RHI Magnesita N.V. announces trading update for the three months to March 2018
RHI Magnesita’s first quarter trading performance continues to reflect the positive trends seen in the H217 and the benefits of the high level of vertical integration. Price increases promoted strong development in revenues, more than offsetting higher raw material input costs. Revenue for the three months to March 2018 was € 745 million, 23 % higher than the comparative period on a constant currency basis1 (14 % higher on a reported basis). Operating EBITA increased by almost 70 % on a constant currency basis1, to € 113 million, with a 15.2 % operating EBITA margin. [1when compared to Q117 adjusted proforma numbers]
Steel division
Steel production growth year-over-year was robust in South America, MEA and Asia Pacific and slightly positive in North America and Europe. RHI Magnesita’s steel division has outperformed these trends so far this year, with the exception of South America. It is too early to gauge the effects from the imposition of trade tariffs, yet the Group believes its diversified production base (in 16 countries across four continents) and client base (10000 plants in more than 180 countries) will cushion any significant impact from these developments, as long as industrial output on a global basis is unaffected.
Industrial division
In the Industrial division, the nonferrous metals segment performs stronger than last year with high margin order intakes so far. In EEC (Environment, Energy & Chemicals) RHI Magnesita sees increasing demand in China and CIS, with the installation business picking up. The Cement/Lime segment is flat, as result of still low capacity utilization in China and Brazil and some market share losses due to pricing. The Minerals segment has benefitted from raw material price increases and supply shortage caused by the stricter environmental enforcement in China.
Integration and synergies
RHI Magnesita continues to successfully implement the planned integration actions and also continue to remain very confident in achieving the synergy target of € 70 million p.a. by 2019 and € 40 million in 2018. The dedicated integration team is working on several additional fronts which may lead to incremental savings and will be communicated when they reach an adequate maturity level. Approximately, € 10 million in synergies were already reflected in the first quarter results.
Financial condition
The financial position continues to strengthen and the deleveraging profile is reinforced by the improving operating profit, in spite of the working capital demands required to finance the higher levels of activity. In line with the Company’s plan to reposition its capital structure to reflect its improved financial position, in the Q118 the Company redeemed $ 133 million in legacy bonds and refinanced certain facilities with a new € 305.6 million 5-year term loan. Accordingly, RHI Magnesita continues to be well financed with high liquidity and a robust balance sheet.
Outlook
The business is expected to develop very positively in 2018 and anticipate full year operating results to continue accruing the benefits from pricing, additional synergies and network optimization, despite currency headwinds. The Group’s revenue growth rate achieved in the first quarter is higher than anticipated for the full year, as the H217 already reflected improved market conditions and some effect on revenues from the pass-through of raw material input inflation.
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