REG - RHI Magnesita N.V. - Q1 2023 Trading Update

RHI Magnesita NVAnnouncement

05/05/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230505:nRSE5012Ya&default-theme=true

RNS Number : 5012Y  RHI Magnesita N.V.  05 May 2023

RHI Magnesita N.V.

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

Q1 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 31 March 2023 ('Q1').

Q1 trading

The momentum of improving EBITA and EBITA margins established in 2022
continued through the first quarter as lower cost inflation offset an expected
reduction in sales volumes.

Refractory sales volumes in the first quarter were 8% lower than Q1 2022, in
line with management expectations and overall market demand. As anticipated,
steel and cement demand outside of India and China softened due to a slowdown
in construction activity, whilst demand in the Industrial Projects segment
remained strong.

Prices of magnesite-based raw materials remained at relatively low levels
throughout Q1, with the Group's vertical integration margin remaining largely
unchanged from the low level of H2 2022.

Refractory margins were resilient due to slower cost escalation, based on
lower freight and purchased raw material costs, despite higher energy costs.
Profitability was supported by the benefits of the Group's strategic sales and
cost reduction initiatives, the contribution from recent acquisitions in
Türkiye and India, together with geographic and product diversification.
EBITA margins in Q1 were ahead of guidance of approximately 10% for 2023 but
pricing pressure is anticipated in the remainder of the year as input costs
reduce for refractory producers globally.

Financial position

Net debt to EBITDA reduced to 2.2x after the successful placing on 5 April of
15.7 million new shares in RHI Magnesita India Ltd, to raise €101 million
via a Qualified Institutional Placement ("QIP") in India. Including a 12-month
historic pro forma EBITDA contribution from businesses acquired during the
period and the proceeds of the QIP, pro forma leverage was 2.1x EBITDA.

The Group was able to reduce gearing due to strong operating cash flows and
through the proceeds of the QIP, whilst continuing to execute on its inorganic
growth strategy. Total investments in M&A of €155 million were completed
during Q1 2023, including the acquisitions of the Indian refractory business
of Dalmia Bharat Refractories Limited and Hi-Tech Chemicals Limited, and a
€5 million investment in MCi Carbon, Australia.

Working capital levels were broadly unchanged from 31 December 2022 as the
Group continues to prioritise security of supply for its customers in order to
support recent market share gains.

The Group continues to retain robust liquidity of approximately €1.2
billion. This follows the April 2023 placement of €170 million of ESG-linked
Schuldschein bonds and the refinancing of a €150 million Term Loan with
UniCredit Bank Austria AG. The Term Loan was increased in size from its
previous level of €115 million, extended to 2026 and is also now ESG-linked.
Both sources of funding were secured at competitive rates of interest.

M&A progress

The acquisitions of Dalmia OCL and Hi-Tech completed in India during Q1
increased the Group's local market share from around 20% to 30% and represent
significant progress in the strategic goal to grow in markets in which the
Group is under-represented, including in India, China and Türkiye. The Group
has now secured new production capacity and a geographically distributed plant
network in India, which is expected to be the highest growth refractory market
globally. RHI Magnesita will now also be able to supply products more
competitively throughout India from low-cost local facilities, as well as
pursuing export opportunities in the West Asia and Africa regions. Margins in
the India business unit are expected to be diluted during the integration
phase as synergies ramp up and market demand grows to fully utilise the newly
acquired plant capacity.

The acquisition of a 65% stake in Jinan New Emei, China for a cash
consideration of €40 million was agreed on 13 January and completed on 28
April 2023. The acquisition of Dalmia GSB Refractories, Germany for a cash
consideration €13 million was agreed on 29 March and completed on 28 April
2023.

On 21 April 2023, the Group announced the acquisition of Seven Refractories
for a cash consideration of €93 million, with completion expected in the
second half of 2023.

The M&A pipeline remains robust as the Group continues to demonstrate
momentum and leadership in the ongoing consolidation of the refractory
industry, in markets and products where the Group is under-represented.

Outlook

Order book trends suggest the potential for a gradual recovery in steel
customer demand in the short term, although the outlook for end markets and
customer volumes remains uncertain and a significant recovery in volumes is
not expected, in line with most economic forecasts globally.

On the basis that customer demand continues to recover over the coming months
and if pressure on pricing is limited to the passing on of cost normalisation,
the Board is confident in the Group's ability to achieve its current guidance
for FY 2023.

Leverage measured as a ratio of net debt to EBITDA is expected to remain above
2.0x as the Group further executes on its M&A pipeline.

 

Stefan Borgas, Chief Executive Officer, said: "RHI Magnesita benefited from
resilient pricing in the first quarter as we fulfilled orders placed in Q4
2022 during the peak inflationary period. Our improved refractory-margin
performance benefits from the investments we have made to rationalize our
network and leaves us well placed to meet expectations for the year. Signs of
a recovery in short-term demand are visible in our order book and whilst our
industry remains exposed to volatility in end markets, we still assume that no
major recession will occur globally. We have continued to make steady progress
in M&A as we identify value-adding opportunities to grow our business
through consolidation in key target geographies and product areas, whilst
carefully managing our balance sheet."

 

Conference Call

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

 Dial in                        +44 203 936 2999 or 0800 358 1035 (UK only)
 Access code                    328251
 Webcast and playback facility  LINK
                                (https://www.investis-live.com/rhimagnesita/644b6e082ed075110074b7ef/olfi)

 

For further enquiries, please contact:

Chris Bucknall, Head of Investor Relations

Tel +43 699 1870 6490

E‐mail: chris.bucknall@rhimagnesita.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 13,500
employees in 33 main production sites and more than 70 sales offices. RHI
Magnesita intends to leverage its leadership in terms of revenue, scale,
product portfolio and diversified geographic presence to target strategically
those countries and regions benefitting from more dynamic economic growth
prospects.

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)

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTAIMMTMTMMTRJ