A global supplier of refractory products, systems, and solutions, RHI Magnesita has announced its trading update for 1Q19.
RHI Magnesita has announced that it remains confident in its expectations for FY19, after a solid trading performance in 1Q19. The company has noted that this continues to reflect trends seen in 4Q18. Some uncertainties exist in the macroeconomic outlook and customer end markets, and management remains vigilant, particularly in terms of plant volumes and production costs.
According to the company, the Industrial Division has performed strongly in 1Q19, continuing the momentum of 2H18. It is thought that this was driven by higher sales in the cement business in China and the South America region. Revenues from the Project Business also saw a strong performance, benefiting from the Middle East and South America regions.
While there has been some easing in magnesium based raw materials prices in 1Q19, alumina based raw material cost keeps increasing. Overall, the raw material pricing outlook remains broadly stable. The group has announced a 5% price increase across the product portfolio. However, given lead times, this will have a limited impact in 2019.
The group continues to achieve its integration plans and is on track to realise the synergy targets of at least €90 million in 2019 and €110 million by 2020.
RHI Magnesita is focused on addressing the specific operational issues experienced at four European plants and challenges in the supply chain. The improvement plans are progressing as planned and management continues to expect to resolve these issues in 2019 and recoup around €20 million of the previous year’s impact on profits in FY19.
A slower start to 1Q19 has resulted in some buildup inventories within the group. However, this is expected to unwind as the year progresses, as a result of the company’s ongoing focus on working capital efficiency. The group also made the final payments of €41 million in respect of the ITO in Brazil. For FY19, the board remains confident of achieving its cash flow generation and leverage targets.
Whilst macroeconomic uncertainties remain at an unusually high level, RHI Magnesita expects to continue to realise the benefits from its integrated model and its growth and cost savings initiatives. Consequently, the board’s expectations for FY19 operating results remain unchanged.
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