Former Chief Operations Officer Gerd Schubert set to retire

RHI Magnesita today announces a new member of its global Executive Management Team. Effective October 1st, Rajah Jayendran, currently Head of Operations Europe/CIS/Türkiye, succeeds Gerd Schubert, who is preparing to retire. 

Stefan Borgas, CEO of RHI Magnesita emphasizes: “Rajah Jayendran has proven in- and outside our company that he is an excellent operations manager, holding the reputation of a reliable and accurate partner. His track record and experience make him the right choice to follow Gerd Schubert as COO. Gerd will withdraw from the Executive Management Team, but continue to work for RHI Magnesita, driving initial Projects until he takes his well-deserved retirement. I would like to thank Gerd for 30 years of passionate engagement on behalf of our company.” 

About Rajah Jayendran

Born in 1969, Rajah Jayendran is a German national who holds an engineering degree from the Ruhr-Universität Bochum. Mr Jayendran began his career in 1995 as a Senior Project Manager at multinational conglomerate Thyssen-Krupp Uhde GmbH. In 1999 he moved to Bayer MaterialScience AG, where he last held the position of Senior Vice President Site Operations in Shanghai, China. This was followed, in 2009, by a two-year stint as Executive Vice President Strategy and Business Development at ChemChina-Bluestar Group Co in Beijing, China. 

In 2011, Mr Jayendran assumed the position of Senior Vice President Strategic Projects at Lonza AG, a Swiss multinational chemicals and biotechnology company, before moving on, in 2013, to Linde Gas Asia in Singapore as Senior Vice President Commercialization. From 2014-2016 he joined the Stora Enso Group Co., a leading global provider of renewable solutions in packing, biomaterials, wooden construction and paper, as Senior Vice President MD China Investments & Operations. This was followed by a role with the Linde Group in Munich as Senior Vice President Performance Management in 2016-2017. Since 2018, Mr Jayendran has been a key team member at RHI Magnesita, the global leader and driving force of the refractory industry, holding the position of Senior Vice President Operations Europe/CIS/Türkiye. Effective October 1^st he will replace Gerd Schubert in the company’s Executive Management Team as Chief Operations Officer (COO). 

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. Our purpose is to master heat, enabling global industries to build sustainable modern life. 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 12,000 employees in 28 main production sites 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

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Green Mining refers to a mine which operates in coordination with the development and utilization of mineral resources and the protection of the ecological environment. It comprises scientific mining methods, efficient utilization of resources, and the protection of ecological environment.

China is an important part of RHI Magnesita’s global strategy. With the rapid development of local economy, China is paying more and more attention to environmental protection and sustainable development. To realize the coordination of resource development and environmental protection, the government has issued a series of measures on mineral resources planning and development. This is reflected in the Green Mining Certificate.

As the global leader of refractories, RHI Magnesita has developed its own technologies and operations whilst adhering to the principles of green sustainable development and strictly complying with local laws and regulations.

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“The world is facing tremendous challenges to protect our global environment. Especially businesses must take their responsibility and significantly ramp up their sustainability efforts,” says Stefan Borgas, CEO RHI Magnesita. “To drive a zero-carbon and circular economy within the industry, RHI Magnesita has declared sustainability as one of its top priorities. We decided to invest €50 million in the development of new technologies to reduce and capture carbon. We aim for nothing less than CO₂ neutrality. This recognition confirms our consistent path and strategic focus.”

Janet Ashdown, Chair of the Board Corporate Sustainability Committee, emphasizes: “RHI Magnesita is recording significant progress in sustainability over the last three years: from our Ankral LC low-carbon bricks series, to recycling and decreasing the carbon footprint of our raw materials and building the circularity of our business, to the increased proportion of women in senior leadership positions.”

MSCI ESG ratings are designed to indicate an investment fund’s resilience to long-term, relevant environmental, social and governance risks. MSCI uses a rules-based methodology to identify industry leaders and laggards based on their exposure to ESG risks and how well they manage those risks relative to their peers. The MSCI ESG rating ranges from CCC (Laggard) to AAA (Leader).

For further information: www.msci.com/our-solutions/esg-investing/esg-ratings

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• Full year guidance unchanged as recovery trends in end markets continue, with solid order book momentum
• Strategic investments in cost reduction and sales strategies on track to deliver the targeted EBITA contribution of €140-160 million from 2022
• Agreement to sell non-core stake in joint venture company, Magnifin, for €100 million
• Buyback programme to continue, with up to a further €50 million approved

Q1 Trading

Revenue momentum continued to improve through Q1 2021 in both the Steel and Industrial Divisions as end markets strengthened. The Cement and Lime business, in particular, experienced a solid Q1 maintenance season. The Group continues to see steady month-on-month improvement in refractory demand and in its order book for the remainder of 2021. Demand visibility is returning to more normal levels, with customers’ order books now full until the third quarter of 2021.

The Group has experienced challenges in rebuilding its supply chain during the quarter, ahead of rising customer demand. This has been aggravated by industry-wide delays in sea freight and higher sea freight costs. Together these have resulted in an increase in lead times to fulfil orders and additional costs being incurred in the quarter to ensure customer expectations are met. These supply chain challenges have started to ease in Q2.

Raw materials prices held higher levels during the quarter compared to Q4 2020, though the benefit to pricing of the Group’s products is expected to be realised largely in the second half of the year.

The Group’s strategic investments in its cost reduction and sales strategies are on track to deliver the guided €90 million EBITA contribution in 2021, with a target of €140-160 million from 2022.

Financial position

The Group’s balance sheet and liquidity remain strong.

Working capital will increase during the first half of 2021 as market volumes recover and inventories are increased in order to satisfy customer demand. Working capital is expected to be within the targeted intensity range of 15-18% at year-end.

Outlook

RHI Magnesita continues to see improvement in demand across all of its end markets, with short term supply chain challenges starting to ease in the second quarter. The implementation of cost reduction and sales strategies is proceeding on schedule, leaving the Group well positioned to benefit as markets recover.

Management expectations for 2021 adjusted EBITA remain in line with market expectations¹ assuming current recovery trends are sustained, with earnings weighted towards the second half.

• Current market expectation based on Company compiled consensus of €310 million, published on 8 March 2021.

Disposal of stake in Magnifin joint venture

RHI Magnesita has a 50% shareholding in Magnifin Magnesiaprodukte GmbH & Co KG (“Magnifin”), a private company based in St. Jakob, Austria, which produces high grade magnesium hydroxide for applications in flame retardancy. The Board has determined that this asset is not core to the Group’s growth strategy and has signed a sale and purchase agreement to sell the Group’s interest in Magnifin to its joint venture partner, J.M. Huber Corporation, for a cash consideration of €100 million. The disposal is subject to Foreign Investment Control approval in Austria and is expected to complete in the second half of 2021. The interest to be disposed is held as a financial investment by RHI Magnesita and is not consolidated into the Group’s reported gross profit or EBITA. In the year to 31 December 2020, the Group’s share of profit before tax from the Magnifin joint venture was €7.3 million (2019: €10.0 million).

Shareholder returns

On 13 April 2021 RHI Magnesita completed its €50 million share buyback programme which commenced on 16 December 2020. The shares repurchased represent 2.2% of the Company’s issued share capital excluding treasury shares prior to the commencement of the buyback programme.

The Group’s balance sheet remains strong and will benefit from the disposal of the Magnifin shareholding for €100 million. Following resilient trading in Q1 and after considering the positive outlook for the remainder of 2021 the Board has decided to extend the successful share buyback programme, by up to €50 million.

The Board is confident that it will be able to maintain all other elements of capital deployment such as investment in the strategic initiatives, pursuing M&A opportunities and maintaining dividend payments as previously guided, whilst having a limited impact on Group leverage.

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 12,000 employees in 28 main production sites 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

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Summary

The business has responded well to the challenges presented by COVID-19. Whilst volumes have declined significantly in the second quarter 2020, in-line with our customers’ volumes, the business remains resilient, particularly with regards to liquidity. In addition, we are continuing to take action to accelerate the delivery of our strategy and to strengthen the business for the longer term.

Challenging environment in Q2 2020

The primary focus of the business has been on the health and safety of employees, customers and business partners. The Company has also continued to supply customers seamlessly and maintained a fully functioning supply chain.

Consistent with our expectations at the time of the Q1 2020 Trading Update on 5 May 2020, there has been an unprecedented slowdown in customer activity and a significant fall in demand in May and June. This effect has caused a material drop in RHI Magnesita’s revenues across both the Steel and Industrial divisions in the second quarter (down almost 20% versus Q1 2020, in line with our scenario planning). Within our business units, Cement and Steel MEA/Asia have remained resilient, offset by further weakness in Steel Europe, Steel South America and Steel India. Activity levels are likely to remain subdued through July and August, with limited visibility beyond this period.

Raw material prices fell over the first four months of the year, due to over-supply from China. There has been some stabilisation in prices in May and June and at current raw material prices the Group continues to derive a positive margin from its backward integration.

Focus on cash preservation and cost management

Against the challenging backdrop of COVID-19, mitigating actions continue to be taken to minimise the financial impact, and the business has moved swiftly to implement cost management and cash preservation measures. These include, the temporary closure of three plants in Europe and one plant in Mexico, the introduction of short time working arrangements in some plants, the deferral of €45 million of capital expenditure in 2020, no 2019 final dividend being paid, and other fixed cost reduction actions. These measures have resulted in the successful delivery of further short-term cost savings in Q2 2020.

Accelerating strategy implementation

The Group is continuing to progress its longer-term strategic initiatives. Embedding the learnings from COVID-19 and the potential for a slower recovery in global economies, management believes there is scope to both accelerate and increase the anticipated benefits. These initiatives build on the strategic themes previously outlined, of:

• increased regionalisation, to match supply with local demand, supported by greater decentralisation and local decision-making;
• increased flexibility in the cost base by reducing the proportion of fixed costs; and
• increased digitalisation, particularly to support the solutions business model.

In particular, management:

• is well advanced in lowering non-operational costs, reducing the scale of the first three levels of management by 20%, effective 1 August 2020; and
• has identified opportunities to extend the Group’s Production Optimisation Plan, which will increase the previously anticipated €40 million of EBITA benefits, due by 2022.

Further details of these initiatives will be provided with the Half Year Results in August.

Strong financial position

The Group continues to have a strong focus on working capital management, especially inventories and accounts receivable. Working capital reduced in the second quarter, although partially offset by lower levels of working capital finance. The Group continues to have a strong financial position with a resilient balance sheet, liquidity of €1.1 billion, no material debt maturity before 2023 and significant headroom under its net debt to EBITDA covenant.

About RHI Magnesita

RHI Magnesita is the leading global supplier of high-grade refractory products, systems and solutions which are critical for industrial high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals and glass. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves customers around the world, with around 13,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to leverage its global leadership in terms of revenue, scale, product portfolio and diversified geographic presence to target strategically those countries and regions benefitting from more dynamic economic growth prospects.

Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index. For more information please visit: www.rhimagnesita.com

Further information:

Investors:

Guy Marks, Head of Investor Relations

+44 7932 013357

guy.marks@rhimagnesita.com

Press:

Matt Denham, Teneo                                                                 

 + 44 7825 735596

Lisa Fuchs, Head of Corporate Communications 

+ 43 69918706198

lisa.fuchs@rhimagnesita.com

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“The award is an important acknowledgment that our holistic approach to communication is successful. The involvement of all external and internal stakeholders and consistent target-group-oriented communication will continue to play a key role in the cultural transformation of RHI Magnesita”, said Stefan Rathausky, Senior VP Corporate Communications & Strategic Marketing.

During the complex cross-border merger of RHI and Magnesita involving merger control proceedings in several jurisdictions, the company focused on consistent and transparent information on the merger process. In addition to an external microsite that informed investors and the media about the developments of the merger, to name just one example, the company focused at an early stage on internal communication and employee involvement.

This communication strategy made a significant contribution to reducing uncertainty among all stakeholders through professional communication in the period of one year between the signing and the closing of the merger and has set the tone for the future positioning of the new company.

About Corporate & Financial Awards

The Corporate & Financial Awards is the benchmark of companies’ communication in the UK. The awards program celebrates and showcases excellence in financial communications and provides recognition for the efforts of staff, companies, agencies and beneficiaries.

For companies trying to reach investors, analysts, consultants in the investment community, financial journalists and their peers, corporate reporting is the primary means of communications. The Corporate & Financial Awards recognizes excellence in this area and in all aspects of corporate communications with these stakeholder groups.

About RHI Magnesita

RHI Magnesita is the global leading supplier of high-grade refractory products, systems and solutions which are indispensable for industrial 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 more than 10,000 customers in nearly all countries around the world.  The Company has broad geographic diversification with more than 14,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to use its global leadership position in terms of revenue, greater scale, complementary product portfolio and diversified geographic presence around the world to target opportunistically those countries and regions benefitting from more dynamic economic growth prospects. 

Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index.  For more information please visit: www.rhimagnesita.com

Enquiries: 
RHI Magnesita N.V. 
Stefan Rathausky 
Senior VP Corporate Communications & Strategic Marketing 
+43 50213-6059 
stefan.rathausky@rhimagnesita.com

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In Leoben, employees from 14 different nations develop and optimize new materials, products, systems and processes for all industry segments of RHI Magnesita.

The site is located in the Austrian province of Styria, in the immediate vicinity of the University of Leoben, one of the world’s leading universities in the area of material sciences. Some key customers and several important RHI Magnesita plants are also situated near the research center.

Today, Stefan Schriebl, Head of R&D Europe, talks to us about the Leoben site and its integration into the RHI Magnesita network.

1) What is special about your R&D hub?

What makes the site in Leoben unique is the diversity of international employees with different experience and training backgrounds. They provide a breeding ground where unique ideas can be created and grown. This environment also allows implementing complex, multi-disciplinary projects in which material scientists and simulation specialists all pull together in order to create the most beneficial systems in the market for our customers.

The excellent equipment offers our employees and the colleagues from other R&D locations the opportunity to seek out new paths that no one has ever taken before in the refractory industry and provides our customers state-of-the-art analyses and studies.

In addition to development, support is an integral part of our activities. This support goes far beyond determining test values and also comprises questions regarding recipe adjustments and raw material selection from our plants as well as processing customer inquiries regarding the choice of the appropriate refractory materials or the clarification of wear phenomena.  

Our responsibilities also include the harmonization and standardization of the test methods and measurements at the plants, including round robin tests. This also applies to the central support for different measurement methods, for example.

Moreover, the Leoben site is home to the “Intellectual Property Rights” department, which is responsible for tasks related patents, brands and licenses for the entire RHI Magnesita Group. Currently, the active property right portfolio consists of more than 170 patent families with more than 1,900 individual patents and patent applications.

Overall, roughly 300 people are employed at the Leoben site. A major advantage is the immediate vicinity to colleagues from the areas of Technical Procurement, Supply Chain Management, Quality Management, Production, Technical Marketing and Sales, with whom many ideas and improvements have been developed.

2) Which research areas do you focus on?

One core area deals with the development of new raw materials, material and binder systems, and refractory mixes, bricks and functional products. Different melting and firing units are available for the production of novel raw materials.  

Another area our projects focus on is the development of concepts and systems for our production for the use of recycling material in order to reduce CO₂ emissions and use resources efficiently.

The understanding of processes is essential both for us and for our customers. Therefore our goal is to further strengthen and expand our competitive edge in the simulation of thermal, thermomechanical and thermochemical correlations. A unique feature of Leoben are our water models, which are used visualize flows in a variety of customer production units and to efficiently test, develop and optimize functional products. In combination with numerical methods, we are a strong partner for our customers and, together with them, are able to significantly shorten development processes.

Test facilities designed in Leoben specifically for our plants allow not only individual manual measurement but also non-destructive 100% testing of our products in the production process. The data from these measuring instruments are analyzed together with a large number of other production and quality data in visualization and modeling methods, which are developed further by our process development in cooperation with external partners. With these analytical tools, our manufacturing processes and our products can be advanced continuously.

3) The objectives of the Technical Advisory Committee are to bring in new expertise and knowledge from outside, to strengthen the ties to the external world of technology and open up the innovation process. Which key partners are you collaborating with internally and externally? Why is this important?

We have a long tradition in the area of refractory materials and as a globally operating group we have great experience and expertise when it comes to the topic of refractories.

Within our internal network, we therefore keep in very close contact with our colleagues from the other R&D locations, international technical marketing and sales, who are experts for the different customer processes, and of course with the production sites.

To ensure that we are also the driving force in refractories in the future, we strive to continuously develop further and learn. This requires us to permanently acquire new skills. In part this also applies to skills that did not play a significant role in the past. Internal and external networking is the prerequisite for an intensive exchange of information.

Besides the additional technical expertise, developments of specific technologies in external collaborations often also enable advantages in terms of time and costs. Depending on the task, we therefore cooperate globally with key experts, universities and research institutions.  

Other important tasks to ensure that we keep our finger on the pulse of time include monitoring, researching and analyzing international patent activities.

4) “To act customer focused and innovatively” is one of our cultural themes. What does this mean concretely for your R&D center?

Many innovations and further developments are only possible together with our customers. This is why we endeavor to be present on site at our customers’ facilities with colleagues from the sales organization and technical marketing. 

A great number of customers visit us at our site in Leoben, either for guided tours, but also for further training at our Training Center. This type of networking is very important for us to find out which challenges the individual industries are faced with and how we can help to resolve such challenges.

Moreover, we develop important future topics in a partnership model in collaboration with key customers, plant suppliers and universities. The Austrian research promotion landscape offers many opportunities in this context, which we make intensive use of.

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RHI Magnesita is pleased to announce today that Ian Botha, currently CFO of Anglo American Platinum, has been nominated as its new CFO and Finance Director for appointment in the 2019 Annual General Meeting. Ian will join our Company on 1 April 2019. Octavio Lopes, will until his departure, focus on delivering the final steps of the merger between RHI and Magnesita.
In the period until Ian Botha commences with the Company, Eduardo Gotilla, the VP of Corporate Finance and Investor Relations will with immediate effect assume the role of acting CFO of RHI Magnesita. As the former CFO of Magnesita he has played a pivotal role in the integration of the finance organisation into RHI Magnesita, and also successfully led the refinancing of the Company. He will continue to deliver the CFO agenda.

Commenting on this announcement, Stefan Borgas, the CEO of RHI Magnesita said: “Ian has enjoyed a highly successful international career with Anglo American in the related mining and metals industry, latterly as CFO of Anglo Platinum. His significant experience in finance & accounting, investor relations and governance, as well as his excellent business acumen and track record in financial and performance improvements makes him an ideal appointment. Additionally, his fit with RHI Magnesita’s management culture and complementarity with our Company’s top leadership team further adds to Ian’s credentials”.
The Chairman of RHI Magnesita, Dr Herbert Cordt commented: “This appointment reflects RHI Magnesita’s fundamental strengths and exciting prospects in being able to attract someone with Ian’s track record and capabilities. Together, Stefan and Ian will be a formidable combination and with my fellow Directors I look forward to welcoming Ian to our Board”.

About RHI Magnesita

RHI Magnesita is the global leading supplier of high-grade refractory products, systems and solutions which are indispensable for industrial 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 more than 10,000 customers in nearly all countries around the world.  The Company has broad geographic diversification with more than 14,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to use its global leadership position in terms of revenue, greater scale, complementary product portfolio and diversified geographic presence around the world to target opportunistically those countries and regions benefitting from more dynamic economic growth prospects. 

Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index.  For more information please visit: www.rhimagnesita.com

Enquiries:
RHI Magnesita N.V.
Stefan Rathausky 
Senior VP Corporate Communications & Strategic Marketing
+43 50213-6059
stefan.rathausky@rhimagnesita.com

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The high-profile round table discussion was dedicated to the challenges of the digital economy. Moderator Katinka Nowotny (ORF Eco) discussed with the panelists what role is desirable for a company, pioneer or fast follower?
Stefan Borgas (CEO RHI Magnesita), Hartwig Löger (Federal Minister of Finance), Dorothee Ritz (General Manager, Microsoft Austria) and Nicolaus Henke (Global Leader, McKinsey Analytics) discussed with the audience. Despite some controversial views, the panel agreed above all on one point: “Digitization needs courage.”

In his keynote speech, Borgas pointed out that both within the company and at the Austrian business location there was a concrete need to catch up in a global comparison. Specifically, he addressed the training of tomorrow’s skilled workers, an immigration law and infrastructure that could be developed. “It is no longer a question of whether, but when to actively and consistently engage in digitization,” says Borgas. The speed of technological development is higher than the speed of change of companies. Nicolaus Henke vividly illustrated the urgency of the topic in his impulse statement: 90% of the worldwide data were generated in the last twelve months alone. He appealed to the audience to use the Forum Alpbach as a platform for new interdisciplinary initiatives and cooperations between companies, start-ups, research and educational institutions. Finance Minister Hartwig Löger, on the other hand, referred in the discussion to the importance of digital literacy and the training of young people in the field of information technology. Dorothee Ritz also followed on from this. She also advocated demystifying the concepts of digitization and artificial intelligence in the social debate. Training initiatives and information campaigns on concrete achievements of the new technologies have already been launched.

Smartphones played a key role in RHI Magnesita’s breakout session at European Forum Alpbach. The audience was asked to contribute live inputs to the panel discussion. Take a look for yourself!

At the end of the discussion, Stefan Borgas thanked the almost 100 participants for their inputs and gave them an open and courageous approach to digitization. The breakout session has repeatedly shown that the focus is on people, not technology, and that opportunities must be used proactively.

About RHI Magnesita

RHI Magnesita is the global leading supplier of high-grade refractory products, systems and services which are indispensable for industrial high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals, and glass, among others. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves more than 10,000 customers in nearly all countries around the world.

The Company has unmatched geographic diversification with more than 14,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to use its global leadership position in terms of revenue, greater scale, complementary product portfolio and diversified geographic presence around the world to target opportunistically those countries and regions benefitting from more dynamic economic growth prospects.

Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index.

For more information please visit: www.rhimagnesita.com

Enquiries:

RHI Magnesita N.V.
Stefan Rathausky, Senior VP Corporate Communications
Tel +43 50213-6059
E-Mail: stefan.rathausky@rhimagnesita.com

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HIGHLIGHTS:

• Revenue of €1,508 million, up 24.6% on an organic basis, driven by price increases and volume growth in both Steel and Industrial divisions offsetting higher input costs
• Adjusted EBITA of €218 million, up 88.2%
• Adjusted EBITA margin of 14.5%, up 490bps from the previous year, driven by margin expansion from both raw material integration and synergies from the merger
• Working capital to revenue ratio at 21.8% versus 22.2% at the end of H2 2017, despite the significant raw material inflation
• Integration progressing well with increased synergy guidance: at least €60 million in 2018 (from previous guidance of €40 million) and €110 million on an annualised recurring basis by 2020 (from previous guidance of €70 million)
• Strategic investment of more than €20 million in our dolomite-based refractory plant and dolomite mine in China
• Consolidation of RHI Magnesita’s three subsidiaries in India to capture local growth opportunities more effectively and efficiently
• Net debt reduced from 1.9x adjusted pro forma EBITDA on 31 December 2017 to 1.6x adjusted EBITDA on 30 June 2018

FINANCIAL SUMMARY:

¹ Further detail on the adjustments can be found in Alternative Performance Measures section

Note: This press release is an abbreviated version. The long version including the consolidated interim financial statements as of June 30, 2018 can be found here

Commenting on the results, Chief Executive Officer, Stefan Borgas, said:

“We are delighted to report strong growth of 25% in the first half and profit growth of 88%. We have seen a continuation of the positive trends we saw in the second half of 2017, the benefits of our high level of vertical integration and the synergies from the merger of RHI and Magnesita in Q4 2017. Continued strong demand from our end markets and price increases drove revenue growth, more than offsetting higher raw material input costs. Our integration plans developed ahead of our plan both in terms of speed of capture and total amount.”

“Whilst geopolitical challenges could impact the second half and beyond, we believe our geographically diversified production bases and broad customer profile will insulate the Group to a large extent. Today, we continue to anticipate that full year operating results will accrue the benefits from strong pricing, additional merger synergies and network optimisation.”

“Overall, we have achieved strong first half results and management expectations for the full year operating results remain unchanged. We thank our customers for their support and collaboration in times of tight availability, and our employees for all their ideas, efforts and contributions.”

INTEGRATION AND SYNERGIES
Our integration plan has progressed ahead of our original expectations. The company’s SAP roll-out is advancing as planned and all former Magnesita European production plants have already been converted to the new platform, a sales and supply chain hub has been operational since 1 August in Rotterdam, and Global Business Services, our shared service centre project, goes live at European sites at the end of 2018.

Not only our planned integration actions have materialized faster, but also additional opportunities have been identified which are fully supported by detailed implementation plans. We expect now to deliver savings of at least €60 million in 2018 (from previous guidance of €40 million) and €110 million in 2020 (from previous guidance of €70 million). Approximately, €27 million in synergies were reflected in H1 2018 results.

STEEL DIVISION
Steel production growth year-over-year was robust, at a 4.6%, most notably in Asia and MEA. RHI Magnesita’s deliveries for steel clients have outperformed the respective trends in North America, South America and Europe. Our businesses in India, Central America and Europe were also strong, with deliveries increasing above 10% in the period, and revenue growth of over 30%.

Altogether, revenue for the Steel division was €1,094 million during H1 2018, 29.3% higher than the prior year, reflecting the significant outperformance of our deliveries on top of a very strong underlying market as well as the price increases to compensate for raw material inflation. Sales growth has also been supported by the increasing cross-selling initiatives across both products and geographies.

It still remains too early to gauge the effects of the imposition of trade tariffs, yet the Group believes its diversified production base (in 16 countries across 4 continents) and client base (10,000 customer plants in more than 180 countries) will insulate any significant impact from these developments, as long as industrial output on a global basis remains unaffected.

INDUSTRIAL DIVISION
In the Industrial division, our Glass segment had strong performance, with demand developing for projects in the US and Poland. The Nonferrous metals segment is performing in line with management expectations, new projects are yet to pick-up, despite good progress in new copper projects in Africa and Asia. In EEC (Environment, Energy & Chemicals) we see increasing demand in China, Europe and CIS, with the installation business picking up. The Cement/Lime segment is flat, as result of still low capacity utilization in China and Brazil and some market share losses due to pricing. The Minerals segment has benefitted from raw material price increases and supply shortage caused by the stricter environmental enforcement in China. Revenue growth has flattened out as increased refractory demand has caused the Group to use more minerals internally, and consequently have less raw materials available for external sales.

Revenue for the Industrial division was €413 million during H1 2018, 14.3% higher than the prior year, as lower deliveries to Cement/Lime and sales of Minerals were more than compensated by higher deliveries to Glass clients and price increases across all segments.

CASH FLOW AND WORKING CAPITAL
Operating cash flow amounted to €136 million which was driven by the substantial increase in adjusted EBITA. Cash conversion was held back by the €85 million demand in working capital caused by the 24.6% increase in revenues over pro forma H1 2017 numbers. Nonetheless, working capital intensity improved from 22.2% in December 2017 to 21.4% in June 2018, as strict control on accounts receivables and progress in our payables strategy more than compensated for the inflationary effect in raw material and finished goods inventories.

FINANCIAL CONDITION
Our financial position continues to strengthen, and our deleveraging profile is reinforced by the improving profit, synergies and interest expense reduction.

Net debt reduced from 1.9x adjusted pro forma EBITDA on 31 December 2017 to 1.6x adjusted EBITDA on 30 June 2018, mostly due to the improvement in LTM EBITDA, but also due to the decrease in net debt in the period. Net debt continues to reduce as planned driven by increasing profitability and cash flows, despite the one-off demand on working capital and the mark to market effect on our US dollar liabilities.

In line with the Company’s plan to reposition its capital structure to reflect its improved financial position, on 3 August 2018 the Company successfully raised a new unsecured US$600 million 5-year term loan and multi-currency revolving credit facility with a syndicate of 10 international banks.

The proceeds of the new facility will be used to redeem the entire amount of the outstanding Magnesita Perpetual Bonds and prepay other short-term facilities, which will generate significant interest expense savings. The new Term Loan allows the Company flexibility and liquidity to pursue its long-term strategy.

DIVIDENDS
The Board of Directors believes that a clear and consistent dividend policy is important to shareholders and intends to implement a policy consistent with its status as a U.K. premium-listed, industrial company. This will be communicated later in the year following completion of the Integrated Tender Offer. Consistent with prior years, RHI Magnesita is this year not declaring an interim dividend.

STRATEGIC DEVELOPMENTS
On 26 June 2018, RHI Magnesita announced a strategically important investment in the Chinese market of more than €20 million in its site in Chizhou, Anhui Province in China. The Chizhou site includes an extensive dolomite mine and raw material production as well as facilities for the production of high-quality dolomite-based finished products. Successful trials are already underway in the brick plant in Chizhou where it is planned to start production by the beginning of 2019. The raw dolomite mine is planned to resume operation by the end of 2019.  Captive supply of raw materials and local production sites grant a significant logistical competitive advantage for the development of regional markets and the securing of growth opportunities in China and the Asia/Pacific region.

On 1 August 2018, RHI Magnesita announced the proposed merger of its three Indian subsidiaries. The merger is designed to optimally position RHI Magnesita’s operations in the strategically important Indian market to capture growth opportunities more effectively and efficiently, by combining the strengths and competencies of each company. This merger is part of RHI Magnesita’s strategic pillar “markets” which focuses on building a global presence with strong local organizations and solid market positions. India became the third largest steel producer in the world after a decade of solid growth and an ambitious government program aims to reach 300m tons of steel production by 2030, triple the output of 2016. With one strong and integrated local organization, the industry’s most comprehensive product portfolio and proven supply and sales capabilities RHI Magnesita India will be optimally positioned to leverage the positive local market developments.

OUTLOOK
The strong trading performance reported in our Q1 2018 update has continued and our business developed positively in H1 2018, supported by continued strong demand from our end markets, raw material integrations and the accrual of synergies.

Currency headwinds have reduced slightly since the first quarter, with the US dollar strengthening against the Euro and the Chinese Yuan. The Group’s revenue and profit growth rates achieved in H1 2018 were higher than we anticipate for the full year, as the H2 2017 results already reflected improved market conditions and some effect on revenues and margins from the pass-through of raw material input inflation. Management believes raw material prices will remain at current elevated levels during the second half.

Overall, management expectations for full year operating results remain unchanged.

About RHI Magnesita

RHI Magnesita is the global leading supplier of high-grade refractory products, systems and solutions which are indispensable for industrial 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 more than 10,000 customers in nearly all countries around the world.  The Company has broad geographic diversification with more than 14,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to use its global leadership position in terms of revenue, greater scale, complementary product portfolio and diversified geographic presence around the world to target opportunistically those countries and regions benefitting from more dynamic economic growth prospects. 

Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index.  For more information please visit: www.rhimagnesita.com

Enquiries:

RHI Magnesita N.V.
Stefan Rathausky, Senior VP Corporate Communications
Tel +43 50213-6059
E-Mail: stefan.rathausky@rhimagnesita.com

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