REG - RHI Magnesita N.V. - RHI Magnesita half-year results
26/07/2023 07:00
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RNS Number : 1792H RHI Magnesita N.V. 26 July 2023
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or the "Group")
Strong pricing, strategic sales initiatives and M&A contribution offset
lower demand to deliver increase in EBITA and deleveraging
RHI Magnesita, the leading global supplier of high-grade refractory products,
systems and solutions, today announces its unaudited results for the six
months ended 30 June 2023 ("H1 2023" or the "Period").
Financial results
(€m unless stated otherwise) H1 2023 H1 2022 Change H1 2022 Change
Constant Currency Constant Currency
Adjusted(1) Adjusted
Revenue 1,734 1,594 9% 1,593 9%
Adjusted EBITDA 265 245 8% 258 2%
Adjusted EBITA(2) 200 188 7% 202 (1)%
Adjusted EBITA margin 11.6% 11.8% (20)bps 12.7% (110)bps
Adjusted EPS 2.53 2.58 (2)%
Net debt 1,124 1,231 (9)%
Pro forma Net debt to LTM Adjusted EBITDA(3) 2.1x 2.7x (0.6)x
H1 2023 H1 2022
Reported
Revenue 1,734 1,594
Reported EBITA 184 177
Profit before tax 111 142
EPS €1.71 €2.06
Dividend per share €0.55 €0.50
( )
(1 ) H1 2022 adjusted for constant currency for H1 2023 average FX rates.
(2) Adjustments of €16 million to reported EBITA include €11 million
relating to non-recurring restructuring costs and €5 million was spent on
M&A integration costs in the Period.
(3) Includes trailing 12 months EBITDA contribution from businesses
acquired during the period, including prior to the date of acquisition.
Operational and strategic highlights
· Steel revenues 5% higher, reflecting an 8% volume reduction in line
with subdued market demand globally, more than offset in the Period by strong
pricing
· Industrial division performance benefited from strong pricing recovery
and later cycle nature of project business, to deliver gross margin of 29.0%
(H1 2022: 25.9%), highlighting benefits of sector diversification
· Low plant capacity utilisation of 76% (H1 2022: 83%) delivers planned
inventory reduction excluding M&A. Associated fixed cost under-absorption
results in flat gross margins for Steel, despite lower input costs
· Inventory now at or approaching target demand coverage ratios, through
focus on stock management without impacting customer performance. Record high
PIFOT ("produced in full and on time") and record low customer complaints
· Recycling rate increased to 13.0% (H1 2022: 9.3%). Over the period
January 2018 to June 2023, approximately 1.1 million tonnes of CO(2) emissions
has now been avoided through the use of secondary raw materials
· Five acquisitions completed during H1 2023 in India, China and Europe
for a total cash consideration of €208 million, including working capital
investments of €23 million. Significant synergies and earnings accretion
expected as new businesses are integrated into the Group
Financial highlights
· Revenue increased 9% to €1,734 million (H1 2022: €1,594 million), as
higher pricing and M&A contribution offset the negative impact of lower
sales volumes
· Adjusted EBITA of €200 million (H1 2022: €188 million) and margin
of 11.6% (H1 2022: 11.8%) as currency tailwind, higher pricing, M&A
contribution and strategic sales initiatives offset lower volumes:
- Price increases contributed €167 million to Adjusted EBITA versus H1 2022
- Adjusted EBITDA from M&A in H1 2023 of €19 million (EBITA: €14
million) against previous full year guidance of €25-€30 million, with
contribution weighted towards H2 2023 due to timing of completion. Guidance
for 2023 increased to approximately €40 million
- Strategic initiatives cumulative annual EBITA contribution since 2019 now at
€131 million, achieving the FY 2023 guided range of €125-€145 million
· Adjusted EPS of €2.53 per share in line with H1 2022 (H1 2022:
€2.58 per share) as higher EBITA was offset by higher debt interest charges,
as guided, and currency movements
· Significant step up in free cash flow to €167 million (H1 2022:
€146 million outflow) driven by working capital release in base business and
strong operating cash flow conversion of 114%
· Net Debt reduced to €1,124 million (31 December 2022: €1,163
million) and pro forma Net Debt to Adjusted EBITDA reduced to 2.1x (31
December 2022 Net Debt to Adjusted EBITDA: 2.3x), strong cash flow and €100
million equity raise in India funded cash invested into M&A of €208
million during the Period, including €23 million of working capital
investments
· Interim dividend of €0.55 per share declared
Outlook
· Outlook for key end markets remains uncertain, with order books
suggesting continued weakness into the second half
· Pricing currently resilient but competitive pressure expected in the
remainder of the year
· Benefit of lower input costs expected to be offset by reduced
fixed-cost absorption due to low production volumes
· Following strong first half profitability, full year Adjusted EBITA
margin is now expected to be between 10.5% and 11.5%, delivering full year
Adjusted EBITA including M&A of at least €360 million
· Net debt to EBITDA expected to remain above 2.0x at the FY 2023 as the
Group further executes on its M&A pipeline, in line with its guidance
range
Commenting on the results, Chief Executive Officer, Stefan Borgas, said:
"In the first half of the year we continued to experience challenging
conditions in the steel market as a result of low demand volumes in all
geographies with the exception of India. However, I am pleased to report that
the resilience of our business model and strategy has been demonstrated by
strong pricing, sector diversification, the delivery of material benefits from
our strategic sales initiatives and a growing contribution from acquisitions.
We have generated free cash flow of €167 million compared to an outflow of
€146 million in H1 2022 and we are now on course to deliver full year EBITA
of at least €360 million with a margin of between 10.5% and 11.5%. This is
higher than we expected at the beginning of this year, but with the benefits
from lower input costs eroded by fixed cost under-absorption due to low
production volumes. Five acquisitions completed in 2023 year to date have been
funded through operating cash flows and an equity raise in India, enabling us
to reduce gearing to 2.1x pro forma EBITDA, in line with our targeted range.
We are continuing to progress the transformation of our business and the
delivery of our strategy, despite the challenging overall demand conditions."
A presentation for investors and analysts will be held today starting at
8:15am UK time (9:15am CET). The presentation will be webcast live and details
can be found on: https://ir.rhimagnesita.com/ (https://ir.rhimagnesita.com/) .
Alternatively the webcast can be accessed here
(https://www.investis-live.com/rhimagnesita/64abcbce383e901300586b51/olkp) .
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)
HEALTH & SAFETY
A core value of the Group is to maintain a safe working environment for its
employees and contractors. During H1 2023 the lost time injury frequency
("LTIF"), excluding recently acquired businesses, increased slightly to 0.25
per 200,000 hours worked (H1 2022: 0.22), whilst the total recordable injury
frequency ("TRIF") reduced to 0.58 per 200,000 hours worked (H1 2022: 0.63).
RHI Magnesita aims to reduce all accidents to zero over the long term.
During the Period, the main focus areas for improvement were protocols for
workplace inductions and safety training for new hires. Further initiatives
related to safety-awareness on specific topics such as prevention of finger
and hand injuries were rolled out in response to an increase in incidents of
this nature in Q1.
FINANCIAL OVERVIEW
Reported revenue increased by 9% to €1,734 million (H1 2022: €1,594
million) as the contribution from M&A, price increases and benefits from
strategic sales initiatives in India and in Cement and Lime offset 9% lower
volumes across Steel and Industrial, excluding recycling and minerals sales.
Revenue increased on a constant currency basis by 9% (H1 2022: €1,593
million). Total revenue contribution in the Period from M&A was €119
million.
Cost inflation began to ease during the Period but absolute costs were higher
compared to H1 2022 largely due to M&A, with cost of goods sold increasing
by 8% on a reported basis to €1,320 million (H1 2022: €1,221 million).
Adjusted EBITA increased by 7% on a reported basis to €200 million (H1 2022:
€188 million) and reduced by 1% on a constant currency basis (H1 2022:
€202 million). Adjusted EBITA margin decreased by 20bps to 11.6% (H1 2022:
11.8%). Higher pricing levels maintained from H2 2022, combined with a
reducing rate of cost inflation, resulted in a record refractory margin
contribution of 9.8ppts (H1 2022: 8.4ppts). The vertical integration margin
was lower, as guided, at 1.8ppts (H1 2022: 3.4ppts) as higher energy costs
increased the internal cost of raw material production, compared to global
market prices which are linked to the marginal production costs of China based
producers. Total Adjusted EBITDA contribution from M&A in the first half
was €19 million (EBITA: €14 million) against original full year EBITDA
guidance of €25-€30 million. Guidance is now increased to approximately
€40 million of Adjusted EBITDA from M&A, including the expected
contribution from DGSB and Seven Refractories in the second half of 2023.
Net debt decreased to €1,124 million at the end of the Period (31 December
2022: €1,163 million) and reported leverage was 2.2x net debt to Adjusted
EBITDA, down from 2.3x at 31 December 2022 due to higher operating cash flow.
Including a 12-month historic EBITDA contribution from businesses acquired
during the period, pro forma leverage was 2.1x Net debt to Adjusted EBITDA.
M&A cash consideration, net debt consolidated on acquisition and working
capital requirements of acquired businesses increased net debt by €256
million in H1 2023. Cash outflow on acquisitions was offset by strong
operating cash flow in the base business and the proceeds of a Qualified
Institutional Placement ("QIP") by RHI Magnesita India Ltd, raising
approximately €100 million in April 2023. The QIP is to be followed by an
equity investment of €22 million by the Group in RHI Magnesita India Ltd via
a Preferential Issue which is expected to complete in Q3 2023.
Net Working capital, before consolidation of new M&A, decreased by €84
million to €834 million (31 December 2022: €892 million) as inventories
and accounts receivables were successfully reduced, offset by decreased
accounts payable due to lower raw material prices and purchases. Excluding
M&A, the base business recorded a working capital intensity of 25.6%.
Including M&A, working capital stood at €940 million and working capital
intensity was 26.0%.
Available liquidity was €1,360 million at the period end (31 December 2022:
€1,121 million) including undrawn committed facilities of €600 million and
cash and cash equivalents of €760 million. Adjusted operating cash flow was
€228 million (H1 2022: €(84) million), resulting from higher profitability
and reduced working capital requirements.
OUTLOOK
The outlook for the Group's key end markets and consequently customer volumes
remains uncertain, with order books suggesting continued weakness into the
second half. Pricing pressure from competitors is expected over the remainder
of the year.
Supported by strong profitability in the first half of the year, the Board
expects to deliver a full year Adjusted EBITA margin of between 10.5% and
11.5% and Adjusted EBITA including M&A of at least €360 million.
Leverage, measured as a ratio of net debt to Adjusted EBITDA, is expected to
remain above 2.0x as the Group further executes on its M&A pipeline.
CAPITAL ALLOCATION AND SHAREHOLDER RETURNS
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 midterm.
These opportunities will be considered against a framework of strategic fit,
risk profile, rates of return, synergy potential and balance sheet strength.
The Group incurred €38 million of project capital expenditure in the first
half (H1 2022: €36 million), which included investments in the Production
Optimisation Plan and on recently acquired assets. Maintenance capital
expenditure in the period was €25 million (H1 2022: €22 million). Total
capital expenditure was therefore €63 million (H1 2022: €58 million),
against unchanged full year 2023 guidance of €200 million, including
M&A.
Consistent with the Company's dividend policy to pay an interim dividend equal
to one third of the previous final dividend, the Board has declared an interim
dividend of €0.55 per share representing €25.9 million in aggregate. The
interim dividend will be paid on 22 September 2023 to shareholders on the
register on 25 August 2023.
Shareholders should note that Rhône Capital reserves the right to reduce the
consideration payable under its Partial Offer, including to shareholders who
have already accepted the Partial Offer, by an amount equal to any such
dividend payments.
M&A
During the Period, the Group completed two highly strategic acquisitions in
India, including the €86 million acquisition of the refractory business of
Hi-Tech in Jamshedpur and the Indian refractory business of DBRL, which has
substantially improved the Group's regional positioning within the flow
control and industrial segments.
Following completion the Group began the integration of these two acquisitions
with its existing Indian footprint, including the relocation of some flow
control and lance production to locations with a closer proximity to customer
sites. The acquisitions in India have increased the Group's local market
share, representing strategic progress against the Group's aim to grow in
geographies where it was previously under-represented. The expanded plant
network and additional low-cost production sites will increase RHI Magnesita's
competitiveness in the region for both local sales and potential new export
opportunities, especially across West Asia and Africa.
The Group agreed to acquire DGSB, a German subsidiary of the Dalmia Bharat
Group, in March 2023. DGSB 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, and represents a
complementary addition to the Group's existing product range.
The acquisition of a 65% stake in Jinan New Emei was completed in April 2023
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. Jinan New Emei is based at a new facility in
Shandong China and has a well-established business in refractory slide gates,
nozzles and mixes. The integration of the plant commenced in May 2023.
On 21 April 2023, the Group announced the acquisition of Seven Refractories
for a cash consideration of €84 million and the transaction was completed on
17 July 2023. Seven Refractories is a specialist supplier of alumina based
refractory mixes with broad applications across all of the Group's customer
segments including iron and steel, cement, aluminium and non-ferrous metals.
The Group has continued to integrate acquisitions that were completed in prior
periods including SÖRMAŞ (Türkiye), MIRECO (Europe Recycling) and Chongqing
(China) and these newly acquired businesses are together delivering material
benefits to the Group.
The total contribution to Adjusted EBITDA from M&A in H1 2023 was €19
million (EBITA: €14 million). Guidance for M&A contribution in the full
year 2023 is increased from the previous range of €25-€30 million Adjusted
EBTIDA to approximately €40 million, including the recent acquisitions of
Seven Refractories and DGSB.
SUSTAINABILITY
The Group secured an increase in its Ecovadis sustainability rating to 72 in
June 2023 (June 2022: 69), maintaining its 'Gold' rating. Out of a total of
€2.4 billion of available debt facilities, the margin payable on €1.9
billion of debt facilities and Schuldschein bonds are now linked to the
Group's Ecovadis sustainability rating. Any further increase in the rating
would result in a reduction in the margin payable to lenders.
Continued progress has been delivered in recycling, with the usage rate of
secondary raw materials increasing to 13.0% in the first half of 2023 (H1
2022: 9.3%). Each tonne of recycled material used saves approximately two
tonnes of CO(2) emissions that would otherwise be released as a result of the
mining and processing of fresh raw material. Since the Group started to
increase its recycling rate significantly in 2018 through technical
innovations, investments in new product formulations, customer engagement, the
use of internal incentives and formation of MIRECO, a total of 1.1 million
tonnes of CO(2) emissions have been averted, compared to the emissions that
would have been released if the increase in recycling had not been
implemented.
The Group continues to invest in developing new technologies to deliver a
reduction in its absolute CO(2) emissions and emissions intensity and will
seek to maintain its leadership position in the refractory industry in the
field of sustainability.
STRATEGIC INITIATIVES
The Group launched a number of strategic initiatives in 2019 to improve its
competitive position by investing in the rationalisation and modernisation of
its production footprint. The Group has invested into its production plants
and raw material assets, creating a technically advanced and cost-competitive
plant footprint with a more localised supply chain. With the Manufacturing
Execution System in the final stages of implementation at Dalian and
Radenthein, the Production Optimisation Plan is now substantially complete and
supporting the Group's resilient performance through the current period of
market weakness. The Brumado mine expansion and kiln installation project in
Brazil is now expected to ramp-up in H1 2024.
The Group also launched a series of sales initiatives to grow its flow control
business, seeking to increase sales from heat management solutions to 40% by
2025 and to grow into new markets including India, China, Türkiye and the
non-basic product segment, both organically and via acquisitions. The target
for cumulative annual EBITA contribution from sales initiatives was €40-
€60 million by the end of 2023 and the total contribution achieved to date
now stands at €61 million.
Growth in new markets strengthened in the Period, primarily as a result of
M&A, with India revenues increasing by 43% to €241 million or 13.9% of
Group revenue (H1 2022: €168 million, 10.6%). Flow Control revenue increased
by 5% to €261 million (H1 2022: €249 million) in line with market volumes,
despite softer overall sales volumes in steel. Tundish mixes and isostatic
sales in America experienced strong pricing dynamics.
The strategic initiatives have delivered cumulative annualised EBITA savings
of €131 million in the period from 2019 to 30 June 2023, which is now within
the targeted range of €125- €145 million of annual EBITA savings by the
end of 2023.
RAW MATERIALS
Raw material prices softened in H1 2023, with the price of high-grade dead
burned magnesia ("DBM") from China decreasing by 13% from the beginning of the
year, and by 15% on average compared to H1 2022. 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 higher for RHI Magnesita, in particular for DBM production in
Türkiye. As guided, the EBITA contribution from vertical integration remained
at approximately the same level as H2 2022 at 1.8ppts (H1 2022: 3.4ppts).
OPERATIONAL REVIEW
Revenues (€m unless stated otherwise) H1 2023 H1 2022 H1 2022 Change Change
(Reported) (Constant currency) (Reported) (Constant currency)
North America 484 426 439 13% 10%
Steel 348 327 339 6% 3%
Industrial 136 99 100 37% 35%
Europe, CIS, Türkiye 442 415 411 7% 8%
Steel 287 281 277 2% 4%
Industrial 155 134 134 16% 16%
India, Africa, West Asia 365 292 285 25% 28%
Steel 282 234 227 21% 24%
Industrial 82 59 58 40% 41%
South America 263 255 258 3% 2%
Steel 182 187 190 (3)% (4)%
Industrial 81 68 68 19% 19%
China and East Asia 180 205 200 (12)% (10)%
Steel 103 121 120 (14)% (14)%
Industrial 77 85 80 (9)% (4)%
Steel H1 2023 H1 2022 H1 2022 Change Change
(Reported) (Constant currency) (Reported) (Constant currency)
Revenue (€m) 1,203 1,150 1,152 5% 4%
Gross Profit (€m) 260 258 272 1% (4)%
Gross margin 21.6% 22.4% 23.6% (80)bps (200)bps
Adj EBITA (€m) 110 128 142 (14)% (23)%
Adj EBITA margin 9.1% 11.1% 12.3% (200)bps (320)bps
Industrial H1 2023 H1 2022 H1 2022 Change Change
(Reported) (Constant currency) (Reported) (Constant currency)
Revenue (€m) 531 444 440 20% 21%
Gross Profit (€m) 154 115 112 34% 37%
Gross margin 29.0% 25.9% 25.5% 310bps 350bps
Adj EBITA (€m) 91 60 58 50% 56%
Adj EBITA margin 17.1% 13.6% 13.2% 350bps 390bps
Steel overview
Supplying the steel market with refractory products and services accounts for
c.70% of RHI Magnesita revenues and market demand is closely aligned to global
steel production volumes. Refractory products line all steel making
applications, protecting equipment from extremely high temperatures of up to
around 1,800°C, chemical reactions, and abrasion of molten steel. RHI
Magnesita offers a comprehensive product and service offering for all steel
applications, including primary iron (blast furnace 'BF' or direct reduction
of iron 'DRI') and steel making (basic oxygen furnace 'BOF' or electric arc
furnace 'EAF') as well as ingot and continuous casting. Refractories used in
the steel-making processes are classified as an operating expense by steel
producers, accounting for c.3% of the cost of steel production.
Revenue increased by 5% to €1,203 million during the Period (H1 2022:
€1,150 million) and by 4% on a constant currency basis (H1 2022: €1,152
million), with higher pricing offsetting a volume decline of 8% (excluding
steel recycling). World Steel Association data recorded volume decline in
steel production globally of c.1% over the Period and, excluding China, a
decline of c.4%. The Steel division recorded a gross margin of 21.6%, a
decrease of 80bps compared to H1 2022 of 22.4%.
Industrial overview
RHI Magnesita supplies refractory products to its customer portfolio across
cement, glass, non-ferrous metals, energy, environmental, chemicals and
foundry industries. It classifies this segment as 'Industrial' and customers
across these industries make up c.30% of Group revenues.
Recorded revenue in the Period was €531 million, an increase of 20% on a
reported basis (H1 2022: €444 million) and by 21% on a constant currency
basis (H1 2022: €440 million).
North America
Revenue in North America increased by 13% to €484 million (H1 2022: €426
million), largely driven by pricing, which is expected come under greater
competitive pressure in H2 2023. On a constant currency basis, revenue
increased by 10% over the period. Volumes were slightly lower in the Period,
down by 2% reflective of a more subdued steel market in the region.
Steel revenue stood at €348 million, an increase of 6% (H1 2022: €327
million) due to higher pricing established in H2 2022. Shipped steel
refractory volumes decreased by 3% in H1 2023 compared to H1 2022, an
outperformance compared to steel production in the region, where according to
World Steel Association (WSA) data, production decreased by c.4%. Volume
performance was ahead of the market, despite one of the Group's largest
customers in Mexico ceasing production in late 2022. Pricing remained strong
with price levels around 6% higher than H1 2022. The region benefited from
contracts to supply 13 greenfield developments and 6 brownfield developments,
all of which were new or expanding EAF plants.
Industrial revenue increased by 37% to €136 million (H1 2022: €99
million), reflecting price increases implemented in H2 2022 of around 38%
against volume increases of 3%. Lower demand in the Cement and Lime segment
driven by softening of the construction business was offset by stronger
volumes in the Non-Ferrous Metal and Glass businesses. Demand is expected to
be stronger in the non-ferrous metals and glass industries over coming years,
given capacity expansion across these industries of 1.2 million tonnes.
The region made good progress in flow control sales over the Period and
expanded its market share in isostatic products and through the Group's
Interstop flow control product range. There was a high growth in demand for
refractory application machinery and technology during the Period,
particularly for EAF steel plants.
The region is actively improving its recycling rate, and in the Period
increased its recycling consumption significantly through maturing its
partnership with recycling processers and the implementation of a regional
recycling team. Recycling rates are comparatively lower in the US compared to
other regions in which the Group operates, representing a significant
opportunity to expand recycling activities further.
Europe, CIS and Türkiye
Revenue in Europe, CIS and Türkiye increased by 7% on a reported basis to
€442 million (H1 2022: €415 million) and by 8% on a constant currency
basis (H1 2022: €411 million).
Steel revenues increased by 2% to €287 million (H1 2022: €281 million).
World Steel Association data indicates that steel production in Europe and
Türkiye (excluding Russia) decreased by 12% in H1 2023 compared to H1 2022,
as high inflation and tight monetary policy impacted end markets and reduced
steel production. RHI Magnesita's shipped refractory volumes were lower by 15%
(excluding recycling), broadly in line with the market. Pricing remained
resilient in the Period, however, cost pressures across the industry are
easing in particular in respect of imports from Asia, leading to pricing
pressure in some markets.
Industrial revenues increased by 16% to €155 million (H1 2022: €134
million), reflecting significant price increases of around 40% implemented in
H2 2022, notably in Cement and Lime. Volumes in industrials declined by 12%
overall, mostly driven by lower activity in Non-Ferrous Metals.
The Group has integrated the acquisition of SÖRMAS, Türkiye, which completed
in H2 2022. SÖRMAS produces refractories for the cement, steel and glass
industries and complements the Group's production footprint by servicing local
customers with finished refractories previously shipped from plants in
Continental Europe. Vertical integration efficiencies are gained due to the
procurement of certain raw materials from the Group's magnesite mine in
Türkiye, Eskisehir.
MIRECO, the Group's newly formed recycling business following the acquisition
of a 51% stake in Horn & Co Minerals Recovery GmbH & Co KG in 2022, is
integrated and ramping up production. Demand for secondary raw material from
MIRECO has been strong in the Period.
The Group completed the acquisition of DGSB in April 2023. The acquisition
expands RHI Magnesita's customer offering in Europe, where monolithic lances
are a complementary addition to its existing product range, with applications
in the desulphurization and homogenization of molten steel. Material synergies
are expected to be generated through cross-selling within the Group's existing
heat management solutions offering.
The acquisition of Seven Refractories, a specialist supplier of non-basic
monolithic refractory mixes, was completed on 17 July 2023. Non-basic
monolithics are expected to become increasingly important with the development
of new low CO(2) emitting manufacturing technologies within the Group's
customer industries. Significant cross selling synergies are anticipated due
to the complementary nature of Seven's products and service offering with the
Group's existing refractory product range and there is an opportunity to roll
out the business model globally, beyond Seven's existing markets in Europe,
USA and India.
India, West Asia and Africa
Revenue in the India, West Asia and Africa region increased by 25% in the
period to €365 million (H1 2022: €292 million) or by 28% on a constant
currency basis (H1 2022: €285 million). Including the contribution from
M&A, volumes were broadly flat, decreasing by 2% in the Period, with an
increase in steel volumes of 2% offsetting lower industrial volumes.
Steel revenue for the region increased by 21% to €282 million (H1 2022:
€234 million). Steel shipped refractory volumes of 2% increased at a
slightly higher rate than the market, which according to WSA steel production
in the region increased by c.6%. Steel refractory prices increased by c.22% in
the Period as the Group maintained pricing against slightly softening input
costs including raw materials, sea freight and European energy costs (which
are relevant for imported products). Steel production in India continues to
benefit from government infrastructure stimulus programmes such as the
Production Linked Investment scheme and is expected to continue to grow at
5-6% on average annually, offsetting slightly weaker demand in West Asia and
Africa largely due to macroeconomic uncertainty in Egypt.
Industrial revenue recorded for the region was €82 million, an increase of
40% (H1 2022: €59 million). Industrial pricing was considerably higher than
the prior period, increasing by over 84% despite a competitive pricing
environment, especially in Non-Ferrous Metals. Pricing was especially strong
in the Industrial Applications and Cement businesses, which offset weaker
demand in Glass and Industrial Applications. Industrial volumes declined by
21%.
In January 2023, the Group completed the acquisition of the Indian refractory
business of DBRL and Hi-Tech. These acquisitions were partly financed by the
issuance of equity in the Group's listed Indian subsidiary, RHI Magnesita
India Ltd, in a QIP which raised €100 million. The integration of DBRL and
Hi-Tech is progressing well, with strong synergy opportunities identified in
SG&A and procurement of raw materials, as well as cross-selling. During
the Period, slide gate production was relocated from Rajgangpur to the
Jamshedpur plant which was previously owned by Hi-Tech. Production of lances
for South and East India has now been shifted to Rajgangpur and Bhilai from
Bhiwadi, improving localised production to the customer. Given the new plant
production capacity and the expanded plant network in India, RHI Magnesita
will now be able to supply products more competitively locally, as well pursue
new export opportunities across West Asia and Africa.
As part of the Group's Production Optimisation Plan, the Group invested into
expanding production at certain plants and Cuttack is now operating at double
its original capacity, at c.30,000 tonnes per year and around 90% utilisation.
The region is growing its market share in the flow control market based on
successful trials for three new tundish technologies brought to India in the
past year. Tundish refractories are used in the lining and operation of the
tundish, which is a vessel used to regulate the flow of molten steel during
the continuous casting process. The Group delivered an Automated Process
Optimisation contract to measure the refractory lining wear rates with one
customer for a BOF application in the Period.
South America
Revenue in South America increased by 3% to €263 million (H1 2022: €255
million) or by 2% on a constant currency basis (H1 2022: €258 million). This
was due to the maintenance of price increases implemented in H2 2022, despite
weakening demand with volumes lower by 8%.
Increased revenue was largely driven by significant price increases in the
Industrial segment, increasing by c.30%. Pricing was especially strong in
Cement and Lime and Non-Ferrous Metals. This led to an increase in revenue in
the Industrial segment of 19% to €81 million (H1 2022: €68 million).
Steel revenue declined by 3% to €182 million (H1 2022: €187 million).
Volumes were down by 7% which was broadly in line with the market, with WSA
reporting crude steel production c.7% lower.
Flow control demand was softer in the Period, in particular due to the
reduction in steel production in Brazil where the Group has a higher market
share. The Group has continued to pursue new business opportunities in flow
control at two sites of one of its largest customers to continue to increase
flow control market share over the near term.
Softness in crude steel production is expected to continue through H2 2023.
High interest rates and inflation in Brazil have resulted in reduced economic
activity and lower export demand, particularly in the construction and
automotive end markets, which affects mostly the Steel and Cement refractory
demand. Industrial segment volumes were down by 9%, primarily in Cement and
Lime and Industrial Applications.
The region achieved a recycling rate of over 10% in H1 2023, driven by a
combination of sourcing, research and development, processing, consumption,
and sales effects.
As part of the Production Optimisation Plan, the Group will increase the life
of the Brumado mine to c.120 years and further improve the cost
competitiveness of this already low-cost mine. The expansion project has
experienced delays due to supply-chain related issues, cost inflation and
COVID-19 related contractor availability. Civil and electromechanical works
are ongoing, with project completion and ramp-up now scheduled for H1 2024.
China and East Asia
China and East Asia revenue decreased by 12% to €180 million (H1 2022:
€205 million), and on a constant currency basis decreased by 10% (H1 2022:
€200 million). The revenue decline was primarily due to lower shipped
volumes, which reduced by 22% due to a production stoppage at a key customer
in Vietnam.
Steel revenue was €103 million and lower by 14% (H1 2022: €121 million).
Steel volumes in the region declined by 24%, driven by weak demand from East
Asia where steel volumes declined by 40%. Comparatively, steel production for
China and East Asia countries were unchanged in the Period according to WSA.
Steel production was weak in South East Asia, especially in Vietnam due to
lower global exports, reflective of weakening construction end markets.
Overall crude steel production in the East Asia region, according to WSA,
declined by c.6%. The Group's weaker shipments in East Asia were mostly due to
one of its key customers in Vietnam stopping production, leading to an
underperformance compared to local steel production volumes. The customer
reduced its steel output by c.50% compared to H1 2022. The plant is expected
to restart production in Q3 2023, however steel market softness is expected to
persist in the region throughout H2 2023. There has also been refractory
destocking over the Period in Japan, South Korea and Oceania, leading to lower
refractory demand compared to steel production.
Shipped steel refractory volumes in China remained stable in the Period. This
compares to crude steel production in China increasing by c.1% in the Period.
Pricing became more competitive in the Period and the Group reduced its prices
for finished products by around 9%.
Industrial revenue in the region reduced by 9% to €77 million (H1 2022:
€85 million) driven by weaker volumes of c.18%, although pricing remained
strong. Volumes were particularly weak in the Glass and Cement sectors in
China. Cement demand reduced due to weak real estate investment and lower
construction demand. Volumes reduced in line with the market and the Group
retained its market share. Glass demand reduced due to fewer new solar
projects undertaken in the Period.
The Group acquired a 51% stake in a new joint venture in Chongqing in December
2021, and is currently developing a state-of-the-art production hub at this
location for refractories for the Cement market with scope to expand into more
industries. The plant is nearing completion with all equipment installed and
the tunnel kiln firing taking place in June. Production trials will commence
in Q3 2023 and the plant will then ramp up production for sales in Q4 2023.
The acquisition of a 65% stake in Jinan New Emei was completed in April 2023
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
In January 2023, the Group announced the acquisition of a 65% stake in Jinan
New Emei for a consideration of €40 million. In April 2023 the acquisition
of Jinan New Emei was completed and cash consideration of €23 million was
paid, after deduction of net debt and other liabilities of €17 million, with
the payment of €3 million of cash consideration deferred to 2024. Jinan New
Emei is a well-established business producing refractory slide gates, nozzles
and mixes from a recently constructed and modern production facility in
Shandong, China. Integration commenced in May 2023 and synergies are expected
to be realised through cross-selling to existing steel customers, as well as
operations and SG&A savings.
FINANCE REVIEW
Reporting approach
The Company uses a number of alternative performance measures ("APMs"), in
addition to the performance measures reported in accordance with 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 which 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 H1 2022 figures in this review are on a reported
basis, unless stated otherwise. Figures presented at constant currency
represent H1 2022 translated to average H1 2023 exchange rates of 1 Euro to
1.08 USD, 1 Euro to 7.47 CNY, 1 Euro to 5.53 BRL, 1 Euro to 88.82 INR, 1 Euro
to 20.8 TRY.
Group performance
Revenue for the Period amounted to €1,734 million (H1 2022: €1,594
million), up by 9%. On a constant currency basis, revenue increased by 9% over
the Period (H1 2022: €1,593 million). The increase in revenue was driven by
a stronger industrials business, where reported revenue (including Minerals)
increased by 19% to €531 million (H1 2022: €444 million). Steel sector
reported revenue increased by 5% to €1,203 million (H1 2022: €1,150
million). Revenue on an underlying basis, excluding revenue contribution from
M&A of €119 million, increased by 1% to €1,615 million (H1 2022:
€1,593) million.
The Group cost of goods sold over the Period amounted to €1,320 million (H1
2022: €1,221 million), an increase of 8% compared to the same period last
year. On a constant currency basis, cost of goods sold was 9% higher (H1 2022:
€1,207 million). Labour costs increased by 19%, raw material costs increased
by 16% given cost of production internally, energy costs decreased by 3% and
freight costs decreased by 15% on a constant currency basis.
The Group delivered gross margin of 23.9%, an increase of 50bps compared to
the same period last year (H1 2022: 23.4%). Gross margin over the period for
the Steel business decreased by 90bps to 21.6% (H1 2022: 22.5%). The
Industrial business gross margin was significantly stronger at 29.0% inclusive
of minerals, increasing by 310bps (H1 2022: 25.9%).
Selling, General and Administrative ("SG&A") expenses, excluding R&D
expenses, amounted to €213 million in H1 2023 (H1 2022: €181 million), 18%
higher than the comparative period. SG&A as a percentage of revenue
increased to 12.3% (H1 2022: 11.4%). Higher SG&A in the period was mainly
due to increased personnel and personnel-related expenses and M&A.
Other income and expenses amounted to €16 million in H1 2023 (H1 2022: €11
million), comprising €11 million of one-off restructuring costs, mostly
relating to a restructuring programme to increase decentralization from the
head office into the regions. A further €6 million was spent on M&A
integration costs in the Period.
Adjusted EBITDA margin was 15.3%, 10bps lower compared to the 15.4% reported
in H1 2022. Adjusted EBITDA increased by 8% to €265 million (H1 2022: €245
million). Acquisitions contributed €19 million of EBITDA over the Period,
and excluding this contribution underlying EBITDA was flat at €246 million.
Adjusted EBITDA margin combined from the newly acquired businesses was 16.0%
and the base business remained unchanged in its recorded adjusted EBITDA
margin of 15.2%.
(€m) H1 2023 H1 2022 H1 2022 % Change Reported % Change at constant currency
Reported at constant currency
Revenue 1,734 1,594 1,593 9% 9%
Cost of Sales (1,320) (1,221) (1,207) 8% 9%
Gross Profit 414 373 386 11% 7%
Gross margin 23.9% 23.4% 24.2% 50bps (30)bps
SG&A (213) (181) (180) 18% 18%
R&D expenses (22) (18) (18) 26% 27%
OIE (16) (11) (10) 52% 61%
EBIT 163 164 178 (1)% (9)%
Amortisation 22 13 13 68% 67%
EBITA 184 177 192 4% (4)%
Adjusted items 16 11 10
Adjusted EBITA 200 188 201 7% (1)%
Adjusted EBITA increased by 6% on a reported basis, to €200 million (H1
2022: €188 million), mainly due to price increases implemented in H2 2022,
currency tailwind and a contribution from M&A. Adjusted EBITA from
acquisitions during the Period amounted to €14 million. Underlying EBITA on
a like-for-like basis and including the impact of currency was broadly flat at
€186 million.
The Group recorded an Adjusted EBITA margin of 11.6%, decreasing by 20bps
compared to 11.8% for the same period last year on a reported basis. The
Refractory margin contributed 9.8ppts of Group EBITA margin (H1 2022: 8.3ppts)
whilst the vertical integration assets contributed 1.8ppts (H1 2022: 3.4ppts).
Adjusted EBITA margin from acquisitions was 12.6% and were therefore overall
margin accretive.
Reported net financial expenses in H1 2023 amounted to €51 million (H1 2022:
€22 million), with net interest expenses of €18 million (H1 2022: €10
million). Net interest expenses in H1 2023 benefited from €9 million (H1
2022: €3 million) of interest income on cash balances resulting from
interest rate rises on deposits. Interest expenses on borrowings, amounting to
€27 million (H1 2022: €13 million), have increased as expected due to
costs associated with bridge loans in India used to fund M&A (€4
million), higher base rates on variable interest facilities as well as overall
higher debt balances. Other net financial expenses amounted to €18 million
(H1 2022: €16 million).
The largest impact on net financial expenses has been foreign exchange and
derivative movements leading to a €15 million loss (H1 2022: €4 million
gain), mainly due to the weakness of the Argentinian Peso, Turkish Lira,
Mexican Peso and US Dollar. The Balance Sheet Translation loss was €23
million, of which €10 million is realised. This is partially offset by
derivative gains of €8 million, being gains on foreign exchange contracts
used by the Group to manage the volatility arising from Balance Sheet
Translation and embedded derivatives in sales contracts.
(€m) H1 2023 H1 2022
Net interest expenses (18) (10)
Interest income 9 3
Interest expenses (27) (13)
FX effects (15) 4
Balance sheet translation (23) 7
Derivatives 8 (3)
Other net financial expenses (18) (16)
Present value adjustment (4) (4)
Factoring costs (5) (3)
Pension charges (5) (3)
Non-controlling interest expenses (3) (3)
Other (2) (3)
Total (51) (22)
Adjusted net financial expenses amounted to €41 million, following a €10
million adjustment mainly due to (i) €5 million cost of bridge loans in
India used to fund M&A; and (ii) a further €3 million non-cash present
value adjustment of the provision for the unfavourable contract required to
satisfy EU remedies at the time of the RHI Magnesita merger. Guidance for
finance costs for the full year remains around €65 million, consisting of
€40 million of net interest cost and €25 million of other net finance
expenses.
Reported profit before tax was €111 million (H1 2022: €142 million). Total
tax for H1 2023 in the income statement amounted to €28 million (H1 2022:
€38 million), representing a 25% reported effective tax rate (H1 2022: 27%).
On a reported basis, the Group recorded a profit after tax of €83 million
(H1 2022: €104 million) and earnings per share of €1.71 (H1 2022:
€2.06).
Adjusted profit before tax was €159 million (H1 2022: €169 million), and
the respective adjusted effective tax rate is 24% (H1 2022: 24%). On an
adjusted basis, profit after tax was €121 million (H1 2022: €129 million)
and adjusted earnings per share for H1 2023 were €2.53 per share (H1 2022:
€2.58 per share), which is stated after excluding other income and expenses
and restructuring charges (€16 million) and other financial income and
expenses (€10 million). The full year adjusted effective tax rate is
expected to be between 23-25% in 2023.
(€m)(3) H1 2023 Items excluded from adjusted performance(4) H1 2023 H1 2022 Items excluded from adjusted performance H1 2022
reported
adjusted
reported
adjusted
EBITA(1) 184 16 200 177 11 188
Amortisation (22) 22 - (13) 13 -
Net financial expenses (51) 10 (41) (22) 3 (19)
Profit before tax 111 48 159 142 27 169
Income tax (28) (10) (38) (38) (2) (40)
Profit after tax 83 38 121 104 25 129
Non-controlling interest 2 - 2 7 - 7
Profit attributable to shareholders 81 38 119 97 25 122
Shares outstanding(2) 47.0 - 47.0 47.0 - 47.0
Earnings per share 1.71 0.82 2.53 2.06 0.52 2.58
(€ per share)
(1. ) EBITA reconciled to revenue above.
(2. ) Total issued and outstanding share capital as at 30 June 2022 was
47,112,047. The Company held 2,365,658 ordinary shares in treasury. The
weighted average number of shares used for calculating basic earnings per
share in H1 2023 is 47,037,581.
(3. ) Numbers may not cast due to rounding.
(4. ) Excluded items of €16 million to reported EBITA include €11 million
relating to non-recurring restructuring costs and €5 million M&A
integration costs in the Period. For further details see APM reconciliation
for Adjusted EBITA below.
Cash flow and working capital
Adjusted operating cash flow, which is presented to reflect net cash inflow
from operating activities before tax and net finance expenses, was €228
million for H1 2023 (H1 2022: €(84) million), reflecting strong cash
generation from increased profitability, working capital release and low
capital expenditure. Cash flow conversion, calculated as Adjusted operating
cash flow as a percentage of Adjusted EBITA, increased to 114% in the Period
(H1 2022: (45)%).
Working capital excluding M&A(1) reduced to €834 million pre-M&A (30
June 2022: €996 million; 31 December 2022: €892 million) driven by a
reduction in inventories and accounts receivable, offset by a decrease in
accounts payable due to lower raw material costs and purchases. Including
working capital investments related to new M&A, working capital increased
to €940 million.
The Group has improved customer service levels and delivered stronger pricing
following its decision to carry higher inventory levels throughout 2022 and is
now seeking to maintain working capital intensity levels at around 25% during
2023. Working capital intensity was slightly above this level at the end of
the Period, at 26.0%, due to higher working capital intensity in recently
acquired businesses.
Inclusive of all M&A, working capital intensity, measured as a percentage
of the last three months' annualised revenue, decreased to 26.0% (H1 2022:
29.3%). Accounts receivable intensity was 10.7% (H1 2022: 11.8%) and accounts
payable intensity was 13.9% (H1 2022: 16.0%). Inventory intensity stood at
29.1% (H1 2022: 33.5%).
(1) Excludes working capital associated with MIRECO, SÖRMAS, DGSB, DBRL,
Hi-Tech, Chongqing and Jinan New Emei. Comparative figures for prior year
periods have not been adjusted.
The Group decreased its inventory levels excluding M&A to €974 million
(30 June 2022: €1,138 million; 31 December 2022: €1,030 million).
Inventory volumes for the base business (excluding M&A) decreased to 591kt
from 606kt at year-end 2022 and were significantly lower than the 716kt
recorded at the end of H1 2022, as production intentionally lagged shipments
to reduce inventory coverage to targeted ratios. Including the effect of
M&A during the Period, inventory decreased versus the prior year to
€1,053 million (30 June 2022: €1,143 million).
Accounts receivable excluding M&A decreased to €278 million at 30 June
2023 (30 June 2022: €402 million; 31 December 2022: €364 million), despite
higher finished goods prices, as the Group implemented various initiatives to
reduce overdue payments. Including M&A, Accounts receivable increased to
€389 million. 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.
Accounts payable excluding M&A was €418 million (30 June 2022: €544
million; 31 December 2022: €501 million) due to lower volumes and pricing of
raw materials purchased, reflect the subdued demand environment. Including
M&A, accounts payable increased to €502 million.
Working capital financing, used to provide low-cost liquidity and support the
Group's commercial offering to customers, stood at €310 million on 30 June
2023 (30 June 2022: €320 million; 31 December 2022: €314 million),
comprising €265 million of accounts receivable financing (factoring) and
€45 million of accounts payable financing (forfaiting). Working capital
financing levels vary according to business activity, and the Board has set a
ceiling of €320 million.
The increase in working capital of €22 million since 31 December 2022 was
mainly driven by the first-time consolidation of newly acquired businesses of
€67 million, which was offset by a €49m reduction in working capital in
the base business prior to M&A and €4m of other items including
unfavourable foreign exchange movements.
The Group incurred €63 million of capital expenditure (H1 2022: €58
million), of which €25 million was maintenance related, €36 million was
expansionary capex and a further €2 million from M&A related capex. Full
year guidance for project capital expenditure is unchanged at €200 million.
This comprises €85 million of maintenance capex, €95 million of
expansionary capex and a further €20 million of maintenance and integration
capex towards new acquisitions.
Net cash interest payments on net debt and further refinancing costs amounted
to €23 million in the Period (H1 2022: €12 million).
Cash expenditure on acquisitions (excluding working capital investments) in
the Period amounted to €185 million, which was partly funded by the proceeds
of a QIP by RHI Magnesita India Ltd, raising approximately €100 million in
April 2023. The QIP is to be followed by an equity investment of €22 million
by the Group in RHI Magnesita India Ltd via a Preferential Issue which is
expected to complete in Q3 2023. Total change in net debt from M&A in the
Period was €256 million, inclusive of (i) €185 million of cash
consideration paid; (ii) €23 million of working capital investments into
newly acquired businesses in addition to opening balances on acquisition, and
(iii) €48 million of net debt consolidated on acquisition.
Cash flow €m(1) H1 2023 H1 2022
Adjusted EBITDA 265 245
Share based payments - gross non-cash 4 4
Working capital changes 41 (267)
Changes in other assets and liabilities for adjusted cash flow purposes (18) (9)
Investments in PPE, IA (63) (58)
Adjusted operating cash flow 228 (84)
Income taxes paid (24) (36)
Cash effects of other income/expenses and restructuring (14) (12)
Net interest paid/received (23) (12)
Net derivative cash inflow/outflow 3 (4)
Investment in financial assets (5) -
Cash inflows from the sale of PPE, IA 2 -
Free cash flow 167 (146)
Investment in subsidiaries net of cash (DGSB, Jinan New Emei, Hi-Tech) (173) (18)
Cash in from sales of subsidiaries net of cash - 9
Proceeds from share issue in subsidiaries 100 -
Payment for share issue costs (2) -
Change in financial receivables from JV and associates 3 -
Dividend payment - (47)
Cash change in net debt 95 (203)
Proceeds from borrowings 205 90
Repayment of borrowings (7) -9
Change in current borrowings (39) -19
Repayment of lease obligations (11) (9)
Change in cash and cash equivalents 243 -149
(1) Further detail on the adjustments can be found in Alternative Performance
Measures section.
Financial position
Net debt at 30 June 2023 was €1,124 million, comprising total debt of
€1,814 million, leases of €70 million and cash and cash equivalents and
marketable securities of €760 million.
As at 30 June 2023, total leases amounted to €70 million (H1 2022: €54
million), which under IFRS 16 is included in the Company's net debt position.
The Group's pro forma leverage position has decreased to 2.1x net debt to
EBITDA (31 December 2022: 2.3x) and has decreased by 0.6x since H1 2022 (30
June 2022: 2.7x). The Group was able to reduce gearing despite a cash outflow
of €173 million on inorganic investments during the Period, given its strong
operating cash flows and the successful QIP raising €100 million in India.
Including 12 months of historic EBITDA contributions from businesses acquired
during the Period, the Group's leverage position further decreased to 2.1x.
Available liquidity for the Group at 30 June 2023 was €1,360 million,
including undrawn committed facilities of €600 million and cash, cash
equivalents and marketable securities of €760 million.
The Group has debt maturities of €88 million scheduled in the second half of
2023, of which €58 million is short-term debt that can be rolled into 2024,
and €136 million of maturities in 2024.
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.
Out of the total gross debt of €1,814 million, 97% is denominated in Euro.
The floating to fixed ratio of the gross debt is 34% floating to 66% fixed and
the weighted average cost of debt as at 30 June 2023 was 2.92%, including
swaps.
Return on invested capital
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.
Group ROIC in H1 2023 was 10.4% (H1 2022: 10.3%), from a total of €2,973
million of invested capital (H1 2022: €2,692 million) and €154 million
recorded net operating profit after tax (NOPAT) (H1 2022: €139 million).
ROIC for raw materials assets was 9.4% (H1 2022: 16.9%), from a total of
€454 million of invested capital (H1 2022: €467 million) and €21 million
NOPAT (H1 2022: €40 million). ROIC for refractory assets was 10.6% (H1 2022:
9.0%), from a total of €2,519 million of invested capital (H1 2022: €2,225
million) and €133 million NOPAT (H1 2022: €100 million).
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has an established risk management process based on a formally
approved framework and regular risk surveys among functional and operational
managers aimed at systematically identifying, assessing and mitigating risks
and uncertainties in the Group.
Material and major risks with potentially high impacts on the Group, its
results or its ability to achieve its strategic objectives are reviewed
regularly by the Board.
The risks considered by the Board to be the principal risks were presented in
the 2022 Annual Report, which is available on the Group's website
at www.rhimagnesita.com (http://www.rhimagnesita.com) .
The Board has reconsidered the principal risks and uncertainties of the Group,
assessed the broader macro and external risk environment and have determined
that those risks reported in the 2022 Annual Report remain relevant for the
remaining half of the 2023 financial year. Emerging risks were considered and
evaluated but were not significant enough to impact the principal risks.
The risk likelihood and/or potential impact of three out of the ten principal
risks have changed during H1 2023, as highlighted in the summary table
below.
The regulatory and compliance risks increased due to an overall more complex
regulatory environment primarily as a result of the Russia-Ukraine conflict
and the post-COVID-19 challenges after a high number of employees have been
working remotely for an extended period.
Overall, RHIM's risk landscape has improved as a result of an upgraded
organisational capacity to execute strategy.
The risks may occur independently from each other or in combination. If they
occur in combination, their impact may be reinforced. The Group might be
facing other risks than the ones mentioned here, some of them being currently
unknown or not considered to be material. The updated comprehensive analysis
of the principal risks and emerging risks faced by RHI Magnesita will be
included in the 2023 Annual Report.
Principal risk Correlated risk from RHIM Group risk dashboard Change in risk level Change description
1 - Macroeconomic environment and geopolitical risk Macroeconomic and geopolitical environment Unchanged
2 - Inability to execute key strategic initiatives Business Transformation - key projects execution risk Unchanged
Acquisition and integration benefits/ business case delivery
Ability to secure significant market shares of recycling business
Ability to realize benefits of CAPEX investments
Data availability, transparency, integrity and quality
Net debt and constraining capital allocation
3 - Significant changes in the competitive environment or speed of disruptive Ability to remain competitive and retain market share Decreased The demonstrated effectiveness in the past six months of RHIM's strategic
innovation management of Sales activity (including pricing and initial implementation of
customer segmentation) has led to a lower assessment of this risk.
4 - Reliability of the Ability to manage inventories in a volatile market demand Unchanged
end-to-end value chain
5 - Sustainability - Environment & Climate Unchanged
Environmental and
climate risks
6 - Sustainability - Health & Safety Unchanged
Health and safety risks
7 - Regulatory and compliance risks Compliance (CoC, Fraud, Corruption) Increased The likelihood of this risk has increased due to a consistently more complex
regulatory environment, particularly ensuring RHIM compliance with all
relevant sanction packages. Additionally ensuring and demonstrating that
acquired entities have a consistent approach to Compliance increases the risk
level until the integration processes are significantly progressed.
8 - Cyber and information security risk IT process interruptions/ Cyber & Information Security Unchanged
9 - Ability to strategically price and deliver price increases Ability to keep margin levels Unchanged
10 - Organizational capacity to execute strategy, incl. company cultural People attraction, capabilities/skills, and retention Decreased The risk has decreased due to improved business performance and the
values
demonstrated positive outcomes from the Regionalisation organisation model
Organizational capacity to execute strategy supported by the successful implementation of other key internal initiatives
to promote effective strategy delivery and enhance the overall capability
levels of RHIM management.
RELATED PARTY TRANSACTIONS
RHI Magnesita enters into arrangements with a number of its subsidiaries and
affiliated companies in the course of its business. These arrangements relate
to service transactions and financing agreements and RHI Magnesita treats
these arrangements as related party transactions. Furthermore, RHI Magnesita
includes transactions with key management personnel as related party
transactions. As of the balance sheet date, 30 June 2023, there have been no
significant changes in the related party transactions from those described in
RHI Magnesita's 2022 Annual Report. More information can be found in note 20
of the Condensed Consolidated Interim Financial Statements.
GOING CONCERN
In considering the appropriateness of adopting the going concern basis in
preparing the Condensed Consolidated Interim Financial Statements, the
Directors have assessed the potential cash generation of the Group and
considered a reverse stress scenario that models a breach of the Group
covenant under a very severe but plausible potential economic downturn. This
assessment considers the period up to the subsequent financial year end, 31
December 2024, for any indicators that the going concern preparation is not
appropriate.
The reverse stress test determines how much volumes could reduce before
breaching the Group's debt covenants and adjusting for price deflation.
Further examples of mitigating actions within management control would be
taken under this scenario, including fixed cost, working capital and SG&A
reductions or deferring capital expenditure but these were not incorporated in
the downside modelling.
The Directors have also considered the Group's current liquidity and available
facilities. As of 30 June 2023, the Group balance sheet reflects cash and cash
equivalents of €760 million. In addition, the Group has access to a €600
million Revolving Credit Facility (RCF), which is currently undrawn and not
relied upon for the purpose of the going concern assessment. The Group is in
compliance with the debt covenant.
On the basis of the assessment performed, the Directors consider it is
appropriate to continue to adopt the going concern basis in preparing the
Condensed Consolidated Interim Financial Statements for the period ended 30
June 2023.
ALTERNATIVE PERFORMANCE MEASURES (APMs)
Definitions of APMs used by the Group are set out below, including 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, as well as 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).
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.
It 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 on the Group.
Adjusted EPS
Adjusted EPS is a key non-IFRS measure and one of the Group's KPIs (as
reflected on pages 26-27 of the 2022 Annual Report). It 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.
It excludes finance income and expenses, including foreign exchange, that are
not directly related to operational performance. This includes the non-cash
present value adjustments for the unfavourable contract that was required to
satisfy EU remedies put in place at the time of the RHI and Magnesita merger
in 2017.
Taxes are adjusted to remove the impacts of items already excluded as well as
certain tax impacts that do not affect the underlying performance of the
business.
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
Statement of Consolidated Profit and 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
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).
It 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 H1 2023 H1 2022
Adjusted operating cash flow (APM) 228 (84)
Add: Capital expenditure(1) 63 58
Less: Income Taxes paid(1) (24) (36)
Other income/expenses and restructuring items (14) (12)
Net cash flow from operating activities(1) 252 (74)
(1) As reflected in the Condensed 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 H1 2023 H1 2022
Cash and cash equivalents(1) 760 443
Add: Revolving credit facility 600 600
Liquidity 1,360 1,043
(1) As reflected in the Condensed 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 purposes of capital management. A reconciliation of Net
Debt is included in note 11 to the Condensed Consolidated Interim Financial
Statements.
€m H1 2023 YE 2022 H1 2022
Cash changes in net debt 93 (82) (203)
Proceeds from borrowings(1) 205 344 90
Repayment of borrowings(1) (7) (278) (9)
Change in current borrowings(1) (37) (12) (19)
Repayment of lease obligations(1) (11) (21) (9)
Change in cash and cash equivalents(1) 243 (50) (149)
(1) As reflected in the Condensed 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 H1 2023 YE 2022 H1 2022
Inventories(1) 1,053 1,049 1,143
Trade receivables (Note 10) 460 433 469
Contract assets 4 4 5
Contract liabilities (Note 14) (76) (62) (71)
Accounts receivables 388 375 403
Trade payables (Note 14) (502) (507) (547)
Total working capital 940 918 1,000
(1) As reflected in the Condensed Consolidated Statement of Financial Position
Return on invested capital (ROIC)
ROIC reflects the annualised return on invested capital of the Group. It is
calculated as NOPAT (net operating profit after tax) divided by total invested
capital at the balance sheet date.
€m H1 2023 H1 2022
Revenue(1) 1,734 1,594
Cost of sales(1) (1,320) (1,221)
Selling and marketing expenses(1) (73) (67)
General and administrative expenses(1) (162) (132)
Income taxes paid(2) (24) (36)
NOPAT 154 139
(1) As reflected in the Condensed Consolidated Statement of Profit and Loss
(2) As reflected in the Condensed Consolidated Statement of Cash Flows
Current provisions(1) (33) (47)
Deferred tax assets(1) 133 179
Deferred tax liabilities(1) (68) (56)
Goodwill(1) 357 126
Income tax liabilities(1) (49) (45)
Income tax receivables(1) 39 46
Inventories(1) 1,053 1,143
Invested capital 2,971 2,692
Investments in joint ventures and associates(1) 5 6
Other intangible assets(1) 438 311
Other non-current assets(1) 35 51
Property, plant and equipment(1) 1,311 1,150
Return on invested capital 10.4% 10.3%
Trade and other current liabilities(1) (871) (798)
Trade and other receivables(1) 621 629
€m H1 2023 H1 2022
(1) As reflected in the Condensed Consolidated Statement of Financial
Position
Condensed Consolidated Interim Financial Statements as at 30.06.2023
Condensed Consolidated Statement of Profit or Loss
for the six months ended 30 June 2023
in € million for the six months ended 30 June Note 2023 2022
Revenue (3) 1,734.1 1,594.4
Cost of sales (1,320.0) (1,221.0)
Gross profit 414.1 373.4
Selling and marketing expenses (72.9) (66.8)
General and administrative expenses (162.5) (131.8)
Restructuring (11.2) (0.3)
Other income 6.5 2.2
Other expenses (11.3) (12.3)
EBIT 162.7 164.4
Interest income 9.2 3.0
Interest expenses on borrowings (27.0) (13.1)
Net (expense)/income on foreign exchange effects and related derivatives (4) (14.9) 4.0
Other net financial expenses (5) (18.6) (15.9)
Net finance costs (51.3) (22.0)
Profit before income tax 111.4 142.4
Income tax (6) (28.3) (38.1)
Profit after income tax 83.1 104.3
RHI Magnesita N.V. shareholders 80.6 97.0
Non-controlling interests 2.5 7.3
in €
Earnings per share - basic 1.71 2.06
Earnings per share - diluted 1.68 2.03
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2023
in € million for the six months ended 30 June Note 2023 2022
Profit after income tax 83.1 104.3
Currency translation differences
Unrealised results from currency translation 10.0 135.3
Unrealised results from net investment hedge and foreign operations 8.4 (14.7)
Deferred taxes thereon (5.8) (9.0)
Current taxes thereon 2.6 1.3
Reclassification to profit or loss - Disposal subsidiaries 0.0 0.6
Cash flow hedges
Unrealised fair value changes (5.3) 21.5
Deferred taxes thereon 1.0 (5.4)
Items that will be reclassified subsequently to profit or loss, if necessary 10.9 129.6
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans 0.6 56.3
Deferred taxes thereon 0.2 (15.3)
Items that will not be reclassified to profit or loss 0.8 41.0
Other comprehensive income after income tax 11.7 170.6
Total comprehensive income 94.8 274.9
RHI Magnesita N.V. shareholders 101.0 267.4
Non-controlling interests (6.2) 7.5
Condensed Consolidated Statement of Financial Position
as at 30 June 2023
in € million Note 30.06.2023 31.12.2022
ASSETS
Non-current assets
Goodwill 357.1 136.9
Other intangible assets 438.4 316.6
Property, plant and equipment (8) 1,310.6 1,203.7
Investments in joint ventures and associates 5.4 5.7
Other non-current financial assets 59.9 55.1
Other non-current assets 35.0 40.0
Deferred tax assets 133.4 128.2
2,339.8 1,886.2
Current assets
Inventories (9) 1,053.4 1,049.1
Trade and other current receivables (10) 620.8 578.9
Income tax receivables 39.3 38.7
Other current financial assets 0.5 1.3
Cash and cash equivalents 759.7 520.7
2,473.7 2,188.7
4,813.5 4,074.9
EQUITY AND LIABILITIES
Equity
Share capital 49.5 49.5
Group reserves 1,277.9 951.7
Equity attributable to shareholders of RHI Magnesita N.V. 1,327.4 1,001.2
Non-controlling interests 125.6 47.4
1,453.0 1,048.6
Non-current liabilities
Borrowings (11) 1,646.5 1,404.9
Other non-current financial liabilities 132.6 92.8
Deferred tax liabilities 67.6 62.0
Provisions for pensions (12) 210.8 214.7
Other personnel provisions 53.1 51.7
Other non-current provisions 82.4 80.0
Other non-current liabilities 8.0 6.3
2,201.0 1,912.4
Current liabilities
Borrowings (11) 167.6 215.1
Other current financial liabilities 39.4 50.1
Trade payables and other current liabilities (14) 870.5 780.3
Income tax liabilities 49.3 38.3
Current provisions (13) 32.7 30.1
1,159.5 1,113.9
4,813.5 4,074.9
ondensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2023
in € million for the six months ended 30 June Note 2023 2022
Cash generated from/(used in) operations (15) 276.7 (37.5)
Income tax paid less refunds (24.3) (35.7)
Net cashflow from operating activities 252.4 (73.2)
Investments in property, plant and equipment and intangible assets (62.8) (57.6)
Investments in subsidiaries net of cash acquired (172.8) (18.3)
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 2.5 0.8
Investment in financial assets (4.6) 0.0
Investment subsidies received and cash inflows from non-current receivables 0.2 0.0
Interest received 9.2 3.2
Net cash used in investing activities (228.3) (63.2)
Payment for share issue costs in subsidiary (2.4) 0.0
Proceeds from share issue in subsidiary 100.0 0.0
Dividends paid to RHI Magnesita shareholders 0.0 (47.0)
Proceeds from long-term financing 205.0 90.0
Repayments of long-term financing (7.4) (8.7)
Changes in current borrowings and financial liabilities to joint ventures and (36.8) (19.2)
associates
Interest payments (30.9) (14.4)
Repayment of lease obligations (10.5) (8.8)
Interest payments from lease obligations (1.0) (0.6)
Cash flows from derivatives 2.6 (4.3)
Net cash generated from/(used in) financing activities 218.7 (13.0)
Total cash flow 242.8 (149.4)
Change in cash and cash equivalents 242.8 (149.4)
Cash and cash equivalents at beginning of period 520.7 580.8
Foreign exchange impact (3.8) 12.0
Cash and cash equivalents at end of period 759.7 443.4
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 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
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 - - - - 80.6 - - - 80.6 2.5 83.1
Currency translation differences - - - - - - - 23.9 23.9 (8.7) 15.2
Cash flow hedges - - - - - (4.3) - (4.3) - (4.3)
Defined benefit plans - - - - - - 0.8 - 0.8 - 0.8
Other comprehensive income/(expense) after income tax - - - - - (4.3) 0.8 23.9 20.4 (8.7) 11.7
Total comprehensive income/(expense) - - - - 80.6 (4.3) 0.8 23.9 101.0 (6.2) 94.8
Hedging gains and losses and costs of hedging transferred to the carrying 1.2 1.2 1.2
value of inventory purchased during the year
Transactions with shareholders
Dividends - - - - (51.7) - - - (51.7) - (51.7)
Share transfer/vested LTIP - 4.7 - - (4.7) - - - - - -
Additions to consolidated companies(1)) - - - - 271.6 - - - 271.6 5.9 277.5
Change of non-controlling interests without a change of control(2)) - 100.0 100.0
Change of non-controlling interests without a change of control(3)) 22.5 22.5 (22.5) -
Other Changes(4)) - - - - (22.0) - - - (22.0) 1.0 (21.0)
Share-based payment expenses - - - - 3.6 - - - 3.6 - 3.6
Transactions with shareholders - 4.7 - - 219.3 - - - 224.0 84.4 308.4
30.06.2023 49.5 (111.4) 361.3 288.7 920.1 28.7 (84.8) (124.7) 1,327.4 125.6 1,453.0
1) In January 2023, RHI Magnesita India Ltd. issued 27,000,000 shares which
were transferred as consideration in exchange for the Dalmia OCL acquisition,
see Note (19).
2) In April 2023, RHI Magnesita India Ltd. issued 15.715.034 shares through a
Qualified Institutional Placement in which only the non-controlling interests
participated. The share issue raised cash proceeds amounting to €100.0
million.
3) In June 2023, RHI Magnesita India Ltd. issued 2.790.061 shares on a
preferential basis in which only RHI Magnesita N.V. participated. The share
issue increased the Equity of RHI Magnesita India Ltd. attributable to
shareholders of RHI Magnesita N.V.
4) Mainly relating to the recognition of the financial liability and
derecognition of the non-controlling interests related to the acquisition of
Jinan New Emei and the impacts of the fair value changes resulting from the
completion of purchase price allocation related to the acquisition of SÖRMAS
Group, see Note (19).
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
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 - - - - 97.0 - - - 97.0 7.3 104.3
Currency translation differences - - - - - - - 113.3 113.3 0.2 113.5
Cash flow hedges - - - - - 16.1 - - 16.1 - 16.1
Defined benefit plans - - - - - - 41.0 - 41.0 - 41.0
Other comprehensive income after income tax - - - - - 16.1 41.0 113.3 170.4 0.2 170.6
Total comprehensive income - - - - 97.0 16.1 41.0 113.3 267.4 7.5 274.9
Transactions with shareholders
Dividends - - - - (47.0) - - - (47.0) - (47.0)
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 - - - - (1.9) - - - (1.9) (6.1) (8.0)
control
Share-based payment expenses - - - - 4.1 - - - 4.1 - 4.1
Transactions with shareholders - - - - (44.8) - - - (44.8) - (44.8)
30.06.2022 49.5 (117.0) 361.3 288.7 585.0 9.0 (84.1) (83.9) 1,008.5 43.8 1,052.3
Notes to the Condensed Consolidated Interim Financial Statements as at 30.06.2023
Basis of preparation
1. General
RHI Magnesita N.V. (the "Company"), a public company with limited liability
under Dutch law is registered with the Dutch Trade Register of the Chamber of
Commerce under the number 68991665 and has its corporate seat in Arnhem,
Netherlands. The administrative seat and registered office is located at
Kranichberggasse 6, 1120 Vienna, Austria.
The Condensed Consolidated Interim Financial Statements ("Interim Financial
Statements") of RHI Magnesita N.V ("the Company") and its subsidiaries
(collectively referred to as "RHI Magnesita or the Group") for the half-year
reporting period ended 30 June 2023 have been prepared in accordance with IAS
34 Interim Financial Reporting as issued by the International Accounting
Standards Board ("IASB") and on the basis of the same accounting principles as
those used in the Company's Annual Financial Statements for the year ended 31
December 2022.
The Interim Financial Statements do not include all information and
disclosures required in the Annual Financial Statements and should therefore
be read in conjunction with RHI Magnesita's Consolidated Financial Statements
as of 31 December 2022. The Interim Financial Statements are presented in
Euros and all values are rounded to the nearest € million, except where
otherwise indicated.
The Interim Financial Statements as of 30 June 2023 were not audited but
reviewed by PricewaterhouseCoopers Accountants N.V.
Going concern
In considering the appropriateness of adopting the going concern basis in
preparing the Interim Financial Statements, the Directors have assessed the
potential cash generation of the Group and considered a reverse stress
scenario that models a breach of the Group covenants under a very severe but
possible economic downturn. This assessment considers the period up to the
subsequent financial year end, 31 December 2024, for any indicators that the
going concern preparation is not appropriate.
The reverse stress test determines how much volumes could reduce before
breaching the Group's debt covenants and adjusting for price deflation.
Further examples of mitigating actions within management control would be
taken under this scenario, including fixed cost, working capital and SG&A
reduction or deferring capital expenditure but these were not incorporated in
the downside modelling.
The Directors have also considered the Group's current liquidity and available
facilities. As of 30 June 2023, the Condensed Consolidated Statement of
Financial Position reflects cash and cash equivalents of €759.7 million. In
addition, the Group has access to a €600 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 debt covenants.
On the basis of the assessment performed, the Directors consider it is
appropriate to continue to adopt the going concern basis in preparing the
Interim Financial Statements for the period ended 30 June 2023.
2. Principles of accounting and measurement
There were no changes regarding principles of accounting and measurement
compared to the Consolidated Financial Statements as of 31 December 2022. We
performed an impact analysis related to the amendments on the existing and new
standards effective in 2023 and concluded that no material impacts are
expected from these.
Effects of the OECD BEPD Pillar II legislation
In January 2023, the IASB issued the Exposure Draft proposing amendments to
IAS 12. The amendments aim to provide temporary relief from accounting for
deferred taxes arising from the implementation of the Pillar Two model rules.
The point in time where the Pillar Two requirements may need to be considered
despite the absence of the IAS 12 amendment becoming effective is if the
Pillar Two legislation is enacted or substantively enacted in the respective
jurisdiction and when the effect of the enacted rules applies to the relevant
fiscal year of the taxpayer. This is currently not the case. The Group is
analysing the potential impacts on the Group's income tax exposure and decided
to apply the accounting policy of not recognising or changing deferred taxes
resulting from the Pillar Two legislation until the amendments to IAS 12 are
endorsed for use in the EU.
Significant accounting judgements and estimates
The Interim Financial Statements require the use of estimates and assumptions
that affect the reported amounts in the Interim Financial Statements. The key
assumptions and estimation uncertainties are unchanged from those described in
last year's Notes to the Consolidated Financial Statements. Actual results may
differ from these estimates.
Impairment of property, plant and equipment, goodwill and other intangible assets
No triggers for an impairment review as of 30 June 2023 were identified.
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 (19). 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. That is
the financial liability was initially recognised against equity attributable
to the Company, while the said non-controlling interests were derecognised to
zero - also against equity attributable to the Company.
3. Segmental analysis
Segment reporting by operating company division
The following tables show the key financial information for the operating
segments for the first half of 2023 and the first half of 2022:
in € million for the six months ended 30 June 2023 Steel Industrial Group
Revenue 1,203.0 531.1 1,734.1
Gross profit 259.9 154.2 414.1
EBIT 162.7
Net finance costs (51.3)
Profit before income tax 111.4
Depreciation and amortisation charges (60.8) (25.1) (85.9)
Segment assets 30.06.2023 2,635.8 988.3 3,624.1
Investments in joint ventures and associates 30.06.2023 5.4
Reconciliation to total assets 1,184.0
Total assets 4,813.5
in € million for the six months ended 30 June 2022 Steel Industrial Group
Revenue 1,150.1 444.3 1,594.4
Gross profit 258.1 115.3 373.4
EBIT 164.4
Net finance costs (22.0)
Profit before income tax 142.4
Depreciation and amortisation charges (50.7) (19.2) (69.9)
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
In the reporting year, revenue is classified by product group as follows:
in € million for the six months ended 30 June 2023 Steel Industrial Group
Shaped products 551.3 390.3 941.6
Unshaped products 253.1 105.1 358.2
Management refractory services 362.8 0.9 363.7
Other 35.8 34.8 70.6
Revenue(1)) 1,203.0 531.1 1,734.1
In the comparable period in 2022, revenue was classified by product group as
follows:
in € million for the six months ended 30 June 2022 Steel Industrial Group
Shaped products 540.0 323.6 863.6
Unshaped products 205.3 92.8 298.1
Management refractory services 372.6 0.0 372.6
Other 32.2 27.9 60.1
Revenue(1)) 1,150.1 444.3 1,594.4
1) Revenue includes €509.8 million (30.06.2022: €508.3 million) relating
to the Solutions Business. Thereof, €442.7 million (30.06.2022: €454.3
million) are attributable to Segment Steel and €67.1 million (30.06.2022:
€54.0 million) to Segment Industrial. Solutions Business is a customer
classification that is characterised by sales of end-to-end solutions covering
large parts of the customer process chain.
Segment reporting by country
Revenue in the first half of 2023 and in the first half of 2022 is classified
by customer sites as follows:
in € million for the six months ended 30 June 2023 2022
Netherlands 5.2 5.7
USA 323.9 281.8
India 240.6 168.3
Brazil 191.4 184.6
PR China 108.8 106.7
Other countries 864.2 847.3
Revenue 1,734.1 1,594.4
4. Foreign exchange effects and related derivatives
The net gain and expense on foreign exchange effects and related derivatives
consists of the following items:
in € million for the six months ended 30 June 2023 2022
Foreign exchange (losses)/gains (22.7) 6.6
Foreign exchange gains/(losses) from related derivative financial instruments 7.8 (2.6)
Net (losses)/gains on foreign exchange effects and related derivatives (14.9) 4.0
The net loss on foreign exchange effects in the current reporting period
resulted mainly from the devaluation of the US Dollar against the Euro,
Mexican peso and Brazilian real.
5. Other net financial expenses
Other net financial expenses consist of the following items:
in € million for the six months ended 30 June 2023 2022
Net interest expense relating to personnel provisions (5.3) (2.6)
Unwinding of discount of provisions and payables (3.7) (3.5)
Interest expense on non-controlling interest liabilities (3.3) (3.3)
Interest expense on lease liabilities (1.0) (0.6)
Income from the revaluation of NCI put options 0.6 0.0
Other interest and similar expenses(1)) (5.9) (5.9)
Other net financial expenses (18.6) (15.9)
1) Includes mainly costs associated with the trade receivables factoring
programme of €4.8 million (30.06.2022 €2.6 million).
6. Income tax
The tax charge for the period has been calculated by applying the effective
corporate tax rate which is expected to apply to the Group for the year ended
31 December 2023 using rates substantively enacted by 30 June 2023, which is
25.4% (30.06.2022: 26.8%).
Total tax for the first half of 2023 in the Condensed Consolidated Statement
of Profit or Loss amounted to €28.3 million (30.06.2022: €38.1 million),
which includes tax expense for prior years of €1.2 million (30.06.2022: tax
income for prior years of €3.2 million).
7. Dividend payments and proposed dividend
Based on a resolution adopted by the Annual General Meeting of RHI Magnesita
N.V. on 24 May 2023 the final dividend amounts to €1.10 per share for the
shareholders of RHI Magnesita N.V. for 2022.
In line with the Group's dividend policy the Board declared an interim
dividend of €0.55 per share for the first half of 2023 to be paid out in
September 2023.
8. Property, plant and equipment
In the first half of 2023 additions to property, plant and equipment amount to
€54.0 million (30.06.2022: €48.5 million) and mainly refer to the
expansion and production optimisation of the plants in Brazil.
9. Inventories
Inventories as presented in the Condensed Consolidated Statement of Financial
Position consist of the following items:
in € million 30.06.2023 31.12.2022
Raw materials and supplies 286.9 303.3
Work in progress 215.7 206.7
Finished products and goods 537.5 526.3
Prepayments made 13.3 12.8
Inventories 1,053.4 1,049.1
10. Trade and other current receivables
Trade and other current receivables as presented in the Condensed Consolidated
Statement of Financial Position are classified as follows:
in € million 30.06.2023 31.12.2022
Trade receivables 460.3 433.4
Other tax receivables 105.8 106.4
Other current receivables 54.7 39.1
Trade and other current receivables 620.8 578.9
thereof financial assets 460.7 433.9
thereof non-financial assets 160.1 145.0
The Group enters into factoring agreements and sells trade receivables to
financial institutions. Trade receivables sold as of 30 June 2023 was €265.3
million (31.12.2022: €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 VAT, receivables from energy tax refunds,
research, education and apprentice subsidies.
Other current receivables mainly relate to advances for insurance, IT services
as well as custom and import-related services and costs.
11. Borrowings
Borrowings include all interest-bearing liabilities due to financial
institutions and other lenders.
In April 2023, the Group successfully issued a Schuldschein bond ("SSD") in
the amount of €170.0 million with an average tenor of 5 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.
Both 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.
In December 2022 and January 2023 respectively, the Group entered into two
bilateral term loans amounting INR 13.25 billion (around €149.1 million), of
which only €4.9 million remain outstanding per June 2023, to fund the
Group's acquisitions of Hi-Tech and Dalmia OCL.
Net debt excluding lease liabilities/Adjusted EBITDA is the key financial
covenant of the loan agreements. 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 the first half of
2023, the Group met all covenant requirements. The calculation of the key
financial covenant is presented in the following table:
in € million 30.06.2023 30.06.2022
EBIT 341.8 252.7
Amortisation 37.7 28.7
Restructuring and write-down expenses 4.1 52.3
Other operating income and expenses 12.7 6.8
Adjusted EBITA 396.3 340.5
Depreciation 122.8 114.1
Adjusted EBITDA 519.1 454.6
Total debt(1)) 1,814.1 1,619.8
Lease liabilities 69.6 54.4
Less: Cash and cash equivalents 759.7 443.4
Net debt 1,124.0 1,230.8
Net debt excluding IFRS 16 lease liabilities 1,054.4 1,176.4
Net debt to Adjusted EBITDA 2.17x 2.72x
Net debt to Adjusted EBITDA excluding IFRS 16 lease liabilities 2.03x 2.60x
1) As from January 1, 2023 "Total 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.
The disclosures in this section include certain Alternative Performance
Measures (APMs). For more information, please refer to APMs section in the
RNS. The key performance indicator for net debt in the RHI Magnesita Group is
the Group leverage, which reflects the ratio of net debt to Adjusted EBITDA,
including lease liabilities. The Adjusted EBITDA is calculated on a trailing
twelve-month basis, considering the last six months of 2022 and the first six
months of 2023.
12. Provisions for pensions
For interim reports, provisions for pensions are determined based on a
forecast for the entire year prepared by an actuary. If there are significant
changes in the actuarial assumptions during the year, a remeasurement of the
net liabilities from employee related defined benefit obligations is
recognised.
As of 30 June 2023, there are no significant changes in actuarial assumptions,
compared to 31 December 2022. The actuarial interest rates are: 9.9%
(31.12.2022: 10.5 %) in Brazil, 8.9% (31.12.2022: 9.5 %) in Mexico, 5.0 %
(31.12.2022: 5.0 %) in the US and 3.7 % (31.12.2022: 3.8 %) in the Euro zone.
13. Other provisions
Provisions for restructuring costs amounting to €11.1 million as of 30 June
2023 (31.12.2022: €12.0 million) primarily consist of benefit obligations to
employees due to termination of employment and dismantling costs. €3.5
million (31.12.2022: €0.0 million) relate to rationalisation of SG&A
expenses. €6.3 million (31.12.2022: €10.5 million) to the severance and
demolition cost relating to the plant closure Trieben, Mainzlar and Kruft.
Provisions for contract obligations include the current portion of the
Oberhausen contract obligation amounting to €12.8 million as of 30 June 2023
(31.12.2022: €12.4 million).
14. Trade payables and other current liabilities
Trade payables and other current liabilities included in the Condensed
Consolidated Statement of Financial Position consist of the following items:
in € million 30.06.2023 31.12.2022
Trade payables 502.2 506.5
Liabilities to employees 106.2 97.2
Contract liabilities 75.7 61.8
Taxes other than income tax 37.8 35.0
Capital expenditure payable 31.9 43.1
Payables from commissions 8.2 7.7
Other current liabilities 108.5 29.0
Trade payables and other current liabilities 870.5 780.3
thereof financial liabilities 624.2 566.4
thereof non-financial liabilities 246.3 213.9
Trade payables include an amount of €44.9 million (31.12.2022:
€68.8 million) for raw material purchases subject to supply chain finance
arrangements.
Other current liabilities include Dividend liabilities in the amount of
€52.1 million (31.12.2022: €0.1 million) as well as liabilities to former
owners resulting from the acquisition of Hi-Tech and Jinan New Emei Industries
Co Ltd.
15. Cash generated from/(used in) operations
in € million for the six months ended 30 June 2023 2022
Profit after income tax 83.1 104.3
Adjustments for
income tax 28.3 38.1
depreciation 64.1 56.9
amortisation 21.8 13.0
write-up of property, plant and equipment and intangible assets (0.3) (0.4)
income from the reversal of investment subsidies (0.3) (0.3)
impairment losses/loss from sale/(write-ups) on securities (0.1) 1.4
losses from the disposal of property, plant and equipment 0.3 0.8
losses from the disposal of subsidiaries 0.0 0.7
net interest expense and derivatives 31.8 22.0
result from joint ventures and associates (2.5) (0.1)
other non-cash changes 12.2 (7.7)
Changes in working capital
inventories 64.2 (109.2)
trade receivables 58.1 (41.2)
contract assets (0.7) (1.4)
trade payables (93.1) (125.7)
contract liabilities 12.3 10.9
Changes in other assets and liabilities
other receivables and assets 3.6 (1.1)
provisions (16.1) (12.9)
other liabilities 10.0 14.4
Cash generated from/(used in) operations 276.7 (37.5)
Income tax paid less refunds (24.3) (35.7)
Net cashflow from operating activities 252.4 (73.2)
The increase in operating cashflow is largely driven by an improvement in
working capital. In prior year inventories increased due to constrained global
logistics supply chain whereas in 2023 inventories (excluding the inventories
from acquired companies) could be reduced. Furthermore a reduction of trade
receivables (excluding the trade receivables from acquired companies) led to
an improved cashflow from working capital, also partially driven by factoring.
16. 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 accordance with IFRS 13. In addition, carrying
amounts are shown aggregated according to measurement category.
30.06.2023 31.12.2022
in € million Measurement category Level Carrying amount Fair value Carrying amount Fair value
IFRS 9(1))
Other non-current financial assets
Marketable securities FVPL 1 9.2 9.2 9.0 9.0
Shares FVPL 3 0.5 0.5 0.5 0.5
Interest derivatives designated as cash flow hedges - 2 42.9 42.9 42.4 42.4
Other non-current financial assets AC - 2.6 3.2
Trade and other current receivables AC - 460.7 433.9
Other current financial assets
Derivatives FVPL 2 0.4 0.4 1.1 1.1
Other current financial receivables AC - 0.1 0.2
Cash and cash equivalents AC - 759.7 520.7
Financial assets 1,276.1 1,011.0
Non-current and current borrowings
Liabilities to financial institutions AC 2 1,795.5 1,767.4 1,612.0 1,578.1
Other financial liabilities AC 2 18.6 8.0
Non-current and current other financial liabilities
Lease liabilities - 2 69.6 63.9
Derivatives FVPL 2 4.2 4.2 10.1 10.1
Commodity swaps designated as cash flow hedges - 2 5.8 5.8 1.1 1.1
Liabilities to fixed-term or puttable non-controlling interests AC 2/3 33.4 33.4 38.1 38.1
Liabilities to fixed-term or puttable non-controlling interests FVPL 3 59.0 59.0 29.7 29.7
Trade payables and other current liabilities AC - 624.2 566.4
Financial liabilities 2,610.3 2,329.3
Aggregated according to measurement category
Financial assets measured at FVPL 10.1 10.6
Financial assets measured at amortised cost 1,223.1 958.0
Financial liabilities measured at amortised cost 2,471.7 2,224.5
Financial liabilities measured at FVPL 63.2 39.8
1) FVPL: Financial assets/financial liabilities measured at fair value
through profit or loss.
AC: Financial assets/financial liabilities measured at amortised
cost.
Marketable securities, derivative financial instruments, shares, and interests
in subsidiaries not consolidated are measured at 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 favorable market if there is no main market. RHI Magnesita
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.
RHI Magnesita considers 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 marketable securities, shares and interests in subsidiaries
not consolidated 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 amortised 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 other derivative contracts corresponds 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).
RHI Magnesita takes into account reclassifications in the measurement
hierarchy at the end of the reporting period in which the changes occur. There
have been no shifts between the different measurement levels in the two
reporting periods.
Liabilities to financial institutions and other financial liabilities are
carried at amortised cost in the Condensed 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 19), 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 19). 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 recognised 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 30 June 2023 and 31 December 2022.
17. Contingent liabilities
As of 30 June 2023, warranties, performance guarantees and other guarantees
amount to €70.9 million (31.12.2022: €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 will transform
into a firm payment obligation is considered low.
Individual administrative proceedings and lawsuits which result from ordinary
activities are pending as of 30 June 2023 or can potentially be exercised
against RHI Magnesita in the future. The related risks were analysed with a
view to their probability of occurrence.
Taxation contingencies
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, e.g., transfer of functions and related profit
between related parties and exit taxation. In this regard, disputes may arise,
where the Group's management understanding differs from the positions of the
local authorities. In such cases, when 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 € 269.1 million (31.12.2022:
€243.0 million). These tax proceedings are as follows:
Income Tax relating to historical corporate transactions
There are three ongoing proceedings resulting from tax audits in which the
deduction of goodwill from Corporate Income Tax generated in two corporate
transactions that where undertaken 2007 and 2008 was rejected. The tax
authorities argue that the goodwill resulting from these transactions does not
qualify for tax deduction. Although the Group has been broadly successful in
past proceedings, the tax authorities have appealed the outcome of those. The
outcome of the ongoing proceedings is expected within one and three years. The
potential cash outflow of €174.2 million (31.12.2022: €157.0 million) is
limited to the fiscal tax years ended 2018 until which 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, 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 audits. Most of the
procedures are ongoing within the ANM administrative courts. Final decisions
of the first cases are expected within four to five years. The potential cash
outflow amounts to €31.0 million (31.12.2022: €28.2 million), including
interest and penalties.
Corporate income and other taxes
There are several tax audits 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 amounts
to €63.9 million (31.12.2022: €57.8 million).
Civil litigation contingencies
Magnesita Refratários S.A., Brazil is party to a public civil action for
damages allegedly caused by overloaded trucks in contravention to Brazilian
traffic legislation. In 2017, a decision was rendered in favour of Magnesita
in the trial court. The decision is being appealed by the Public Ministry of
Minas Gerais. The final decision is expected in ten years. The potential cash
outflow from this procedure amounts to €17.6 million (31.12.2022: €15.5
million).
A class action against a Brazilian subsidiary relates to the working
conditions of existing and former employees based at a costumer's plant. A
technical expertise appointed by the court indicated the exposure of current
and formers employees to unhealthy conditions. The number of current and
former employees that are entitled to compensation is 826 ('adicional de
insalubridade'). A provision amounting to €0.6 million was recognised. The
expected timing of the court rule is unknown, but a hearing is scheduled for
September 2023.
Other minor proceedings and lawsuits in which subsidiaries are involved have
no significant impact on the financial position and performance of the Group.
18. Other financial commitments
As of 30 June 2023, the RHI Magnesita Group has commitments for the purchase
of property, plant and equipment in the amount of €47.1 million (31.12.2022:
€20.4 million).
19. Business combinations
Acquisition of Horn & Co Minerals Recovery Group (Mireco)
The purchase price allocation was finalised and does not materially differ
from the preliminary purchase price allocation disclosed in the last year's
Consolidated Financial Statements.
Acquisition of SÖRMAS
Last year the Group completed the acquisition of Sörmas group. 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 the 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) (1.7) (6.7)
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
& equipments' 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 date on which Dalmia OCL and DSR were included
in the Group's Interim Financial Statements. The remaining 49% of DSR's shares
were acquired by the Group between the reporting date and the date the Interim
Financial Statements were authorised for issue, see Note (21).
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.
Until the date the Interim 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 prepayments on mining
rights, customer relationships, Property, plant and equipment 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 28.8 17.5 46.3
Intangible assets: Customer relationships 0.0 105.9 105.9
Intangible assets: prepayments on mining rights 0.0 9.3 9.3
Other intangible assets 1.3 0.0 1.3
Inventories 42.7 0.0 42.7
Trade and other receivables (gross contractual amounts: 42.2) 38.8 0.0 38.8
Cash and cash equivalents 0.1 0.0 0.1
Total assets acquired 111.7 132.8 244.5
Lease Liabilities 9.9 0.0 9.9
Trade and other liabilities 52.1 0.0 52.1
Other employee obligations 1.2 0.0 1.2
Provisions 1.6 0.0 1.6
Borrowings 19.7 0.0 19.7
Deferred tax liabilities 4.4 0.0 4.4
Total liabilities assumed 88.9 0.0 88.9
Net identifiable assets acquired 22.8 132.8 155.6
Less: Non-controlling interests (5.9)
Goodwill 175.5
Consideration 325.2
Consideration paid, net of cash acquired for purposes of the Condensed 55.1
Consolidated Statement of Cash Flows
Equity shares issued and transferred 270.0
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 2023.
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 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 preliminary goodwill recognised as a result if this acquisition is
attributable to the expected synergies mentioned above and is allocated to
both the Steel Segment and the Industrial Segment. The goodwill is not tax
deductible.
The Group recognises non-controlling interests for this acquisition measured
at the present ownership instruments' proportionate share in DSR's net assets.
Direct costs relating to this acquisition, expensed in the Condensed
Consolidated Statement of Profit or Loss, amounted to €1.0 million.
Since the date of inclusion of the acquired companies in the Group's Interim
Financial Statements, revenues have increased by €55.3 million, Adjusted
EBITA has increased by €2.8 million and net income has decreased by €4.4
million.
Acquisition of Hi-Tech
In October 2022, the Group signed an agreement stipulating its acquisition of
the refractory business of HiTech Chemicals Ltd ('Hi-Tech'), India, via an
asset deal. The acquisition was closed on 31 January 2023 which is the date on
which the refractory business was included in the Group's Interim Financial
Statements.
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 preliminary consideration payable in cash amounts to €99.2 million.
Thereof an amount of €86.2 million was paid upon closing of the acquisition.
The remaining amount of €13.0 million is a liability towards the former
owner.
Until the date the Interim 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 property, plant and equipment. 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 10.7 11.7 22.4
Intangible assets: Customer relationships 0.0 18.4 18.4
Inventories 7.7 0.0 7.7
Trade and other receivables 13.5 0.0 13.5
Total assets acquired 31.9 30.2 62.1
Lease liabilities 0.1 0.0 0.1
Trade and other liabilities 0.9 0.0 0.9
Deferred tax liabilities 0.0 3.3 3.3
Total liabilities assumed 1.0 3.3 4.3
Net identifiable assets acquired 30.9 26.9 57.8
Goodwill 41.4
Consideration (preliminary) 99.2
Consideration paid, net of cash acquired for purposes of the Condensed 86.2
Consolidated Statement of Cash Flows
Liability towards former owner 13.0
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 2023.
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 refractory business' existing
customers. The customer relationships are amortised over the estimated useful
life of 20 years.
The preliminary goodwill recognised as a result of this acquisition is
attributable to the expected synergies mentioned above and is allocated to the
Steel Segment. The goodwill is not tax deductible.
Direct costs relating to the acquisition of the refractory business and
expensed in the Condensed Consolidated Statement of Profit or Loss, amounted
to €0.6 million.
Since the date of inclusion of the acquired refractory business in the Group's
Interim Financial Statements, revenues have increased by €11.3 million,
Adjusted EBITA has increased by €0.9 million and net income has increased by
€0.5 million.
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 date on which Jinan New Emei and JEMM were included in the
Group's Interim Financial Statements.
The acquired companies are a leading manufacturer 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 preliminary 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.
Until the date the Interim Financial Statements were authorised for issue, the
initial consolidation is incomplete because the purchase price allocation and
the measurement of the acquired companies' assets and liabilities is still
ongoing. 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 19.4 0.2 19.5
Intangible assets: Customer relationships 0.0 2.6 2.6
Other intangible assets 4.5 0.3 4.8
Inventories 16.3 (0.2) 16.1
Trade and other receivables 64.3 0.0 64.3
Cash and cash equivalents 5.7 0.0 5.7
Total assets acquired 110.2 2.8 113.0
Trade and other liabilities 70.7 0.0 70.7
Other employee obligations 5.1 0.0 5.1
Borrowings 3.9 0.0 3.9
Deferred tax liabilities 0.0 0.2 0.2
Total liabilities assumed 79.8 0.2 80.0
Net identifiable assets acquired 30.4 2.6 33.0
Less: Non-controlling interests (11.5)
Goodwill 1.5
Consideration (preliminary) 22.9
Consideration paid, net of cash acquired for purposes of the Condensed 14.1
Consolidated Statement of Cash Flows
Liability towards former owner 3.1
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 2023.
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
around 8 years.
The preliminary 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. It is allocated to
the Steel segment and not tax deductible.
Direct costs relating to this acquisition and expensed in the Condensed
Consolidated Statement of Profit or Loss, amounted to €0.4 million.
Since the date of inclusion of the acquired companies in the Group's Interim
Financial Statements, revenues have increased by €13.5 million, Adjusted
EBITA has decreased by €0.2 million and net income has decreased by €0.6
million. Had the inclusion of the acquired companies taken place as of 1
January 2023, revenues would have increased by €39.0 million, Adjusted EBITA
would have decreased by €1.2 million and net income would have decreased by
€1.4 million.
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 of €127 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
FVTPL 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, see significant judgement section in Note (2).
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. On 1 May 2023 Dalmia GSB was
included in the Group's Interim Financial Statements.
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 flow control product range 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. The net cash outflow related to the
acquisition (after deduction of the cash acquired) amounts to €18.1 million.
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 Dalmia GSB from €1.9 million to €-1.4 million. The
difference between the consideration paid and the (adjusted) negative net
assets is allocated to goodwill amounting to €14.5 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 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 2023.
20. Disclosures on related parties
The nature of related party transactions as of 30 June 2023 are in line with
the transactions disclosed in Note (43) of the 2022 Group Financial
Statements. All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Related companies
No material transactions took place between the Group and related companies
and persons.
Related persons
There is a non-remunerated consultancy agreement in place between RHI
Magnesita and a close relative of a Non-Executive Director to advise the Group
on the economic and political framework in countries in which it does not yet
have strong business links.
21. Material events after the reporting date 30.06.2023
Acquisition of Seven Refractories Group
In April 2023, the Group signed a share purchase agreement stipulating its
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 6
companies located in Italy, Cyprus, USA and the United Kingdom which were also
acquired in the scope of this business combination.
The acquisition was closed on 17 July 2023.
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 CO2 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 €83.9 million.
Until the date the Interim Financial Statements were authorised for issue, the
purchase price was not allocated to the assets acquired and liabilities
assumed since the Financial Statements of the acquired companies as of the
closing date were not available. Therefore, the amounts recognised as of the
closing date for each major class of assets acquired and liabilities assumed,
the non-controlling shareholder's share in the acquired net assets, the
goodwill related explanations and the acquired companies' contribution to the
Group's Interim Financial Statements measures cannot be disclosed.
Acquisition of non-controlling interests
Following the acquisition of 51% of the shares of Dalmia Seven Refractories
Ltd (refer to Note (19)) the company was renamed to RHI Magnesita Seven
Refractories Ltd. Within the Seven Refractories' business combination, the
Group acquired the remaining shares (49%) of RHI Magnesita Seven Refractories
Ltd held by the non-controlling shareholders for a cash consideration of
€6.1 million on 24 July 2023. 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.
Statement of the Board of Directors
Statement pursuant to Article 5:25d, paragraph 2, subsection c. of the Dutch
Financial Markets Supervision Act ("Wet op het financieel toezicht").
The Interim Financial Statements for the six-month period ended 30 June 2023,
have been prepared in accordance with IAS 34 'Interim Financial Reporting' as
issued by the IASB and interpretations issued by the IFRIC, and as endorsed by
the European Union (EU).
To our knowledge,
- The Interim 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 Interim Report for the six-month period ended 30 June 2023 as presented
in the report on unaudited half year results includes a fair view of the
information required pursuant to article 5:25d paragraphs 8 and 9 of the Dutch
Financial Markets supervision Act ("Wet op het financieel toezicht").
Vienna, 25 July 2023
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
Independent auditor's review report
To: the board of directors of RHI Magnesita N.V.
Introduction
We have reviewed the accompanying condensed consolidated interim financial
information for the six-month period ended 30 June 2023 (the 'interim
financial information) of RHI Magnesita N.V., Arnhem, the Netherlands, which
comprise the condensed consolidated statement of financial position as at 30
June 2023, the condensed consolidated statement of profit or loss, the
condensed consolidated statement of comprehensive income, the condensed
consolidated statement of cash flows, the condensed consolidated statement of
changes in equity for the period then ended and the selected explanatory
notes. The board of directors is responsible for the preparation and
presentation of this (condensed) interim financial information in accordance
with IAS 34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility is to express a conclusion on this interim financial
information based on our review.
Scope
We conducted our review in accordance with Dutch law including standard 2410,
Review of Interim Financial Information Performed by the Independent Auditor
of the entity. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
auditing standards and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying condensed consolidated interim financial
information for the six-month period ended 30 June 2023 are not prepared, in
all material respects, in accordance with IAS 34, 'Interim Financial
Reporting' as adopted by the European Union.
Rotterdam, 25 July 2023
PricewaterhouseCoopers Accountants N.V.
Original has been signed by A. F. Westerman RA
partner
DEFINITIONS
€m Millions of Euros
APMs Alternative performance measures
DBRL Dalmia Bharat Refractories Limited
DGSB Dalmia GSB Refractories GmbH
FY 2022 Twelve months ended 31 December 2022
H1 2022 Six months ended 30 June 2022
"H1 2023" or the "Period" Six months ended 30 June 2023
H2 2023 Six months ended 31 December 2023
Hi-Tech Hi-Tech Chemicals Limited
Jinan New Emei Jinan New Emei Industries Co. Ltd.
kt kilotonnes
LTIF Lost Time Injury Frequency
LTM Last twelve months
M&A Mergers and acquisitions
QIP Qualified Institutional Placement
Rhône Capital Rhône Capital L.L.C.. Rhône Capital published a voluntary partial cash offer
for 14,086,156 shares in the Company on 30 May 2023 through Ignite Luxembourg
Holdings S.à r.l., a wholly owned subsidiary of a number of limited
partnerships which are indirectly managed by Rhône Holdings VI L.L.C.
"RHI Magnesita" or the "Company" or the "Group" RHI Magnesita N.V. or RHI Magnesita N.V. and its subsidiary undertakings, as
appropriate
"Seven Refractories" or "Seven" A group of companies acquired by the Group on 17 July 2023, previously owned
and controlled by Seven Refractories GmbH and carrying out refractory business
under the trading name of Seven Refractories
TRIF Total Recordable Injury Frequency
WSA World Steel Association
CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited. 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.
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.
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