11 November 2024
RHI Magnesita N.V.
("RHI Magnesita" the
"Company" or the "Group")
Q3 2024 TRADING UPDATE
Strong execution in exceedingly
challenging demand environment
RHI Magnesita, the leading global supplier of
heat management solutions, today provides an update on trading for
the three-month period ended 30 September 2024
('Q3').
Q3
trading
Revenues in the nine months to 30
September were in line with the prior year period, with the
contribution from M&A offsetting expected softness in pricing
and lower sales volumes than expected, due to ongoing weak customer
demand. Customer demand remains subdued in all markets except
India.
Q3 year-to-date sales volumes
including M&A increased by 3% year-on-year. Q3 2024 sales
volumes were up 2% on Q2 2024.
Pricing pressure continued in Q3 as
forecast, with year-to-date pricing now 4% lower compared to the
prior year, in line with guidance for a decline of up to 5% in
2024, reflecting lower input costs for the industry with
competitors becoming increasingly aggressive on pricing as a
result.
Whilst year on year input costs are
lower, some externally purchased raw material costs have increased
during H2 due to higher prices for both alumina based material and
electrofused magnesia, with additional increases announced by
suppliers for 2025. This will increase cost of goods sold in Q4 and
2025. A price increase programme has been implemented to maintain
margins.
Adjusted EBITA in Q3 was in line
with the levels reported in Q1 and Q2, as cost saving initiatives
and operational efficiencies offset lower refractory prices and
fixed cost under-absorption, to deliver an Adjusted EBITA margin
slightly higher than the 11.0% guided for the full year. The EBITA
margin contribution from vertical integration remained at a record
low of 0.8% whilst refractory margins remained at record
highs.
Strong operational delivery combined with new product
offerings
4PRO - more than products and services
RHI Magnesita has continued to
upgrade its customer offering with advanced products, automation
and sustainability options being made available via tailored and
digitalised solutions contracts. Re-branded under '4PRO', the new
offering is gaining traction with customers seeking efficiency
gains and quality improvements across all regions.
Green steel contract wins
The Group is continuing to win
further new business with OEMs for refractory applications in green
steel production. Such contracts represent material new project
revenue and validation of the Group's strategy to position itself
as the leading supplier of refractory linings and services for
Direct Reduction, Open Bath, Electric Arc and Basic Oxygen
furnaces, which are expected to be essential for the large-scale
adoption of green steel production globally.
Customers respond positively to the
continuous improvement of the offering as measured by net promoter
scores and PIFOT ("Produced in full and on time") metrics, which
increased to record highs in Q3.
Process optimisation
A restructuring and upgrade of the
Group's shared service centre network is being implemented with the
aim of delivering further service improvements for customers,
broader career opportunities for employees and SG&A savings for
the company. To achieve this, RHI Magnesita is transferring the
majority of its global shared services operations to Capgemini, a
global leader in process design, digital transformation and shared
services operations. Capgemini's operations will support the Group
in the implementation of the new ERP system which is scheduled to
take place between mid 2025 and mid 2027.
M&A update
No new M&A transactions were
agreed or completed during Q3.
The Group's intended acquisition of
Resco Group for an enterprise value of up to $430 million, remains
subject to Second Phase Review by US merger control authorities.
Completion of the transaction is now expected to occur in Q1
2025.
M&A transactions completed in
2023 are broadly on track to achieve the 2024 guidance of €80
million contribution to Group Adjusted EBITDA.
Financial position
Cash conversion remained strong at
96% in the year to date, as further modest working capital
reductions were realized, mainly resulting from lower input costs.
Working capital intensity increased to 26% ahead of the seasonal
uplift in Q4 cement sales but is on track to reduce to the guided
level of approximately 24% by the year end.
Net debt remained at a similar level
to that reported at the 2024 Half Year results. Gearing measured as
a ratio of net debt to Adjusted EBITDA is expected to be within the
target range of 2.0-2.5x at the year end.
2024 outlook
Sales volume guidance for 2024 was
previously for the base business to remain flat, with M&A
increasing shipped volumes by up to 10%. Following weaker than
expected demand, sales volumes are now expected to be around 5%
higher in 2024 compared to the prior year, including the
contribution from M&A and with a slight decline in the base
business.
An increase in profitability and
margins in Q4 is expected due to normal seasonality of the cement
business, the timing of project deliveries in the Industrial
segment and cost benefits from efficiency programmes.
Whilst 2024 revenues and profits
have been severely impacted by continued weak customer demand, a
strong focus on execution has enabled the preservation of EBITA
margins slightly above guidance of 11.0% in the year to
date.
Adjusted EBITA for 2024 is expected
to be between €400 million and €410 million, taking into account
year-to-date performance and no further customer delays in
deliveries scheduled for Q4.
Supported by favourable foreign
exchange movements, Adjusted EPS is expected to be in line with the
current analyst consensus of €5.00 per share.
The Group remains well positioned
for a recovery in customer production volumes whenever it may
occur. Such a change has the potential for significant upside from
operational gearing and recovered raw material margin
contribution.
Stefan Borgas, Chief Executive
Officer, said:
"RHI Magnesita has delivered another
resilient performance in difficult market conditions in the midst
of a global industrial recession, now in its third year. A strong
step-up in earnings is required in the fourth quarter to achieve
EBITA guidance. Such step-up was expected earlier but has
repeatedly been delayed to due to very weak customer demand. The
normal seasonal upturn in cement and the timing of key industrial
project deliveries however support a stronger Q4 compared to the
first nine months of the year.
In India, mid-term demand outlook
looks now a notch softer than expected six months ago. Outside of
India, we are not seeing any catalyst for a near-term recovery in
customer demand. The restructuring of heavy industry and the
construction sector inside China will take time, meanwhile
structural oversupply is likely to continue to impact global steel
markets negatively.
RHI Magnesita's strategy to seek
earnings growth through value-accretive M&A and improved
operational performance does not rely on organic growth in our
underlying markets. We see a broad addressable market and long
lasting opportunity to continue our inorganic growth strategy,
without adding new greenfield capacity to a global market which is
already over-supplied, even in the few growth
geographies."
Conference Call
A conference call will be hosted at
8:15am UK time to discuss the trading update:
For further enquiries, please
contact:
Chris Bucknall, Head of Investor
Relations
Tel +43 699 1870 6490
E‐mail:
chris.bucknall@rhimagnesita.com
Media:
Hudson Sandler
Mark Garraway, Emily Dillon, Nick
Moore
Tel +44 020 7796 4133
E-mail:
rhimagnesita@hudsonsandler.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 1,200°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
over 20,000 employees in 67 main production sites (including
raw material sites), 12 recycling facilities 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 is listed within the
Equity Shares (Commercial Companies) category ("ESCC") of 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
About 4PRO: Advancing sustainability and
innovation in refractory solutions
RHI Magnesita, the global leader in
refractory products and solutions, proudly introduces "4PRO", a new
refractory solutions contract model. The transformative business
model is designed to lead high-temperature industries like steel,
cement, glass, non-ferrous metals towards a sustainable and
technologically advanced future through a more holistic and
contemporary approach.
Reflecting RHI Magnesita's mission
to master heat for enabling modern industries to build a
sustainable world, 4PRO goes beyond traditional refractory
offerings. With this new approach, the company delivers advanced,
high-performance solutions while addressing critical sustainability
needs through innovation and strategic partnerships.
The 4PRO model encompasses four key
pillars that guide RHI Magnesita's commitment to excellence and
responsibility:
· Performance: Pushing the boundaries of innovation and
resilience by designing products and services that withstand
extreme temperatures, enhancing operational efficiency and
durability.
· Partnership: Strengthening collaborative relationships with
clients and industry stakeholders to drive change, exchange
knowledge, and redefine the future.
· People: Upholding a commitment to safety, continuous
development, and corporate social responsibility, fostering an
environment where our people can thrive.
· Planet: Actively pursuing a sustainable world through
low-carbon initiatives and circular economy principles that reduce
environmental impact and promote resource efficiency.
Under 4PRO, RHI Magnesita offers a
comprehensive suite of sustainable, technology-driven products and
services that are tailored to meet evolving industrial challenges.
Each solution category - from Sustainable Products and Robotics to
Systems, Sensors, and Digital Solutions - has been designed to
deliver tangible performance benefits while contributing to
sustainability and operational excellence. By integrating recycled
materials, automation, real-time monitoring, and digital platforms,
RHI Magnesita supports industries in optimizing high-temperature
processes with greater efficiency and lower environmental impact.
Further reinforcing its sustainability leadership, RHI Magnesita's
Decarbonization and Green Steel Solutions are pivotal for customers
working toward climate goals. Through innovations such as carbon
capture pilots, low-carbon materials, and refractory solutions that
support emission reductions, RHI Magnesita is setting the standard
for a greener industrial future.
Read more here:
https://www.rhimagnesita.com/4PRO/
