RHI Magnesita N.V. 2024 Half Year Results

Operational and strategic highlights

Steel division sales volumes decreased by 1% excluding M&A, due to weaker than forecast steel output in all regions except India in H1.

Industrial division demand reduced, with 10% lower sales volumes excluding M&A, due to customer capital project cycle, movement of certain project deliveries to H2 and subdued cement demand in markets outside India.

Production increased to match sales volumes following destocking in 2023.

Recycling rate increased to 13.2% (H1 2023: 13.0%), €5 million acquisition of Refrattari Trezzi in Italy further strengthens European recycling footprint.

Increasing customer demand for RHI Magnesita’s automated solutions and robotics in SAM, NAM and India regions.

Intended US$430 million acquisition of Resco Group now subject to Second Phase Review by US merger authorities and expected to complete in late H2 2024 or early 2025.

Key green steel contract win in April reinforces sustainability leadership position - RHI Magnesita to design and supply refractory linings for furnaces to be installed by SMS group at Thyssenkrupp's €2 billion Duisburg project.

Financial highlights.

Revenue of €1728 million in line with H1 2023 (€1,734 million) as M&A contribution offsets 3% decline in sales volumes and 4% lower pricing in the base business.

Adjusted EBITA of €190 million (H1 2023: €200 million) reflecting lower volumes and lower backward integration benefits, as price and mix impacts were balanced by reduced input costs.

Adjusted EBITA margin of 11.0% (H1 2023: 11.6%) in line with guidance, comprising high refractory margin of 10.2% (H1 2023: 9.8%) and very low raw material margin contribution of 0.8% (H1 2023: 1.8%).

M&A contribution to Adjusted EBITDA of €34 million (H1 2023: €15 million) represents progress against full year guidance of approximately €80 million, with second half weighting for synergy benefits and similar demand and pricing conditions to the base business. The contribution to Adjusted EBITA was €27 million and full year guidance for Adjusted EBITA from M&A is €65 million.

Adjusted EPS increased 2% to €2.59 per share (H1 2023: €2.53 per share) supported by FX related gains.

Working capital reduced by €80 million to €894 million (31 December 2023: €974 million), driven by lower receivables and higher payables.

Adjusted Operating Cash Flow of €233 million with strong EBITA cash conversion of 123% (H1 2023: 114%), supported by second half phasing for capex.

Net Debt reduced to €1274 million (31 December 2023: €1304 million), gearing stable and within guided range at 2.4x (31 December 2023 Net debt to Pro Forma Adjusted EBITDA: 2.3x).

Interim dividend of €0.60 per share declared, in line with policy.

Outlook

Refractory demand remains subdued in all key geographies with the exception of India, following a period of weaker than forecast steel output in the first half of the year, lower capex at industrial customers leading to fewer projects and reduced activity in the key end markets of construction and transportation.

RHI Magnesita remains on track to achieve Adjusted EBITA of at least €410 million, as previously guided, based on higher sales volumes and unit cost savings resulting from increased capacity utilisation and efficiency measures.

Second half order book is supported by normal seasonality in the cement market, the push back of certain industrial project deliveries previously scheduled for the first half and a higher weighting of steel sales in H2 as China steel exports reduce.

The Group continues to take action to preserve margins and is well positioned to increase output into a future recovery, with significant operational gearing and fixed cost absorption benefits to be realised once customer demand returns. The timing of such recovery remains uncertain.

Stefan Borgas, Chief Executive Officer, said: “Demand for refractories was weaker than expected in the first half of 2024 as conditions in the global construction, transportation and other key end markets remained subdued with no positive catalysts evident in the short term. We have taken appropriate measures to safeguard profitability and cash generation throughout this period, as demonstrated by the release of €80 million of working capital in the first half of the year and the delivery of our EBITA margin guidance. Record refractory margins compensated for the temporarily lower contribution from our raw material assets. We remain on track to achieve full year guidance despite the very weak external market conditions experienced in the first half, with markedly higher sales volumes anticipated in the remainder of the year.

We have been able to advance our strategic M&A ambitions over the last three years and the contribution to earnings from acquisitions will grow as integrations progress and synergies are realised.

We are proud to have been chosen in April to design and supply refractories to SMS as the original equipment manufacturer for Thyssenkrupp’s Duisburg green steel project. This is a welcome validation of our strategy to lead the refractory industry in sustainability, which will deliver value in the long term as we seek to reduce our own CO2 emissions and to provide enabling technologies for our customers to do the same.”

Read the article online at: https://www.worldcement.com/europe-cis/24072024/rhi-magnesita-nv-2024-half-year-results/