Trading

The Group delivered the expected improvement in performance over the four months from July to October, in line with full-year guidance.

Adjusted EBITA for the four months was €136 million, representing a 12.7% margin, significantly ahead of the run-rate in H1 2025 (six months ended 30 June 2025 of €141 million, 8.4% margin), despite the third quarter typically being a seasonally weaker period due to northern hemisphere summer breaks.

Steel volumes for the period remained weak and broadly consistent with full-year guidance, reflecting subdued but stable overall demand, with only modest improvement compared to the first half. Demand for high-quality steel for the automotive sector was particularly soft in western markets. The Group saw growth in the Period in India, META (Middle East, Africa and Türkiye), with European demand contracting further. Market share in India was re-established during the Period, as expected.

The Industrial project order book has improved throughout the last months, in line with guidance provided at the H1 2025 results, with clear visibility for the remainder of 2025. High-margin industrial projects are however still at a low point, with order volumes around 40% below recent years. The concentration of industrial order delivery in H2 is caused by seasonality and customers shifting orders.

The pricing environment remains highly competitive, particularly in markets with overcapacity, such as China, and in regions heavily supplied by Chinese exports, including India, East Asia and the Middle East.  Small price increases were nevertheless achieved as our customers continue to value our local-for-local supply, the value-creating 4PRO contracts and innovation pipeline.

The Group’s cost efficiency programmes remain solidly on track, with expected SG&A reductions and fixed cost savings from two plant closures in Germany in line with previous full-year guidance. These measures account for the vast majority of the margin improvement in the Period.

Earnings growth from the former Resco plants is progressing well, with integration advancing smoothly and synergies being delivered in line with expectations. The integration is enabling the Group to generate enhanced benefits from its North American footprint. US local-for-local production has increased from 50% to 65% in 2025 and is expected to exceed 75% in H2 2026. While increased US local production has mitigated the Group’s overall tariff exposure, more recent headwinds have emerged with tariffs on raw materials and finished goods exported from Brazil to the US.

Backward integration margins remain near historical lows, at 1.1% year-to-date, as a result of very low raw material pricing across most categories. Further action around cost reduction and portfolio optimisation are being implemented in the raw materials plants and mines to improve earnings from backward integration stepwise over the next two years.

Financial Position

Working capital increased temporarily in the Period, to support delivery of the stronger Q4 order book. The booked project deliveries in the remainder of the year, together with the seasonal peak sales in the cement industry, will enable the Group to de-lever during Q4 to approximately 3.0x by year-end.

Outlook

The Group remains on track to deliver the full-year Adjusted EBITA of €370-390 million, supported by market share recovery in India and META, executed management initiatives in cost reduction and the seasonal recovery expected in China. The weak US Dollar and Indian Rupee continue to weigh on reported financial performance.

The current industrial order book, in particular, underpins expectations that the improved performance achieved in H2 2025 will continue into H1 2026, with the modest pricing benefits retained. Nevertheless, end-markets demand especially in the steel industry remains at a cyclical low, and a rapid normalisation is not anticipated.

Global trade update:

• The European Commission proposes cutting by almost half its tariff-free steel import quota to support onshoring steel production volumes. While the exact timing in 2026 is still uncertain, resultant higher steel production in-region could stabilise refractory demand in Europe.
• Brazil has officially launched an investigation into potential duty protection for refractory materials. The outcome and timing is uncertain at this point.
• With strong market positions in both regions and a well-invested local network, this could become a positive development for RHI Magnesita in late 2026 or 2027.

Stefan Borgas, Chief Executive Officer of RHI Magnesita, said:

“RHI Magnesita has delivered the expected step-up improvement through the second half of 2025 by systematically implementing its self-help actions. This is despite subdued demand conditions. The Group has successfully executed cost reduction initiatives in all cost categories, progressed plant closures, and captured synergies from the Resco acquisition. Market share in India has been re-established, and modest pricing discipline has supported results despite intense competition. I would like to thank the RHI Magnesita-team globally for this outstanding operational performance. Looking ahead, our self-help actions and innovation projects underpin confidence that the momentum from the second half of 2025 will carry into the first half of 2026.”

For further enquiries, please contact:

Alexander Ordosch, Head of Investor Relations
Tel +43 699 1870 6162
E‐mail: Alexander.Ordosch@rhimagnesita.com 

Media:
Hudson Sandler
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com

About RHI Magnesita

RHI Magnesita is the leading global supplier of high-grade refractory products, systems and solutions which are critical for high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals and glass. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves customers around the world, with over 20,000 employees in 68 main production sites (including recycling facilities), 12 raw material sites and more than 70 sales offices. RHI Magnesita intends to leverage its leadership in terms of revenue, scale, product portfolio and diversified geographic presence to target strategically those countries and regions benefiting from more dynamic economic growth prospects.

RHI Magnesita offers investors EBITDA and free cash flow comparable to FTSE 100 peers, the highest free cash flow yield in the UK industrials sector, a compelling M&A growth story and high operational gearing to market recovery. The Group seeks to allocate capital to maximise value generation for shareholders. After maintenance capex and dividend, M&A, organic investments and buybacks compete for capital. The global refractory industry remains fragmented and the M&A pipeline presents an opportunity to continue a value-accretive consolidation strategy.

The Group is listed within the Equity Shares (Commercial Companies) category (“ESCC”) of the Official List of the London Stock Exchange (symbol: RHIM) and is a constituent of the FTSE 250 index, with a secondary listing on the Vienna Stock Exchange (Wiener Börse). For more information please visit: www.rhimagnesita.com

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Downside risks to the 2025 trading outlook have increased, driven by a weak outlook for H1 performance and rising global trade tensions, which could negatively affect the Group’s end markets.

Q1 trading

First quarter trading conditions became more challenging, reflecting lower sales volumes, a continued decline in project business in the glass and non-ferrous metals sectors worldwide and lower pricing for cement and steel markets in India and the Middle East.

EBITA margins in the first quarter were lower, as expected, impacted by a combination of lower volumes in high-margin project business, weaker finished goods pricing and higher cost of purchased raw material.

Reflecting the demand backdrop, the Group continues to operate its plants at lower levels of capacity utilisation compared to Q4 2024, with fixed cost under-absorption further weighing on margins. As part of its ongoing Network Optimisation Programme (“NOP”), the Group has announced the closure of its Wetro plant in Germany. Alongside the NOP, management has initiated additional cost saving measures targeting both Cost of Goods Sold and Selling, General & Administration expenses.

In response to higher unit costs, a price increase programme is being implemented to restore margins over the remainder of the year, although securing increases is likely to be more challenging in the current market environment. In particular, India and West Asia markets are experiencing elevated competitive pressure from low-cost imports of refractories from China and overcapacity that has been built in India recently by international and domestic refractory competitors, impacting both margins and sales volumes.

Financial position

As expected, net debt increased to €1.6 billion as at 31 March 2025, primarily due to the completion of the Resco acquisition and the payment of the remaining €346 million of cash proceeds. This was partially funded by a new €200 million syndicated term loan.

Working capital rose modestly, in line with expectations of increased sales in Q2. Guidance for year-end working capital intensity remains at c.24%, excluding any potential impact from global supply chain disruptions stemming from tariff changes.

Following the payment related to the Resco acquisition, gearing – measured as the ratio of net debt to Pro Forma Adjusted EBITDA – is expected to be c.2.9x at the half year, above the Group’s target range of 2.0 to c.2.5x. Gearing is anticipated to reduce through the second half and, based on current earnings and cash flow expectations, would return towards c.2.5x by year end.

Strategic developments

RHI Magnesita pursues a local for local production strategy and benefits from vertical integration in key raw materials. This provides some protection against potential adverse transactional impacts arising from tariffs, compared to other industry participants who rely on imported raw materials from third party producers.

The Group’s growth strategy is primarily focused on M&A. In Q1, the Group completed the planned €391 million acquisition of Resco, marking a significant strategic milestone in strengthening its presence in the North American market. A key benefit of the Resco transaction is the opportunity to increase domestic US production of many products which are currently imported to the US. However, the relocation and ramp-up of production to fully capture these benefits will take approximately 18 months, in line with normal industrial capacity projects.

Outlook

First quarter trading conditions were weaker as expected, with a reduction in both revenues and margins in the period. Performance is expected to improve in the second quarter based on the current order book as cost saving initiatives support profits somewhat. With the benefits of price and cost actions weighted towards the latter part of the year, the first half is now expected to contribute 35-40% of full-year Adjusted EBITA, with 60-65% weighted to the second half, also supported by Non-ferrous Metals project volumes postponed from H1.

Whilst the current order book still could allow delivery of full year guidance for Adjusted EBITA to be modestly ahead of 2024 including Resco, the Group is mindful of the elevated risk posed by current macroeconomic volatility. This could impact end market demand and customer production volumes with the additional possibility of instability in global supply chains. The weaker US dollar will also impact earnings from the North America region in euro terms and if the current exchange rate is maintained for the remainder of 2025 this would represent a c.€15 million incremental headwind to Adjusted EBITA.

Stefan Borgas, Chief Executive Officer of RHI Magnesita, said:

“RHI Magnesita continues to navigate difficult market conditions as end markets and customer production volumes remain subdued and as industrial projects are being postponed into the second half of the year. New uncertainties surrounding global trade and tariff arrangements are adding complexity to our planning processes and risk of further project postponements. We have implemented measures to support margins by reducing costs and executing price increases as well as progressing more structural drivers including production network optimisation and the realisation of synergies from recent acquisitions. Guidance for 2025 Adjusted EBITA to be modestly ahead of 2024 is maintained, although downside risks have increased and a step up in profitability in the second half will be required to meet expectations.”

Conference call

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

AGM

Further to the Notice of Meeting issued on 27 March 2025, the Company will hold its Annual General Meeting (“AGM”) today at 14:00 CET. Voting results from the AGM will be made available shortly after the meeting.

For further enquiries, please contact:

Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E‐mail: chris.bucknall@rhimagnesita.com   

Media:

Hudson Sandler
Andrew Hayes
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com

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Franz-Ferdinand has been nominated by Rhône Capital, which currently holds approximately 24% of the Company through funds under its management. He brings significant international experience in private equity and investment management. A Managing Director at Rhône Capital since 2011, he has been with the firm since 2004 and has played a key role in a wide range of investments across the business services, consumer, energy, and industrial sectors. Prior to joining Rhône, he worked in the mergers and acquisitions division of Citigroup.

Rhône has a long-standing relationship with RHI Magnesita and was previously a key shareholder in Magnesita prior to the formation of the combined Group. As a strategic minority investor, Rhône brings deep sector knowledge and has expressed strong support for RHI Magnesita’s growth strategy, including its focus on total heat management solutions, backward integration, and sustainability leadership.

Chairman of the Board, Herbert Cordt commented: “We look forward to welcoming Franz-Ferdinand onto the Board of RHI Magnesita and benefitting from his extensive experience.”

Franz-Ferdinand holds Master’s degrees in Management from ESCP-EAP and in Finance from the London Business School, both with distinction. Earlier in his career, he served as a second lieutenant in German Army Intelligence.

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Q3 trading

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

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

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

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

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

Strong operational delivery combined with new product offerings

4PRO – more than products and services

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

Green steel contract wins

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

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

Process optimisation

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

M&A update

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

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

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

Financial position

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

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

2024 outlook

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

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

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

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

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

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

Stefan Borgas, Chief Executive Officer, said:

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

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

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

For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E‐mail: chris.bucknall@rhimagnesita.com

Media:
Hudson Sandler
Mark Garraway, Emily Dillon, Nick Moore
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com

About 4PRO: Advancing sustainability and innovation in refractory solutions

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

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

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

• Performance: Pushing the boundaries of innovation and resilience by designing products and services that withstand extreme temperatures, enhancing operational efficiency and durability.
• Partnership: Strengthening collaborative relationships with clients and industry stakeholders to drive change, exchange knowledge, and redefine the future.
• People: Upholding a commitment to safety, continuous development, and corporate social responsibility, fostering an environment where our people can thrive.
• Planet: Actively pursuing a sustainable world through low-carbon initiatives and circular economy principles that reduce environmental impact and promote resource efficiency.

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

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

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Katarina has an extensive international career focusing on operational transformation through continuous improvement, and on the value-chain, at both executive and board level. She has held positions in Sweden and Japan at Volvo Group, as well as roles at Munters AB in Sweden and Hempel A/S in Denmark.

Chairman of the Board, Herbert Cordt commented: “We are delighted to formally welcome Katarina to our Company. Katarina has been attending Board meetings in an observer capacity since November 2023 and we can already see the value that her skills and expertise, particularly in operations, is bringing to the Company.”

Katarina commented: “I have enjoyed the opportunity to get to know RHI Magnesita in the last few months and I am looking forward to further bringing my operational knowledge and experience to the Board to steer the RHI Magnesita Group in realising their aspirations.”

With the appointment of Katarina, RHI Magnesita’s Board of Directors now numbers 15 members.

The post RHI Magnesita appoints Katarina Lindström as a Non-Executive Director appeared first on RHI Magnesita.

RHI Magnesita, the leading global supplier of high-grade refractory products, systems and solutions, today provides an update on trading for the three months to 31 March 2024 (“Q1”).

The trading outlook for 2024 remains in line with the guidance issued at the 2023 full year results and the Group is on track to meet analyst consensus expectations for 2024.

Q1 trading

As expected, continuing weakness in the key end markets of construction and transportation resulted in subdued customer demand during the first quarter, with weaker sales volumes and lower pricing as expected, offset by M&A.

EBITA margin was in-line with the guidance for c.11% for 2024. The EBITA contribution from the Group’s raw material assets remained at a very low level, due to weak market prices for refractory raw materials, in line with the expected contribution of approximately 1.0 ppt of EBITA margin for the year as a whole.

Green steel contract award

In April 2024 RHI Magnesita was awarded a major new contract for the design and supply of refractory linings for two DRI Open Bath furnaces (“DRI-OBF”) to be installed by SMS group as the original equipment manufacturer (“OEM”) as part of Thyssenkrupp’s flagship €2 billion, 2.3 Mtpa green steel project at its Duisburg site in North Rhine-Westphalia, Germany. The Duisburg project will produce steel from 2027, initially using natural gas for direct reduction of iron ore and subsequently, through the use of hydrogen, reducing CO₂ emissions to close to zero. RHI Magnesita’s contract as the refractory supplier to the OEM represents material new project revenue and validation of the Group’s strategy to position itself as the leading supplier of refractory linings and services for OBF, EAF and BOF converters, which are expected to be essential for the large-scale adoption of green steel production globally.

Financial position

Net debt reduced slightly from the €1.3 billion level reported at the 2023 year end and leverage (Net Debt : Pro Forma Adjusted EBITDA) remained stable at 2.3x. The acquisition of Resco Group will be partially funded by a new €200 million syndicated term loan.

Working capital was at similar levels to the 2023 year end. Working capital intensity increased slightly due to lower revenues in Q1 compared to the prior quarter. Guidance for working capital intensity of c.24% at the 2024 year end is maintained.

M&A update

The Group announced its intended acquisition of Resco Group on 29 March 2024, for an enterprise value of up to $430 million. Completion of the transaction, which is conditional on US merger control approval, is expected to occur in H2 2024. The proposed acquisition of Resco continues the Group’s strategic growth trajectory in alumina-based refractories and in industrial application segments. The transaction will increase RHI Magnesita’s local production footprint in the US and Canada, thus responding to long standing customer wishes. Supply chain, production network, logistics and working capital improvements will also be implemented.

The Group has completed nine other acquisitions in the period since December 2021 and the integration of each of these is proceeding in line with expectations. The Group continues to expect an Adjusted EBITDA contribution in 2024 of approximately €80 million, from acquisitions made in 2023, which excludes Resco.

Outlook

The Group continues to manage key operational and commercial disciplines closely, including its pricing, costs, production planning, inventories and customer credit exposures through a period of cyclically weaker demand. Low plant utilisation and consequent under-absorption of fixed costs create favourable conditions to increase output into a recovery, with significant operational gearing benefits to be realised once customer demand returns. The timing of such recovery remains uncertain and is not yet evident in customer behaviour. Weaker volumes and pricing in the industrial segment, following a strong performance from the industrial business in 2023, are expected to be offset by modest growth in steel production in non-China markets in 2024.

Stefan Borgas, Chief Executive Officer of RHI Magnesita, said:

“RHI Magnesita is navigating a challenging demand landscape whilst progressing its strategic priority to grow through consolidation in the fragmented global refractory industry. Our broad addressable market extends to all high temperature steel and industrial processes and we have expanded our business via a counter-cyclical M&A programme in alumina-based refractories, industrial market segments and other product areas and geographies where we have previously been under-represented. We are the clear market leader in India, the fastest growing refractory market in the world.

The Group has now committed approximately €1 billion of capital to acquisitions since December 2021, including its recently announced intention to acquire Resco Group. We are continuing to invest in our global production network and digital systems to maintain our leadership position in innovation, services and sustainability. Whilst the timing of recovery in other markets is hard to predict and not yet evident, we are confident of being well positioned to meet any increase in customer demand, with significant operational gearing and vertical integration upside potential in the event of a recovery.”

Conference call

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

AGM

Further to the Notice of Meeting issued on 21 March 2024, the Company will hold its Annual General Meeting (“AGM”) today at 14:00 CET. Voting results from the AGM will be made available shortly after the meeting.

For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E‐mail: chris.bucknall@rhimagnesita.com  

The post Q1 Trading Update appeared first on RHI Magnesita.

About Resco

Resco is a producer of shaped and unshaped refractories, including products for use in the petrochemical, cement, aluminium, and steel making industries. Resco operates seven plants and two raw material sites in the US and two plants in the UK and Canada. Resco’s Rescobond and Rescocast brands are widely used in refining and petrochemical applications by global customers.

Resco is currently owned by Balmoral Funds, a $1.5 billion assets under management California-based private equity RIA focusing on investments in industrials, business services, aerospace and logistics businesses with complex operations and/or ownership dynamics, such as corporate divestitures.

Resco recorded unaudited revenues of $252 million in the year to 31 December 2023, with Profit before Tax of $20 million and had Gross Assets of $191 million at 31 December 2023.

Logic of the Acquisition

Currently approximately 50% of RHI Magnesita’s US sales are not produced in the country. The Acquisition will increase RHI Magnesita’s local production in the US and Canada by transferring significant volumes of production from non-US plants to the Resco production facilities in the US. Based on customer feedback, we are taking steps to improve supply chain security, reduce production lead times and stabilise working capital. This acquisition continues the Group’s strategic growth trajectory in alumina-based refractories by providing US customers with an improved product offering.

Synergies will be created in the mid-term following the restructuring of the combined supply chain, which is expected to last approximately two years and will create one time costs of €60 million, including restructuring efforts in non-US plants. Synergies are expected to be generated through supply chain improvements, production network optimisation, working capital reduction, logistics efficiencies, supply integration, technology transfer, increased recycling opportunities and procurement savings.

Timing and financial impact

The acquisition is subject to customary closing conditions including merger control authority approval and is expected to be completed in H2 2024. In connection with the Acquisition, RHI Magnesita has agreed to pay a deposit of $18 million, offsetable against the consideration payable, which shall be non-refundable in the event the deal does not complete. In addition, the Group has agreed to make certain ticker payments, related to the achievement of certain triggering events or completion conditions. The first of these is a monthly payment of $2 million, running to a maximum of 18 months from signing, which will, to the extent payable, increase the consideration for the Acquisition on a dollar-for-dollar basis. There is another payment of $12 million which is payable upon signing, but offsetable against the consideration payable at completion and fully refundable in the event the deal does not complete, unless certain conditions are met.

Following completion, Group gearing measured as a ratio of Net Debt to EBITDA is expected to increase by approximately 0.3x to 2.6x on a pro forma 2024 EBITDA basis (2023: 2.3x). This is consistent with previous guidance on leverage for M&A. The cash consideration for the Acquisition is expected to be approximately $324 million (with an upper cap of approximately $342 million if completion extends 18 months beyond signing) and will be funded by RHI Magnesita’s existing liquidity, together with a new committed facility of €200 million. The Group had available liquidity of €1.3 billion at the 2023 year end and will continue to maintain a significant liquidity reserve going forwards.

Commenting on the Acquisition, Stefan Borgas, Chief Executive Officer of RHI Magnesita, said:

“I am pleased to report that the acquisition of Resco represents a step-change for our US business and our North American production footprint. The acquisition advances our ‘local for local’ production strategy and will shorten supply chains, improve our speed of reaction and increase the security of supply of refractories for our customers. We are listening to our customers and responding to their desires. Resco’s main strengths are in the petrochemical, cement and aluminium industries, where RHI Magnesita has had very little business thus far, and its activities in steel making are complementary to those of RHI Magnesita. Resco operates seven refractory plants and two raw material sites, with two plants also located in the UK and Canada.

Resco has an excellent reputation with its customers and is a profitable and cash flow generative business which will make an important financial contribution to our Group. We have been nothing but impressed with the professional people that we have met throughout the entire Resco and Balmoral organisations, especially in operations and we are keen to welcome Resco into the RHI Magnesita Group and provide global career opportunities. I am confident that the combined team will set new industry standards.”

A&O served as RHI Magnesita’s legal advisor.

Conference call

A conference call for analysts will be held on Tuesday 2 April 2024 at 09:00 UK time (10:00 CET). The call can be accessed using the following link:

https://www.netroadshow.com/events/login?show=63d2e2a7&confId=62970

A replay will be available on the same link shortly after event.

For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E‐mail: chris.bucknall@rhimagnesita.com

Media:
Hudson Sandler
Mark Garraway, Emily Dillon, Nick Moore
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com

About RHI Magnesita

RHI Magnesita is a 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 16,000 employees in 47 production sites, 8 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

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

Continued progress in M&A activities

On 3 October 2023, RHI Magnesita completed its acquisition of P-D Refractories, a European producer of high quality alumina-based refractories for industrial applications in process industries, with revenues of €171 million in the year to 31 December 2022. The Group has now completed a total of nine acquisitions in the last 24 months, as it executes on its strategy to consolidate small and medium sized businesses in its target geographies and product segments.  

Q3 trading

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

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

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

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

Outlook

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

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

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

Read more about RHI Magnesita’s Q3 trading update in the RNS.

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Q1 trading

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

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

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

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

Financial position

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

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

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

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

M&A progress

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

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

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

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

Outlook

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

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

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

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

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RHI Magnesita today announces the acquisition of a majority shareholding in Jinan New Emei Industries Co. Ltd. (“Jinan New Emei”), a leading producer of refractories in China. The acquisition will enable RHI Magnesita to expand its product range in steel flow control refractories and its solutions contract offering in the Chinese domestic market, both of which are key strategic priorities. The acquisition will also give access to substantial new customer relationships in China and deliver additional production capacities for increasing supply of refractories in both China and the wider East Asia region.

Jinan New Emei is a leading producer of refractory slide gate plates and systems, nozzles and mixes for use in steel flow control, employing over 1,300 people and headquartered in Shandong province, China. A state-of-the-art, fully automated new plant with an annual production capacity of up to 80,000 tons has recently been commissioned at Laiwu in Shandong province, thus marking a main asset of the acquisition. RHI Magnesita expects substantial synergy realization opportunities from the combination of Jinan New Emei with RHI Magnesita’s existing refractory business in China.

Commenting on the acquisition, Stefan Borgas, CEO of RHI Magnesita, said: “This transaction represents an important step in the development of our flow control refractory business in China and is directly aligned with our stated strategy to grow through consolidation in fragmented new markets where we are currently under-represented. China is the largest steel market in the world, accounting for over 50% of global production, and the addition of Jinan New Emei to our existing Chinese operations will broaden our product and solutions contract offering for our steel customers, enabling us to better serve our domestic customers in China and the wider East Asia region.”

Marco Olszewsky, President of RHI Magnesita China and East Asia, added: “We are excited that Jinan New Emei, as a market leader and trusted long-term business partner, will complement our China steel product portfolio and strengthen our full line service offerings. This acquisition is a key milestone for us to deliver our strategy. We are ready to grow our business, leveraging substantial synergies to capture more market share in the world’s largest steel market.”

Li Qinglin, Owner of Jinan New Emei, commented on the transaction: “RHI Magnesita is a global leader in the refractory market with a strong worldwide network and deep-rooted footprints in China and East Asia. The focus on serving customer with quality products with high level of automation and innovation in China and East Asia is fully aligned with our strategy. Becoming part of RHI Magnesita’s network will drive better synergies and collaboration within the organization.”

RHI Magnesita will initially acquire a majority shareholding in Jinan New Emei. The acquisition is subject to competition authority clearance.

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