REG - RHI Magnesita N.V. - 2024 Half Year Results
24/07/2024 07:00
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RNS Number : 5535X RHI Magnesita N.V. 24 July 2024
24 July 2024
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
2024 Half Year Results
Resilient margins, strong cash conversion and M&A mostly offset ongoing
weaker demand environment
RHI Magnesita, the leading global supplier of high-grade refractory products,
systems and solutions, today announces its unaudited results for the six
months ended 30 June 2024 ("H1 2024" or the "Period").
Financial results H1 2024 H1 2023 Change H1 2023 (constant currency) Change (constant currency)
(Adjusted, €m unless stated otherwise)(1)
Revenue 1,728 1,734 0% 1,716 1%
Adjusted EBITDA 258 265 (3)% 271 (5)%
Adjusted EBITA 190 200 (5)% 207 (8)%
Adjusted EBITA margin 11.0% 11.6% (60)bps 12.0% (100)bps
Adjusted EPS (€/per share) 2.59 2.53 2%
Adjusted Operating Cash Flow 233 228 2%
Net debt(2) 1,274 1,124 13%
Net debt to Pro Forma Adjusted 2.4 2.1
EBITDA(3)
(Reported, H1 2024 H1 2023
€m unless stated otherwise)
Revenue 1,728 1,734
Gross profit 416 414
EBITA 174 184
Profit before income tax 143 111
Profit after income tax 111 83
EPS (€/per share) 2.15 1.71
Dividend (€/per share) 0.60 0.55
1. Adjusted figures are alternative performance measures "APMs" excluding
impairments, amortisation of intangibles and exceptional items to enable an
understanding of the underlying performance of the business. Full details are
shown in the APM section.
2. H1 2024 Net debt includes the impact of IFRS 16 of €66 million. For
further details see Note 11.
3. Pro Forma Adjusted EBITDA is used to assess financial gearing and
includes a full year of Adjusted EBITDA contribution from businesses acquired
during the year.
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 $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 €1,728 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 €1,274 million (31 December 2023: €1,304 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 CO(2) emissions and to provide enabling
technologies for our customers to do the same."
For further enquiries, please contact:
Investors: Chris Bucknall, Head of Investor Relations, +43 699 1870 6490,
chris.bucknall@rhimagnesita.com (mailto:chris.bucknall@rhimagnesita.com)
Media: Hudson Sandler, +44 020 7796 4133, rhimagnesita@hudsonsandler.com
(mailto:rhimagnesita@hudsonsandler.com)
Conference call
A presentation for investors and analysts will be held on 24 July 2024
starting at 8:15am UK time (9:15am CET). The presentation will be webcast live
and details can be found on: https://ir.rhimagnesita.com/
(https://ir.rhimagnesita.com/) . Alternatively the webcast can be accessed
using the following link:
https://www.investis-live.com/rhimagnesita/6662ee06806e6315001f447b/wrqq
(https://www.investis-live.com/rhimagnesita/6662ee06806e6315001f447b/wrqq)
A replay will be available on the same link shortly after event.
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 around 22,000
employees in 47 main production sites, 9 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 maintains a premium listing on 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 prime segment of the Vienna Stock Exchange (Wiener
Börse). For more information please visit: www.rhimagnesita.com
(http://www.rhimagnesita.com)
FORWARD LOOKING STATEMENTS
This announcement contains (or may contain) certain forward-looking statements
with respect to certain of the Company's current expectations and projections
about future events. These statements, which sometimes use words such as
"aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and
words of similar meaning, reflect the directors' beliefs and expectations and
involve a number of risks, uncertainties and assumptions which could cause
actual results and performance to differ materially from any expected future
results or performance expressed or implied by the forward-looking statement.
Statements contained in this announcement regarding past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future. The information contained in this announcement is
subject to change without notice and, except as required by applicable law,
the Company does not assume any responsibility or obligation to update
publicly or review any of the forward-looking statements contained in it and
nor does it intend to. You should not place undue reliance on forward looking
statements, which apply only as of the date of this announcement. No statement
in this announcement is or is intended to be a profit forecast or profit
estimate or to imply that the earnings of the Company for the current or
future financial years will necessarily match or exceed the historical or
published earnings of the Company. As a result of these risks, uncertainties
and assumptions, the recipient should not place undue reliance on these
forward-looking statements as a prediction of actual results or otherwise. The
Company has no obligation or undertaking to update or revise the
forward-looking statements contained in this announcement to reflect any
change in its expectations or any change in events, conditions, or
circumstances on which such statements are based unless required to do so by
applicable regulations. The numbers presented throughout this announcement may
not sum precisely to the totals provided and percentages may not precisely
reflect the absolute figures, due to rounding.
OVERVIEW
Health & safety
A core value of the Group is to maintain a safe working environment for its
employees and contractors.
It is with deep sorrow that we report a fatal incident occurred at one of the
Group's plants in China in June 2024. A thorough investigation of the root
cause of this incident has been carried out and procedural changes will be
implemented worldwide to prevent recurrence.
Following three tragic fatalities over the past 18 months in its operations
the Group has commenced a wide-ranging review of safety procedures, risks,
preventive measures and safety culture, with external support from DSS+. The
Board and management are fully committed to making all necessary changes and
improvements to eliminate fatalities, serious injuries and in the longer term
to achieve zero harm.
During H1 2024 the lost time injury frequency ("LTIF"), excluding recently
acquired businesses, decreased significantly to 0.07 per 200,000 hours worked
(H1 2023: 0.25), whilst total recordable injury frequency ("TRIF") reduced to
0.33 per 200,000 hours worked (H1 2023: 0.58).
Financial overview
Reported revenue decreased by 0.3% to €1,728 million (H1 2023: €1,734
million) as a €223 million revenue contribution from M&A completed in
2023 offset a 3% decline in sales volumes and a 4% decline in average pricing
in the base business, due to expected product mix changes and price
reductions.
Price reductions were in line with guidance to be up to 5% lower than 2023.
Sales volumes in the base business were anticipated to be flat in 2024 versus
the prior year, as a moderate recovery in steel volumes balanced a cyclical
reduction in industrial sales. However, global steel production was weaker
than forecast in all regions except India in the first half of 2024.
The key input costs of purchased raw materials, energy and freight were lower
on average compared to H1 2023. Reduced input costs combined with better fixed
cost absorption to offset the 4% decline in pricing, and the revenue impact of
changing product mix towards lower priced refractories in the industrial
segments of Cement & Lime, NFM and other industrials. An increase in
SG&A largely due to M&A and a reduced contribution from the Group's
raw material assets resulted in Adjusted EBITA of €190 million (H1 2023:
€200 million) at a margin of 11.0%, in line with guidance. Refractory margin
contribution increased to a record high of 10.2 ppts whilst the contribution
from raw material assets reduced to 0.8 ppts due to low benchmark prices for
refractory raw materials.
Adjusted EPS increased to €2.59 per share (H1 2023: €2.53) supported by an
FX gain of €14 million (H1 2023: loss of €15 million). Net interest
expenses of €19 million were higher than €18 million incurred in H1 2023
but better than anticipated in full year guidance of €50 million due to
repayment of higher margin facilities and lower base rates.
Net debt decreased to €1,274 million, a reduction of €30 million from the
€1,304 million reported at 31 December 2023, as cash generation from the
base business and 2023 M&A exceeded the final dividend payment of €59
million and €39 million allocated to investments and acquisitions, net of
proceeds from disposals. Gearing, measured as the ratio of net debt to pro
forma Adjusted EBITDA, increased to 2.4x (31 December 2023: 2.3x), due to the
decrease in pro forma Adjusted EBITDA in the 12 months to 30 June 2024 to
€541 million, compared to €561 million in the 12 months to 31 December
2023.
M&A
The intended acquisition of Resco for up to $430 million has moved into second
phase review by US merger authorities and the expected timing for completion
is now late 2024 or early 2025.
The Group acquired Refrattari Trezzi for an enterprise value of €5 million
in June 2024. Refrattari Trezzi is a recycling specialist based in Italy and
the transaction is an important step towards achieving RHI Magnesita's
decarbonisation targets in Europe, which to date have largely been delivered
through recycling. Together with the Group's Joint Venture MIRECO, a strong
platform has been established to further advance the circular economy in
European refractories.
The Group allocated €46 million of capital to acquisitions and investments
in the Period including Resco, Refrattari Trezzi, Seven Refractories Cyprus,
Jinan New Emei and MCi Carbon. A non-cash gain of €7 million was realised
from the disposal of the Group's interest in its Dashiqiao joint venture in
China.
M&A completed in 2023 contributed €34 million to Adjusted EBITDA against
guidance of approximately €80 million for the full year, as acquired
businesses experienced similar demand and pricing conditions to the base
business and as the realisation of synergy benefits is weighted towards the
second half. The recently acquired non-basic European project business
delivered a strong performance during the first half, supported by resilient
demand from glass and aluminium customers.
Raw materials
Magnesite and dolomite based raw material prices remained at a cyclical low in
H1 2024, with the exception of medium grade dead burned magnesia ("DBM") from
China delivered to Europe, which increased as a result of higher freight
costs. Whilst remaining at lower average levels than H1 2023, magnesite based
raw material prices increased slightly during the Period, as loss making
Chinese producers withdrew marginal production from the market. The lower
average price levels for magnesite based raw materials resulted in a record
low EBITA contribution from vertical integration of 0.8ppts (H1 2023:
1.8ppts). The raw material margin contribution is expected to remain low at
around 1.0 ppts in 2024 and will be driven by the timing of recovery in global
demand for refractories.
Alumina-based refractory raw materials (in which the Group is not vertically
integrated) increased in price significantly during the first half of 2024,
due to supply constraints in the global alumina and bauxite markets combined
with increasing demand for alumina for aluminium production. A price increase
programme has commenced for alumina-based refractories to maintain margins on
these products.
Sustainability
RHI Magnesita increased its Ecovadis rating to 76 in June 2024 (2023: 72),
triggering a reduction in the margin payable on approximately €2 billion of
debt facilities, which will result in an annual saving of c.€0.5 million on
debt interest expenses. Ecovadis recognised the Group's commitment to
sustainability and its improved performance in labour and human rights and
sustainable procurement practices. RHI Magnesita is ranked in the 97(th)
percentile of industrial companies covered by Ecovadis and received a 'Gold'
rating.
Recycling rates increased to 13.2% (H1 2023: 13.0%), with a significant
increase in absolute volumes of secondary raw materials usage offset by the
effect of M&A completed in 2023, as new businesses joined the Group with
an initially lower level of recycled raw material usage. The Group maintains
its target to achieve a recycling rate of 15% by 2025, including the dilutive
impact of M&A. Since 2019, over 1 million tonnes of CO(2) emissions have
been averted as a result of the Group's recycling activities and the use of
secondary raw materials remains the primary route by which CO(2) emissions
reductions have been achieved. During the Period, a new business unit was
established to assess the possibility to grow sales of recycled minerals to
customers outside the Group, in addition to supplying RHI Magnesita's internal
requirements.
RHI Magnesita continues to invest in the research and development of a wide
range of CO(2) emissions reduction technologies to reduce its carbon footprint
in the long term. During the first half of 2024, the Group invested €3
million in a further funding round for its technology partner MCi Carbon and
progressed a pilot plant project in Newcastle, Australia to demonstrate the
remineralisation of CO(2) using the MCi Carbon process.
A key contract was awarded to the Group for the design and supply of
refractories for DRI Open Bath Furnaces to be installed by SMS group at
Thyssenkrupp's €2 billion, 2.3 Mtpa Duisburg project in North
Rhine-Westphalia, Germany. This contract award demonstrates RHI Magnesita's
leading position in the refractory industry, with unique capabilities to
partner with OEMs and customers for the development of the new technologies
that will enable the decarbonisation of the steel industry and other hard to
abate sectors. Green steel production is expected to result in an increase in
demand for the refractory products in which RHI Magnesita already has a
leading market position, technical knowledge and extensive vertical
integration.
Outlook and guidance updates
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 in 2024, as previously guided, based on higher sales
volumes and unit cost savings resulting from increased capacity utilisation
and efficiency measures. Second half volumes are expected to be 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 volumes in the second half of the year 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.
Capital expenditure guidance of €170 million issued at the full year results
is revised to €135 million due to the reclassification of €35 million of
spending on digital architecture and ERP system upgrade as an expense, which
will not be capitalised. The previously guided c.€100 million of spending
over three years on digital upgrades from 2024-26 will be reported under
'Other expenses' in the Profit and Loss statement and will be excluded from
Adjusted EBITDA, Adjusted EBITA and Adjusted EPS. Expenses of €15 million on
this item were incurred in the first half of 2024.
Working capital intensity of approximately 24% is targeted in 2024 and the
Group expects to maintain Net debt to Pro Forma Adjusted EBITDA within the
guided range of 2.0-c.2.5x for periods of compelling M&A.
Guidance for net interest expenses in 2024 is reduced from €50 million to
€45 million due to the repayment of higher cost facilities and lower base
rates. Guidance for other adjusted net financial expenses is also reduced from
€35 million to €30 million, resulting in €75 million of adjusted net
finance expenses guided for 2024.
Guidance for non-controlling interest expense in 2024 is increased from
approximately €10 million to €20 million to reflect the €9 million
expense already incurred in the first half of 2024 and positive outlook for
India. All other guidance remains as set out in the Group's Full Year Results
announcement dated 28 February 2024.
Capital allocation and shareholder returns
The Board's capital allocation policy remains to support the long-term Group
strategy, providing flexibility for both organic and inorganic investment
opportunities and delivering attractive shareholder returns over the midterm.
These opportunities will be considered against a framework of strategic fit,
risk profile, rates of return, synergy potential and balance sheet strength.
The Group incurred €35 million of project capital expenditure in the first
half (H1 2023: €38 million), in recently acquired assets. Maintenance
capital expenditure in the period was €26 million (H1 2023: €25 million).
Total capital expenditure was therefore €68 million (H1 2023: €63
million), against full year 2024 guidance of €135 million, including
M&A.
Consistent with the Company's dividend policy to pay an interim dividend equal
to one third of the previous final dividend, the Board has declared an interim
dividend of €0.60 per share representing €28 million in aggregate. The
interim dividend will be paid on 26 September 2024 to shareholders on the
register on 30 August 2024.
OPERATIONAL REVIEW
Steel overview
Steel H1 2024 H1 2023 reported H1 2023 (constant currency) Change Change (constant currency)
Revenue (€m) 1,185 1,203 1,192 (1)% (1)%
Gross profit (€m) 268 260 269 3% 0%
Gross margin 22.6% 21.6% 22.6% 100bps 0bps
Supplying refractory products and services to the steel industry accounted for
c.69% of RHI Magnesita's revenues in H1 2024. Refractory products are required
to protect steel making equipment from extremely high temperatures of up to
1,800°C, chemical corrosion and abrasion. Refractory product applications
include iron making (blast furnace or direct reduction), primary steel-making
(basic oxygen furnace or electric arc furnace) as well as ingot and continuous
casting. RHI Magnesita offers a complete range of products and solutions for
the steel making process. The lifespan of refractory products in the steel
making process can range from hours to months depending on the application,
for example a slide gate is a consumable item that may need to be replaced
every four hours whilst the lining of a primary steel making furnace could
require re-lining at six month intervals. Refractory consumption in steel
making is therefore classified as an operating expense by steel producers and
usually accounts for around 2-3% of operating costs, on average.
Steel segment revenues decreased by 1% to €1,185million (H1 2023: €1,203
million, constant currency €1,192 million). Global steel demand in all
regions excluding India declined in H1 2024 due to weakness in the key end
markets of construction, transportation and consumer goods. High inflation and
interest rates continued to impact consumer demand and the cost of financing
for new capital projects in many economies.
Shipped volumes of steel refractories decreased by 2% as steel exports from
China reduced domestic steel production volumes in several of the Group's core
geographic markets in Europe and the Americas.
Sales from the Group's Advanced Technology portfolio gathered momentum during
the first half, with increasing customer interest and orders in South America,
North America and India. A growing proportion of contracts now include
products from the Advanced Technology portfolio, which includes systems,
sensors, robotics and specialist machinery. This range of products brings a
broad range of benefits to the customer such as health and safety
improvements, increased productivity and process reliability. Each component
can be networked and performance enhancements made using intelligent data
evaluation, allowing for continuous optimisation and stability.
Industrial overview
Industrial H1 2024 H1 2023 reported H1 2023 (constant currency) Change Change (constant currency)
Revenue (€m) 543 531 524 2% 4%
Gross profit (€m) 148 154 151 (4)% (2)%
Gross margin 27.2% 29.0% 28.7% (180)bps (150)bps
RHI Magnesita is a leading supplier of refractory products and services to
customers in the cement and lime, non-ferrous metals, glass, energy,
environmental and chemicals industries. These Industrial customers accounted
for c.31% of Group revenues in H1 2024 and have longer replacement cycles
compared to Steel customers, ranging from one to 20 years. Refractories are
classified as capital expenditure by Industrial customers and represent
between 0.2% and 1.5% of total costs over the life cycle of a facility.
The Industrial division increased revenues by 2% to €543 million (H1 2023:
€531 million) or 4% in constant currency terms, with shipped volumes
increasing by 10%. The main drivers for the increase in shipped volumes was
the strong business performance in the regions Europe 32% and India 31% driven
by M&A contributions, offsetting weaker demand in North America, South
America and China. Excluding the contribution from M&A, volumes decreased
by 10% and revenues decreased by 14%.
Cement & lime
Cement and lime revenues of €188 million represented 11% of Group revenues
in H1 2024 (H1 2023: €214 million) and decreased by 12%, mainly driven by
lower volumes and prices in all regions. The cement maintenance season in Q1
2024 was weaker than the prior year due to low utilization of cement kilns
during 2023 caused by a global slowdown in construction activity.
Non-ferrous metals
Non-ferrous metal ("NFM") refractory revenues accounted for 7% of the Groups
revenues in H1 2024 and decreased by 8% to €127 million (H1 2023: €138
million), driven by a 8% decrease in volumes and flat pricing. The NFM market
is project based and linked to the capital project cycles of customers in the
metals and mining sector which is a longer and later cycle business compared
to the steel industry. Strong project based activity in 2023 reduced as
expected in the first half of 2024.
Other
Glass refractory shipped volumes increased by 13% in H1 2024, contributing to
an increase in revenues of 26% from €82million to €104 million in H1 2024
and represented 6% of Group revenues. The main driver for growth in this
segment were the contributions from acquisitions completed in Europe in 2023.
Excluding M&A revenues decreased by 24% driven by weakness in construction
end markets.
Revenues from other industrial applications accounted for 5% of the Groups
revenues in H1 2024 and includes the customer markets of energy, environment,
chemicals, foundry and aluminium. Revenues increased by 71% to €94million
(H1 2023: €55 million), largely due to the impact of acquisitions. Excluding
M&A, revenues decreased by 1%.
Minerals
Raw materials not utilised internally by the Group are sold in the open market
and reported under Minerals generating revenues of €30million in H1 2024 (H1
2023: €41 million). The decrease in revenues resulted from lower sales
volumes and weaker market prices for refractory raw materials.
Regional business units
Revenue H1 2024 H1 2023 reported H1 2023 (constant currency) % change (reported) % change (constant currency)
Europe, CIS & Türkiye 465 426 419 9% 11%
Steel 280 287 280 (2)% 0%
Industrial 185 139 139 33% 33%
North America 432 476 475 (9)% (9)%
Steel 329 348 348 (5)% (5)%
Industrial 103 128 127 (19)% (19)%
India, West Asia & Africa 355 361 358 (2)% (1)%
Steel 264 282 280 (6)% (6)%
Industrial 91 79 78 16% 16%
South America 258 258 255 0% 1%
Steel 191 182 183 5% 5%
Industrial 67 76 72 (11)% (7)%
China & East Asia 187 172 168 8% 11%
Steel 120 103 101 17% 19%
Industrial 66 69 67 (4)% (1)%
Minerals 30 41 41 (27)% (26)%
Total 1,728 1,734 1,716 0% 1%
Europe, CIS & Türkiye
Europe, CIS & Türkiye revenues increased by 9% to €465 million (H1
2023: €426 million), or by 11% in constant currency terms, due to positive
contributions from M&A, notably in the non-basic project business and
Seven Refractories. Excluding M&A, revenues decreased by 12% to €369
million. Shipped volumes increased by 12% but decreased by 3% excluding
M&A.
Gross profit increased by 8% to €102 million (H1 2023: €95million) with
lower gross margins of 21.9% (H1 2023: 22.2%) due to pricing pressure and
higher unit costs resulting from low capacity utilisation.
Steel revenues remained flat in constant currency and decreased by 2% on a
reported basis. Türkiye performed particularly strongly in the first six
months, recording a volume increase of 29.4%. This was mainly a recovery from
weak volumes in H1 2023 when the region was affected by earthquakes which
resulted in temporary shutdowns of steel plants. Steel production in the
European Union declined slightly, reflecting temporary plant suspensions and
reduced end market demand from regional construction and automotive
industries.
Industrial volumes increased by 32% and revenues by 33% in constant currency
terms, supported by the acquisition of non-basic process industries focused
P-D Refractories in the fourth quarter of 2024. Excluding the contribution
from M&A, industrial segments reported a decrease in revenues of 15% to
€118 million and a decrease in shipped volumes of 13%, reflecting the weak
demand environment.
Plant capacity utilisation remained at low levels, leading to ongoing
under-absorption of fixed costs.
New customer wins in the waste to energy segment were achieved, strengthening
RHI Magnesita's position in this market and further diversifying the business.
New product sales initiatives were focused on high recycling content product
ranges, to further improve sustainability performance.
In April 2024 RHI Magnesita was awarded a major new contract for the design
and supply of refractory linings for two DRI Open Bath Furnaces ("DRI-OBF") to
be installed by SMS group as the original equipment manufacturer ("OEM") as
part of Thyssenkrupp's flagship €2 billion, 2.3 Mtpa green steel project at
its Duisburg site in North Rhine-Westphalia, Germany. The Duisburg project
will produce steel from 2027, initially using natural gas for direct reduction
of iron ore and subsequently, through the use of hydrogen, reducing CO(2)
emissions to close to zero. RHI Magnesita's contract as the refractory
supplier to the OEM represents material new project revenue and validation of
the Group's strategy to position itself as the leading supplier of refractory
linings and services for OBF, EAF and BOF converters, which are expected to be
essential for the large-scale adoption of green steel production globally.
North America
Revenues in North America decreased by 9% to €432 million (H1 2023: €476
million) or by 9% in constant currency terms, largely driven by a volume
decline of 8% and lower pricing.
Gross profit decreased to €116 million (H1 2023: €133 million) at a margin
of 26.8% (H1 2023: 28.0%), mainly due to higher unit costs resulting from low
capacity utilisation.
Steel revenues decreased by 5% to €329 million (H1 2023: €348 million),
driven by weaker customer demand with shipped volumes decreasing by 5%.
Despite the subdued steel market, pricing remained resilient and only
moderately decreased compared to H1 2023. The North America region continues
to benefit from new contracts to supply recent greenfield and brownfield
developments, all of which are new or expanding EAF plants, with further new
plants anticipated to come online in 2025. Low customer demand in Mexico was
exacerbated by some lost production due to strike action in local plants, now
resolved.
In the Industrial segments of Cement & Lime, NFM and Other industrials,
revenues declined to €103 million, representing a decrease of 19% (H1 2023:
€128 million). The main factor impacting revenues was a decrease in sales
volumes of 19%, largely due to a cyclical downturn in customer project
activity.
The US recycling rate increased to a record high of 13.5% (2023: 8.3%),
through strengthening the partnership with recycling processors and continued
development of the regional recycling team. The high-recycling content gunning
mixes developed and produced in the region have become a benchmark for the
Group in sales and recycling consumption.
India, West Asia & Africa
Revenues in India, West Asia & Africa decreased by 2% to €355 million
(H1 2023: €361 million) or by 1% in constant currency. Excluding M&A,
revenues decreased by 3%. Although steel output growth in the region was
positive, RHI Magnesita's steel sales volumes decreased by 4% for the first
six months of 2024, as the Group prioritised pricing and margins over market
share. Steel volumes were also impacted by a temporary suspension of shipments
to a key customer due to overdue payments (now resolved), a reduction in
orders around the time of the Indian elections and increased competition from
Chinese exporters. The order book for the second half of 2024 indicates a
recovery in steel sales volumes.
Following M&A in 2023 new opportunities are being pursued in iron-making
refractories, and a substantial order has been secured for coke oven repair.
The Group also received an order for a fully automated robotic solution,
including multiple systems over a multi-year contract, its first such contract
in India, during the Period.
Gross profit increased by 4% to €82 million (H1 2023: €78 million) with
increased gross margins of 23.1% (H1 2023: 21.6%) supported by pricing
discipline and lower input costs.
Gross margin in steel increased slightly to 22.0% (H1 2023: 19.9%).
Industrial revenues increased by 16% to €91million (H1 2023: €79 million)
largely due to the contribution of the DBRL acquisition, which led to an 31%
increase in sales volumes of industrial refractories. Industrial gross margin
declined to 26.4% (H1 2023: 27.7%) due to the mix effect of strong growth in
lower priced product ranges.
South America
Revenues in South America were flat at €258 million (H1 2023: €258
million) and 1% higher in constant currency terms (H1 2023: €255 million). A
high inflation environment, combined with reduced consumer spending and
economic challenges in Argentina continued to affect economic activity in the
region, impacting RHI Magnesita's end customers. Despite market weakness, the
business region continues to benefit from long-term partnerships with its
customers who value RHI Magnesita's local supply guarantee and high-quality
performance refractories. Gross profit increased to €77 million (H1 2023:
€73 million) at a margin of 29.7% (H1 2023: 28.3%).
Steel revenues increased by 5% to €191 million (H1 2023: €182 million) as
price increases more than offset a 3% reduction in shipped volumes.
Industrial revenues decreased by 11%, mainly driven by lower shipped volumes
which reduced by 6%. Demand for cement and lime refractories remained below
2023 levels driven by weak customer demand, excluding in Brazil where demand
remained stable. Reduced economic activity in Argentina, the second most
important market in the region, impacted revenues.
The region significantly improved its recycling rate, reaching 12.3% in H1
2024, from 11.0% in H1 2023. This improvement was driven by sourcing, research
and development, processing, consumption, and sales efforts, highlighting the
Group's commitment to sustainability and efficient resource management.
The Brumado expansion project has been completed and commissioned with the
recent startup of the rotary kiln. The project increases the life of the
Brumado mine to c.120 years and further improves its cost competitiveness. The
kiln is currently in ramp up and will increase low-cost production capacity in
advance of an expected recovery in end market demand.
China & East Asia
Revenues in China & East Asia increased to €187 million (H1 2023: €172
million), an increase of 8%, or 11% in constant currency terms, as the
acquisition of Jinan New Emei offset pricing pressure in the region. Due to
declining domestic steel production, the refractory market in China currently
suffers from oversupply and weak pricing. Exports of surplus refractory
production have impacted surrounding regions, such as East Asia, India and
West Asia.
RHI Magnesita's Gross profit in China & East Asia increased to €38
million (H1 2023: €32 million) reflecting the revenue increase and higher
gross margin of 20.5% (H1 2023: 18.6%).
Shipped volumes of steel refractories excluding M&A in China increased by
2%. In East Asia, low demand combined with competing exports from China
resulted in temporary plant closures, driving an 8% decrease in revenues in
constant currency terms. Steel revenues in the region excluding M&A
decreased by 7% to €84 million.
Sales volumes in the Industrial segments decreased by 3% and revenues
decreased by 4% to €66 million from €69 million in H1 2023. The Cement
& lime segment experienced low shipped volumes due to weak construction
activity resulting from the subdued real estate market in China. Glass volumes
were similarly adversely impacted by both a weak construction market and a
downturn in the solar energy industry.
FINANCIAL REVIEW
Reporting approach
The Company uses a number of alternative performance measures (APMs) in
addition to measures reported in accordance with International Financial
reporting Standards as adopted by the European Union ("IFRS"), which reflect
the way in which the Board and the Executive Management Team assesses the
underlying performance of the business. The Group's results are presented on
an "adjusted" basis, using APMs that are not defined or specified under the
requirements of IFRS, but are derived from the IFRS financial statements. The
APMs are used to improve the comparability of information between reporting
periods and to address investors' requirements for clarity and transparency of
the Group's underlying financial performance. The APMs are used internally in
the management of our business performance, budgeting and forecasting. A
reconciliation of key metrics to the reported financials is presented in the
section titled APMs.
All references to comparative 2023 numbers in this review are on a reported
basis, unless stated otherwise. All reported volume changes year-on-year are
excluding mineral sales.
Revenue
The Group recorded revenues of €1,728 million, a 0.7% increase on a constant
currency basis (H1 2023: €1,716). On a reported basis, revenues decreased by
0.3% (H1 2023: €1,734 million), due to the depreciation of certain key
currencies against the Euro, including the US dollar, Chinese yuan, Brazilian
real and Indian rupee. Foreign exchange effects impacted revenues in Euro
terms by €18 million.
H1 2024 H1 2023 reported H1 2023 (constant currency) Change Change (constant currency)
Steel
Revenue (€m) 1,185 1,203 1,192 (1)% (1)%
Gross profit (€m) 268 260 269 3% 0%
Gross margin 22.6% 21.6% 22.6% 100bps 0bps
Adjusted EBITA (€m) 117 110 119 7% (2)%
Adjusted EBITA margin 9.9% 9.1% 10.0% 80bps (10)bps
Industrial
Revenue (€m) 543 531 524 2% 4%
Gross profit (€m) 148 154 151 (4)% (2)%
Gross margin 27.2% 29.0% 28.7% (180)bps (150)bps
Adjusted EBITA (€m) 73 91 88 (20)% (17)%
Adjusted EBITA margin 13.4% 17.1% 16.7% (370)bps (330)bps
Steel revenues decreased to €1,185 million, a decrease of 1% on a reported
basis (H1 2023: €1,203 million) and 1% on a constant currency basis (H1
2023: €1,192 million), representing 69% of Group revenue in the first six
month of 2024. The main driver behind the decrease in revenues were a subdued
steel market lead by weak demand in all regions as well as pricing pressure,
both partially offset by M&A contributions. Sales volumes in the Steel
segment decreased by 2%.
Industrial revenues increased by 2% to €543 million (H1 2023: €531
million) and by 4% in constant currency terms (H1 2023: €524 million),
outperforming steel revenue growth due to contributions from M&A. Cement
and lime revenues decreased by 12% to €188 million (H1 2023: €214
million), while non-ferrous metal revenues decreased by 8% to €127 million
(H1 2023: €138 million). Revenues in the glass business increased by 26% to
€104 million (H1 2023: €82 million) driven by strong contributions from
M&A. Revenues from industrial applications increased by 71% to €94
million (H1 2023: €55 million), also due to M&A.
Industrial revenues include revenues from mineral sales of €30 million,
which were 27% lower than the prior year (H1 2023: €41 million), due to
lower market prices for refractory raw materials.
Cost of goods sold
Cost of goods sold decreased by 1% to €1,312 million from €1,320 million
in H1 2023 and increased by 1% on a constant currency basis. The cost of
purchased raw materials decreased by 10% to €535 million (H1 2023: €594
million). Plant-related labour costs increased by 16% during the first six
month of 2024 from €218 million to €253 million, mainly due to
acquisitions as well as salary increases to offset the impact of inflation.
Following a period of disruption and high inflation in 2023, freight and
energy costs decreased by 23% and 15% respectively in H1 2024. Since May
freight costs have increased significantly again due to ongoing conflicts in
the Red Sea, low water levels in the Panama channel and equipment failure at
major ports in Singapore and Malaysia. The lower shipping capacity combined
with longer sea routes have led to an increase in freight costs and are
expected to continue in H2 2024.
Unit costs in H1 2024 were impacted negatively by low production capacity
utilisation, leading to under-absorption of fixed costs. Expenditure on
general supplies including pallets, packaging and spare parts increased in
line with the business growth to €275 million compared to €211 million in
H1 2023.
Raw material prices
Average raw material prices were lower in H1 2024 compared with H1 2023, with
the price of high-grade dead burned magnesia ("DBM") from China declining 2%.
The main driver for the decrease in DBM was oversupply combined with lower
customer demand for refractories globally. Lower raw material prices usually
result in lower finished goods pricing for refractories worldwide, as
production costs for non-vertically integrated competitors are reduced.
Alumina, another key raw material feedstock for the manufacturing of
refractories, recorded a 37% price increase since the end of H1 2023, driven
by tight bauxite markets in China and elevated alumina demand for aluminium
production. Higher alumina prices combined with increased freight costs
experienced towards the end of H1 2024 led to higher cost of goods sold for
the Group towards the end of H1 2024, which is in the process of being passed
on to customers via price increases.
Gross profit
Gross profit was flat at €416 million (H1 2023: €414 million) lower raw
material costs partially offset by higher plant related personnel costs and
gross margins were also relatively stable at 24.1% (H1 2023: 23.9%). The
positive contribution from M&A was offset by lower sales volumes in the
base business. The benefits of reduced raw material, energy and freight input
costs and improved fixed cost absorption were balanced out by pricing and
product mix impacts, as anticipated in the Group's full year 2024 earnings
guidance.
Gross profit in the Steel segment increased to €268 million (H1 2023: €260
million) despite the 2% decline in shipped volumes, as higher margins offset
the reduction in sales. The Industrial division recorded a slight decrease in
gross profit to €148 million (H1 2023: €154 million) with margins of
27.2%, 180bps lower compared to H1 2023, as lower shipped volumes in cement
& lime, glass and NFM were only partially offset by the contribution from
M&A.
(€m) H1 2024 H1 2023 reported H1 2023 (constant currency) Change Change (constant currency)
Revenue 1,728 1,734 1,716 0% 1%
Cost of sales (1,312) (1,320) (1,296) (1)% 1%
Gross profit 416 414 420 0% (1)%
SG&A (222) (213) (213) 4% 4%
R&D expenses (23) (22) (22) 1% 1%
OIE (16) (16) (16) 2% 3%
EBIT 155 163 169 (5)% (8)%
Amortisation 19 22 22 (14)% (14)%
EBITA 174 184 191 (6)% (9)%
Adjusted items 16 16 16 2% 3%
Adjusted EBITA 190 200 207 (5)% (8)%
Refractory EBITA 176 170 - 4% -
Vertical integration EBITA 14 30 - (53)% -
Selling, general and administrative expenses (SG&A), before
R&D-related expenses, amounted to €222 million in H1 2024, a 4% increase
compared to the previous reporting period (H1 2023: €213 million),
attributable to increases in labour costs and M&A additions.
Other income and expenses amounted to €16 million in H1 2024, (H1 2023:
€16 million) including €15 million of expenditure on digital architecture,
including an ERP system upgrade as set out in "Items excluded from adjusted
performance" below.
Depreciation increased by 5% to €68 million (H1 2023: €64 million),
including €7 million of depreciation relating to assets acquired in the
previous year. Depreciation in 2024 is expected to be around €140 million.
Adjusted EBITDA
The Group recorded Adjusted EBITDA of €258 million, a 3% decrease compared
to the previous reporting period (H1 2023: €265 million). Adjusted EBITDA
margin decreased to 14.9% (H1 2023: 15.3%) a decrease of 40bps, reflecting an
increase in SG&A. Adjusted EBITDA margin decreased by 90bps on a constant
currency basis.
Adjusted EBITA
Adjusted EBITA decreased to €190 million from €200 million in H1 2023, in
line with the decreased Adjusted EBITDA. Adjusted EBITA from businesses
acquired amounted to €27 million, with the base business excluding M&A
recording a reduction in Adjusted EBITA, mainly due to lower like for like
sales volumes and pricing pressure. Adjusted EBITA margin reduced to 11.0% (H1
2023: 11.6%) as M&A contributions were offset by weaker sales mix and
lower pricing as well as a record low vertical integration margin.
Vertical integration contributed 0.8ppts of the total Adjusted EBITA margin of
11.0%, lower than the 1.8ppts contribution from vertical integration in H1
2023, primarily due to the decline in the price of key refractory raw
materials. Lower raw material prices negatively impact the calculation of the
contribution from the Group's raw material assets, which is based on the
theoretical cost of acquiring those raw materials in the open market. The
Group continues to expect a contribution of 2.5ppts to 3.5ppts from its
vertical integration over the longer term due to the competitive cost position
of its raw material assets.
The Group's refractory business contributed a historic high 10.2ppts towards
the total Adjusted EBITA margin of 11.0%, an increase of 50 bps compared to
the 9.7ppts contribution in 2023, reflecting lower input costs, the benefits
of M&A synergies and structural cost reductions resulting from the Group's
strategic cost-saving initiatives.
Adjusted EBITA and Adjusted EBITDA both exclude €16 million of Items
excluded from adjusted performance (H1 2023: €16 million), including
restructuring costs, M&A-related costs and other expenses as set out in
"Items excluded from adjusted performance" below.
Adjusted EBITA in 2024 is expected to be at least €410 million.
Net finance expenses
Net finance expenses, which includes interest payable on borrowings net of
interest income on cash balances, gains and losses relating to foreign
exchange, pension expenses, present value adjustments, factoring costs and
non-controlling interest expenses, decreased to €12 million (H1 2023: €51
million).
Net interest expenses increased to €19 million (H1 2023: €18 million) due
to higher base rates on variable interest rate facilities. Interest expenses
on borrowings of €32 million (H1 2023: €27 million) were offset by €14
million of interest income on cash balances on deposit (H1 2023: €9
million).
Foreign exchange gains of €14 million were incurred in the first six months
of 2024 compared to foreign exchange related losses of €15 million in H1
2023, mainly driven by US Dollar strength, Brazilian Real and Mexican Peso
weakness and a €3 million IAS29 hyperinflation adjustment related to
Argentina.
Other net financial expenses amounted to €8 million (H1 2023: €19 million)
including factoring costs of €5 million (H1 2023: €5 million), pension
charges of €4 million (H1 2023: €5 million) and present value adjustments
of €4 million (H1 2023: €4 million).
Guidance for net interest expenses in 2024 is reduced from €50 million to
€45 due to the repayment of higher cost facilities and lower base rates.
Guidance for other adjusted net financial expenses is also reduced from €35
million to €30 million, resulting in €75 million of adjusted net finance
expenses guided for 2024.
(€m) H1 2024 H1 2023
Net interest expenses (19) (18)
Interest income 14 9
Interest expenses (32) (27)
FX effects 14 (15)
Balance sheet translation 23 (23)
Derivatives (9) 8
Other net financial expenses (8) (19)
Present value adjustment (4) (4)
Factoring costs (5) (5)
Pension charges (4) (5)
Non-controlling interest expenses (3) (3)
Capitalization of borrowing costs 2 1
Interest expense - Transaction costs - (1)
Other 7 (2)
Total net finance expenses (12) (51)
Items excluded from adjusted performance
In order to accurately assess the underlying performance of the business, the
Group excludes certain items from Adjusted EBITA related to other income and
expenses of €16 million associated with:
· €(15)million of expenses relating to digital architecture update
and ERP system upgrade
· €(9) million of losses on disposal of Argentinian bonds
· €(7) million of expenses related to M&A activities
· €(2) million of other expenses
· €9 million historical FX gains from disposal of assets (non-cash
effect)
· €7 million of amortisation of onerous contracts imposed by EU as
part of the merger with Magnesita
Taxation
Total tax for H1 2024 in the income statement amounted to €32 million (H1
2023: €28 million), representing a 22% reported effective tax rate (H1 2023:
25%).
Reported profit before tax amounted to €143 million (H1 2023: €111
million). Adjusted profit before tax amounted to €173 million (H1 2023:
€159 million), with an adjusted effective tax rate of 24% (H1 2023: 24%).
Adjusted items include non-taxable IFRS revenues related to put option
valuation and sale of fixed assets in China, as well as non-deductible legal
restructuring costs.
The adjusted effective tax rate guidance is between 23-25% for 2024.
Profit after tax
On a reported basis the Group recorded profit after tax of €111 million (H1
2023: €83 million), profit attributable to shareholders of €102 million
(H1 2023: €81 million) and earnings per share of €2.15 (H1 2023: €1.71).
Adjusted profit after tax increased to €131 million (H1 2023: €121
million) and Adjusted earnings per share was €2.59 (H1 2023: €2.53). A
full reconciliation of EBITA to EPS and Adjusted EBITA to Adjusted EPS can be
found in the table in the APMs section.
Profit attributable to shareholders is stated after non-controlling interests
of €9 million (H1 2023: €3 million). The Group, holding a majority stake
of 56% in RHI Magnesita India Ltd., attributes most of its non-controlling
interests to the earnings consolidated from this subsidiary. Guidance for
non-controlling interest expense in 2024 is increased from approximately €10
million to €20 million to reflect the €9 million expense already incurred
in the first half of 2024 and positive outlook for India.
(€m) H1 2024 Items excluded from adjusted performance H1 2024 adjusted H1 2023 reported Items excluded from adjusted performance H1 2023 adjusted
EBITA 174 16 190 184 16 200
Amortisation (19) 19 - (22) 22 -
Net financial expenses (12) (5) (17) (51) 10 (41)
Profit before tax 143 30 173 111 48 159
Income tax (32) (10) (42) (28) (10) (38)
Profit after tax 111 20 131 83 38 121
Non-controlling interest 9 - 9 3 - 3
Profit attributable to shareholders 102 20 122 81 38 119
Shares outstanding 47 - 47 47 - 47
Earnings per share 2.15 0.43 2.59 1.71 0.81 2.53
Working capital
Working capital excluding M&A decreased to €748 million (30 June 2023:
€834 million) driven by a decrease in accounts receivable in line with
reduced business activity. Including additional working capital resulting from
M&A in 2023, working capital increased to €894 million.
Working capital intensity excluding M&A, measured as a percentage of the
last three months' annualised revenue, decreased to 24.3% (30 June 2023
excluding M&A: 25.7%). Excluding M&A, accounts receivable intensity
was 10.8% (30 June 2023 excluding M&A: 8.6%), accounts payable intensity
was 14.7% (30 June 2023 excluding M&A: 12.9%) and inventory intensity
decreased to 28.2% (30 June 2023 excluding M&A: 30.1%). Including the
impact of M&A, working capital intensity decreased to 25.3% (30 June 2023:
26.0%).
Inventories excluding M&A decreased to €869 million (30 June 2023
excluding M&A: €974 million), as a result of lower input costs and
reduced inventory volumes. Including M&A, inventories were €997 million
(30 June 2023: €1,053 million) with demand coverage ratios at targeted
levels.
Accounts receivable excluding M&A decreased to €332 million (30 June
2023 excluding M&A: €278 million), reflecting the lower level of
business activity. Accounts receivable is calculated as trade receivables
excluding factoring plus contract assets less contract liabilities and
downpayments received, and a full reconciliation can be found in the APMs
section. Including M&A, accounts receivable increased to €422 million
(30 June 2023: €389 million).
Accounts payable excluding M&A reduced to €453 million (30 June 2023
excluding M&A: €418 million) due to lower volumes and pricing of raw
materials purchased, reflecting the subdued demand environment. Including
M&A, accounts payable increased to €525 million (30 June 2023: €502
million).
Working capital financing, used to provide low-cost liquidity and support the
Group's commercial offering to customers, was €289 million on 30 June 2024
(30 June 2023: €310 million), comprising €245 million of accounts
receivable financing (factoring) and €44 million of accounts payable
financing (forfaiting). Working capital financing levels vary according to
business activity, and the Board has set an internal limit of €320 million
on its use.
The decrease in overall working capital (including M&A) of €80 million
versus 31 December 2023 level of €974 million was driven by the reduction in
accounts receivable and increase in payables, with inventories remaining
stable.
Working capital intensity is targeted to be approximately 24% in 2024.
Acquisitions
In April 2024 the Group announced its intention to acquire Resco Group, a US
based producer of alumina monolithics and wide range of basic and non-basic
refractories, for an enterprise value of up to $430 million. Completion of the
transaction, which is conditional on Second Phase Review in the US, is
expected to occur in late H2 2024 or early 2025.
In June 2024 the Group announced the €5 million acquisition of Refrattari
Trezzi, a recycling specialist in Italy, thereby expanding its production
footprint to Italy.
The Group allocated €46 million of capital to acquisitions and investments
in the Period, including €33 million of prepayments for the intended
acquisition of Resco, €5 million for the acquisition of Refrattari Trezzi,
€3 million for the purchase of the remaining 49% stake in Seven Refractories
Cyprus not already owned by the Group, a €3 million deferred payment for
Jinan New Emei and €3 million invested in an equity fundraising for MCi
Carbon. Expenditure on acquisitions and investments was partially offset by a
non-cash gain of €7 million arising from the disposal of the Group's
interest in its Dashiqiao joint venture in China.
Acquisitions agreed or completed since January 2023 are expected to contribute
€80 million to Adjusted EBITDA in 2024 (H1 2024: €34 million), or €65
million of EBITA.
Cash flow
Adjusted operating cash flow increased to €233 million (H1 2023: €228
million) representing cash flow conversion from Adjusted EBITA of 123% (H1
2023: 114%), supported by the €80 million release of working capital.
Free cash flow decreased to €103 million (H1 2023: €167 million), mainly
due to €33 million of prepayments related to the intended acquisition of
Resco, recorded in 'Other investing activities' and a €3 million investment
in MCi Carbon. The €33 million Resco prepayments are not expected to be
refundable in the event that the transaction does not complete.
Cash income tax payments increased to €36 million (H1 2023: €24 million)
and net interest paid also increased to €36 million (H1 2023: €23
million).
Cash dividends paid in the first six months of 2024 amounted to €59 million
(H1 2023: €0).
Cash flow €m H1 2024 H1 2023
Adjusted EBITDA 258 265
Share based payments - gross non-cash 5 4
Working capital changes 86 41
Changes in other assets and liabilities (47) (18)
Investments in PPE, IA (68) (63)
Adjusted operating cash flow 233 228
Income taxes paid (36) (24)
Cash effects of other income/expenses and restructuring (17) (14)
Investments in financial assets(1) (22) (5)
Cash inflows from the sale of PPE, IA(2) 8 2
Cash inflows from the sale of financial assets 15 -
Investment subsidies received 2 -
Dividends received 1 -
Net interest paid/received (36) (23)
Net derivative cash inflow/outflow (13) 3
Dividend payments to NCI (1) -
Other investing activities(4) (33) -
Free cash flow 103 167
Investment in subsidiaries net of cash(5) (8) (173)
Proceeds from share issue in subsidiaries - 100
Investments in NCI (3) -
Payment for share issue costs - (2)
Dividend payments (59) -
Change financial receivables from joint ventures & associates - 3
Cash change in net debt 33 95
Debt from acquisitions - (55)
New lease obligations (7) (6)
Exchange effects 4 (2)
Others - 12
Actual change in net debt 30 44
1. Includes purchase of BOPREAL securities in Argentina, blue chip bond swap
losses and €3 million investment in MCi Carbon
2. Includes €7 million realised upon sale of the Group's interests in the
Dashiqiao joint venture
3. Includes €11 million cash inflow from the sale of BOPREAL securities in
Argentina
4. Comprises €33 million of prepayments related to the intended
acquisition of Resco
5. Includes €5 million acquisition of Refrattari Trezzi and €3 million
deferred payment for acquisition of Jinan New Emei
Financial position
Net debt decreased to €1,274 million, comprising total debt of €1,812
million, leases of €66 million and cash and cash equivalents of €605
million.
Total leases of €66 million (2023: €64 million) are included in the
Group's Net debt position as required by IFRS 16.
The Group's leverage position was 2.4x net debt to pro forma Adjusted EBITDA
(31 December 2023: 2.3x).
Available liquidity at 30 June 2024 was €1,405 million, comprising undrawn
committed facilities of €800 million and cash and cash equivalents of €605
million.
Out of the total gross debt of €1,812 million, 97% is denominated in euro.
The floating to fixed ratio of the gross debt is 29% floating to 71% fixed and
the weighted average cost of debt as of 30 June 2024 was 3.07%, including
swaps.
The Group will seek to maintain the ratio of Net debt to Pro Forma Adjusted
EBITDA within the guided range of 2.0-2.5x or above for periods of compelling
M&A.
Return on invested capital
ROIC is used to assess the Group's efficiency in executing its capital
allocation strategy, which is aimed at enabling organic growth, disciplined
M&A and shareholder returns. ROIC is an APM, see the APM section for full
details of how ROIC reconciles to IFRS metrics.
Under the APM definition, ROIC was 8.8% in H1 2024 (H1 2023:11.1%) based on
average invested capital of €3,089million (H1 2023: €2,780 million) and
NOPAT of €136 million (H1 2023: €154 million). ROIC generated by the
Group's raw material assets was 2.6% (H1 2023: 10.1%) and ROIC from the
refractory business was 10.0% (H1 2023: 11.9%). The main drivers of the
decrease in ROIC were the increase in Average Invested Capital to €3,089
million (H1 2023: €2,780 million) as a result of M&A transactions
completed in the 12 month period to 30 June 2024 and the reduction in
contribution from the Raw material assets.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has an established risk management process based on a formally
approved framework including standardised risk assessments aimed at
systematically identifying and assessing risks and uncertainties amongst the
functional and operational areas of RHIM Regions and Group.
Material and major risks with potentially significant impacts on the Group,
its results or its ability to achieve its strategic objectives are discussed
with the Executive Management Team and reviewed regularly by the Board. The
risks considered by the Board to be the principal risks were presented in the
2023 Annual Report, published on 28 February 2024, which is available on the
Group's website at www.rhimagnesita.com.
As part of the Group's risk monitoring processes, the Board has assessed the
broader internal and external risk environment and updated the principal risks
and uncertainties and have determined that nine out of ten risks reported in
the 2023 Annual Report are relevant for the remaining half of the 2024
financial year. The risk Ability to strategically price and deliver price
increases was removed. The risk has been replaced with the risk of Trade
Compliance.
The risk scoring of six out of the ten principal risks have changed compared
to H2 2023 as highlighted in the summary table below. The regulatory and
compliance risks have decreased due to the creation of a new principal risk
related to Trade Compliance matters due to the Group operating in an overall
more complex regulatory environment primarily as a result of geopolitical
tensions and acquisition activities.
In addition to the principal risks, emerging risks were considered and
evaluated.
Overall, RHIM's risk landscape remains at a stable overall level, compared to
H2 2023.
The risks may occur independently from each other or in combination. If they
occur in combination, their impact may be reinforced. The Group might be
facing other risks than the ones mentioned here, some of them being currently
unknown or not considered to be material. The updated comprehensive analysis
of the principal risks and emerging risks faced by RHI Magnesita will be
included in the 2024 Annual Report.
Principal risk Correlated risk from RHIM Group risk dashboard Change description
1 - Macroeconomic environment and geopolitical risk Unchanged
2 - Inability to execute key strategic initiatives Increased The key strategic initiatives remain on track to deliver longer-term benefits
but are nonetheless complex and interdependent in nature. The risk level has
been increased to reflect the wider scope due to recent M&A and emerging
challenges as the execution phase progresses. Management are developing
corrective plans to address the emerging risks and ensure delivery of the
longer-term benefits.
3 - Significant changes in the competitive environment or speed of disruptive Unchanged
innovation
4 - Reliability of the end-to-end value chain Increased Low plant utilisation levels during the current period of reduced customer
demand create the risk of potential inefficiencies in the plant network and
under-absorption of fixed costs. This risk is increasing due to recent
acquisitions and evolving global challenges.
5 - Sustainability - Environmental and climate risks Decreased The risk remains a high focus area for RHIM mainly driven by the targets and
aims for decarbonisation.
The current risk score has decreased due to the effective short-term delivery
of Sustainability improvements and the assessment of RHI Magnesita's readiness
for longer term challenges regarding this risk.
6 - Sustainability -Health and safety risks Unchanged
7 - Regulatory and compliance risks (excluding Trade Compliance) Decreased This risk has been re-evaluated and has been split into two principal risks.
Trade Compliance has been separated and is reported as Principal risk nine.
Whilst there are a wide range of Ethics, Anti-Corruption and Bribery and other
compliance risks faced by RHIM the risk score reduces due to the typical low
materiality of issues identified and the restructuring of Compliance risks.
8 - Cyber and information security risk Decreased The inherent risk of potential Cyber Attacks is at a high and increasing
level. However, RHIM's residual risk score decreases due to recent
strengthened internal controls and awareness programs.
9 - Trade Compliance NEW The specific risk in relation to sanctions regimes has become increasingly
complex and therefore this risk has been identified as a distinct principal
risk and given increased focus by Management.
10 - Organizational capacity to execute strategy, incl. company cultural Unchanged
values
GOING CONCERN
In considering the appropriateness of adopting the going concern basis in
preparing the Interim Financial Statements, the Directors have assessed the
potential cash generation of the Group and considered a reverse stress
scenario that models a breach of the Group covenants under a very severe but
possible economic downturn. This assessment considers the period up to the
subsequent financial year end, 31 December 2025, for any indicators for which
the going concern basis of preparation is not appropriate.
The reverse stress test determines how much volumes could reduce before
breaching the Group's debt covenants and adjusts for price deflation. Further
examples of mitigating actions within management control would be taken under
this scenario, including fixed cost mitigation, working capital management,
SG&A reduction and deferring capital expenditure but these were not
incorporated in the downside modelling.
The Directors have also considered the Group's current liquidity and available
facilities. As of 30 June 2024, the Condensed Consolidated Statement of
Financial Position reflects cash and cash equivalents of €605 million (31
December 2023: €704 million). In addition, the Group has access to a €600
million (31 December 2023: €600 million) Revolving Credit Facility (RCF) and
a €200 million syndicated term loan (31 December 2023: nil), to be utilised
for the intended acquisition of the Resco Group, which are currently undrawn
and not relied upon for the purpose of the going concern assessment. The Group
has complied with the debt covenants.
On the basis of the assessment performed, the Directors consider it is
appropriate to continue to use the going concern basis in preparing the
Interim Financial Statements for the period ended 30 June 2024.
ALTERNATIVE PERFORMANCE MEASURES (APMs)
Definitions of APMs used by the Group are set out below. The purpose and
usefulness of each APM and a reconciliation to the nearest IFRS equivalent
measure, or a reference to a reconciliation appearing elsewhere in this
document. In general, APMs are presented externally to meet investor and
analyst requirements for clarity and transparency of the Group's underlying
financial performance. APMs are also used internally in the management of the
Group's business performance, budgeting and forecasting. APMs are non-IFRS
measures which enable investors and other readers to review alternative
measurements of financial performance, but they should not be used in
isolation from the main financial statements. Commentary within the Annual
Report, including the Financial Review, the Consolidated Financial Statements
and the accompanying notes, should be referred to in order to fully appreciate
all the factors and context affecting the Group's financial performance.
Readers are strongly encouraged not to rely on any single financial measure
and to carefully review the Group's reporting in its entirety.
Performance APMs
Adjusted EBITDA
Adjusted EBITDA is a key non-IFRS measure that the Executive Management Team
(EMT) and Directors use internally to assess the underlying financial
performance of the Group and is viewed as relevant to capital intensive
industries. The ratio of Net Debt to Adjusted EBITDA is used as a measure of
financial gearing.
Adjusted EBITDA is defined as EBIT, as presented in the Condensed Consolidated
Statement of Profit or Loss, before amortisation, depreciation, and Excluded
Items (see definition below).
Pro Forma Adjusted EBITDA
Pro Forma Adjusted EBITDA is used to assess financial gearing and includes a
full year of Adjusted EBITDA contribution from businesses acquired during the
year.
Adjusted EBITA
Adjusted EBITA is a key non-IFRS measure that the EMT and Directors use
internally to assess the underlying performance of the Group.
Adjusted EBITA is determined consistently with Adjusted EBITDA, but includes
depreciation expense of property, plant and equipment to reflect the wear and
tear cost and future replacement of productive assets.
Adjusted EPS
Adjusted EPS is a key non-IFRS measure and one of the Group's KPIs. Adjusted
EPS is used to assess the Group's underlying operational performance, post tax
and non-controlling interests on a per share basis.
This measure is based on Adjusted EBITA after finance income and expenses,
taxes, share of profit or loss from associates and joint ventures and
non-controlling interest. Share of profit or loss from associates and joint
ventures is adjusted to exclude impairments and gains or losses recognised on
disposals.
Adjusted EPS excludes finance income and expenses and certain foreign exchange
effects, that are not directly related to operational performance. This
includes the non-cash present value adjustments for the Oberhausen provision.
Taxes are calculated by applying the effective tax rate normalised for
restructuring expenses and impairments.
Excluded items
Items that are excluded (Excluded Items) in arriving at the Group's Adjusted
measures of Adjusted EBITA, EBITDA and EPS include:
Other income, other expenses and restructuring expenses as reflected on the
Consolidated Statement of Profit or Loss as well as gains and losses within
interest income, interest expenses and other net financial expenses that are
non-recurring in nature and not reflective of the underlying operational
performance of the business. Excluded items include restructuring related
provisions, costs in relation to corporate transactions and other
non-recurring costs. The tax impacts of the above Excluded Items are also
adjusted for.
Cash flow performance measures
Adjusted operating cash flow and Free cash flow
Adjusted operating cash flow is a key non-IFRS measure used by the EMT and the
Directors to reflect the operational cash generation capacity of the Group
before the cash impacts of Excluded Items (see definition above).
Adjusted operating cash flow is defined as Adjusted EBITDA adjusted for
working capital items, changes in other assets and liabilities and capital
expenditure and other non-cash items, such as share based payments. This APM
is reconciled to Net Cash flow from operating activities as follows:
€m H1 2024 H1 2023
Adjusted operating cash flow (APM) 233 228
Capital expenditure(1) 68 63
Income Taxes paid(1) (36) (24)
Other income/expenses and restructuring items(2) (17) (14)
Net cash flow from operating activities(1) 249 252
1. As reflected in the Condensed Consolidated Statement of
Cash Flows
2. Net cash impact of adjusting Other income, Other expenses
and Restructuring
Free cash flow is determined from the IFRS measures of Net cash flow from
operating activities, net cash used in investing activities and net cash (used
in)/provided by financing activities and excludes the cash impacts of
purchases and disposals of business and subsidiaries, dividends paid to equity
shareholders of the Group, share capital transactions with shareholders,
proceeds and repayment of borrowings and current borrowings and repayment of
leases.
Free cash flow is reconciled to Cash changes in Net debt in the table in the
Cash flow and working capital section. Cash changes in Net debt is reconciled
to Change in cash and cash equivalents in the Net Debt APM reconciliation.
Balance sheet
Liquidity
Liquidity comprises cash and cash equivalents, short term marketable
securities and undrawn committed credit facilities.
€m H1 2024 H1 2023
Cash and cash equivalents(1) 605 760
Revolving credit facility 600 600
Syndicated term loan 200 -
Liquidity (APM) 1,405 1,360
1. As reflected in the Condensed Consolidated Statement of
Financial Position
Net Debt
Net Debt is the excess of current and non-current borrowings, associated debt
derivatives for which hedge accounting is applied and lease liabilities over
cash and cash equivalents and short-term marketable securities. The Board uses
this measure for the purpose of capital management. A reconciliation of Net
Debt is included in Note 11 to the Condensed Consolidated Interim Financial
Statements.
€m H1 2024 H1 2023
Cash changes in Net debt 33 93
Proceeds from borrowings(1) 13 205
Repayment of borrowings(1) (109) (7)
Change in current borrowings(1) (42) (37)
Repayment of lease obligations(1) (10) (11)
Cash inflow from financial assets(1) 12 -
Change in cash and cash equivalents(1) (103) 243
1. As reflected in the Condensed Consolidated Statement of
Cash Flows
Working capital
Working capital consists of inventories plus trade receivables and other
receivables minus trade payables and other payables. Working capital intensity
provides a measure of how efficient the Company is in managing operating cash
conversion cycles. It is measured as Working capital divided by trailing
three-month revenues (annualised) and is expressed as a percentage.
€m H1 2024 H1 2023
Inventories (Note 9) 997 1,053
Trade receivables (Note 10) 475 460
Contract assets (Note 10) 2 4
Contract liabilities (Note 14) (55) (76)
Accounts receivable 422 388
Trade payables (Note 14) (525) (502)
Total working capital 894 940
1. As reflected in the Condensed Consolidated Statement of
Financial Position
Return on invested capital (ROIC)
ROIC reflects the annualised return on invested capital of the Group. The
Group has amended its definition of ROIC to use Average Invested Capital,
being the average of the level of Invested Capital at the beginning and end of
the financial year. ROIC is calculated as NOPAT (net operating profit after
tax) divided by average invested capital of the year.
€m H1 2024 H1 2023
Revenue(1) 1,728 1,734
Cost of sales(1) (1,312) (1,320)
Selling and marketing expenses(1) (65) (73)
General and administrative expenses(1) (180) (162)
Income taxes paid(2) (36) (24)
NOPAT 136 154
€m H1 2024 H1 2023
Goodwill(3) 348 357
Other intangible assets(3) 443 438
Property, plant and equipment(3) 1,322 1,311
Investments in joint ventures and associates(3) 6 5
Other non-current assets(3) 66 35
Deferred tax assets(3) 148 133
Inventories(3) 997 1,053
Trade and other receivables(3) 611 621
Income tax receivables(3) 39 39
Deferred tax liabilities(3) (61) (68)
Trade and other current liabilities(3) (788) (871)
Income tax liabilities(3) (44) (49)
Current provisions(3) (30) (33)
Invested capital 3,056 2,973
Average invested capital 3,089 2,780
Return on invested capital(4) 8.8% 11.1%
1. As reflected in the Condensed Consolidated Statement of
Profit and Loss
2. As reflected in the Condensed Consolidated Statement of
Cash Flows
3. As reflected in the Condensed Consolidated Statement of
Financial Position
4. NOPAT divided by average invested capital of the year.
GLOSSARY
CEO Chief Executive Officer
CFO Chief Financial Officer
CIS Commonwealth Of Independent States
CO2 Carbon dioxide
CoGS Cost of Goods Sold
DBM Dead Burned Magnesia
DBRL Dalmia Bharat Refractories Limited
DRI Direct Reduced Iron
DSR Dalmia Seven Refractories Ltd
EAF Electric Arc Furnace
EBIT Earnings Before Interest and Taxes
EBITA Earnings Before Interest, Taxes and Amortisation
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation
EMT Executive Management Team
EPS Earnings Per Share
ERP Enterprise Resource Planning
EU European Union
FX Foreign Exchange
IAS International Accounting Standards
IFRS International Financial Reporting Standards
Jinan New Emei Jinan New Emei Industries Co. Ltd
LTIF Lost Time Injury Frequency
LTIP Long-Term Incentive Plan
M&A Mergers & Acquisitions
N.V. Naamloze Vennootschap (public limited liability company)
NAM North America
NFM Non-Ferrous Metals
NOPAT Net Operating Profit After Tax
OBF Open Bath Furnace
OCF Operating Cash Flow
OEM Original Equipment Manufacturer
OIE Other Income and Expenses
P-D Refractories P-D Refractories CZ a.s.
PIFOT Process In Full On Time
PPE Property, Plants & Equipment / Personal Protective Equipment
RFC Revolving Credit Facility
ROIC Return On Invested Capital
SAM South America
Second Phase Review A request for additional information and documentary materials ('Second
Request') from the US Department of Justice pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976
SG&A Selling, General and Administrative Expenses
SÖRMAŞ Söğüt Refrakter Malzemeleri Anonim Şirketi
TRIF Total Recordable Injury Frequency
UK United Kingdom
Condensed Consolidated Interim Financial Statements as at 30.06.2024
Condensed Consolidated Statement of Profit or Loss
for the six months ended 30 June 2024
in € million for the six months ended 30 June Note 2024 2023
Revenue (3) 1,728.2 1,734.1
Cost of sales (1,312.2) (1,320.0)
Gross profit 416.0 414.1
Selling and marketing expenses (64.7) (72.9)
General and administrative expenses (180.1) (162.5)
Restructuring 1.2 (11.2)
Other income 18.1 6.5
Other expenses (35.7) (11.3)
EBIT 154.8 162.7
Interest income 13.6 9.2
Interest expenses on borrowings (32.3) (27.0)
Net income/(expense) on foreign exchange effects (4) 14.2 (14.9)
Other net financial expenses (5) (7.7) (18.6)
Net finance costs (12.2) (51.3)
Profit before income tax 142.6 111.4
Income tax (6) (31.8) (28.3)
Profit after income tax 110.9 83.1
RHI Magnesita N.V. shareholders 101.6 80.6
Non-controlling interests 9.3 2.5
in €
Earnings per share - basic 2.15 1.71
Earnings per share - diluted 2.10 1.68
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2024
in € million for the six months ended 30 June Note 2024 2023
Profit after income tax 110.9 83.1
Currency translation differences
Unrealised results from currency translation (11.0) 10.0
Unrealised results from foreign operations (26.0) 8.4
Deferred taxes thereon 9.7 (5.8)
Current taxes thereon 0.0 2.6
Reclassification to profit or loss (8.6) 0.0
Cash flow hedges
Unrealised fair value changes 24.4 (5.3)
Reclassification to profit or loss (9.5) 0.0
Deferred taxes thereon (4.0) 1.0
Costs of hedging
Time value changes (0.1) 0.0
Remeasurement of investments in debt instruments
Unrealised fair value changes (5.7) 0.0
Reclassification to profit or loss 5.7 0.0
Items that may be reclassified to profit or loss in later periods (25.1) 10.9
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans 15.8 0.6
Deferred taxes thereon (3.7) 0.2
Items that are not reclassified to profit or loss in later periods 12.1 0.8
Other comprehensive (loss)/income after income tax (13.0) 11.7
Total comprehensive income 97.9 94.8
RHI Magnesita N.V. shareholders 82.6 101.0
Non-controlling interests 15.3 (6.2)
Condensed Consolidated Statement of Financial Position
as at 30 June 2024
in € million Note 30.06.2024 31.12.2023
ASSETS
Non-current assets
Goodwill 347.8 339.2
Other intangible assets 442.6 469.8
Property, plant and equipment (8) 1,321.6 1,360.1
Investments in joint ventures and associates 6.4 6.2
Other non-current financial assets 61.5 43.4
Other non-current assets 66.5 36.7
Deferred tax assets 148.0 152.0
2,394.4 2,407.4
Current assets
Inventories (9) 996.7 1,001.0
Trade and other current receivables (10) 610.9 680.6
Income tax receivables 39.0 43.5
Other current financial assets 6.6 13.6
Cash and cash equivalents 604.8 703.5
2,258.0 2,442.2
4,652.4 4,849.6
EQUITY AND LIABILITIES
Equity
Share capital 49.5 49.5
Group reserves 1,178.4 1,152.2
Equity attributable to shareholders of RHI Magnesita N.V. 1,227.9 1,201.7
Non-controlling interests 173.7 161.8
1,401.6 1,363.5
Non-current liabilities
Borrowings (11) 1,523.3 1,799.5
Other non-current financial liabilities 117.4 133.4
Deferred tax liabilities 61.2 62.5
Provisions for pensions (12) 217.0 241.5
Other personnel provisions 57.3 55.2
Other non-current provisions 82.7 91.6
Other non-current liabilities 8.6 7.3
2,067.5 2,391.0
Current liabilities
Borrowings (11) 289.1 149.3
Other current financial liabilities 31.4 40.9
Trade payables and other current liabilities (14) 788.4 820.2
Income tax liabilities 44.5 50.8
Current provisions (13) 29.9 33.9
1,183.3 1,095.1
4,652.4 4,849.6
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2024
in € million for the six months ended 30 June 2024 2023
Cash generated from operations (15) 284.7 276.7
Income tax paid less refunds (35.6) (24.3)
Net cash flow from operating activities 249.1 252.4
Investments in property, plant and equipment and intangible assets (67.8) (62.8)
Investments in subsidiaries net of cash acquired (7.8) (172.8)
Cash inflows from the sale of property, plant and equipment 8.4 2.5
(Cash outflows) from investments in financial assets (21.8) (4.6)
Cash inflows from the sale of financial assets 26.2 0.0
Dividends received from non-consolidated entities, joint ventures and 0.5 0.0
associates
Investment subsidies received 2.1 0.2
Prepayments related to intended business combinations (33.3) 0.0
Interest received 13.0 9.2
Net cash used in investing activities (80.5) (228.3)
Payment for share issue costs in subsidiary 0.0 (2.4)
Proceeds from share issue in subsidiary 0.0 100.0
Acquisition of non-controlling interests (2.8) 0.0
Dividends paid to RHI Magnesita N.V. shareholders (59.0) 0.0
Dividend paid to non-controlling interests (0.7) 0.0
Proceeds from long-term financing 13.4 205.0
Repayments of long-term financing (108.5) (7.4)
Changes in current borrowings and financial liabilities to joint ventures and (42.1) (36.8)
associates
Interest payments (47.5) (30.9)
Repayment of lease obligations (9.9) (10.5)
Interest payments from lease obligations (1.3) (1.0)
Cash flows from derivatives (12.9) 2.6
Net cash used in financing activities (271.3) 218.7
Total cash flow (102.7) 242.8
Change in cash and cash equivalents (102.7) 242.8
Cash and cash equivalents at beginning of period 703.5 520.7
Foreign exchange impact 4.0 (3.8)
Cash and cash equivalents at end of period 604.8 759.7
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2024
Group reserves
Accumulated other comprehensive income
in € million Share Treasury shares Additional Mandatory reserve Retained earnings Cash flow hedges and costs of hedging Defined Currency translation Equity attributable Non-controlling interests Total equity
capital
paid-in
benefit plans
to shareholders
capital
of RHI Magnesita N.V.
Note
31.12.2023 49.5 (110.7) 361.3 288.7 871.4 6.0 (101.9) (162.6) 1,201.7 161.8 1,363.5
Profit after income tax - - - - 101.6 - - - 101.6 9.3 110.9
Currency translation differences - - - - - - - (42.0) (42.0) 6.1 (35.9)
Cash flow hedges - - - - - 10.9 - - 10.9 - 10.9
Costs of hedging - - - - - (0.1) - - (0.1) - (0.1)
Defined benefit plans - - - - - - 12.2 - 12.2 (0.1) 12.1
Other comprehensive income after income tax - - - - - 10.8 12.2 (42.0) (19.0) 6.0 (13.0)
Total comprehensive income - - - - 101.6 10.8 12.2 (42.0) 82.6 15.3 97.9
Dividends - - - - (59.0) - - - (59.0) (0.6) (59.6)
Share transfer/vested LTIP - 2.7 - - (2.7) - - - - - -
Other changes(1)) - - - - (1.4) - - - (1.4) (2.8) (4.2)
Share-based payment expenses - - - - 4.8 - - - 4.8 - 4.8
Hedging gains and losses included in the initial cost of inventory purchased - - - - - (0.8) - - (0.8) - (0.8)
in the reporting period
- 2.7 - - (58.3) (0.8) - - (56.4) (3.4) (59.8)
30.06.2024 49.5 (108.0) 361.3 288.7 914.7 16.0 (89.7) (204.6) 1,227.9 173.7 1,401.6
1) This mainly comprises the effects of the acquisition of non-controlling
interests of Seven Refractories' Group as well as the final adjustments from
the purchase price allocation of Seven Refractories' Group and the update of
the purchase price allocation of P-D Refractories, both completed in 2023.
Group reserves
Accumulated other comprehensive income
in € million Share Treasury shares Additional Mandatory reserve Retained earnings Cash flow hedges Defined Currency translation Equity attributable Non-controlling interests Total equity
capital
paid-in
benefit plans
to shareholders
capital
of RHI Magnesita N.V.
Note
31.12.2022 49.5 (116.1) 361.3 288.7 620.2 31.8 (85.6) (148.6) 1,001.2 47.4 1,048.6
Profit after income tax - - - - 80.6 - - - 80.6 2.5 83.1
Currency translation differences - - - - - - - 23.9 23.9 (8.7) 15.2
Cash flow hedges - - - - - (4.3) - - (4.3) - (4.3)
Defined benefit plans - - - - - - 0.8 - 0.8 - 0.8
Other comprehensive income after income tax - - - - - (4.3) 0.8 23.9 20.4 (8.7) 11.7
Total comprehensive income - - - - 80.6 (4.3) 0.8 23.9 101.0 (6.2) 94.8
Dividends - - - - (51.7) - - - (51.7) - (51.7)
Share transfer/vested LTIP - 4.7 - - (4.7) - - - - - -
Additions to consolidated companies and change of non-controlling interests - - - - 149.3 - - - 149.3 128.2 277.5
without a change of control(1))
Change of non-controlling interests without a change of control(1)) - - - - 36.2 - - - 36.2 63.8 100.0
Change of non-controlling interests without a change of control(1)) - - - - 3.2 - - - 3.2 (3.2) -
Other changes - - - - (22.0) - - - (22.0) 1.0 (21.0)
Share-based payment expenses - - - - 3.6 - - - 3.6 - 3.6
Hedging gains and losses included in the initial cost of inventory purchased - - - - - 1.2 - - 1.2 - 1.2
in the reporting period
- 4.7 - - 113.9 1.2 - - 119.8 189.8 309.6
30.06.2023 49.5 (111.4) 361.3 288.7 814.7 28.7 (84.8) (124.7) 1,222.0 231.0 1,453.0
1) Refer to Note (2) for further information.
Notes
to the Condensed Consolidated Interim Financial Statements as at 30.06.2024
Basis of preparation
1. General
RHI Magnesita N.V. (the "Company"), is a public limited company incorporated
under the laws of the Netherlands (naamloze vennootschap), having its official
seat (statutaire zetel) in Arnhem, the Netherlands, and its office at
Kranichberggasse 6, 1120 Vienna, Austria, registered with the Dutch Trade
Register under number 68991665 and listed on the London Stock Exchange, with a
secondary listing on the Vienna Stock Exchange (Wiener Börse).
The Condensed Consolidated Interim Financial Statements ("Interim Financial
Statements") of RHI Magnesita N.V. ("the Company") and its subsidiaries
(collectively referred to as "RHI Magnesita or the Group") for the half-year
reporting period ended 30 June 2024 have been prepared in accordance with IAS
34 Interim Financial Reporting as issued by the International Accounting
Standards Board ("IASB") and as adopted by the European Union, applying the
same accounting principles as those used in the Company's Annual Financial
Statements for the year ended 31 December 2023.
The Interim Financial Statements do not include all information and
disclosures required in the Annual Financial Statements and should therefore
be read in conjunction with RHI Magnesita's Consolidated Financial Statements
as of 31 December 2023. The Interim Financial Statements are presented in
Euros and all values are rounded to the nearest € million with one decimal,
except where otherwise indicated.
The Interim Financial Statements as of 30 June 2024 were not audited but
reviewed by PricewaterhouseCoopers Accountants N.V.
Going concern
In considering the appropriateness of adopting the going concern basis in
preparing the Interim Financial Statements, the Directors have assessed the
potential cash generation of the Group and considered a reverse stress
scenario that models a breach of the Group covenants under a very severe but
possible economic downturn. This assessment considers the period up to the
subsequent financial year end, 31 December 2025, for any indicators for which
the going concern basis of preparation is not appropriate.
The reverse stress test determines how much volumes could reduce before
breaching the Group's debt covenants and adjusts for price deflation. Further
examples of mitigating actions within management control would be taken under
this scenario, including fixed cost mitigation, working capital management,
SG&A reduction and deferring capital expenditure, but these were not
incorporated in the downside modelling.
The Directors have also considered the Group's current liquidity and available
facilities. As of 30 June 2024, the Condensed Consolidated Statement of
Financial Position reflects cash and cash equivalents of €604.8 million
(31.12.2023: €703.5 million). In addition, the Group has access to a
€600.0 million (31.12.2023: €600.0 million) Revolving Credit Facility
(RCF) and a €200.0 million syndicated term loan (31.12.2023: nil) to be
utilised for the intended acquisition of the Resco Group, which are currently
undrawn and not relied upon for the purpose of the going concern assessment.
The Group has complied with the debt covenants.
On the basis of the assessment performed, the Directors consider it is
appropriate to continue to use the going concern basis in preparing the
Interim Financial Statements for the period ended 30 June 2024.
2. Significant Accounting Policies, Judgements, Estimates and Errors
Principles of accounting and measurement
There were no changes regarding principles of accounting and measurement
compared to the Consolidated Financial Statements as of 31 December 2023. We
performed an impact analysis related to the amendments on the existing and new
standards effective in 2024 and concluded that no material impacts are
expected from these except for the following amendment.
The amendments to IAS 7 & IFRS 7 mandate new disclosure requirements for
the Group's existing liabilities related to supply finance arrangements and
their effects on the Group's liabilities, cash flows and exposure to liquidity
risk. We have completed the identification of all supply finance arrangements
subject to these disclosure requirements and will disclose the required
information in the Consolidated Financial Statements as of 31.12.2024 for the
first time. The new disclosures are not required to be provided in the 2024
Interim Financial Statements.
Significant accounting judgements and estimates
The Interim Financial Statements require the use of estimates and assumptions
that affect the reported amounts in the Interim Financial Statements. The key
assumptions and estimation uncertainties are unchanged from those described in
last year's Consolidated Financial Statements. Actual results may differ from
these estimates.
Impairment of property, plant and equipment, goodwill and other intangible assets
No triggers for an impairment review as of 30 June 2024 were identified.
Significant judgement: Presentation of cash flows related to investments in and divestments of special national government bonds
The Group maintains business operations in Argentina. In 2019, the Argentinian
Central Bank imposed several foreign exchange restrictions on import payments,
essentially preventing the Argentinian subsidiary's ability to honor its
payment obligations to suppliers outside Argentina in the usual manner. Given
a change in legislation in December 2023, Argentinian companies are now
allowed to settle their previously restricted import payment obligations by
purchasing U.S. dollar-denominated securities issued by the Central Bank of
Argentina, also called BOPREAL bonds, which can be held to maturity,
transferred or sold in the secondary market. In 2024 the Group has invested
€19.1 million in these BOPREAL bonds all of which have been sold or
transferred before the reporting date. The cash proceeds realised from the
sales, amounting to €13.9 million, were used to settle intercompany and
third-party trade liabilities. The cash flows arising from the investment in
and divestment of the BOPREAL bonds are presented within the investing
category in the Condensed Consolidated Statement of Cash Flows. Judgement is
applied in determining that this presentation is appropriate.
Significant estimation uncertainty: prepayments related to intended business combinations
Within other non-current assets €33.3 million of prepayments are recogised
in relation to the intended acquisition of the Resco Group. Management assumes
that the acquisition will be closed and as such the full amount of prepayments
is recognised as an asset. In the event that the acquisition will not be
closed, these prepayments are non-refundable and will be expensed through the
Consolidated Statement of Profit or Loss.
Error correction
In 2023, several transactions with the shareholdings of RHI Magnesita India
Ltd. took place in relation to the acquisition of Dalmia OCL Ltd. ('DOCL'),
Dalmia Seven Refractories Ltd ('DSR'), and other subsequent share issues.
Management identified that the Initial allocation between non-controlling
interests and equity attributable to shareholders of RHI Magnesita N.V. as of
30 June 2023 was incorrect. The allocation was restated through comparative
figures in the Condensed Consolidated Statement of Changes in Equity as of 30
June 2023.
This resulted in an increase of non-controlling interests by €105.5 million
and a corresponding decrease of equity attributable to shareholders of RHI
Magnesita N.V. as of 30 June 2023 where the dilution gain related to the
mentioned transactions was reflected.
Neither total equity, nor the Condensed Consolidated Statement of Profit or
Loss (including the earnings per share) / Statement of Comprehensive Income
nor the Condensed Consolidated Statement of Cash Flows as of 30 June 2023 were
affected by this correction.
3. Segmental analysis
Segment reporting by operating company division
Each reporting period the appropriateness and decision usefulness of the
Group's segment reporting structure is reassessed. This reassessment has
resulted in a change of the Group's segment reporting structure aiming to
provide a more detailed insight into the financial performance of certain
operating segments which had formed part of the former reportable segment
Industrial until the previous reporting period. According to this change, the
key performance measures revenue and gross profit, are disclosed for the newly
designated reportable segments, Industrial Cement & Lime, Industrial
Non-Ferrous Metals and a residual category titled, 'all other segments',
comprising the operating segments Industrial Glass and Industrial Applications
and the business activities subsumed into the business unit, Minerals. The
comparative figures have been restated in accordance with IFRS 8 to reflect
the new segment reporting structure.
The following tables show the key financial information for the operating
segments for the first half of 2024 and the first half of 2023:
in € million for the six months ended 30 June 2024 Steel Industrial Cement & Lime Industrial Non-Ferrous Metals All Other segments Group
Revenue 1,185.0 188.4 126.7 228.1 1,728.2
Gross profit 268.2 44.2 52.4 51.2 416.0
EBIT 154.8
Net finance costs (12.2)
Profit before income tax 142.6
in € million for the six months ended 30 June 2023 Steel Industrial Cement & Lime Industrial Non-Ferrous Metals All Other segments Group
Revenue 1,203.0 213.7 138.6 178.8 1,734.1
Gross profit 259.9 60.0 57.5 36.7 414.1
EBIT 162.7
Net finance costs (51.3)
Profit before income tax 111.4
Revenue in the first half of 2024 and in the first half of 2023 is classified
by product groups as follows:
in € million for the six months ended 30 June 2024 Steel Industrial Cement & Lime Industrial Non-Ferrous Metals All Other segments Group
Shaped products 518.2 154.1 104.1 147.2 923.6
Unshaped products 255.7 27.2 12.9 63.5 359.3
Management refractory services 369.1 0.5 0.0 0.3 369.9
Other 42.0 6.6 9.7 17.1 75.4
Revenue 1,185.00 188.4 126.7 228.1 1,728.2
in € million for the six months ended 30 June 2023 Steel Industrial Cement & Lime Industrial Non-Ferrous Metals All Other segments Group
Shaped products 551.3 175.2 116.4 98.7 941.6
Unshaped products 253.1 25.9 15.2 64.0 358.2
Management refractory services 362.8 0.7 0.0 0.2 363.7
Other 35.8 11.9 7.0 15.9 70.6
Revenue 1,203.0 213.7 138.6 178.8 1,734.1
Segment reporting by country
Revenue in the first half of 2024 and in the first half of 2023 is classified
by customer sites as follows:
in € million for the six months ended 30 June 2024 2023
The Netherlands 5.8 5.2
USA 295.2 323.9
India 221.9 240.6
Brazil 191.0 191.4
PR China 115.6 108.8
Other countries 898.7 864.2
Revenue 1,728.2 1,734.1
4. Net income/(expense) on foreign exchange effects
The net income comprises the foreign exchange effects from translating foreign
currency balances into the functional currency, the results from derivative
financial instruments, such as forward exchange contracts and derivatives in
open orders, as well as the gain on the net monetary position related to
hyperinflation accounting (IAS 29) can be detailed as follows:
in € million for the six months ended 30 June 2024 2023
Foreign exchange gains/(losses) 20.7 (22.7)
(Losses)/gains on forward exchange contracts and derivatives in open orders (9.2) 7.8
Gain on net monetary position 2.7 0.0
Net income/(expense) on foreign exchange effects 14.2 (14.9)
The foreign exchange gains in the current reporting period mainly result from
the depreciation of the functional currencies of subsidiaries with a net asset
foreign currency exposure against USD and the appreciation of the functional
currencies of subsidiaries with a net liability foreign currency exposure
against USD.
5. Other net financial expenses
Other net financial expenses consist of the following items:
in € million for the six months ended 30 June 2024 2023
Net interest expense relating to personnel provisions (4.3) (5.3)
Unwinding of discount of provisions and payables (3.8) (3.7)
Interest expense on non-controlling interest liabilities (3.3) (3.3)
Interest expense on lease liabilities (1.3) (1.0)
Income from the revaluation of NCI put options 10.9 0.6
Other interest and similar income and expenses(1)) (5.9) (5.9)
Other net financial expenses (7.7) (18.6)
1) Includes mainly costs associated with the trade receivables
factoring programme of €5.4 million (30.06.2023 €4.8 million).
6. Income tax
The tax charge for the period has been calculated by applying the effective
corporate tax rate (ETR) which is expected to apply to the Group for the year
ending 31 December 2024, using rates substantively enacted by 30 June 2024.
The ETR is 22.3% (30.06.2023: 25.4%).
Total tax charge for the first half of 2024 in the Condensed Consolidated
Statement of Profit or Loss amounted to €31.8 million (30.06.2023: €28.3
million), which includes tax income for prior years of €2.5 million
(30.06.2023: tax expense for prior years of €1.2 million).
The OECD and the G20 agreed on a minimum ETR per country of 15% that is
applicable to Multinational Enterprises ("MNEs") with annual revenues
exceeding €750m, the so-called Pillar 2 rules. The Pillar 2 rules use a
standardised base and definition of taxes to identify countries in which the
MNE's ETR is below 15%. In such cases, a so-called top-up tax is imposed in a
coordinated manner to reach the minimum 15% ETR in that country. The Group is
within the scope of the OECD Pillar Two rules. In 2023 Pillar Two legislation
was enacted in Austria, where the Ultimate Parent Entity of the Group is
managed and tax resident and is coming into effect for financial years
starting after 31 December 2023. The temporary exception issued by the IASB in
May 2023 from the accounting requirements for deferred taxes in IAS 12 was
applied and accordingly there were no deferred tax assets and liabilities
recognised or disclosed.
The Group has performed a preliminary calculation of the "Transitional CbCR
Safe Harbours" for Pillar Two purposes based on financial data for 2023.
"Transitional CbCR Safe Harbour" is a mechanism that relies on certain
information contained in the Country-by-Country Report ("CbCR"), and that is
designed to mitigate the need for complex calculations and compliance burden
for MNE's during the initial years of implementation of the Pillar 2 rules.
The safe harbour applies if the MNE in a country meets one out of three
formula-based tests. If the MNE qualifies for one of these tests, the MNE is
exempt from further compliance and is deemed not to be subject to the top up
tax in that country. If none of these tests are met, the safe harbour does not
apply, and further calculations and compliance are required to determine
whether top up tax is due. For those jurisdictions that do not qualify for
"Transitional CbCR Safe Harbours" either (a) specific adjustments are
performed to determine the applicability of the "Transitional CbCR Safe
Harbours" (e.g., if the low ETR is derived from an extraordinary/one-off
factor being specifically applicable for 2023), or (b) a simplified
calculation of the effective tax rate and potential top-up tax is based on
data of the first half of 2024. The country for which a potential exposure to
top-up tax may exist is the United Arab Emirates. As the Group does not have
significant operations there, no significant impact of potential top-up tax is
expected.
7. Dividend payments and proposed dividend
Based on a resolution adopted by the Annual General Meeting of RHI Magnesita
N.V. in May 2024 the final dividend for 2023 amounted to €1.25 per share for
the shareholders of RHI Magnesita N.V. The dividend was paid out in June 2024,
amounting to €59.0 million.
In line with the Group's dividend policy the Board declared an interim
dividend of €0.60 per share for the first half of 2024 to be paid out in
September 2024.
8. Property, plant and equipment
In the first half of 2024 additions to property, plant and equipment amount to
€61.6 million (30.06.2023: €54.0 million) and mainly refer to the
expansion and production optimisation of the plants in Brazil, as well as to
production optimisation and digitalisation projects.
9. Inventories
Inventories as presented in the Condensed Consolidated Statement of Financial
Position consist of the following items:
in € million 30.06.2024 31.12.2023
Raw materials and supplies 265.9 274.0
Work in progress 205.8 220.5
Finished products and goods 505.0 488.6
Prepayments made 15.0 12.8
Emission rights(1)) 5.0 5.1
Inventories 996.7 1,001.0
1) With effect from 1 January 2024 "Other current receivables"
excludes "Emission rights" which are now presented in "Inventories". Prior
period comparatives have been revised to conform with current year
presentation.
Net write-down expenses on inventories amount to €3.6 million in the first
half of 2024 (30.06.2023: €10.2 million).
10. Trade and other current receivables
Trade and other current receivables as presented in the Condensed Consolidated
Statement of Financial Position are classified as follows:
in € million 30.06.2024 31.12.2023
Trade receivables 475.2 537.6
Contract assets 2.2 3.5
Other tax receivables 86.7 95.4
Prepaid expenses 10.9 8.4
Other current receivables(1)) 35.9 35.7
Trade and other current receivables 610.9 680.6
thereof financial assets 477.6 541.4
thereof non-financial assets 133.3 139.2
1) With effect from 1 January 2024 "Other current receivables"
excludes "Emission rights" which are now presented in "Inventories". Prior
period comparatives have been revised to conform with current year
presentation.
The Group enters into factoring agreements and sells trade receivables to
financial institutions. Trade receivables sold as of 30 June 2024 was €244.4
million (31.12.2023: €259.4 million). These have been derecognised from the
balance sheet as substantially all risks and rewards, as well as control, have
been transferred. Payments received from customers following the sale are
recognised in current borrowings until repaid to the factorer.
Other tax receivables mainly include VAT receivables.
Other current receivables mainly relate to prepayments for insurance, IT
services, and, custom and import-related services and costs.
11. Borrowings
Borrowings include all interest-bearing liabilities due to financial
institutions and other lenders.
In March 2024, the Group successfully raised a €200.0 million syndicated
term loan with a tenor of five years. Loan proceeds will be used for the
intended acquisition of the Resco Group. The term loan remains fully undrawn
per 30 June 2024.
In April 2024, the Group prepaid €100.0 million from a €150.0 million
bilateral term loan, which matures in April 2026, to optimise the Group's
capital structure and maturity profile and reduce excess cash.
Resulting from the Group's strong EcoVadis ESG rating upgrade in June 2024,
with an improvement by four points and an achieved score of 76, the margin
payable on the Group's ESG-linked financings amounting to €2,003 million
(including the fully undrawn €600.0 million RCF) was reduced by 3bps,
leading to €0.5 million savings in interest cost on an annual basis, ceteris
paribus.
Net debt excluding lease liabilities/Adjusted EBITDA is the key financial
covenant of the loan agreements. Compliance with the covenants is measured on
a semi-annual basis. In line with the covenant requirements, net debt
excluding lease liabilities/ Adjusted EBITDA cannot exceed 3.5x. Breach of
covenants leads to an anticipated maturity of loans. During the first half of
2024, the Group met all covenant requirements.
The calculation of the key financial covenant is presented in the following
table:
in € million 30.06.2024 30.06.2023
EBIT 326.1 341.8
Amortisation 40.6 37.7
Restructuring and write-down expenses 7.2 4.1
Other operating income and expenses 24.6 12.7
Adjusted EBITA 398.5 396.3
Depreciation 137.4 122.8
Adjusted EBITDA 535.9 519.1
Total debt 1,812.4 1,814.1
Lease liabilities 65.8 69.6
Less: Cash and cash equivalents 604.8 759.7
Net debt 1,273.4 1,124.0
Net debt excluding IFRS 16 lease liabilities 1,207.6 1,054.4
Net debt to Adjusted EBITDA 2.38x 2.17x
Net debt to Adjusted EBITDA excluding IFRS 16 lease liabilities 2.25x 2.03x
The disclosures in this section include certain Alternative Performance
Measures (APMs). The key performance indicator for net debt in the RHI
Magnesita Group is the Group leverage, which reflects the ratio of net debt to
Adjusted EBITDA, including lease liabilities. The Adjusted EBITDA is
calculated on a trailing twelve-month basis, considering the last six months
of 2023 and the first six months of 2024.
Alternative Performance Measures (APMs) are non-IFRS measures which enable
investors and other readers to review alternative measurements of financial
performance, but they should not be used in isolation from the main financial
statements. Adjusted EBITA and adjusted EBITDA are key non-IFRS measures that
the Executive Management Team and Directors use internally to assess the
underlying performance of the Group. Adjusted EBITDA is defined as EBIT, as
presented in the Condensed Consolidated Statement of Profit or Loss, before
amortisation, depreciation, and excluded Items. Adjusted EBITA is determined
consistently with Adjusted EBITDA, but includes depreciation expense of
property, plant and equipment to reflect the wear and tear cost and future
replacement of productive assets on the Group. Excluded items are other
income, other expenses and restructuring expenses as reflected on the
Statement of Consolidated Profit or Loss, as well as gains and losses within
interest income, interest expenses and other net financial expenses that are
non-recurring in nature and not reflective of the underlying operational
performance of the business. Excluded items include restructuring related
provisions and other non-recurring costs.
12. Provisions for pensions
For interim reports, provisions for pensions are determined based on a
forecast for the entire year prepared by an actuary. If there are significant
changes in the actuarial assumptions during the year, a remeasurement of the
net liabilities from employee related defined benefit obligations is
recognised.
As of 30 June 2024, a net defined plan liability of €217.0 million was
recognised compared to €241.5 million at 31 December 2023. The remeasurement
comprises primarily actuarial gains which were reported in other comprehensive
income, and which are mainly driven by changes in the actuarial interest
rates, which are as follows: 11.0 % (31.12.2023: 10.1 %) in Brazil, 10.2%
(31.12.2023: 9.2 %) in Mexico, 5.3 % (31.12.2023: 4.8 %) in the US, and 3.6 %
(31.12.2023: 3.3 %) in the Euro zone.
13. Current provisions
Provisions for restructuring costs amounting to €7.1 million as of 30 June
2024 (31.12.2023: €8.7 million) primarily consist of benefit obligations to
employees, due to termination of employment, and dismantling costs. €4.5
million (31.12.2023: €6.2 million) relate to the closure of plants, Trieben,
Mainzlar and Kruft.
Provisions for contract obligations of €12.3 million as of 30 June 2024
(31.12.2023: €15.1 million) include mainly the current portion of the
Oberhausen contract obligation amounting to €10.0 million as of 30 June 2024
(31.12.2023: €10.6 million).
Other provisions consist mainly of obligations related to warranty claims and
other similar obligations from the sale of refractory products.
14. Trade payables and other current liabilities
Trade payables and other current liabilities included in the Condensed
Consolidated Statement of Financial Position consist of the following items:
in € million 30.06.2024 31.12.2023
Trade payables 524.6 497.9
Contract liabilities 55.4 64.6
Liabilities to employees 108.6 136.4
Capital expenditure payable 19.8 33.0
Taxes other than income tax 35.1 32.6
Payables from commissions 9.1 9.4
Other current liabilities 35.8 46.3
Trade payables and other current liabilities 788.4 820.2
thereof financial liabilities 568.3 561.2
thereof non-financial liabilities 220.1 259.0
Trade payables include an amount of €102.9 million (31.12.2023:
€84.1 million) for raw material purchases subject to supply chain finance
arrangements.
Other current liabilities include liabilities from accrued interest in the
amount of €13.6 million (31.12.2023: 15.3 million) as well as a deferred
income amount of €7.2 million (31.12.2023: €8.6 million).
15. Cash generated from/(used in) operations
in € million for the six months ended 30 June 2024 2023
Profit after income tax 110.9 83.1
Adjustments for
income tax 31.8 28.3
depreciation 67.6 64.1
amortisation 18.8 21.8
write down of property, plant and equipment and intangible assets 0.3 (0.3)
income from the reversal of investment subsidies (0.3) (0.3)
(write ups)/impairment losses/loss from sale on securities 3.3 (0.1)
Loss from the disposal of property, plant and equipment 4.6 0.3
gains from the disposal of operations in subsidiaries (8.6) 0.0
net interest expense and valuation call/put options 22.3 31.8
result from disposal and share in profit of joint ventures and associates (0.1) (2.5)
other non-cash changes (3.9) 12.2
Changes in working capital
inventories 1.5 64.2
trade receivables 61.0 58.1
contract assets 1.3 (0.7)
trade payables 30.9 (93.1)
contract liabilities (9.0) 12.3
Changes in other assets and liabilities
other receivables and assets (0.6) 3.6
provisions (20.6) (16.1)
other liabilities (26.5) 10.0
Cash generated from operations 284.7 276.7
Income tax paid less refunds (35.6) (24.3)
Net cashflow from operating activities 249.1 252.4
16. Additional disclosures on financial instruments
The following tables show the carrying amounts and fair values of financial
assets and liabilities by measurement category and level and the allocation to
the measurement category. In addition, carrying amounts are shown aggregated
according to measurement category.
30.06.2024 31.12.2023
in € million Measurement category Level Carrying amount Fair value Carrying amount Fair value
IFRS 9(1))
Non-current financial assets
Marketable securities FVPL 1 12.0 12.0 11.8 11.8
Shares FVPL 3 0.5 0.5 0.5 0.5
Shares FVOCI 3 7.1 7.1 4.6 4.6
Interest rate derivatives and Commodity swaps designated as cash flow hedges - 2 27.1 27.1 20.5 20.5
Investments in non-consolidated subsidiaries FVPL - 7.0 7.0 2.4 2.4
Other non-current financial assets AC - 7.8 3.6
Trade and other current receivables AC - 430.2 510.4
Trade and other current receivables FVOCI - 47.5 47.5 31.0 31.0
Current financial assets
Marketable securities FVPL 1 0.0 0.0 11.3 11.3
Interest rate derivatives and Commodity swaps designated as cash flow hedges - 2 3.0 3.0 0.4 0.4
Derivatives in open orders and Forward exchange contracts FVPL 2 1.3 1.3 0.4 0.4
Other current financial receivables AC - 2.3 1.6
Cash and cash equivalents AC - 604.8 703.5
Financial assets 1,150.6 1,302.0
Non-current and current borrowings
Liabilities to financial institutions AC 2 1,799.9 1,785.4 1,932.0 1,919.8
Other financial liabilities AC - 12.6 16.8
Non-current and current other financial liabilities
Lease liabilities - - 65.8 69.9
Interest rate derivatives and Commodity swaps designated as cash flow hedges - 2 9.0 9.0 13.4 13.4
Derivatives in open orders and Forward exchange contracts FVPL 2 1.1 1.1 3.8 3.8
Liabilities to fixed-term or puttable non-controlling interests AC 2/3 28.6 28.6 33.5 33.5
Liabilities to fixed-term or puttable non-controlling interests FVPL 3 44.4 44.4 53.7 53.7
Trade payables and other current liabilities AC - 568.3 561.2
Financial liabilities 2,529.7 2,684.3
Aggregated according to measurement category
Financial assets measured at AC 1,045.1 1,219.1
Financial assets measured at FVOCI 54.6 35.6
Financial assets measured at FVPL 20.8 26.4
Financial liabilities measured at AC 2,409.4 2,543.5
Financial liabilities measured at FVPL 45.5 57.5
1) FVPL: Financial assets/financial liabilities measured at fair
value through profit or loss
FVOCI: Financial assets
measured at fair value through other comprehensive income
AC: Financial assets/financial
liabilities measured at amortised cost
In the Group, marketable securities, derivative financial instruments and
shares are measured at fair value. Interests in subsidiaries not consolidated
are recognised at cost, which due to materiality reasons, is considered a
reasonable approximation of fair value. Fair value is defined as the amount
for which an asset could be exchanged, or a liability settled, between market
participants in an arm's length transaction on the day of measurement. When
the fair value is determined it is assumed that the transaction in which the
asset is sold or the liability is transferred takes place either in the main
market for the asset or liability, or in the most favorable market if there is
no main market. RHI Magnesita considers the characteristics of the asset or
liability to be measured which a market participant would consider in pricing.
It is assumed that market participants act in their best economic interest.
The Group takes into account the availability of observable market prices in
an active market and uses the following hierarchy to determine fair value:
Level 1: Prices quoted in active markets for identical financial instruments.
Level 2: Measurement techniques in which all important data used are based on
observable market data.
Level 3: Measurement techniques in which at least one significant parameter is based on
non-observable market data.
The fair value of securities and shares is based on price quotations at the
reporting date (Level 1), where such quotations exist. In other cases, a
valuation model (Level 3) would be used for such instruments with an exception
if such instruments are immaterial to the Group, in which case cost serves as
an approximation of fair value.
The fair value of interest derivatives in a hedging relationship (interest
rate swaps) is determined by calculating the present value of future cash
flows based on current yield curves, taking into account the corresponding
terms (Level 2).
The fair value of foreign currency derivative contracts corresponds to the
market value of the forward exchange contracts and the embedded derivatives in
open orders denominated in a currency other than the functional currency.
These derivatives are measured using quoted forward rates that are currently
observable (Level 2). The fair value of commodity swaps for natural gas
reflects the difference between the fixed contract price and the closing
quotation of the natural gas price (EEX Base) as of the respective due date of
the transaction. The closing price on the stock exchange is used as the input
(Level 2).
Liabilities to financial institutions and other financial liabilities are
carried at amortised cost in the Condensed Consolidated Statement of Financial
Position. Liabilities related to fixed-term or puttable non-controlling
interests based on a fixed consideration are recognised at amortised cost
whereas those liabilities based on a variable consideration are recognised at
fair value. The fair values of the liabilities to financial institutions are
only disclosed in the Notes and calculated at the present value of the
discounted future cash flows using yield curves that are currently observable
(Level 2). The carrying amount of other financial liabilities approximate
their fair value at the reporting date.
The carrying amounts of other financial assets approximately correspond to
their fair value. Due to the low amounts recognised no material deviation
between the fair value and the carrying amount is assumed and the credit
default risk is accounted for by forming valuation allowances.
Trade and other current receivables and liabilities as well as cash and cash
equivalents are predominantly short-term. Therefore, the carrying amounts of
these items approximate fair value at the reporting date.
No contractual netting agreement of financial assets and liabilities were in
place as at 30 June 2024 and 31 December 2023.
17. Contingent liabilities
As of 30 June 2024, warranties, performance guarantees and other guarantees
amount to €73.9 million (31.12.2023: €70.9 million). Contingent
liabilities have a remaining term of between two months and three years. Based
on past experience the probability that contingent liabilities will transform
into a firm payment obligation is considered low.
Individual administrative proceedings and lawsuits which result from ordinary
activities are pending as of 30 June 2024 or can potentially be exercised
against RHI Magnesita in the future. The related risks were analysed with a
view to their probability of occurrence.
Taxation contingencies
The calculation of income taxes is based on the tax laws applicable in the
individual countries in which the Group operates. Due to their complexity, the
tax items presented in the Consolidated Financial Statements may be subject to
different interpretations by local finance authorities. In this context it
should be noted that a tax provision is generally recognised when the Group
has a present obligation as a result of a past event, and when it is
considered probable that there will be a future outflow of funds.
The Group is continually adapting its global presence to improve customer
service and maintain its competitive advantage, accordingly, it leads open
discussions with tax authorities about, e.g., transfer of functions and
related profit between related parties and exit taxation. In this regard,
disputes may arise, where the Group's management understanding differs from
the positions of the local authorities. In such cases, when an appeal is
available, management's judgements are based on a likely outcome approach,
taking into consideration advice from professional firms and previous
experiences when assessing the risks.
The Group is party to several tax proceedings in Brazil which involve
estimated contingent liabilities amounting to €215.4 million (31.12.2023:
€271.8 million). These tax proceedings are as follows:
Income Tax relating to historical corporate transactions
There are three proceedings in which Brazilian Federal Tax Authorities issued
tax assessments which rejected the deduction of goodwill generated in two
corporate transactions that were undertaken 2007 and 2008, for Corporate
Income Taxes. The tax authorities issued assessments arguing that such
transactions cannot generate deductions as they do not fulfil the requirements
provided by law.
In the first half of 2024, two of the three proceedings have reached the final
outcome under Brazilian Federal Administrative Courts. As a result, the
contingent liability is reduced by €112.1 million. The first proceeding has
been formally notified, whilst the second proceeding has been published but is
yet to be formally notified. The third proceeding is expected to conclude
within one to three years.
The exposure in cash as of 30 June 2024 is €54.4 million (31.12.2023:
€177.2 million).
Royalties
The Group is party to 38 proceedings where the Brazilian Mining Authorities
("ANM") challenged the criteria used for calculating and paying the Financial
Compensation for Exploration of Mineral Resources ("CFEM"), which are mining
royalties payable by every mining company. The authorities have mainly
disputed the basis of production costs estimates used in the determination of
the royalties that are payable. The claims relate to fiscal years up to 2017,
following which the legislation for royalties was changed. The Group, together
with its technical and legal advisors continues to challenge ANM assessments.
Most of the procedures are ongoing within the ANM administrative courts. Final
decisions of the first cases are expected within four to five years. As of 30
June 2024, the potential risk amounts to €29.6 million, including interest
and penalties (31.12.2023: €31.5 million).
Corporate income and other taxes
There are several tax assessments in Brazil mainly relating to: offsetting
federal tax payables and receivables, social security contributions,
offsetting certain federal tax debts with corporate income tax credits. The
potential risks of these tax assessments amount to €51.1 million
(31.12.2023: €63.1 million).
Civil litigation contingencies
Magnesita Refratários S.A., Contagem, Brazil is party to a public civil
action for damages allegedly caused by overloaded trucks in contravention of
Brazilian traffic legislation. In 2017, a decision was rendered in favour of
Magnesita in the trial court. The decision is being appealed by the Public
Ministry of Minas Gerais. The final decision is expected in nine years. The
potential loss from this procedure amounts to €18.2 million as of 30 June
2024 (31.12.2023: €18.3 million).
Other minor proceedings and lawsuits in which subsidiaries are involved have
no significant impact on the financial position and performance of the Group.
18. Other financial commitments
As of 30 June 2024, the RHI Magnesita Group has commitments for the purchase
of property, plant and equipment in the amount of €36.7 million (31.12.2023:
€9.3 million).
19. Business combinations and acquisition of non-controlling interests
Acquisitions completed in 2023
In July 2023 the Group completed the acquisition of Seven Refractories Group.
The purchase price allocation was finalised in 2024. Compared to the
preliminary amounts recognised for the acquired assets and liabilities in the
last year's Consolidated Financial Statements, the intangible asset related to
identified customer relationships decreased by €2.8 million accompanied by a
reduction in deferred tax liabilities of €0.6 million. These adjustments
were reflected against goodwill and non-controlling interests, in line with
IFRS 3, and mainly result from the reassessment of valuation parameters used
in the measurement of the intangible asset.
In October 2023 the Group completed the acquisition of P-D Refractories. The
purchase price allocation is still preliminary and does not materially differ
from the purchase price allocation disclosed in the last year's Consolidated
Financial Statements.
Acquisitions completed in 2024
In June 2024 the Group, through its non-wholly owned subsidiary Horn & Co.
RHIM Minerals Recovery GmbH, completed the acquisition of 100% of the equity
shares of Refrattari Trezzi S.r.l., a company engaged in the refractory
recycling business. The acquisition means that a strategic production facility
has been added to the Group's existing plant network. The strengthened
presence in Italy will enable an increased supply of high-value secondary raw
materials and customised services to extend the Group's full-line services
portfolio for the customers. The consideration paid in cash amounts to €4.5
million.
Acquisition of non-controlling interests
In April 2024 the Group acquired non-controlling interests of Seven
Refractories' Group for a cash consideration of €2.7 million with the
difference between the carrying amount of the non-controlling interests'
portion of equity acquired and the consideration paid recorded in retained
earnings within equity.
20. Disclosures on related parties
The nature of related party transactions as of 30 June 2024 are in line with
the transactions disclosed in Note (43) of the 2023 Group Financial
Statements. All transactions with related parties are conducted on an arm's
length basis and in accordance with normal business terms.
Related companies
No material transactions took place between the Group and related companies
and persons.
Related persons
There is a non-remunerated consultancy agreement in place between RHI
Magnesita and a close relative of a Non-Executive Director to advise the Group
in respect of political and/or strategic analysis in countries outside the
European Union and Brazil.
21. Material events after the reporting date 30.06.2024
After the reporting date on 30 June 2024, there were no other events of
significance which may have a material impact on the financial position and
performance of the RHI Magnesita Group.
Statement of the Board of Directors
Statement pursuant to Article 5:25d, paragraph 2, subsection c. of the Dutch
Financial Markets Supervision Act ("Wet op het financieel toezicht").
The Interim Financial Statements for the six-month period ended 30 June 2024,
have been prepared in accordance with IAS 34 'Interim Financial Reporting' as
issued by the IASB and interpretations issued by the IFRIC, and as endorsed by
the European Union (EU).
To our knowledge,
- The Interim Financial Statements referred to above, give a true and fair
view of the assets, liabilities, financial position, and profit of RHI
Magnesita N.V. and the undertakings included in the consolidation as a whole;
and
- The Interim Report for the six-month period ended 30 June 2024 as presented
in the report on unaudited half year results includes a fair view of the
information required pursuant to article 5:25d paragraphs 8 and 9 of the Dutch
Financial Markets Supervision Act ("Wet op het financieel toezicht").
Vienna, 23 July 2024
Executive Directors
Stefan Borgas Ian Botha
Non-Executive Directors
Herbert Cordt John Ramsay
Janet Ashdown David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein Berleburg Janice "Jann" Brown
Karl Sevelda Marie-Hélène Ametsreiter
Wolfgang Ruttenstorfer Katarina Lindström
Employee Representative Directors
Karin Garcia Martin Kowatsch
Michael Schwarz
Independent auditor's review report
To: the board of directors of RHI Magnesita N.V.
Introduction
We have reviewed the accompanying condensed consolidated interim financial
information for the six-month period ended 30 June 2024 (the 'interim
financial information') of RHI Magnesita N.V., Arnhem, which comprises the
condensed consolidated statement of financial position as at 30 June 2024,
the condensed consolidated statement of profit or loss, the condensed
consolidated statement of comprehensive income, the condensed consolidated
statement of changes in equity, the condensed consolidated statement of cash
flows for the period then ended and the selected explanatory notes. The board
of directors is responsible for the preparation and presentation of this
interim financial information in accordance with IAS 34, 'Interim Financial
Reporting' as adopted by the European Union. Our responsibility is to express
a conclusion on this interim financial information based on our review.
Scope
We conducted our review in accordance with Dutch law including standard 2410,
Review of Interim Financial Information Performed by the Independent Auditor
of the entity. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
auditing standards and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying condensed consolidated interim financial
information for the six-month period ended 30 June 2024 is not prepared, in
all material respects, in accordance with IAS 34, 'Interim Financial
Reporting' as adopted by the European Union.
Rotterdam, 23 July 2024
PricewaterhouseCoopers Accountants N.V.
Original has been signed by A. F. Westerman RA
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