16. August 2018


Delivering Strong Operating Profits and Synergy Upgrades




  Adjusted Pro forma at constant currency
Financial Summary H1 2018 H1 2017 H1 2018 H1 2017
€m €m €m €m Change %
Revenue 1,508 855         1,508    1,210 24.6%
EBITA      229 64             218           116 88.2%
EBITA margin 15.2% 7.5% 14.5% 9.6% +490 bps
Profit before tax 97
Earnings per share 1.60
Net debt 741

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


  • 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

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.”

There will be an analyst presentation at 8.00am in the Minories Room at the Andaz Hotel, 40 Liverpool St, London, EC2M 7QN. For those unable to attend in person, a conference call will be available. Please visit the RHI Magnesita’s website

For further enquiries, please contact:

Guy Marks, Head of Investor Relations
Tel +44 (0) 7741 730681

Stefan Rathausky, Head of Corporate Communications
Tel +43 50213-6059

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:


RHI Magnesita’s first half results continue to reflect the positive trends seen in the H217, the benefits of our high level of vertical integration and synergies from the combination. Price increases drove revenue development, more than offsetting higher raw material input costs. Revenue for the six months to June 2018 was €1,508 million, 24.6% higher than the comparative period on a constant currency basis[1] (76.4% higher on a reported basis). Adjusted EBITA increased by almost 90% on a constant currency basis, to €218 million, with a 14.5% adjusted EBITA margin.


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.

Total one-time costs to implement the synergy opportunities above are expected to amount to between €110 million and €130 million (from previous guidance of €70 million), as costs to achieve the additional synergies are expected to be higher than 1:1. €53 million of the synergy costs were expensed in 2017 and €5 million in H1 2018. We expect to expense an additional €25 to €30 million in restructuring costs in the H2 2018 and the balance in 2019. Total cash disbursements are expected to be €75 million in 2018, of which €28 million have been paid out in H1 2018.



  Adjusted Pro forma at constant currency
Divisional Performance H1 2018 H1 2017
Steel  €m €m Change %
Revenue           1,094           846 29.3%
Gross profit            283          192 47.4%
Gross margin 25.9% 22.7% +320 bps

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

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.

Gross profit for the Steel division amounted to €283 million, 47.4% higher than the prior year. Gross margin stood at 25.9% in the H1 2018, 320bps higher than the previous year, as the segment benefitted from both RHI Magnesita’s raw material integration and increased sales volumes.

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.



  Adjusted Pro forma   at constant currency
Divisional Performance H1 2018 H1 2017
Industrial  €m €m Change %
Revenue           413         362 14.3%
Gross profit           98            81 21.0%
Gross margin 23.7% 22.3% +140 bps

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

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.

Gross profit for the Industrial division amounted to €98 million, 21.0% higher than the prior year. Gross margin stood at 23.7% in the H1 2018, 140bps higher than the previous year. Whilst margin developed positively, further improvement was held back by lower sales of high margin raw materials and lower sizeable project business, especially in EEC and Nonferrous metals.


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.

As anticipated, cash outlays for the merger and restructuring expenses provisioned in 2017 amounted to €49 million in the first half (including €6 million of capital expenses for the issue of shares, which was accounted for in equity in 2017). Net interest payments on net debt and refinancing costs amounted to €35 million in the period and should decrease considerably moving forward after the previously announced planned Perpetual Bond redemption on 20 August 2018. Income tax paid amounted to €35 million for the period, with a cash tax rate of 36%. However, the effective tax rate (ETR) was 27% with prepaid income tax and other timing mismatches accounting for the difference between cash flow and the income statement. The full-year cash tax rate and ETR are expected to be between 25% – 30%.

Cash Flow H1 2018
Adjusted EBITA        218
Working capital            -85
Changes in other assets/liabilities -15
Capital expenditures -35
Depreciation 53
Operating cash flow 136
Income tax -35
Net interest expenses -35
Restructuring/transaction costs -49
Free cash flow1 17

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


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.

Capitalisation Table H1 2018
Schuldscheindarlehen          221
OeKB term loan              306
Perpetual bond 128
Other loans and facilities 496
Total gross indebtedness 1,151
Cash, equivalents and marketable securities 409
Net debt 741


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.


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.

The Integrated Tender Offer for the remaining shares in Magnesita is expected to be completed during H2 2018. As set out in Note 5 of the Financial Statements below, the Group expects substantially all of Magnesita’s minority shareholders to tender their shares and opt for the cash plus shares consideration. If 100% of Magnesita’s minority shareholders tender their shares and elect for the cash plus shares consideration option, the Group will disburse R$455.6 million, adjusted by SELIC (the Brazilian benchmark interest rate) from 26 October 2017 until the date of the settlement of the auction of the Integrated Tender Offer, and issue an additional 5,000,000 shares.


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.


The Group has an established risk management process based on a formally approved framework and regular risk surveys among functional and operational managers aiming at systematically identifying, assessing and mitigating risks and uncertainties in the Group. Material and major risks with potential high impacts on the Group, its results or its ability to achieve its strategic objectives are reviewed regularly by the Board.

The risks considered by the Board to be the principal ones are presented in the 2017 Annual Report which is available on the Group’s website at Those risks were reviewed in the course of the regular risk survey and were found to be still relevant for the second half of the financial year: Macroeconomic environment and condition of customer industries, fluctuations in exchange rates and energy prices, volatility of raw material prices, business interruption and supply chain, regulatory and compliance risks, environment, health & safety, risks related to the merger. The board believes that the level of uncertainty regarding the future development of the macroeconomic environment has increased since we presented the 2017 Annual Report due to recent geopolitical events and the adoption of new trade barriers and tariffs by several countries.

The risks may occur independently from each other or in combination. In case they occur in combination their impact may be reinforced. Also, the Group is facing other risks than the one mentioned here, some of them being currently unknown or not considered to be material.


The Group has considerable financial resources together with long-standing relationships with a number of customers, suppliers and funding providers across different geographic areas and industries. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is able to operate within the level of its current bank facilities without needing to renew facilities expiring in the next 12 months. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the uncertainties inherent in the current economic outlook.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Interim Financial Report.


APMs used by the Group are reviewed below to provide a definition and reconciliation from each non-IFRS APM to its IFRS equivalent, and to explain the purpose and usefulness of each APM.

In general, APMs are presented externally to meet investors’ requirements for further clarity and transparency of the Group’s underlying financial performance. The APMs are also used internally in the management of our business performance, budgeting and forecasting.

APMs are non-IFRS measures. As a result, APMs allow investors and other readers to review different kinds of revenue, profits and costs and should not be used in isolation. Other commentary within the preliminary announcement, including the other sections of this Finance Review, as well as the Condensed Consolidated Financial Statements and the accompanying notes, should be referred to in order to fully appreciate all the factors that affect our business. We strongly encourage readers not to rely on any single financial measure, but to carefully review our reporting in its entirety.

Adjusted Pro-forma Results at a Constant Currency (unaudited)

Adjusted pro-forma results were prepared as if the combined Group had existed since 1 January 2016 and before the impact of Items such as: divestments, restructuring expenses, merger-related adjustments and other non-merger related other income and expenses, which are generally non-recurring. Pro forma results have also been adjusted to reflect the preliminary purchase price allocation (PPA) related to the acquisition of Magnesita.

Given the changes in capital structure arising from the acquisition of Magnesita, the historical interest, tax and dividend charges are not deemed to be meaningful. As a result, adjusted pro-forma results have only been provided down to EBITA.

Adjusted EBITDA and EBITA

To provide further transparency and clarity to the ongoing, underlying financial performance of the Group, adjusted EBITDA and EBITA are used. Both measures exclude other income and expenses, which contains divestments, restructuring expenses, merger-related adjustments and other non-merger related other income and expenses, which are generally non-recurring.

Operating Cash Flow and Free Cash Flow

We present alternative measures for cash flow to reflect net cash inflow from operating activities before exceptional items. Free cash flow is considered relevant to reflect the cash performance of business operations after meeting usual obligations of financing and tax. It is therefore a measure that is before all other remaining cash flows, being those related to exceptional items, acquisitions and disposals, other equity-related and debt-related funding movements, and foreign exchange impacts on financing and investing activities.

Net Debt

We present an alternative measure to bring together the various funding sources that are included on the Group’s Condensed Consolidated Balance Sheet and the accompanying notes. Net debt is a measure to reflect the net indebtedness of the Group and includes all cash, cash equivalents and marketable securities; and any debt or debt-like items, including any derivatives entered into in order to manage risk exposures on these items.


The Directors of the Company, which are listed in the Governance section of the 2017 Annual Report, hereby declare that, to the best of their knowledge:

  • This condensed set of interim financial statements for the six-month period ended 30 June 2018, which have been prepared in accordance with IAS 34 “Interim Financial Reporting”, as issued by the International Accounting Standard Board and adopted by the European Union gives a true and fair view (“getrouw beeld”) of the assets, liabilities, financial position and profit or loss of RHI Magnesita and the joint enterprises included in the consolidation; and
  • the interim management report gives a fair review of the information required pursuant to regulations 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules (DTR) issued by the UK Financial Conduct Authority and section 5:25d paragraphs 8 and 9 of the Dutch Act on Financial Supervision.

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