| · | Successful completion of the merger of RHI and Magnesita and the subsequent admission of RHI Magnesita N.V. to the Premium Segment of the London Stock Exchange |
| · | Adjusted pro-forma revenue1 of €2,677.2 million in 2017, up 11%, driven by sales growth in both steel and industrial divisions, supported by a more favorable market environment |
| · | Adjusted pro-forma EBITA1 of €304.1 million, up 39% |
| · | Net Debt/Adjusted Pro-forma EBITDA1 of 1.9x |
| · | Faster realization of synergies by one year: €40 million in 2018 and the balance of €70 million in 2019 |
Note: this is a shortened version. The full version including all details can be found at ir.rhimagnesita.com
Vienna/London, March 21, 2018 – In many ways, 2017 was a transformative year for RHI Magnesita: the listing in the Premium Segment on the London Stock Exchange on October 27th marked the successful combination of RHI and Magnesita as well as the rise of RHI Magnesita to the top of the refractory industry.
Financial Summary
| Reported (audited) | Adjusted Pro-forma¹ (unaudited) | |||||
| 2017 | 2016 | 2017 | 2016 | Change % | ||
| €m | €m | €m | €m | |||
| Revenue | 1,946.1 | 1,651.2 | 2,677.2 | 2,409.1 | 11% | |
| EBITA | 56.7 | 126.6 | 304.1 | 219.3 | 39% | |
| EBITA margin | 2.9% | 7.7% | 11.4% | 9.1% | +230 bps | |
| Dividend per share | 0.75 | 0.75 | n/a | n/a | n/a | |
Solid operating performance in 2017
“In addition to the cross-border merger, RHI Magnesita recorded a strong operating performance in the financial year which is attributable to the company’s efficient operations, improving macroeconomic environment and the engagement of all employees worldwide”, commented CEO Stefan Borgas on the first joint annual results.
Adjusted pro-forma revenue1 for 2017 was €2,677.2 million, an 11.1% increase over the adjusted pro-forma revenue1 of €2,409.1 million achieved in 2016. The increase reflects sales growth in both the steel and industrial divisions, supported by strong industrial production globally.
Adjusted pro-forma EBITA1 was €304.1 million, 38.7% above the adjusted pro-forma performance for 2016. Adjusted pro-forma EBITA margin1 reached 11.4%, up 230 bps compared to the adjusted pro-forma margin in 2016. The improvement was mostly driven by higher sales with resulting better fixed cost dilution, in addition to the Company’s initiatives to improve efficiency in its operations.
The reported statutory results, which consolidate 10 months of results for RHI and 2 months of results for RHI Magnesita, meaning the consolidated financial statements only include 2 months of results of Magnesita Refratários, are as follows: the reported Group revenue amounted to €1,946.1 million, up by 17.9% over the previous year as a result of growth in both steel and industrial sales, as explained above, and the consolidation of Magnesita revenues from 1 November 2017. Reported revenue from Steel Division totalled €1,308.8 million in 2017, whereas Industrial Division amounted to €577.6 million.
Reported EBITA, which does not exclude transaction costs, merger-related adjustments, foreign exchange variations, disposed businesses and non-merger-related expenses, which are generally non-recurring, amounted to €56.7 million in 2017, with a 2.9% margin.
Steel division recorded two-digit growth
Adjusted pro-forma sales1 to steel totalled €1,913.1 million, up by 14.2% over 2016 adjusted pro-forma sales1. The robust performance was largely driven by the 5.3% increase in world steel production in 2017. According to the World Steel Association, global steel production totalled 1.69 billion tonnes, compared with 1.61 billion tonnes in 2016, with output expanding in almost all regions, with steel production increasing simultaneously in Europe, North America and South America, after a few years of production declines. In addition, RHI Magnesita’s growth initiatives evolved constructively, especially in the US, Brazil and India, where deliveries growth surpassed underlying steel market growth.
Industrial division grew by nearly 3%
Adjusted pro-forma revenue1 of the Industrial division grew by 2.6% in 2017, to €658.8 million, compared to €642.1 million in 2016. Growth was led by the cement segment, especially in the second half of the year. The raw material crisis in China also influenced the demand for refractories, as some customers anticipated orders to secure supply. Despite recovering metal prices in 2017, there were virtually no greenfield projects in the nonferrous segment in the year, thus reducing most of the business to standard repairs with very few major new relining activities. Demand for refractories from the glass industry improved during the year, especially from flat glass, as some projects came online during the year. For the container glass segment, demand remained nearly flat year-over-year. Finally, sales to the Environment-Energy-Chemical (EEC) segment were flat compared to the previous year, as oil and gas prices have not recovered yet to a level that would trigger substantial new investments.
Raw material situation remained difficult over the year
The refractory raw material markets suffered a dramatic change after the Chinese government enforced stricter environmental controls which caused temporary and permanent closures of raw material facilities during the year. This measure caused a significant imbalance between supply and demand and, consequently, Chinese-sourced raw material prices skyrocketed. Prices for the two main magnesite-based raw materials, dead-burned magnesia (DBM) and electro-fused magnesia (EFM), from China have more than doubled during the year and remain well above historical levels. This environment created significant challenges for all refractory producers and forced price adjustments across the supply chain. Moreover, the environment created scarcity of important raw material for the refractory industry across the globe. RHI Magnesita’s vertically integrated business model, with high quality raw material sources, allowed the Company to ensure supply to its customers while managing to maintain competitive costs.
Financial position
Cash flow generation in 2017 was mainly driven by the increase in free cash flow from operations of €221.6 million, an increase of 36.2% over the €162.7 million generated in 2016. The net cash flow from investing activities totalled a positive income of €33.3 million, driven by the net cash inflow of €45.1 million from acquired subsidiaries (cash disbursement less the cash & cash equivalent received from the acquired company). Additionally, the proceeds from the divestment businesses in the amount of €30.6 million also led to the positive cash flow from investing activities. Net cash flow from financing activities added up €16.4 million, which resulted from the funding raised related to the acquisition of Magnesita. RHI Magnesita had an overall cash generation of €271.3 million in 2017.
Net debt amounted to €750.8 million at year-end, compared to €298.8 million in the previous year. The net debt number includes already the acquisition of the control of Magnesita in October 2017 and the proceeds of the merger-related divestments received in November 2017. Leverage, measured by net debt/ adjusted pro-forma EBITDA1, stood at 1.9x at year-end.
Working Capital performance is measured in both absolute values and as a percentage of total sales. Cash flow generation from trading working capital amounted to €10.8 million, with a higher consumption of inventories being offset by an improvement on the trade payables terms. Absolute values for working capital at year end amounted to €610.2 million. Working Capital intensity, measured as a percentage of adjusted pro-forma 2nd half annualized revenue1, stood at 22.2% at the end of 2017. At the end of 2016, RHI and Magnesita, had combined working capital equal to €667.8 million, equivalent to 27.8% of adjusted pro-forma 2016 revenue1.
Dividends
For the financial year 2017, the Board of Directors will propose a dividend of €0.75 per share, which corresponds to a dividend payment of €33.6 million for the shareholders of RHI Magnesita N.V. The proposed dividend is subject to the approval by the Annual General Meeting of Shareholders on June 7, 2018 and was not recognized as a liability in the consolidated financial statements 2017.
Synergies
We continue to successfully implement our planned integration actions and remain very confident in achieving significant synergies. Now, we expect the €70 million in synergies to be already capture fully in 2019, with at least €40 million in 2018. Expected total cash restructuring costs to achieve these synergies are projected to amount to €70 million, of which €53 million have already been expensed in 2017. Most cash outflows related to these restructuring costs will be incurred over 2018.
Adjusted Pro-forma Results (unaudited)
The reported statutory results consolidate 10 months of results for RHI and 2 months of results for RHI Magnesita, which means that the consolidated financial statements only include 2 months of results of Magnesita Refratários. As such, in an effort to provide comparable information for the 2 year time period, the Directors have carefully considered appropriate to provide and analyse adjusted pro-forma results for the combined Group.
Given the changes in capital structure arising from the acquisition of Magnesita, the historical interest, tax and dividend charges are not deemed to be meaningful. As a result, adjusted pro-forma results have only been provided down to EBIT.
Adjusted pro-forma results are stated before the impact of Items such as: divestments, restructuring expenses, merger-related adjustments and other non-merger related other income and expenses, which are generally non-recurring.
About RHI Magnesita
RHI Magnesita is the global leading supplier of high-grade refractory products, systems and solutions which are indispensable for industrial 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 more than 10,000 customers in nearly all countries around the world. The Company has broad geographic diversification with more than 14,000 employees in 35 main production sites and more than 70 sales offices. RHI Magnesita intends to use its global leadership position in terms of revenue, greater scale, complementary product portfolio and diversified geographic presence around the world to target opportunistically those countries and regions benefitting from more dynamic economic growth prospects.
Its shares have a premium listing on the London Stock Exchange (symbol: RHIM) and are a constituent of the FTSE 250 index. For more information please visit: www.rhimagnesita.com
Enquiries:
RHI Magnesita N.V.
Stefan Rathausky, Senior VP Corporate Communications
Tel +43 50213-6059
E-mail: stefan.rathausky@rhimagnesita.com
Eduardo Gotilla, Head of Corporate Finance and Investor Relations
Tel +44 (0) 20 3823 3661
E-mail: eduardo.gotilla@rhimagnesita.com