REG - RHI Magnesita N.V. - Q3 2024 Trading Update

RHI Magnesita NVAnnouncement

11/11/2024 07:00

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RNS Number : 6159L  RHI Magnesita N.V.  11 November 2024

11 November 2024

RHI Magnesita N.V.

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

Q3 2024 TRADING UPDATE

 

Strong execution in exceedingly challenging demand environment

RHI Magnesita, the leading global supplier of heat management solutions, today
provides an update on trading for the three-month period ended 30 September
2024 ('Q3').

Q3 trading

Revenues in the nine months to 30 September were in line with the prior year
period, with the contribution from M&A offsetting expected softness in
pricing and lower sales volumes than expected, due to ongoing weak customer
demand. Customer demand remains subdued in all markets except India.

Q3 year-to-date sales volumes including M&A increased by 3% year-on-year.
Q3 2024 sales volumes were up 2% on Q2 2024.

Pricing pressure continued in Q3 as forecast, with year-to-date pricing now 4%
lower compared to the prior year, in line with guidance for a decline of up to
5% in 2024, reflecting lower input costs for the industry with competitors
becoming increasingly aggressive on pricing as a result.

Whilst year on year input costs are lower, some externally purchased raw
material costs have increased during H2 due to higher prices for both alumina
based material and electrofused magnesia, with additional increases announced
by suppliers for 2025. This will increase cost of goods sold in Q4 and 2025. A
price increase programme has been implemented to maintain margins.

Adjusted EBITA in Q3 was in line with the levels reported in Q1 and Q2, as
cost saving initiatives and operational efficiencies offset lower refractory
prices and fixed cost under-absorption, to deliver an Adjusted EBITA margin
slightly higher than the 11.0% guided for the full year. The EBITA margin
contribution from vertical integration remained at a record low of 0.8% whilst
refractory margins remained at record highs.

Strong operational delivery combined with new product offerings

4PRO - more than products and services

RHI Magnesita has continued to upgrade its customer offering with advanced
products, automation and sustainability options being made available via
tailored and digitalised solutions contracts. Re-branded under '4PRO', the new
offering is gaining traction with customers seeking efficiency gains and
quality improvements across all regions.

Green steel contract wins

The Group is continuing to win further new business with OEMs for refractory
applications in green steel production. Such contracts represent material new
project revenue and validation of the Group's strategy to position itself as
the leading supplier of refractory linings and services for Direct Reduction,
Open Bath, Electric Arc and Basic Oxygen furnaces, which are expected to be
essential for the large-scale adoption of green steel production globally.

Customers respond positively to the continuous improvement of the offering as
measured by net promoter scores and PIFOT ("Produced in full and on time")
metrics, which increased to record highs in Q3.

Process optimisation

A restructuring and upgrade of the Group's shared service centre network is
being implemented with the aim of delivering further service improvements for
customers, broader career opportunities for employees and SG&A savings for
the company. To achieve this, RHI Magnesita is transferring the majority of
its global shared services operations to Capgemini, a global leader in process
design, digital transformation and shared services operations. Capgemini's
operations will support the Group in the implementation of the new ERP system
which is scheduled to take place between mid 2025 and mid 2027.

M&A update

No new M&A transactions were agreed or completed during Q3.

The Group's intended acquisition of Resco Group for an enterprise value of up
to $430 million, remains subject to Second Phase Review by US merger control
authorities. Completion of the transaction is now expected to occur in Q1
2025.

M&A transactions completed in 2023 are broadly on track to achieve the
2024 guidance of €80 million contribution to Group Adjusted EBITDA.

Financial position

Cash conversion remained strong at 96% in the year to date, as further modest
working capital reductions were realized, mainly resulting from lower input
costs. Working capital intensity increased to 26% ahead of the seasonal uplift
in Q4 cement sales but is on track to reduce to the guided level of
approximately 24% by the year end.

Net debt remained at a similar level to that reported at the 2024 Half Year
results. Gearing measured as a ratio of net debt to Adjusted EBITDA is
expected to be within the target range of 2.0-2.5x at the year end.

2024 outlook

Sales volume guidance for 2024 was previously for the base business to remain
flat, with M&A increasing shipped volumes by up to 10%. Following weaker
than expected demand, sales volumes are now expected to be around 5% higher in
2024 compared to the prior year, including the contribution from M&A and
with a slight decline in the base business.

An increase in profitability and margins in Q4 is expected due to normal
seasonality of the cement business, the timing of project deliveries in the
Industrial segment and cost benefits from efficiency programmes.

Whilst 2024 revenues and profits have been severely impacted by continued weak
customer demand, a strong focus on execution has enabled the preservation of
EBITA margins slightly above guidance of 11.0% in the year to date.

Adjusted EBITA for 2024 is expected to be between €400 million and €410
million, taking into account year-to-date performance and no further customer
delays in deliveries scheduled for Q4.

Supported by favourable foreign exchange movements, Adjusted EPS is expected
to be in line with the current analyst consensus of €5.00 per share.

The Group remains well positioned for a recovery in customer production
volumes whenever it may occur. Such a change has the potential for significant
upside from operational gearing and recovered raw material margin
contribution.

 

Stefan Borgas, Chief Executive Officer, said:

"RHI Magnesita has delivered another resilient performance in difficult market
conditions in the midst of a global industrial recession, now in its third
year. A strong step-up in earnings is required in the fourth quarter to
achieve EBITA guidance. Such step-up was expected earlier but has repeatedly
been delayed to due to very weak customer demand. The normal seasonal upturn
in cement and the timing of key industrial project deliveries however support
a stronger Q4 compared to the first nine months of the year.

In India, mid-term demand outlook looks now a notch softer than expected six
months ago. Outside of India, we are not seeing any catalyst for a near-term
recovery in customer demand. The restructuring of heavy industry and the
construction sector inside China will take time, meanwhile structural
oversupply is likely to continue to impact global steel markets negatively.

RHI Magnesita's strategy to seek earnings growth through value-accretive
M&A and improved operational performance does not rely on organic growth
in our underlying markets. We see a broad addressable market and long lasting
opportunity to continue our inorganic growth strategy, without adding new
greenfield capacity to a global market which is already over-supplied, even in
the few growth geographies."

 

Conference Call

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

 Dial in                        +44 20 3936 2999
 Access code                    646752
 Webcast and playback facility  https://www.investis-live.com/rhimagnesita/6712513eb2cedb000e3a34c9/lwpfg
                                (https://www.investis-live.com/rhimagnesita/6712513eb2cedb000e3a34c9/lwpfg)

 

For further enquiries, please contact:

Chris Bucknall, Head of Investor Relations

Tel +43 699 1870 6490

E‐mail: chris.bucknall@rhimagnesita.com

 

Media:

Hudson Sandler

Mark Garraway, Emily Dillon, Nick Moore

Tel +44 020 7796 4133

E-mail: rhimagnesita@hudsonsandler.com

 

About RHI Magnesita

RHI Magnesita is 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 over 20,000
employees in 67 main production sites (including raw material sites), 12
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 is listed within the Equity Shares (Commercial Companies) category
("ESCC") of 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)

 

About 4PRO: Advancing sustainability and innovation in refractory solutions

RHI Magnesita, the global leader in refractory products and solutions, proudly
introduces "4PRO", a new refractory solutions contract model. The
transformative business model is designed to lead high-temperature industries
like steel, cement, glass, non-ferrous metals towards a sustainable and
technologically advanced future through a more holistic and contemporary
approach.

Reflecting RHI Magnesita's mission to master heat for enabling modern
industries to build a sustainable world, 4PRO goes beyond traditional
refractory offerings. With this new approach, the company delivers advanced,
high-performance solutions while addressing critical sustainability needs
through innovation and strategic partnerships.

The 4PRO model encompasses four key pillars that guide RHI Magnesita's
commitment to excellence and responsibility:

· Performance: Pushing the boundaries of innovation and resilience by
designing products and services that withstand extreme temperatures, enhancing
operational efficiency and durability.

· Partnership: Strengthening collaborative relationships with clients and
industry stakeholders to drive change, exchange knowledge, and redefine the
future.

· People: Upholding a commitment to safety, continuous development, and
corporate social responsibility, fostering an environment where our people can
thrive.

· Planet: Actively pursuing a sustainable world through low-carbon
initiatives and circular economy principles that reduce environmental impact
and promote resource efficiency.

Under 4PRO, RHI Magnesita offers a comprehensive suite of sustainable,
technology-driven products and services that are tailored to meet evolving
industrial challenges. Each solution category - from Sustainable Products and
Robotics to Systems, Sensors, and Digital Solutions - has been designed to
deliver tangible performance benefits while contributing to sustainability and
operational excellence. By integrating recycled materials, automation,
real-time monitoring, and digital platforms, RHI Magnesita supports industries
in optimizing high-temperature processes with greater efficiency and lower
environmental impact. Further reinforcing its sustainability leadership, RHI
Magnesita's Decarbonization and Green Steel Solutions are pivotal for
customers working toward climate goals. Through innovations such as carbon
capture pilots, low-carbon materials, and refractory solutions that support
emission reductions, RHI Magnesita is setting the standard for a greener
industrial future.

Read more here: https://www.rhimagnesita.com/4PRO/
(https://www.rhimagnesita.com/4PRO/)

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