purposes of the Consolidated 77.7
Statement of Cash Flows
The amounts recognised for the acquired assets and liabilities on the closing
date and the resulting goodwill are preliminary and subject to adjustment for
a period of one year from the closing date as allowed under the accounting
standards. On finalisation of the purchase price allocation, adjustments,
including tax impacts, if any, will be reflected against goodwill. The initial
accounting for this acquisition including the purchase price allocation is
expected to be finalised by the end of June 2024.
The preliminary fair value of the customer relationships was measured using
the multi-period excess earnings method. Under this method, the fair value of
the customer relationships is calculated by determining the present value of
earnings after tax attributable to the acquired companies' existing customers.
The customer relationships are amortised over the estimated useful life of 15
years.
The preliminary goodwill recognised as a result of this acquisition is
attributable to the synergies mentioned above and is not tax deductible.
The Group recognises non-controlling interests for this acquisition measured
at the present ownership instruments' proportionate share in the acquired
companies' net assets.
Since the date of inclusion of the acquired companies in the Consolidated
Financial Statements, revenues have increased by €41.8 million, Adjusted
EBITA has increased by €0.9 million and net income has decreased by €0.5
million. Had the inclusion of the acquired companies taken place as of 1
January 2023, revenues would have increased by €94.2 million and net income
would have decreased by €1.6 million. The acquired companies form part of
the Steel and Industrial reportable segments.
Acquisition of P-D Refractories
In August 2023, the Group signed a purchase agreement for the acquisition of
the refractory business of Wetro GmbH ('Wetro'), Germany, via an asset deal,
of 100% of the shares of P-D Refractories GmbH, Germany, and 86.77% of the
shares of P-D Refractories CZ a.s., Czech Republic. P-D Refractories CZ a.s.
owns 50% of the shares of P-D Kremen d.o.o, Slovenia, which were also acquired
in the scope of this business combination. P-D Kremen d.o.o unlike the other
P-D companies is a joint venture under IFRS 11 and the Group therefore
accounts for the investment in this company under the equity method.
The acquisition was closed on 2 October 2023 which is the acquisition date.
P-D Refractories is a producer of high-quality alumina-based refractories for
industrial applications in process industries, with a leading market position
in the glass and aluminium sectors. Previously part of the Preiss-Daimler
Group, the assets acquired include refractory plants in Germany and Czech
Republic and clay, quartzite and silica raw material sites in Czech Republic
and Slovenia.
The acquisition will increase the Group's capabilities in alumina-based
refractories and its presence in process industries, where the Group had been
under-represented compared to other customer sectors. Substantial synergies
are expected to be generated through access to new customers and cross-selling
opportunities, production network and logistics efficiencies, vertical
integration benefits, recycling, technology transfer and procurement savings.
The consideration paid in cash amounts to €44.5 million. Additionally, the
Group repaid borrowings on behalf of P-D Refractories GmbH in the amount of
€22.3 million upon closing of the acquisition. Since under the purchase
agreement the Group is obliged to repay the borrowings, the repaid amounts are
included in the net cash outflow related to the acquisition.
Until the date the Consolidated Financial Statements were authorised for
issue, the initial consolidation is incomplete because the purchase price
allocation and the measurement of assets and liabilities has not been
finalised. The outstanding measurement considerations mainly relate to
property, plant and equipment and inventories. The fair value adjustments of
assets and liabilities based on the preliminary purchase price allocation as a
result of the acquisition are the following:
in € million book value fair value (adjusted) value
adjustments
Property plant and equipment and Investments 53.2 (32.5) 20.7
Deferred tax assets 0.0 10.5 10.5
Inventories 81.7 (12.6) 69.1
Trade and other receivables 38.2 0.0 38.2
Cash and cash equivalents 3.6 0.0 3.6
Total assets acquired 176.7 (34.6) 142.1
Trade and other liabilities 41.9 0.0 41.9
Other provisions 3.1 0.0 3.1
Provisions for pensions 14.5 (3.2) 11.3
Deferred tax liabilities 1.3 (1.3) 0.0
Borrowings 28.3 0.0 28.3
Total liabilities assumed 89.1 (4.5) 84.6
Net identifiable assets acquired 87.6 (30.1) 57.5
Less: Non-controlling interests (5.5)
Bargain purchase gain (7.5)
Consideration 44.5
Consideration paid less cash acquired plus repaid borrowings for purposes of 63.2
the Consolidated Statement of Cash Flows
The amounts recognised for the acquired assets and liabilities on the closing
date and the resulting bargain purchase gain are preliminary and subject to
adjustment for a period of one year from the closing date as allowed under the
accounting standards. On finalisation of the purchase price allocation,
adjustments, including tax impacts, if any, will be reflected against the
bargain purchase gain. The initial accounting for this acquisition including
the purchase price allocation is expected to be finalised by the end of June
2024.
The fair value adjustments of assets and liabilities based on the preliminary
purchase price allocation as a result of the acquisition have decreased the
net assets of the acquired companies from €87.6 million to €57.5 million.
These include the devaluation of obsolete inventories, an adjustment of the
acquired fixed assets' carrying amount and the impact from the remeasurement
of assumed provisions for pensions. Taking into account these adjustments and
the respective tax impacts the acquisition has resulted in the recognition of
a preliminary bargain purchase gain amounting to €7.5 million within other
income. This gain mainly reflects the expected tax benefits resulting from the
future reversal of temporary differences associated with the mentioned
adjustments.
The Group recognises non-controlling interests for this acquisition measured
at the present ownership instruments' proportionate share in P-D Refractories
CZ a.s.'s net assets.
Since the date of inclusion of the acquired companies in the Consolidated
Financial Statements, revenues have increased by €32.3 million, Adjusted
EBITA has decreased by €0.6 million and net income has decreased by €1.7
million. Had the inclusion of the acquired companies taken place as of 1
January 2023, revenues would have increased by €164.1 million and net income
would have decreased by €1.0 million. The acquired companies mainly form
part of the Industrial reportable segment.
43. Transactions with related parties
Related companies include subsidiaries that are not consolidated, joint
ventures, associates and MSP Foundation, Liechtenstein, as a shareholder of
RHI Magnesita N.V., since it exercises significant influence based on its
shareholding of more than 25% in RHI Magnesita N.V. The personnel welfare
foundation of Stopinc AG, Switzerland, as well as Chestnut Beteiligungs GmbH,
Germany and FEWI Beteiligungs GmbH, Germany (shareholders of the Group, which
are related to a director) are considered related companies.
Related persons are persons having authority and responsibility for planning,
directing and controlling the activities of the Group (key management
personnel) and their close family members. Key management personnel comprises
members of the Board of Directors of RHI Magnesita N.V. and the Executive
Management Team (EMT).
Related companies
In 2023 and 2022, the Group conducted the following transaction with its
related companies:
Joint ventures Associates
in € million 2023 2022 2023 2022
Revenue from the sale of goods and services 2.2 0.7 0.0 0.0
Purchase of raw materials 5.5 4.0 0.0 0.0
Interest income 0.0 0.0 0.0 0.7
Trade liabilities 1.0 0.5 0.0 0.0
In 2023 and 2022, no transactions were carried out between the Group and MSP
Foundation, FEWI Beteiligungs GmbH or Chestnut Beteiligungs GmbH, with the
exception of the dividend paid.
A service relationship with respect to the company pension scheme of the
employees of Stopinc AG exists between the personnel welfare foundation of
Stopinc AG and the fully consolidated subsidiary Stopinc AG. Stopinc AG makes
contribution payments to the plan assets of the foundation to cover pension
obligations. The pension plan is recognised as a defined benefit plan and is
included in Note (29). At 31 December 2023, no current accounts receivable
existed (2022: €0.0 million). In the past reporting period, employer
contributions amounting to €0.6 million (2022: €0.6 million) were made
to the personnel welfare foundation. At 31 December 2023, a net asset from
overfunded pension plans of €1.7 million (2022: €1.7 million) is
recognised.
Related persons
Remuneration of key management personnel of the Group comprises the
remuneration of the active Board of Directors and the EMT.
in € million 2023 2022
Executive Directors and EMT
Short-term employee benefits 9.7 7.9
Share-based payments 6.4 4.6
Total 16.1 12.5
Non-Executive Directors(1)) 1.2 1.1
(1) Compensation paid to Non-Executive Directors mainly reflects fees for
services as Directors.
Employee representatives acting as Non-Executive Directors do not receive
additional compensation for these services and are not included in the above
table.
Share dealing reports of persons discharging managerial responsibilities are
published on the website of RHI Magnesita N.V. and announced via regulatory
news services. The Group maintains Directors' & Officers' liability
insurance for the Board of Directors and Company officers.
The Group and a close relative of a Non-Executive Director agreed a
non-remunerated consultancy agreement to advise the Group on the economic and
political framework in countries in which it does not yet have strong business
links.
44. Material events after the reporting date
After the reporting date on 31 December 2023, there were no events of special significance which may have a material effect on the financial position and performance of the Group.
Statement of the Board of Directors
Statement pursuant to Article 5:25c, paragraph 2, subsection c. of the Dutch
Financial Markets Supervision Act ("Wet op het financieel toezicht").
The Consolidated Financial Statements for the year ended 31 December 2023,
have been prepared on a going concern basis and in accordance with IFRSs, as
issued by the IASB and interpretations issued by the IFRIC, and as endorsed by
the European Union (EU).
To our knowledge,
• the Consolidated Financial Statements referred to above 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;
and
• the Annual Report for RHI Magnesita Group (comprising RHI Magnesita NV and
its affiliated companies whose details are included in its Financial
Statements) for the year ended 31 December 2023 gives a true and fair view of
the state of affairs as of the balance sheet date, the development and course
of business during the financial year, and that the Annual Report describes
the material risks that the RHI Magnesita Group faces.
Vienna, 28 February 2024
Executive Directors
Stefan Borgas Ian Botha
Non-Executive Directors
Herbert Cordt John Ramsay
Janet Ashdown David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein Berleburg Janice "Jann" Brown
Karl Sevelda Marie-Hélène Ametsreiter
Wolfgang Ruttenstorfer
Employee Representative Directors
Karin Garcia Martin Kowatsch
Michael Schwarz
Company Financial Statements of RHI Magnesita N.V.
Company Balance Sheet as at 31 December 2023
(before appropriation of result)
in € million Note 31.12.2023 31.12.2022
ASSETS
Non-current assets
Property, plant and equipment 0.3 0.2
Non-current financial assets (A) 1,196.2 943.3
Securities 0.5 0.5
Deferred tax assets 6.9 10.8
Total non-current assets 1,203.9 954.8
Current assets
Receivables from group companies 8.6 52.2
Other current receivables 1.3 0.4
Cash and cash equivalents (B) 0.8 1.6
Total current assets 10.7 54.2
Total assets 1,214.6 1,009.0
EQUITY AND LIABILITIES
Equity
Share capital (C) 49.5 49.5
Treasury shares (D) (110.7) (116.1)
Additional paid-in capital (E) 361.3 361.3
Legal and mandatory reserves (F) 86.3 86.3
Other reserves 650.7 464.5
Result for the period (L) 164.6 155.7
Shareholders' Equity 1,201.7 1,001.2
Non-current liabilities
Non-current liabilities (G) 0.3 0.2
Current liabilities
Current liabilities (H) 12.6 7.6
Total liabilities 12.9 7.8
Total equity and liabilities 1,214.6 1,009.0
Company Statement of Profit or Loss for the period 1 January 2023 to 31 December 2023
in € million Note 2023 2022
General and administrative expenses (I) (29.7) (22.0)
Result before taxation (29.7) (22.0)
Net financial result (J) (0.4) 0.0
Loss before income tax (30.1) (22.0)
Income tax (3.3) (18.8)
Net result from investments (K) 198.0 196.5
Net result for the period (L) 164.6 155.7
Movements in Shareholders' Equity
Legal and mandatory reserves Other reserves
in € million Share Treasury shares Additional Cash flow hedges Currency translation Mandatory reserve Retained earnings Net result Equity attributable to shareholders
capital
paid-in
capital
31.12.2022 49.5 (116.1) 361.3 31.8 (148.6) 288.7 378.9 155.7 1,001.2
Appropriation of prior year result - - - - - - 155.7 (155.7) -
Net result - - - - - - - 164.6 164.6
Share transfer / Vested LTIP - 5.4 - - - - (5.4) - -
Share-based expenses - - - - - - 8.7 - 8.7
Dividends - - - - - - (77.7) - (77.7)
Net income / (expense) recognised directly in equity - - - (25.8) (14.0) - 144.7 - 104.9
31.12.2023 49.5 (110.7) 361.3 6.0 (162.6) 288.7 604.9 164.6 1,201.7
Legal and mandatory reserves Other reserves
in € million Share Treasury shares Additional Cash flow hedges Currency translation Mandatory reserve Retained earnings Net result Equity attributable to shareholders
capital
paid-in
capital
31.12.2021 49.5 (117.0) 361.3 (7.1) (197.3) 288.7 164.7 243.1 785.9
Appropriation of prior year result - - - - - - 243.1 (243.1) -
Net result - - - - - - - 155.7 155.7
Share transfer / Vested LTIP - 0.9 - - - - (0.9) - -
Share-based expenses - - - - - - 8.3 - 8.3
Dividends - - - - - - (70.5) - (70.5)
Net income / (expense) recognised directly in equity - - - 38.9 48.7 - 34.2 - 121.8
31.12.2022 49.5 (116.1) 361.3 31.8 (148.6) 288.7 378.9 155.7 1,001.2
General
RHI Magnesita N.V. (the "Company"), is a public limited company incorporated
under the laws of the Netherlands (naamloze vennootschap), having its official
seat (statutaire zetel) in Arnhem, the Netherlands, and its office at
Kranichberggasse 6, 1120 Vienna, Austria, registered with the Dutch Trade
Register under number 68991665.
The shares of RHI Magnesita N.V. (ISIN code NL0012650360) are listed on the
Main Market of the London Stock Exchange and are included in the FTSE 250
index. The Company holds a secondary listing on the Vienna Stock Exchange
(Wiener Börse).
Basis of preparation
The Company Financial Statements have been prepared in accordance with the
provisions of Part 9 of Book 2 of the Dutch Civil Code. The Company uses the
option of Section 362, subsection 8 of Part 9, Book 2, of the Dutch Civil Code
to prepare the Company Financial Statements on the basis of the same
accounting principles as those applied for the Consolidated Financial
Statements. Valuation is based on recognition and measurement requirements of
accounting standards adopted by the EU (i.e. only IFRS that is adopted for use
in the EU at the date of authorisation) as explained further in the Notes to
the Consolidated Financial Statements.
Fiscal Unity
For corporate income tax purposes, RHI Magnesita N.V., Vienna Branch, acts as
the head of a corporate tax group in Austria with the following companies:
· RHI Magnesita GmbH
· Veitscher Vertriebsgesellschaft m.b.H
· Veitsch-Radex Vertriebgesellschaft m.b.H
· Refractory Intellectual Property GmbH
· Veitsch-Radex GmbH
· Radex Vertriebsgesellschaft m.b.H
· RHI Refractories Raw Material GmbH
· Lokalbahn Mixnitz-St. Erhard GmbH
According to the Group and tax compensation agreement, which forms a legal
requirement for the Austrian corporate tax group, tax compensation payments
within the corporate tax group are calculated based on the stand-alone method,
without charging negative tax compensations. In case of a taxable profit, the
respective tax group member has to pay a tax compensation to RHI Magnesita
N.V. as the head of the corporate tax group amounting to the legally
applicable corporate tax rate (24.0% for 2023). In case of a taxable loss, the
respective tax group member does not receive a negative tax compensation by
RHI Magnesita N.V., but rather the taxable loss is carried forward internally
and reduces the calculation base for any future tax compensation payment by
the respective tax group member to RHI Magnesita N.V. (group internal carry
forward of losses). Any tax compensation payment by tax group members to RHI
Magnesita N.V. is reduced by withholding taxes paid by the respective group
member, which RHI Magnesita N.V. could credit against any corporate income tax
due in Austria. For cases of termination of the corporate tax group or cases
in which a tax group member leaves the corporate tax group, the group and tax
compensation agreement foresees a final tax compensation true-up.
The corporate income tax rate for the Company is 24.0% (2022: 25.0%). The
effective tax rate is 2.0% (2022: 86.0%) with an income tax expense of €3.3
million (2022: €18.8 million expense) on a loss before income tax of €30.1
million (2022: €22.0 million loss). The low effective income tax rate is
mainly attributable to a substantial non-taxable income derived from
investments in subsidiaries (€198.0 million). Still, the Company, as head of
a fiscal unity, consolidated the taxable results of the other unity members
and recognised a tax expense of €3.3 million.
All income and expenses are settled through their intercompany (current)
accounts.
Significant accounting policies
Non-current financial assets
In the Company Financial Statements, investments in Group companies are stated
at net asset value, in accordance with the equity method, if the Company
effectively exercises influence of significance over the operational and
financial activities of these investments. The net asset value is determined
on the basis of the accounting principles applied by the Company. In case the
net asset value of an investment in a Group company is negative, any existing
loans to Group companies considered as net investment are impaired. A
provision for any remaining equity deficit is recognised when an outflow of
resources is probable and can be reliably estimated.
Receivables from Group companies
Accounts receivables are measured at fair value and are subsequently measured
at amortised cost, less allowance for credit losses. The carrying amount of
the accounts receivable approximates the fair value.
Net result from investments
The share in the result of investments comprises the share of the Company in
the result of these investments.
Non-current financial assets
(A) Non-current financial assets
The financial fixed assets comprise investments in:
31.12.2023 31.12.2022
Name and registered office of the company Country of core activity Share in % Share in %
RHI Magnesita Deutschland AG, Wiesbaden, Germany Germany 12.5 12.5
RHI Refractories Raw Material GmbH, Vienna, Austria Austria 25.0 25.0
RHI Magnesita GmbH, Vienna, Austria Austria 100.0 100.0
The investments have developed as follows:
in € million 2023 2022
At beginning of year 943.3 644.8
Transactions with non-controlling interests without change of control 161.0 (5.2)
Changes from currency translation and cash flow hedges (39.8) 87.7
Changes from defined benefit plans (16.3) 39.5
Dividend distribution (50.0) (20.0)
Net result from investments 198.0 196.5
Balance at year-end 1,196.2 943.3
The following list, prepared in accordance with the relevant legal
requirements (Dutch Civil Code, Book 2, Sections 379), shows all companies in
which RHI Magnesita N.V. holds a direct or indirect share of at least 20%:
31.12.2023 31.12.2022
Ser. no. Name and registered office of the company Share- Share in % Share- Share in %
holder
holder
1. RHI Magnesita N.V., Arnhem, Netherlands
2. Agellis Group AB, Lund, Sweden 39. 100.0 39. 100.0
3. Baker Refractories Holding Company, Delaware, USA 28. 100.0 28. 100.0
4. Baker Refractories I.C., Inc., Delaware, USA 3. 100.0 3. 100.0
5. Dalmia GSB Refractories GmbH, Bochum, Germany 53. 100.0 - 0.0
6. Didier Société Industrielle de Production et de Construction - 53. 100.0 53. 100.0
"D.S.I.P.C.", Valenciennes, France
7. Dutch Brasil Holding B.V., Arnhem, Netherlands 99. 100.0 99. 100.0
8. Dutch MAS B.V., Arnhem, Netherlands 53. 100.0 53. 100.0
9. Dutch US Holding B.V., Arnhem, Netherlands 99. 100.0 99. 100.0
10. Feuerfestwerk Bad Hönningen GmbH, Wiesbaden, Germany 103. 100.0 103. 100.0
11. Foreign Enterprise "VERA", Dnepropetrovsk, Ukraine 39. 100.0 39. 100.0
12. GIX International Limited, Dinnington, United Kingdom 104. 100.0 104. 100.0
13. Horn & Co. RHIM Minerals Recovery GmbH, Siegen, Germany 54. 51.0 54. 51.0
14. Indresco U.K. Limited, Dinnington, United Kingdom 12.,78. 100.0 12. 100.0
15. Intermetal Engineers (India) Private Limited, Mumbai, India 55. 100.0 55. 99.9
16. Jinan New Emei Industries Co. Ltd., Jinan, PR China 49. 65.0 - 0.0
17. Liaoning RHI Jinding Magnesia Co., Ltd, Dashiqiao, PR China 1) 39. 100.0 39. 83.3
18. Lokalbahn Mixnitz-St. Erhard GmbH, Vienna, Austria 76. 100.0 76. 100.0
19. LWB Refractories Hagen GmbH, Wiesbaden, Germany 103. 100.0 103. 100.0
20. LWB Refractories Holding France S.A.S., Valenciennes, France 103. 100.0 103. 100.0
21. Magnesita Asia Refractory Holding, Limited, Hong Kong, Hong Kong 20. 100.0 20. 100.0
22. Magnesita Finance S.A., Luxembourg, Luxembourg 7.,35. 100.0 7. 100.0
23. Magnesita Malta Finance Ltd., St. Julians, Malta 24.,103. 100.0 24.,103. 100.0
24. Magnesita Malta Holding Ltd., St. Julians, Malta 29.,103. 100.0 29.,103. 100.0
25. Magnesita Mineração S.A., Brumado, Brazil 22.,35. 100.0 35. 100.0
26. Magnesita Refractories (Canada) Inc., Montreal, Canada 3. 100.0 3. 100.0
27. Magnesita Refractories (Dalian) Co., Ltd., Dalian, PR China 22. 100.0 22. 100.0
28. Magnesita Refractories Company, York, USA 40. 100.0 40. 100.0
29. Magnesita Refractories GmbH, Wiesbaden, Germany 103. 100.0 103. 100.0
30. Magnesita Refractories Limited, Dinnington, United Kingdom 3. 100.0 3. 100.0
31. Magnesita Refractories México, S.A. de C.V., Monterrey, Mexico 3.,4. 100.0 3.,4. 100.0
32. Magnesita Refractories Middle East Free Zone Establishment, Dubai, United Arab 22. 100.0 22. 100.0
Emirates
33. Magnesita Refractories S.C.S., Valenciennes, France 20.,103. 100.0 20.,103. 100.0
34. Magnesita Refractories S.R.L., Milano, Italy 103. 100.0 103. 100.0
35. Magnesita Refratários S.A., Contagem, Brazil 7. 100.0 7. 100.0
36. Magnesita Resource (Anhui) Company Ltd., Chizhou, PR China 21.,49. 100.0 49. 100.0
37. P-D Refractories CZ a.s., Velké Opatovice, Czech Republic 54. 86.8 - 0.0
38. Producción RHI México, S. de R.L. de C.V., Ramos Arizpe, Mexico 71.,104. 100.0 71.,104. 100.0
39. Radex Vertriebsgesellschaft m.b.H., Leoben, Austria 101. 100.0 101. 100.0
40. Rearden G Holdings Eins GmbH, Wiesbaden, Germany 22. 100.0 22. 100.0
41. Refractarios Argentinos S.A, Industrial Comercial Y Minera (I.C.M.), San 7.,9.,104. 100.0 7.,42. 100.0
Nicolás, Argentina 2)
42. Refractarios Magnesita Colombia S.A.S., Sogamoso, Colombia 7.,35. 100.0 7. 100.0
43. Refractarios Magnesita Perú S.A.C., Lima, Peru 7.,35. 100.0 7.,42. 100.0
44. Refractory Intellectual Property GmbH, Vienna, Austria 54. 100.0 54. 100.0
31.12.2023 31.12.2022
Ser. no. Name and registered office of the company Share- Share in % Share- Share in %
holder
holder
45. Refractory Intellectual Property GmbH & Co KG, Vienna, Austria 44. 100.0 44.,54. 100.0
46. RHI Canada Inc., Burlington, Canada 104. 100.0 104. 100.0
47. RHI Chile S.A., Santiago, Chile 41.,12.,104. 100.0 12.,104. 100.0
48. RHI Italia S.R.L., Brescia, Italy 54. 100.0 54. 100.0
49. RHI Magnesita (China) Co., Ltd., Shanghai, PR China 39. 100.0 39. 100.0
50. RHI Magnesita (Chongqing) Refractory Materials Co., Ltd. , Chongqing, PR China 49. 51.0 49. 51.0
51. RHI Magnesita Belgium NV , Evergem, Belgium 58.,83. 100.0 58.,83. 100.0
52. RHI Magnesita Bochum GmbH, Bochum, Germany 53. 100.0 - 0.0
53. RHI Magnesita Deutschland AG, Wiesbaden, Germany 1.,39. 100.0 1.,39. 100.0
54. RHI Magnesita GmbH, Vienna, Austria 1. 100.0 1. 100.0
55. RHI Magnesita India Limited, New Delhi, India 7.,9.,104. 56.1 7.,9.,104. 70.2
56. RHI Magnesita India Refractories Limited, Rajgangpur, India 55. 100.0 - 0.0
57. RHI Magnesita RE Limited, Guernsey, United Kingdom 39. 100.0 39. 100.0
58. RHI Magnesita Sales Germany GmbH, Wiesbaden, Germany 83. 100.0 83. 100.0
59. RHI Magnesita Seven Refractories Limited, Dseven, India 56. 100.0 - 0.0
60. RHI Magnesita Switzerland AG, Hünenberg, Switzerland 39.,53. 100.0 39.,53. 100.0
61. RHI Magnesita Trading B.V., Rotterdam, Netherlands 1.,54. 100.0 54. 100.0
62. RHI Magnesita Turkey Refrakter Ticaret Anonim Sirketi, Eskisehir, Türkiye 3) 18.,39.,99. 100.0 39. 100.0
63. RHI Magnesita Vietnam Company Limited, Ho Chi Minh City, Vietnam 70. 100.0 70. 100.0
64. RHI Magnesita Wetro GmbH, Puschwitz, Germany 54. 100.0 - 0.0
65. RHI Marvo S.R.L., Bucharest, Romania 39.,99. 100.0 39.,99. 100.0
66. RHI Refractories (Dalian) Co., Ltd., Dalian, PR China 39.,49. 100.0 39. 100.0
67. RHI Refractories (Site Services) Limited, Dinnington, United Kingdom 78. 100.0 14. 100.0
68. RHI Refractories Africa (PTY) LTD, Sandton, South Africa 39. 100.0 39. 100.0
69. RHI Refractories Andino, C.A., Puerto Ordaz, Venezuela 104. 100.0 104. 100.0
70. RHI Refractories Asia Pacific Pte. Ltd, Singapore, Singapore 54. 100.0 54. 100.0
71. RHI Refractories España, S.L., Lugones, Spain 8.,53. 100.0 8.,53. 100.0
72. RHI Refractories France SA, Valenciennes, France 53.,58.,89. 100.0 89. 100.0
73. RHI Refractories Ibérica, S.L., Oviedo, Spain 89. 100.0 89. 100.0
74. RHI Refractories Liaoning Co., Ltd., Bayuquan, PR China 39.,49. 100.0 39. 66.0
75. RHI Refractories Nord AB, Stockholm, Sweden 89. 100.0 89. 100.0
76. RHI Refractories Raw Material GmbH, Vienna, Austria 1.,39.,54. 100.0 1.,39.,54. 100.0
77. RHI Refractories Site Services GmbH, Wiesbaden, Germany 53. 100.0 53. 100.0
78. RHI Refractories UK Limited, Bonnybridge, United Kingdom 53. 100.0 53. 100.0
79. RHI Refratãrios Brasil Ltda., Contagem, Brazil 7.,35.,104. 100.0 9.,35. 100.0
80. RHI Trading (Dalian) Co., Ltd, Dalian, PR China 39.,49. 100.0 39. 100.0
81. RHI Ukraina LLC, Dnepropetrovsk, Ukraine 39.,99. 100.0 39.,99. 100.0
82. RHI United Offices America, S.A. de C.V., Monterrey, Mexico 61.,71. 100.0 61.,71. 100.0
83. RHI Urmitz AG & Co. KG, Mülheim-Kärlich, Germany 53.,77. 100.0 53.,77. 100.0
84. RHI US Ltd., Delaware, USA 9. 100.0 9. 100.0
85. RHI Wostok Limited Liability Company, Moscow, Russia 39.,54. 100.0 39.,54. 100.0
86. RHI Wostok Service Limited Liability Company, Moscow, Russia 39.,54. 100.0 39.,54. 100.0
87. RHIM Mireco Mitterdorf GmbH, St.Barbara im Mürztal, Austria 13. 100.0 13. 100.0
88. RHI-Refmex, S.A. de C.V., Ramos Arizpe, Mexico 71.,104. 100.0 71.,104. 100.0
31.12.2023 31.12.2022
Ser. no. Name and registered office of the company Share- Share in % Share- Share in %
holder
holder
89. Sapref AG für feuerfestes Material, Basel, Switzerland 104. 100.0 104. 100.0
90. Seven Lakeway Refractories LLC, Huron, USA 92.,94. 100.0 - 0.0
91. Seven Refractories (UK) Ltd, Rotherham, United Kingdom 92. 76.0 - 0.0
92. Seven Refractories d.o.o, Divača, Slovenia 54. 100.0 - 0.0
93. Seven Refractories Deutschland GmbH, Düsseldorf, Germany 54.,92. 100.0 - 0.0
94. Seven Refractories Holding, Inc., Huron, USA 92. 100.0 - 0.0
95. Seven Refractories Limited, Nicosia, Cyprus 92. 51.0 - 0.0
96. Seven Refractories S.r.l., Castellazzo Bormida, Italy 92. 100.0 - 0.0
97. Sipra S.p.A., Bergamo, Italy 92. 52.0 - 0.0
98. Sörmaş Söğüt Refrakter Malzemeleri Anonim Şirketi, Söğüt / Bilecik, 39. 91.0 39. 89.2
Türkiye
99. Veitscher Vertriebsgesellschaft m.b.H., Vienna, Austria 54. 100.0 54. 100.0
100. Veitsch-Radex GmbH, Vienna, Austria 54. 100.0 54. 100.0
101. Veitsch-Radex GmbH & Co OG, Vienna, Austria 54. 100.0 54.,100. 100.0
102. Veitsch-Radex Vertriebsgesellschaft m.b.H., Vienna, Austria 54. 100.0 54. 100.0
103. Vierte LWB Refractories Holding GmbH, Hilden, Germany 40. 100.0 40. 100.0
104. VRD Americas B.V., Arnhem, Netherlands 39.,54. 100.0 39.,54. 100.0
105. Zimmermann & Jansen GmbH, Wiesbaden, Germany 53. 100.0 53. 100.0
106. Dr.-Ing. Petri & Co. Unterstützungs-Gesellschaft m.b.H., Wiesbaden, 53. 100.0 53. 100.0
Germany
107. Horn & Co Polska sp. z o.o., Chorzów, Poland 13. 100.0 13. 100.0
108. Mag Tec Participações Ltda., Contagem, Brazil i.l. 35. 98.7 35. 98.7
109. Magnesita Refractories Private Limited, Mumbai, India 40.,103. 100.0 40.,103. 100.0
110. Magnesita Refractories S.A. (Pty) Ltd., Middleburg, South Africa 29. 100.0 29. 100.0
111. Minerals and Metals Recovering - Mireco Aktiebolag, Fagersta, Sweden 13. 100.0 13. 100.0
112. Mireco SARL, Entzheim, France 13. 100.0 13. 100.0
113. Mireco SH.P.K, Lebushe, Kosovo 13. 100.0 13. 100.0
114. RHI Réfractaires Algérie, Sidi Amar, Algeria 72. 100.0 72. 100.0
115. Rudgruvans Industrier Aktiebolag, Fagersta, Sweden 13. 100.0 13. 100.0
Equity-accounted joint ventures and associated companies . .
116. Chongqing Boliang Refractory Materials Co., Ltd., Chongqing, PR China 49. 51.0 49. 51.0
117. Magnesita-Envoy Asia Ltd., Kaohsiung, Taiwan 3. 50.0 3. 50.0
118. P-D Kremen d.o.o., Šentjernej, Slovenia 37. 50.0 - 0.0
1) In accordance with IAS 32, fixed-term or puttable non-controlling
interests are shown under liabilities.
2) Further shareholder is Magnesita Refratários S.A., Contagem, Brazil.
3) Further shareholders are VRD Americas B.V., Arnhem, Netherlands and Dutch
MAS B.V., Arnhem, Netherlands.
i.l. in liquidation
Current assets
(B) Cash and cash equivalents
Cash and cash equivalents are at RHI Magnesita N.V.'s free disposal.
Equity
(C) Share capital
The Company's authorised share capital amounts to €100.000.000, comprising
100,000,000 ordinary shares, each of €1 nominal value. As at 31 December
2023, RHI Magnesita N.V.'s issued and fully paid-in share capital consists of
47,130,338 ordinary shares (2022: 47,017,695 ordinary shares). For additional
information on treasury shares see (D).
(D) Treasury shares
As at 31 December 2023, RHI Magnesita treasury shares amount to 2,347,367
(2022: 2,460,010).
(E) Additional paid-in capital
Additional paid-in capital comprises premiums on the issue of shares less
issue costs by RHI Magnesita N.V.
(F) Legal, mandatory and other reserves
Cash flow hedges
The item cash flow hedges include gains and losses from the effective part of
cash flow hedges less tax effects. Further information on hedge accounting is
included in Note (36) and Note (37) of the Consolidated Financial Statements.
Currency translation
Currency translation includes the accumulated currency translation differences
from translating the Financial Statements of foreign subsidiaries as well as
unrealised currency translation differences from monetary items which are part
of a net investment in a foreign operation, net of related income taxes. If
foreign companies are deconsolidated, the currency translation differences are
recognised in the Statement of Profit or Loss as part of the gain or loss from
the sale of shares in subsidiaries. In addition, when monetary items cease to
form part of a net investment in a foreign operation, the currency translation
differences of these monetary items previously recognised in OCI are
reclassified to profit or loss.
The cash flow hedge reserve and the currency translation reserve are legal
reserves and are restricted for distribution.
Legal and mandatory reserve
The Articles of Association stipulate a mandatory reserve of €288,699,230.59
which was created in connection with the merger of RHI Refractories and
Magnesita in 2017.
No distributions, allocations or additions may be made, and no losses of the
Company may be allocated to the mandatory reserve.
Legal and mandatory reserves represent legal and statutory reserves in line
with Chapter 7 'Decree on financial statements formats' of the Dutch Civil
Code.
Retained earnings
Retained earnings includes the result of the financial year and results that
were earned by consolidated companies during prior periods, but not
distributed. The difference between the purchase consideration or sale
proceeds after tax and the relevant proportion of the non-controlling
interest, measured by reference to the carrying amount of the interest's net
assets at the date of acquisition or sale, is recognised in retained earnings
too.
Net income recognised directly in equity represents the additions to
consolidated companies and change of non-controlling interests without a
change of control through the year (€181.8 million), netted of by other
changes as described in the Group Consolidated Statement of Changes in Equity
(€22.8 million) and by the defined benefit plan (€16.3 million).
Non-Current liabilities
(G) Non-current liabilities
in € million 31.12.2023 31.12.2022
Personnel provisions 0.1 0.1
Provisions for pensions 0.2 0.1
Total non-current liabilities 0.3 0.2
Current liabilities
(H) Current liabilities
in € million 31.12.2023 31.12.2022
Trade payables 1.2 1.2
Payables to group companies 4.7 0.4
Accrued liabilities 6.7 6.0
Total current liabilities 12.6 7.6
The current liabilities are due in less than one year. The fair value of other
current liabilities approximates the book value, due to their short-term
character.
(I) General and administrative expenses
in € million 2023 2022
External services/consulting expenses (5.5) (2.0)
Personnel expenses (21.1) (18.4)
Other expenses (3.1) (1.6)
Total general and administrative expenses (29.7) (22.0)
in € million 2023 2022
Wages and salaries (18.7) (16.5)
Social security charges (1.4) (1.1)
Pension contributions (0.5) (0.4)
Other employee costs (0.5) (0.4)
Total wages and salaries (21.1) (18.4)
(J) Net financial result
The 2023 net financial result amounts to €0.4 million (2022:
€0.0 million).
(K) Net results from investments
In 2023, the full year results of the investments amount to a profit of
€198.0 million (2022: €196.5 million) and are recognised in the Company
Statement of Profit or Loss.
(L) Net result for the period
In 2023, there are no differences in the result between the Company Financial
Statements and the Consolidated Financial Statements.
Proposed appropriation of result
It is proposed that, pursuant to Article 27 clause 1 of the Articles of
Association of the Company, as approved in the AGM 2023, the result shown in
RHI Magnesita N.V. income statement is appropriated as follows:
in € million 2023
Profit attributable to shareholders 164.6
In accordance with Article 27 clause 1 to be transferred to reserves 0.0
At the disposal of the General Meeting of Shareholders 164.6
For 2023, the Board of Directors will propose a final dividend of €1.25 per
share for the shareholders of RHI Magnesita N.V. The proposed dividend is
subject to approval by the Annual General Meeting in May 2024.
Other notes
Number of employees
The average number of employees of RHI Magnesita N.V. during 2023 amounts to 9
(2022: 8); all employees are working outside the Netherlands.
Off balance sheet commitments
RHI Magnesita N.V. as an ultimate parent company, provided a corporate
guarantee of €2,008.4 million (2022: €1,549.4 million) for the borrowings
of the Group. The Borrowings are as disclosed in Note (27). Additionally
€20.0 million (2022: €20.1 million) of corporate guarantees are issued in
favour of customers and suppliers of the Group.
The Company has issued a declaration of joint and several liability as
referred to in section 403, Book 2 of the Dutch Civil Code in respect of one
of its consolidated participations, namely RHI Magnesita Trading B.V.
Other information
Information regarding independent auditor's fees, the number of employees of
RHI Magnesita Group and the remuneration of the Board of Directors is included
in Note (41), (10) and (43) of the Consolidated Financial Statements.
The Company opened a branch (RHI Magnesita N.V.) in Vienna, Austria and, as of
February 2020, started to employ staff in the branch office and undertake
services.
Material events after the reporting date
There were no material events after the reporting date other than those
disclosed in Note (44) of the Consolidated Financial Statements.
Vienna, 28 February 2024
Board of Directors
Executive Directors
Stefan Borgas Ian Botha
Non-Executive Directors
Herbert Cordt John Ramsay
Janet Ashdown David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein Berleburg Janice "Jann" Brown
Karl Sevelda Marie-Hélène Ametsreiter
Wolfgang Ruttenstorfer
Employee Representative Directors
Karin Garcia Martin Kowatsch
Michael Schwarz
Provisions of the articles of association on profit and distributions
Other information
The stipulations of Article 27 and 28 of the Articles of Association
concerning profit and distributions are:
27 Profit and distributions
27.1 The Board may resolve that the profits realised during a financial year
will fully or partially be appropriated to increase and/or form reserves. With
due regard to Article 26.2, a deficit may only be offset against the reserves
prescribed by law to the extent this is permitted by law.
27.2 The allocation of profits remaining after application of Article 27.1
shall be determined by the General Meeting. The Board shall make a proposal
for that purpose. A proposal to make a distribution of profits shall be dealt
with as a separate agenda item at the General Meeting.
27.3 Distribution of profits shall be made after adoption of the annual
accounts if permitted under the law given the contents of the annual accounts.
27.4 The Board may resolve to make interim distributions and/or to make
distributions at the expense of any reserve of the Company, other than the
Mandatory Reserve.
27.5 Distributions on shares may be made only up to an amount which does not
exceed the amount of the Distributable Equity. If it concerns an interim
distribution, the compliance with this requirement must be evidenced by an
interim statement of assets and liabilities as referred to in Section 2:105
paragraph 4 of the Dutch Civil Code. The Company shall deposit the statement
of assets and liabilities at the Dutch Trade Register within eight days after
the day on which the resolution to make the distribution is published.
27.6 Distributions on shares payable in cash shall be paid in Euro, unless the
Board determines that payment shall be made in another currency.
27.7 The Board is authorised to determine that a distribution on shares will
not be made in cash but in kind or in the form of shares, or to determine that
shareholders may choose to accept the distribution in cash and/or in the form
of shares, all this out of the profits and/or at the expense of reserves,
other than the Mandatory Reserve, and all this if and in so far the Board has
been designated by the General Meeting in accordance with Article 6.1. The
Board shall set the conditions under which such a choice may be made.
28 Release for payment
Distributions of profits and other distributions shall be made payable four
weeks after adoption of the relevant resolution, unless the Board or the
General Meeting at the proposal of the Board determine another date.
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