RHI Magnesita records strong results for 3Q18

The Group has further improved its EBITDA margin profile for 3Q18 in this stable environment. The company has noted that this margin expansion demonstrates the successful execution of the integration and RHI Magnesita’s corporate strategy more broadly.

The company’s cement and lime segment continues to be held back by reduced cement production in the Chinese market, as well as, the company states, RHI Magnesita’s ongoing focus on pricing and quality, against more commoditised competitors.

The company has reported that it is continuing to make progress in the strategic markets of India and China. Growing by more than 20% in the first nine months of 2018 against the same period in 2017, RHI Magnesita has continued to grow strongly in India, ahead of the consolidation of the company’s operating entities. Although the Group is at an earlier stage of its business development in China, growth was still recorded of around 30% over the first nine months. The company has noted that the recommissioning of the dolomite-based facilities in Chizhou is continuing to plan.

RHI Magnesita continues to feel the effects from the imposition of trade tariffs. However, the company has state that, to date, it has been cushioned from significant impacts by its diversified production and client base.

The Group has also stated that it is continuing to successfully achieve its integration plans and remains on track to achieve recently increased synergy targets of at least €60 million in 2018 and €110 million by 2020.

In addition, the Group has reported that its financial position continued to strengthen in 3Q18, as operational cash flow generation increases. The company has experienced cash out flows from restructuring and transaction costs, but it is predicted that leverage will continue to improve, reaching less than 1.5 times net debt to EBITDA by year end. This is expected due to the inventory build up from securing the supply of raw material and from pricing inflation, as well as cash outflow in respect to the ITO in Brazil in 4Q18.

Although it was partially offset by the depreciation of the Brazilian Real, the Group experienced a currency benefit in 3Q18. This was due to the depreciation of both the US dollar and the Chinese Yuan.

In terms of outlook, the company has noted that government controls in China have led to a significant reduction in material output. This is expected to continue in the longer term. Overall, however, the company has noted that its integrated model continues to derive benefit from this structurally changed environment.

In addition, the strong trading performance that the Group has reported throughout 2018 is expected to continue. It is thought that this will be supported by solid demand from the Group’s end markets, the benefits of raw material integration, and the realisation of synergies.

“The solid results in 3Q18 reflect a continuation of the positive trends we saw in 1H18, driven by strong end-markets, the positive response by customers to the full portfolio and solution offering, a stable raw material pricing environment (which we expect to extend into 2019), and the delivery of the merger synergies,” said Stefan Borgas, CEO of RHI Magnesita. “The merger integration continues to go well and we remain on track to achieve our recently increased synergy targets of €60 million in 2018 and €110 million by 2020. Our expectations for full year 2018 operating results remain unchanged.”

RHI Magnesita is the global leading supplier of high-grade refractory products, systems, and services for a wide range of industries. These include steel, cement, non-ferrous materials, and glass.

Read the article online at: https://www.worldcement.com/europe-cis/06112018/rhi-magnesita-records-strong-results-for-3q18/