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EUR 36,50 [10/16/2017 18:45]

Report Q2-2017

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Annual Report 2016

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RHI and Magnesita to combine to create a leading refractory company

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Financial Key Figures

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Company Presentation

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Results of the first half of 2017

Thu Sep 14 07:30:00 CEST 2017

  • Positive economic environment strengthens business development

  • M&A costs and currency effects weigh on margins

  • Adjusted operating EBIT exceeds first half of 2016

In the first half of 2017, the RHI Group’s revenue was up 3.1% on the comparative period of 2016 and amounted to € 855.8 million. Revenue of the Steel Division rose by 2.9%, among other things thanks to a positive business development in the US. The increase in revenue by 2.0% in the Industrial Division is among other things due to higher project deliveries of the glass business unit and a satisfactory repair business in the cement/lime business unit.

Stefan Borgas, CEO of RHI and designated CEO of RHI-Magnesita, comments on the half-year result: “In the first half of the year, we got many issues on the right track, even though the figures were somewhat mixed due to one-off effects. We expect a strong third quarter and are confident to achieve the goals we set.”

The operating EBIT amounted to € 59.0 million in the first half of 2017 after € 70.2 million in the first half of 2016 and includes external costs of € 12.6 million related to the planned combination of RHI and Magnesita as well as negative currency effects of € 9.2 million resulting from the measurement of balance sheet items. Adjusted for these two effects, the operating EBIT amounts to € 80.8 million in the first half of 2017, which corresponds to a margin of 9.4%. This positive development is among other things attributable to a more favorable market environment in many customer industries, the associated improved order situation and the resulting higher utilization of production capacities. The higher raw material costs resulting from a shortage of supply could so far not be fully passed on to customers.

EBIT amounted to € 49.6 million in the first half of the year and includes impairments of € 5.5 million as a result of the planned sale or closure of the plant in Aken, Germany. The imminent sale of the Italian San Vito plant and the Russian Podolsk plant, which produce fused cast refractories for the use in the glass industry led to impairments of € 1.7 million. The negative net effect from the power supply contract in Norway of € 1.2 million resulting from declining electricity future prices also had a negative impact on EBIT. In addition, restructuring costs of € 1.0 million related to changes in the product portfolio at the site in Porsgrunn, Norway, were incurred in the first quarter of 2017.

Net cash flow from operating activities amounted to € 39.8 million in the first half of 2017 after € 76.7 million in the same period of 2016. Net cash flow from investing activities amounted to € (4.8) million in the first half of 2017 after € (17.1) million in the first half of 2016. Free cash flow thus amounted to € 35.0 million in the first half of 2017 after € 59.6 million in the comparative period of 2016.

Development in the second quarter of 2017
In the second quarter of 2017 the RHI Group’s revenue increased by 4.3% compared with the preceding quarter and amounted to € 437.0 million. This increase is due to higher contributions to revenue by both the Steel Division and the Industrial Division. Here, revenue growth is above all attributable to the start of the maintenance season in the oil and gas segment in North America as well as in Europe.  

The operating EBIT amounted to € 21.1 million in the past quarter compared with € 37.9 million in the first quarter of 2017 and includes external costs of € 8.8 million related to the planned combination of RHI and Magnesita as well negative currency effects of € 5.6 million resulting from the measurement of balance sheet items. Adjusted for these two effects, the operating EBIT amounts to € 35.5 million in the second quarter of 2017, which corresponds to a margin of 8.1%.

Outlook
In its forecast published in July 2017, the International Monetary Fund predicts global economic growth of 3.5% in the current year after 3.2% in the year 2016. However, there is considerable uncertainty regarding the impact of the policies of the newly elected US government. Although the environment in the advanced economies improved, especially in Europe, the pace of growth in the emerging markets will continue to influence the global economy to a significant extent. Based on a current study, the research institute CRU expects a decline in steel production in China by roughly 1% in the year 2017 and an increase in steel production outside China by 4%. Based on these estimates, RHI expects a more positive market environment in 2017. The focus will stay on the generation of free cash flow in the current financial year in order to reduce net debt further. Due to the preparations for a successful completion of the planned combination with Magnesita and the integration of the two companies, external costs will be incurred.

Closing of the combination with Magnesita expected for late October
The planned combination of RHI and Magnesita has obtained all merger control clearances. The company is currently working intensively on the preparations for the share’s listing in the Premium Segment of the London Stock Exchange. The first trading day in London and the closing of the transaction are scheduled for late October 2017.

Stefan Borgas adds: “London offers the company as the global market leader in the refractories segment access to an important capital market. At the same time we will stay loyal to the Vienna Stock Exchange via the new Global Market. With the combination of the two companies we will open a new chapter in the long history of RHI.”

in € million
Revenue
EBITDA
EBITDA margin
Operating EBIT 1)
Operating EBIT margin
EBIT
EBIT margin
Profit before income tax
Profit after income tax
1H/2017
855.8
89.2
10.4%
59.0
6.9%
49.6
5.8%
45.9
25.7
1H/2016
830.2
100.6
12.1%
70.2
8.5%
68.6
8.3%
62.9
38.9
Delta
3.1%
(11.3)%
(1.7)pp
(16.0)%
(1.6)pp
(27.7)%
(2.5)pp
(27.0)%
(33.9)%
     2Q/2017
437.0
40.7
9.3%
21.1
4.8%
17.0
3.9%
15.7
7.2
1Q/2017
418.8
48.5
11.6%
37.9
9.0%
32.6
7.8%
30.2
18.5
Delta
4.3%
(16.1)%
(2.3)pp
(44.3)%
(4.2)pp
(47.9)%
(3.9)pp
(48.0)%
(61.1)%

1) EBIT before expenses from derivatives from supply contracts, impairment and restructuring effects