TIDMRHIM
RNS Number : 5012Y
RHI Magnesita N.V.
05 May 2023
RHI Magnesita N.V.
("RHI Magnesita" the "Company" or the "Group")
Q1 2023 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 2023 ('Q1').
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 EUR101 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 EUR155 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 EUR5
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
EUR1.2 billion. This follows the April 2023 placement of EUR170
million of ESG-linked Schuldschein bonds and the refinancing of a
EUR150 million Term Loan with UniCredit Bank Austria AG. The Term
Loan was increased in size from its previous level of EUR115
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 EUR40 million was agreed on 13 January and
completed on 28 April 2023. The acquisition of Dalmia GSB
Refractories, Germany for a cash consideration EUR13 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 EUR93 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."
Conference Call
A conference call will be hosted at 8:15am UK time to discuss
the trading update:
Dial in +44 203 936 2999 or 0800 358 1035 (UK
only)
Access code 328251
Webcast and playback LINK
facility
For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E--mail: chris.bucknall@rhimagnesita.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 1,200degC 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 13,500
employees in 33 main production 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
benefitting from more dynamic economic growth prospects.
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 prime segment
of the Vienna Stock Exchange (Wiener Börse). For more information
please visit: www.rhimagnesita.com
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