REG - RHI Magnesita N.V. - Q1 2024 Trading Update

RHI Magnesita NVAnnouncement

02/05/2024 07:00

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RNS Number : 9148M  RHI Magnesita N.V.  02 May 2024

2 May 2024

RHI Magnesita N.V.

("RHI Magnesita" or "the Group")

 

Q1 2024 TRADING UPDATE

 

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
CO(2) 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 iron, 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 €1.2 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 08:15 UK time to discuss the
trading update:

 Webcast (live and on-demand)  https://www.investis-live.com/rhimagnesita/661e88614cb0dd0c00780093/wgrkj
                               (https://url.de.m.mimecastprotect.com/s/KWZQC160QLCNxovrcL35hi?domain=investis-live.com)
 Dial in (listen only)         International:       +44 20 3936 2999

                               UK toll-free:         0800 358 1035

                               Access code:         382679
 Replay facility               International:       +44 20 3936 3001

                               UK toll-free:         0808 304 5227

                               Access code:         602383

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
(mailto:chris.bucknall@rhimagnesita.com)

 

Media:

Hudson Sandler

Mark Garraway, Emily Dillon, Nick Moore

Tel +44 020 7796 4133

E-mail: rhimagnesita@hudsonsandler.com (mailto: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 (http://www.rhimagnesita.com)

 

Glossary

 "BOF"  Basic oxygen furnace
 "DRI"  Direct reduced sponge iron
 "EAF"  Electric arc furnace
 "OBF"  Open bath furnace, electrically powered furnace for processing direct reduced
        sponge iron into hot metal before transfer to the basic oxygen furnace
 "OEM"  Original equipment manufacturer

 

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