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RHI Magnesita provided an update on trading for the first three months to 30 September 2023 (‘Q3’) on Tuesday, 31 October 2023. A call for investors and analysts took place on the day. The replay is available to view here.
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.
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.
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.