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RHI Magnesita announced its results for the first half of 2023 on Wednesday, 26 July 2023. A call for investors and analysts took place on the day. The replay is available to view here.
RHI Magnesita, the leading global supplier of refractory products, systems, and solutions, today announces its results for the first half year 2023. The company experienced challenging conditions, with low demand volumes in the steel market in all geographies except India. However, the resilient nature of RHI Magnesita’s business model and the strength of the company’s strategy, combined with improved pricing and strong contribution from recent acquisitions, have offset these headwinds. This resulted in a strong revenue and earnings performance in the first half of the year. At the same time, RHI Magnesita has again extended its track record in delivering stable EBITA margins and cash generation throughout a tough economic cycle.
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In 2023 year to date, RHI Magnesita has completed five acquisitions, and eight in the last 20 months. Taken together, these acquisitions generated €19 million of EBITDA in the first half, with around €40 million being expected for the full year. Every asset acquired brings a range of complementary attributes to the company’s global network while also building a broader product portfolio, generating network efficiencies and gaining proximity to customers, thus resulting in an enhanced customer service and experience.
In India, which is the fastest growing major refractory market in the world, RHI Magnesita reports strong progress: Two strategic businesses that will be highly beneficial to RHI Magnesita’s customer offering have been acquired, being Dalmia Bharat Refractories and Hi-Tech. This has resulted in an increase in the size of our India plant network from three to nine sites, spread out across the country in areas where RHI Magnesita was not present before. The merger with Dalmia Bharat rebalances the presence in India towards the industrial segment. Hi-Tech increases the flow control offering through the recently constructed and modernised plant in Jamshedpur. RHI Magnesita is now well positioned to provide the refractory products and services that India will need in the coming years from local supply chains. This will reduce the country’s reliance on imports of refractories which are higher cost and bring logistical and working capital challenges.
RHI Magnesita has also made excellent progress in other target geographies such as China, where the company has made another significant flow control acquisition, Jinan New Emei.
While acquisitions are a key source of growth, RHI Magnesita also continues to execute on its strategy to grow sustainably. The company’s recycling activities are a core pathway to reduce the CO2 emissions intensity of the entire industry. The rate of use of secondary raw materials has continued to increase, and now stands at 13% (H1 2022: 9.3%). RHI Magnesita is continuing to take its recycling activities to the next level, as well as working on the next stages for using alternative fuels and how to meet the challenge of capturing and sequestering unavoidable process emissions.
RHI Magnesita continues to invest in its production facilities and raw material plants to create a technically advanced and cost-competitive footprint with a localised supply chain. At the company’s facilities in Dalian, China, and Radenthein, Austria, RHI Magnesita now is in the final stages of implementation of the new Manufacturing Execution System, which is the final stage in the implementation of RHI Magnesita’s Production Optimisation Plan at these sites.
Commenting on the results, Stefan Borgas, CEO RHI Magnesita, said: “In the first half of the year we continued to experience challenging conditions in the steel market as a result of low demand volumes in all geographies with the exception of India. However, I am pleased to report that the resilience of our business model and strategy has been demonstrated by strong pricing, sector diversification, the delivery of material benefits from our strategic sales initiatives and a growing contribution from acquisitions. We have generated free cash flow of €167 million compared to an outflow of €146 million in H1 2022 and we are now on course to deliver full year EBITA of at least €360 million with a margin of between 10.5% and 11.5%. This is higher than we expected at the beginning of this year, but with the benefits from lower input costs eroded by fixed cost under-absorption due to low production volumes. Five acquisitions completed in 2023 year to date have been funded through operating cash flows and an equity raise in India, enabling us to reduce gearing to 2.1x pro forma EBITDA, in line with our targeted range. We are continuing to progress the transformation of our business and the delivery of our strategy, despite the challenging overall demand conditions.”
The outlook for RHI Magnesita’s key end markets and consequently customer volumes remains uncertain. Order books suggest continued weakness in the second half of 2023 while pricing pressure from competitors is also expected. On the cost side, the refractory industry as a whole has seen a reduction in the key input costs of raw materials, energy and freight, but RHI Magnesita faces the challenge of absorbing fixed costs across lower production volumes. This will keep unit costs at close to their previous levels during the high cost inflation period.
RHI Magnesita faces these challenges with a much more efficient network and processes than four years ago when the company embarked upon its production optimization plan. At the same time, the Group can deliver growth through its ambitious M&A strategy, even during a downturn in its customer markets. RHI Magnesita will continue to progress the transformation of its business and the delivery of its strategy. The investments which have been made throughout the last years, including the rationalisation and modernisation of the company’s assets globally, underpin the strong performance of the first half of 2023 and leave the Group well positioned for the remainder of the year.
About RHI Magnesita
RHI Magnesita is the leading global supplier of high-grade refractory products, systems and solutions which are critical for high-temperature processes exceeding 1,200°C in a wide range of industries, including steel, cement, non-ferrous metals and glass. With a vertically integrated value chain, from raw materials to refractory products and full performance-based solutions, RHI Magnesita serves customers around the world, with around 15,000 employees in 47 production sites, 7 recycling facilities and 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
For further enquiries, please contact:
Head of Corporate Communications and Public Affairs
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