REG - RHI Magnesita N.V. - Q3 2023 Trading Update

RHI Magnesita NVAnnouncement

31/10/2023 07:00

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RNS Number : 7753R  RHI Magnesita N.V.  31 October 2023

RHI Magnesita N.V.

("RHI Magnesita" the "Company" or the "Group")

Q3 2023 TRADING UPDATE

 

RHI Magnesita, the leading global supplier of high‐grade refractory
products, systems and solutions, today provides an update on trading for the
three months to 30 September 2023 ('Q3').

Q3 trading

Adjusted EBITA in the third quarter was at a similar level to that achieved in
Q1 and Q2, as resilient pricing, the benefits of strategic initiatives and
M&A offset lower sales volumes and under-absorption of fixed costs. The
Group has also achieved a consistent improvement in its operating KPIs in the
year to date, leading to improved customer service levels and more effective
cost management.

Volume performance in Q3 reflected normal seasonal factors, with plants
operating at an average of 70% of capacity, and was consistent with the
expectation underpinning previous guidance for full year sales volumes (pre
M&A) to be up to 5% below 2022. Steel volume weakness was most pronounced
in Europe, China and South America, reflecting local market conditions.

Pricing was strongest in the cement & lime and nonferrous metals segments
within the Industrials business, due to the later cycle nature of these
customer industries. Refractory raw material prices moved lower in Q3,
indicating potential for finished goods pricing pressure in Q4.

The Group's EBITA margin in Q3 reduced slightly to 11.2%, from 11.6% in H1
2023. Refractory margin remained strong with a relatively low contribution
from vertical integration at 1.8%, as guided.

Financial position

The Group continued to generate strong organic operating cash flows from its
base business before M&A with YTD cash conversion increasing to over 120%
due to further release of working capital.

M&A has increased net debt by approximately €430 million in the year to
date, including working capital, assumed net debt and the P-D Refractories
transaction completed in October. Acquisitions in India were partially funded
by the issuance of 27 million shares in RHI Magnesita India Limited to the
sellers of Dalmia OCL and a Qualified Institutional Placement raising €100
million in April 2023. The Group's gearing measured as a ratio of net debt to
EBITDA is expected to increase modestly by the year end, but to remain in line
with the target range of 2.0-2.5x.

M&A update

On 3 October 2023, the Group completed its acquisition of P-D Refractories, a
European producer of high quality alumina-based refractories for industrial
applications in process industries, with revenues of €171 million in the
year to 31 December 2022. The transaction is not expected to result in a
material increase in gearing for the Group on a pro forma EBITDA basis.

The Group has now completed a total of nine acquisitions in the last 24
months, as it executes on its strategy to consolidate small and medium sized
businesses in its target geographies and product segments.

Outlook

Order book visibility is at normal levels with limited signs of a recovery in
demand volumes in 2024, as global construction activity continues to be weak
and demand in the autos market remains below pre-pandemic levels.

However, following good execution, the strong EBITA delivered in the third
quarter, outperformance in the delivery of M&A synergies in the year to
date and seasonally higher volumes in cement and lime anticipated in Q4,
Adjusted EBITA guidance for the full year is increased from €360 million to
at least €380 million. The benefits from M&A and operational
efficiencies will support earnings into 2024, offsetting weak demand.

Net financial expenses excluding foreign exchange related items are tracking
in line with guidance of c.€65 million for 2023. Taking into account the
higher EBITA forecast offset by higher financial expenses and foreign exchange
adjustments in the year to date, EPS is expected to be moderately ahead of
analyst consensus for the full year.

 

Stefan Borgas, Chief Executive Officer, said: "I am pleased by the strong
execution demonstrated by RHI Magnesita during difficult conditions for our
key end markets. We are currently benefitting from the strategic investments
we have made in reducing our cost base and rationalizing our production
network, together with improved planning and careful management of our assets
through this period of weaker demand. Pricing discipline has helped to
maintain EBITA margins at over 11%, offsetting the impact of lower production
on our fixed cost base. We have also been able to progress our M&A
strategy, with six acquisitions completed in the first nine months of 2023 and
a total of nine in the last 24 months. As a result of success in the early
stages of M&A integration and our consistent operational and financial
delivery in the year to date, we are able to increase our EBITA guidance for
2023 to at least €380 million."

 

Conference Call

A conference call will be hosted at 8:15am UK time to discuss the trading
update:

 Dial in                        +44 207 107 0613
 Access code                    42809281
 Webcast and playback facility  LINK
                                (https://www.investis-live.com/rhimagnesita/64f9d6726dedf60c001ec344/ndok)

 

For further enquiries, please contact:

Chris Bucknall, Head of Investor Relations

Tel +43 699 1870 6490

E‐mail: chris.bucknall@rhimagnesita.com
(mailto:chris.bucknall@rhimagnesita.com)

 

Media:

Hudson Sandler

Mark Garraway, Emily Dillon, Nick Moore

Tel +44 020 7796 4133

E-mail: rhimagnesita@hudsonsandler.com (mailto:rhimagnesita@hudsonsandler.com)

 

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 15,000
employees in 47 production sites, 7 recycling facilities and more than 70
sales offices. RHI Magnesita intends to build on its leadership in revenue,
scale, product portfolio and diversified geographic presence to expand further
in high growth markets.

The Group maintains a premium listing on the Official list of the London Stock
Exchange (symbol: RHIM) and is a constituent of the FTSE 250 index, with a
secondary listing on the Vienna Stock Exchange (Wiener Börse). For more
information please visit: www.rhimagnesita.com (http://www.rhimagnesita.com)

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