TIDMRHIM
RNS Number : 1792H
RHI Magnesita N.V.
26 July 2023
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or the "Group")
Strong pricing, strategic sales initiatives and M&A
contribution offset lower demand to deliver increase in EBITA and
deleveraging
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 2023 ("H1 2023"
or the "Period").
Financial results
(EURm unless stated H1 2023 H1 2022 Change H1 2022 Change
otherwise) Constant Currency Constant
Adjusted(1) Currency
Adjusted
Revenue 1,734 1,594 9% 1,593 9%
Adjusted EBITDA 265 245 8% 258 2%
Adjusted EBITA(2) 200 188 7% 202 (1)%
Adjusted EBITA margin 11.6% 11.8% (20)bps 12.7% (110)bps
Adjusted EPS 2.53 2.58 (2)%
Net debt 1,124 1,231 (9)%
Pro forma Net debt
to LTM Adjusted EBITDA(3) 2.1x 2.7x (0.6)x
H1 2023 H1 2022
Reported
Revenue 1,734 1,594
Reported EBITA 184 177
Profit before tax 111 142
EPS EUR1.71 EUR2.06
Dividend per share EUR0.55 EUR0.50
(1) H1 2022 adjusted for constant currency for H1 2023 average
FX rates.
(2) Adjustments of EUR16 million to reported EBITA include EUR11
million relating to non-recurring restructuring costs and EUR5
million was spent on M&A integration costs in the Period.
(3) Includes trailing 12 months EBITDA contribution from
businesses acquired during the period, including prior to the date
of acquisition.
Operational and strategic highlights
-- Steel revenues 5% higher, reflecting an 8% volume reduction
in line with subdued market demand globally, more than offset in
the Period by strong pricing
-- Industrial division performance benefited from strong pricing
recovery and later cycle nature of project business, to deliver
gross margin of 29.0% (H1 2022: 25.9%), highlighting benefits of
sector diversification
-- Low plant capacity utilisation of 76% (H1 2022: 83%) delivers
planned inventory reduction excluding M&A. Associated fixed
cost under-absorption results in flat gross margins for Steel,
despite lower input costs
-- Inventory now at or approaching target demand coverage
ratios, through focus on stock management without impacting
customer performance. Record high PIFOT ("produced in full and on
time") and record low customer complaints
-- Recycling rate increased to 13.0% (H1 2022: 9.3%). Over the
period January 2018 to June 2023, approximately 1.1 million tonnes
of CO(2) emissions has now been avoided through the use of
secondary raw materials
-- Five acquisitions completed during H1 2023 in India, China
and Europe for a total cash consideration of EUR208 million,
including working capital investments of EUR23 million. Significant
synergies and earnings accretion expected as new businesses are
integrated into the Group
Financial highlights
-- Revenue increased 9% to EUR1,734 million (H1 2022: EUR1,594
million), as higher pricing and M&A contribution offset the
negative impact of lower sales volumes
-- Adjusted EBITA of EUR200 million (H1 2022: EUR188 million)
and margin of 11.6% (H1 2022: 11.8%) as currency tailwind, higher
pricing, M&A contribution and strategic sales initiatives
offset lower volumes:
- Price increases contributed EUR167 million to Adjusted EBITA
versus H1 2022
- Adjusted EBITDA from M&A in H1 2023 of EUR19 million
(EBITA: EUR14 million) against previous full year guidance of
EUR25-EUR30 million, with contribution weighted towards H2 2023 due
to timing of completion. Guidance for 2023 increased to
approximately EUR40 million
- Strategic initiatives cumulative annual EBITA contribution
since 2019 now at EUR131 million, achieving the FY 2023 guided
range of EUR125-EUR145 million
-- Adjusted EPS of EUR2.53 per share in line with H1 2022 (H1
2022: EUR2.58 per share) as higher EBITA was offset by higher debt
interest charges, as guided, and currency movements
-- Significant step up in free cash flow to EUR167 million (H1
2022: EUR146 million outflow) driven by working capital release in
base business and strong operating cash flow conversion of 114%
-- Net Debt reduced to EUR1,124 million (31 December 2022:
EUR1,163 million) and pro forma Net Debt to Adjusted EBITDA reduced
to 2.1x (31 December 2022 Net Debt to Adjusted EBITDA: 2.3x),
strong cash flow and EUR100 million equity raise in India funded
cash invested into M&A of EUR208 million during the Period,
including EUR23 million of working capital investments
-- Interim dividend of EUR0.55 per share declared
Outlook
-- Outlook for key end markets remains uncertain, with order
books suggesting continued weakness into the second half
-- Pricing currently resilient but competitive pressure expected in the remainder of the year
-- Benefit of lower input costs expected to be offset by reduced
fixed-cost absorption due to low production volumes
-- Following strong first half profitability, full year Adjusted
EBITA margin is now expected to be between 10.5% and 11.5%,
delivering full year Adjusted EBITA including M&A of at least
EUR360 million
-- Net debt to EBITDA expected to remain above 2.0x at the FY
2023 as the Group further executes on its M&A pipeline, in line
with its guidance range
Commenting on the results, Chief Executive Officer, Stefan
Borgas, said:
"In the first half of the year we continued to experience
challenging conditions in the steel market as a result of low
demand volumes in all geographies with the exception of India.
However, I am pleased to report that the resilience of our business
model and strategy has been demonstrated by strong pricing, sector
diversification, the delivery of material benefits from our
strategic sales initiatives and a growing contribution from
acquisitions. We have generated free cash flow of EUR167 million
compared to an outflow of EUR146 million in H1 2022 and we are now
on course to deliver full year EBITA of at least EUR360 million
with a margin of between 10.5% and 11.5%. This is higher than we
expected at the beginning of this year, but with the benefits from
lower input costs eroded by fixed cost under-absorption due to low
production volumes. Five acquisitions completed in 2023 year to
date have been funded through operating cash flows and an equity
raise in India, enabling us to reduce gearing to 2.1x pro forma
EBITDA, in line with our targeted range. We are continuing to
progress the transformation of our business and the delivery of our
strategy, despite the challenging overall demand conditions."
A presentation for investors and analysts will be held today
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/ . Alternatively the webcast can be
accessed here .
For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
Tel +43 699 1870 6490
E--mail: chris.bucknall@rhimagnesita.com
Media:
Hudson Sandler
Mark Garraway, Emily Dillon, Nick Moore
Tel +44 020 7796 4133
E-mail: rhimagnesita@hudsonsandler.com
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 1,200degC 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 15,000
employees in 47 production sites, 7 recycling facilities and more
than 70 sales offices. RHI Magnesita intends to build on its
leadership in revenue, scale, product portfolio and diversified
geographic presence to expand further in high growth markets.
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 Vienna Stock
Exchange (Wiener Börse). For more information please visit:
www.rhimagnesita.com
HEALTH & SAFETY
A core value of the Group is to maintain a safe working
environment for its employees and contractors. During H1 2023 the
lost time injury frequency ("LTIF"), excluding recently acquired
businesses, increased slightly to 0.25 per 200,000 hours worked (H1
2022: 0.22), whilst the total recordable injury frequency ("TRIF")
reduced to 0.58 per 200,000 hours worked (H1 2022: 0.63). RHI
Magnesita aims to reduce all accidents to zero over the long
term.
During the Period, the main focus areas for improvement were
protocols for workplace inductions and safety training for new
hires. Further initiatives related to safety-awareness on specific
topics such as prevention of finger and hand injuries were rolled
out in response to an increase in incidents of this nature in
Q1.
FINANCIAL OVERVIEW
Reported revenue increased by 9% to EUR1,734 million (H1 2022:
EUR1,594 million) as the contribution from M&A, price increases
and benefits from strategic sales initiatives in India and in
Cement and Lime offset 9% lower volumes across Steel and
Industrial, excluding recycling and minerals sales. Revenue
increased on a constant currency basis by 9% (H1 2022: EUR1,593
million). Total revenue contribution in the Period from M&A was
EUR119 million.
Cost inflation began to ease during the Period but absolute
costs were higher compared to H1 2022 largely due to M&A, with
cost of goods sold increasing by 8% on a reported basis to EUR1,320
million (H1 2022: EUR1,221 million).
Adjusted EBITA increased by 7% on a reported basis to EUR200
million (H1 2022: EUR188 million) and reduced by 1% on a constant
currency basis (H1 2022: EUR202 million). Adjusted EBITA margin
decreased by 20bps to 11.6% (H1 2022: 11.8%). Higher pricing levels
maintained from H2 2022, combined with a reducing rate of cost
inflation, resulted in a record refractory margin contribution of
9.8ppts (H1 2022: 8.4ppts). The vertical integration margin was
lower, as guided, at 1.8ppts (H1 2022: 3.4ppts) as higher energy
costs increased the internal cost of raw material production,
compared to global market prices which are linked to the marginal
production costs of China based producers. Total Adjusted EBITDA
contribution from M&A in the first half was EUR19 million
(EBITA: EUR14 million) against original full year EBITDA guidance
of EUR25-EUR30 million. Guidance is now increased to approximately
EUR40 million of Adjusted EBITDA from M&A, including the
expected contribution from DGSB and Seven Refractories in the
second half of 2023.
Net debt decreased to EUR1,124 million at the end of the Period
(31 December 2022: EUR1,163 million) and reported leverage was 2.2x
net debt to Adjusted EBITDA, down from 2.3x at 31 December 2022 due
to higher operating cash flow. Including a 12-month historic EBITDA
contribution from businesses acquired during the period, pro forma
leverage was 2.1x Net debt to Adjusted EBITDA.
M&A cash consideration, net debt consolidated on acquisition
and working capital requirements of acquired businesses increased
net debt by EUR256 million in H1 2023. Cash outflow on acquisitions
was offset by strong operating cash flow in the base business and
the proceeds of a Qualified Institutional Placement ("QIP") by RHI
Magnesita India Ltd, raising approximately EUR100 million in April
2023. The QIP is to be followed by an equity investment of EUR22
million by the Group in RHI Magnesita India Ltd via a Preferential
Issue which is expected to complete in Q3 2023.
Net Working capital, before consolidation of new M&A,
decreased by EUR84 million to EUR834 million (31 December 2022:
EUR892 million) as inventories and accounts receivables were
successfully reduced, offset by decreased accounts payable due to
lower raw material prices and purchases. Excluding M&A, the
base business recorded a working capital intensity of 25.6%.
Including M&A, working capital stood at EUR940 million and
working capital intensity was 26.0%.
Available liquidity was EUR1,360 million at the period end (31
December 2022: EUR1,121 million) including undrawn committed
facilities of EUR600 million and cash and cash equivalents of
EUR760 million. Adjusted operating cash flow was EUR228 million (H1
2022: EUR(84) million), resulting from higher profitability and
reduced working capital requirements.
OUTLOOK
The outlook for the Group's key end markets and consequently
customer volumes remains uncertain, with order books suggesting
continued weakness into the second half. Pricing pressure from
competitors is expected over the remainder of the year.
Supported by strong profitability in the first half of the year,
the Board expects to deliver a full year Adjusted EBITA margin of
between 10.5% and 11.5% and Adjusted EBITA including M&A of at
least EUR360 million. Leverage, measured as a ratio of net debt to
Adjusted EBITDA, is expected to remain above 2.0x as the Group
further executes on its M&A pipeline.
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 EUR38 million of project capital expenditure
in the first half (H1 2022: EUR36 million), which included
investments in the Production Optimisation Plan and on recently
acquired assets. Maintenance capital expenditure in the period was
EUR25 million (H1 2022: EUR22 million). Total capital expenditure
was therefore EUR63 million (H1 2022: EUR58 million), against
unchanged full year 2023 guidance of EUR200 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 EUR0.55 per share
representing EUR25.9 million in aggregate. The interim dividend
will be paid on 22 September 2023 to shareholders on the register
on 25 August 2023.
Shareholders should note that Rhône Capital reserves the right
to reduce the consideration payable under its Partial Offer,
including to shareholders who have already accepted the Partial
Offer, by an amount equal to any such dividend payments.
M&A
During the Period, the Group completed two highly strategic
acquisitions in India, including the EUR86 million acquisition of
the refractory business of Hi-Tech in Jamshedpur and the Indian
refractory business of DBRL, which has substantially improved the
Group's regional positioning within the flow control and industrial
segments.
Following completion the Group began the integration of these
two acquisitions with its existing Indian footprint, including the
relocation of some flow control and lance production to locations
with a closer proximity to customer sites. The acquisitions in
India have increased the Group's local market share, representing
strategic progress against the Group's aim to grow in geographies
where it was previously under-represented. The expanded plant
network and additional low-cost production sites will increase RHI
Magnesita's competitiveness in the region for both local sales and
potential new export opportunities, especially across West Asia and
Africa.
The Group agreed to acquire DGSB, a German subsidiary of the
Dalmia Bharat Group, in March 2023. DGSB is a leading supplier of
monolithic lances and other precast products to European steel
customers for use in the desulphurisation and homogenisation of
molten steel, and represents a complementary addition to the
Group's existing product range.
The acquisition of a 65% stake in Jinan New Emei was completed
in April 2023 for a cash consideration of EUR23 million plus
assumed net debt and other liabilities of EUR17 million, with the
payment of EUR3 million of cash consideration deferred to 2024.
Jinan New Emei is based at a new facility in Shandong China and has
a well-established business in refractory slide gates, nozzles and
mixes. The integration of the plant commenced in May 2023.
On 21 April 2023, the Group announced the acquisition of Seven
Refractories for a cash consideration of EUR84 million and the
transaction was completed on 17 July 2023. Seven Refractories is a
specialist supplier of alumina based refractory mixes with broad
applications across all of the Group's customer segments including
iron and steel, cement, aluminium and non -ferrous metals.
The Group has continued to integrate acquisitions that were
completed in prior periods including SÖRMA (Türkiye), MIRECO
(Europe Recycling) and Chongqing (China) and these newly acquired
businesses are together delivering material benefits to the
Group.
The total contribution to Adjusted EBITDA from M&A in H1
2023 was EUR19 million (EBITA: EUR14 million). Guidance for M&A
contribution in the full year 2023 is increased from the previous
range of EUR25-EUR30 million Adjusted EBTIDA to approximately EUR40
million, including the recent acquisitions of Seven Refractories
and DGSB.
SUSTAINABILITY
The Group secured an increase in its Ecovadis sustainability
rating to 72 in June 2023 (June 2022: 69), maintaining its 'Gold'
rating. Out of a total of EUR2.4 billion of available debt
facilities, the margin payable on EUR1.9 billion of debt facilities
and Schuldschein bonds are now linked to the Group's Ecovadis
sustainability rating. Any further increase in the rating would
result in a reduction in the margin payable to lenders.
Continued progress has been delivered in recycling, with the
usage rate of secondary raw materials increasing to 13.0% in the
first half of 2023 (H1 2022: 9.3%). Each tonne of recycled material
used saves approximately two tonnes of CO(2) emissions that would
otherwise be released as a result of the mining and processing of
fresh raw material. Since the Group started to increase its
recycling rate significantly in 2018 through technical innovations,
investments in new product formulations, customer engagement, the
use of internal incentives and formation of MIRECO, a total of 1.1
million tonnes of CO(2) emissions have been averted, compared to
the emissions that would have been released if the increase in
recycling had not been implemented.
The Group continues to invest in developing new technologies to
deliver a reduction in its absolute CO(2) emissions and emissions
intensity and will seek to maintain its leadership position in the
refractory industry in the field of sustainability.
STRATEGIC INITIATIVES
The Group launched a number of strategic initiatives in 2019 to
improve its competitive position by investing in the
rationalisation and modernisation of its production footprint. The
Group has invested into its production plants and raw material
assets, creating a technically advanced and cost-competitive plant
footprint with a more localised supply chain. With the
Manufacturing Execution System in the final stages of
implementation at Dalian and Radenthein, the Production
Optimisation Plan is now substantially complete and supporting the
Group's resilient performance through the current period of market
weakness. The Brumado mine expansion and kiln installation project
in Brazil is now expected to ramp-up in H1 2024.
The Group also launched a series of sales initiatives to grow
its flow control business, seeking to increase sales from heat
management solutions to 40% by 2025 and to grow into new markets
including India, China, Türkiye and the non-basic product segment,
both organically and via acquisitions. The target for cumulative
annual EBITA contribution from sales initiatives was EUR40- EUR60
million by the end of 2023 and the total contribution achieved to
date now stands at EUR61 million.
Growth in new markets strengthened in the Period, primarily as a
result of M&A, with India revenues increasing by 43% to EUR241
million or 13.9% of Group revenue (H1 2022: EUR168 million, 10.6%).
Flow Control revenue increased by 5% to EUR261 million (H1 2022:
EUR249 million) in line with market volumes, despite softer overall
sales volumes in steel. Tundish mixes and isostatic sales in
America experienced strong pricing dynamics.
The strategic initiatives have delivered cumulative annualised
EBITA savings of EUR131 million in the period from 2019 to 30 June
2023, which is now within the targeted range of EUR125- EUR 145
million of annual EBITA savings by the end of 2023.
RAW MATERIALS
Raw material prices softened in H1 2023, with the price of
high-grade dead burned magnesia ("DBM") from China decreasing by
13% from the beginning of the year, and by 15% on average compared
to H1 2022. The cost of production of refractory raw materials for
suppliers in China remained low due to availability of low-cost
energy, whilst the cost of production of raw material remained
higher for RHI Magnesita, in particular for DBM production in
Türkiye . As guided, the EBITA contribution from vertical
integration remained at approximately the same level as H2 2022 at
1.8ppts (H1 2022: 3.4ppts).
OPERATIONAL REVIEW
Revenues (EURm H1 2023 H1 2022 H1 2022 Change Change
unless stated
otherwise)
(Reported) (Constant (Reported) (Constant
currency) currency)
------------------ -------- ------------ ----------- ------------ -----------
North America 484 426 439 13% 10%
------------------ -------- ------------ ----------- ------------ -----------
Steel 348 327 339 6% 3%
Industrial 136 99 100 37% 35%
------------------ -------- ------------ ----------- ------------ -----------
Europe, CIS,
Türkiye 442 415 411 7% 8%
------------------ -------- ------------ ----------- ------------ -----------
Steel 287 281 277 2% 4%
Industrial 155 134 134 16% 16%
------------------ -------- ------------ ----------- ------------ -----------
India, Africa,
West Asia 365 292 285 25% 28%
------------------ -------- ------------ ----------- ------------ -----------
Steel 282 234 227 21% 24%
Industrial 82 59 58 40% 41%
------------------ -------- ------------ ----------- ------------ -----------
South America 263 255 258 3% 2%
------------------ -------- ------------ ----------- ------------ -----------
Steel 182 187 190 (3)% (4)%
Industrial 81 68 68 19% 19%
------------------ -------- ------------ ----------- ------------ -----------
China and East
Asia 180 205 200 (12)% (10)%
------------------ -------- ------------ ----------- ------------ -----------
Steel 103 121 120 (14)% (14)%
Industrial 77 85 80 (9)% (4)%
------------------ -------- ------------ ----------- ------------ -----------
Steel H1 2023 H1 2022 H1 2022 Change Change
(Reported) (Constant (Reported) (Constant
currency) currency)
------------------ -------- ------------ ----------- ------------ -----------
Revenue (EURm) 1,203 1,150 1,152 5% 4%
Gross Profit
(EURm) 260 258 272 1% (4)%
Gross margin 21.6% 22.4% 23.6% (80)bps (200)bps
Adj EBITA (EURm) 110 128 142 (14)% (23)%
Adj EBITA margin 9.1% 11.1% 12.3% (200)bps (320)bps
Industrial H1 2023 H1 2022 H1 2022 Change Change
(Reported) (Constant (Reported) (Constant
currency) currency)
------------------ -------- ------------ ----------- ------------ -----------
Revenue (EURm) 531 444 440 20% 21%
Gross Profit
(EURm) 154 115 112 34% 37%
Gross margin 29.0% 25.9% 25.5% 310bps 350bps
Adj EBITA (EURm) 91 60 58 50% 56%
Adj EBITA margin 17.1% 13.6% 13.2% 350bps 390bps
Steel overview
Supplying the steel market with refractory products and services
accounts for c.70% of RHI Magnesita revenues and market demand is
closely aligned to global steel production volumes. Refractory
products line all steel making applications, protecting equipment
from extremely high temperatures of up to around 1,800degC,
chemical reactions, and abrasion of molten steel. RHI Magnesita
offers a comprehensive product and service offering for all steel
applications, including primary iron (blast furnace 'BF' or direct
reduction of iron 'DRI') and steel making (basic oxygen furnace
'BOF' or electric arc furnace 'EAF') as well as ingot and
continuous casting. Refractories used in the steel-making processes
are classified as an operating expense by steel producers,
accounting for c.3% of the cost of steel production.
Revenue increased by 5% to EUR1,203 million during the Period
(H1 2022: EUR1,150 million) and by 4% on a constant currency basis
(H1 2022: EUR1,152 million), with higher pricing offsetting a
volume decline of 8% (excluding steel recycling). World Steel
Association data recorded volume decline in steel production
globally of c.1% over the Period and, excluding China, a decline of
c.4%. The Steel division recorded a gross margin of 21.6%, a
decrease of 80bps compared to H1 2022 of 22.4%.
Industrial overview
RHI Magnesita supplies refractory products to its customer
portfolio across cement, glass, non-ferrous metals, energy,
environmental, chemicals and foundry industries. It classifies this
segment as 'Industrial' and customers across these industries make
up c.30% of Group revenues.
Recorded revenue in the Period was EUR531 million, an increase
of 20% on a reported basis (H1 2022: EUR444 million) and by 21% on
a constant currency basis (H1 2022: EUR440 million).
North America
Revenue in North America increased by 13% to EUR484 million (H1
2022: EUR426 million), largely driven by pricing, which is expected
come under greater competitive pressure in H2 2023. On a constant
currency basis, revenue increased by 10% over the period. Volumes
were slightly lower in the Period, down by 2% reflective of a more
subdued steel market in the region.
Steel revenue stood at EUR348 million, an increase of 6% (H1
2022: EUR327 million) due to higher pricing established in H2 2022.
Shipped steel refractory volumes decreased by 3% in H1 2023
compared to H1 2022, an outperformance compared to steel production
in the region, where according to World Steel Association (WSA)
data, production decreased by c.4%. Volume performance was ahead of
the market, despite one of the Group's largest customers in Mexico
ceasing production in late 2022. Pricing remained strong with price
levels around 6% higher than H1 2022. The region benefited from
contracts to supply 13 greenfield developments and 6 brownfield
developments, all of which were new or expanding EAF plants.
Industrial revenue increased by 37% to EUR136 million (H1 2022:
EUR99 million), reflecting price increases implemented in H2 2022
of around 38% against volume increases of 3%. Lower demand in the
Cement and Lime segment driven by softening of the construction
business was offset by stronger volumes in the Non-Ferrous Metal
and Glass businesses. Demand is expected to be stronger in the
non-ferrous metals and glass industries over coming years, given
capacity expansion across these industries of 1.2 million
tonnes.
The region made good progress in flow control sales over the
Period and expanded its market share in isostatic products and
through the Group's Interstop flow control product range. There was
a high growth in demand for refractory application machinery and
technology during the Period, particularly for EAF steel
plants.
The region is actively improving its recycling rate, and in the
Period increased its recycling consumption significantly through
maturing its partnership with recycling processers and the
implementation of a regional recycling team. Recycling rates are
comparatively lower in the US compared to other regions in which
the Group operates, representing a significant opportunity to
expand recycling activities further.
Europe, CIS and Türkiye
Revenue in Europe, CIS and Türkiye increased by 7% on a reported
basis to EUR442 million (H1 2022: EUR415 million) and by 8% on a
constant currency basis (H1 2022: EUR411 million).
Steel revenues increased by 2% to EUR287 million (H1 2022:
EUR281 million). World Steel Association data indicates that steel
production in Europe and Türkiye (excluding Russia) decreased by
12% in H1 2023 compared to H1 2022, as high inflation and tight
monetary policy impacted end markets and reduced steel production.
RHI Magnesita's shipped refractory volumes were lower by 15%
(excluding recycling), broadly in line with the market. Pricing
remained resilient in the Period, however, cost pressures across
the industry are easing in particular in respect of imports from
Asia, leading to pricing pressure in some markets.
Industrial revenues increased by 16% to EUR155 million (H1 2022:
EUR134 million), reflecting significant price increases of around
40% implemented in H2 2022, notably in Cement and Lime. Volumes in
industrials declined by 12% overall, mostly driven by lower
activity in Non-Ferrous Metals.
The Group has integrated the acquisition of SÖRMAS, Türkiye,
which completed in H2 2022. SÖRMAS produces refractories for the
cement, steel and glass industries and complements the Group's
production footprint by servicing local customers with finished
refractories previously shipped from plants in Continental Europe.
Vertical integration efficiencies are gained due to the procurement
of certain raw materials from the Group's magnesite mine in
Türkiye, Eskisehir.
MIRECO, the Group's newly formed recycling business following
the acquisition of a 51% stake in Horn & Co Minerals Recovery
GmbH & Co KG in 2022, is integrated and ramping up production.
Demand for secondary raw material from MIRECO has been strong in
the Period.
The Group completed the acquisition of DGSB in April 2023. The
acquisition expands RHI Magnesita's customer offering in Europe,
where monolithic lances are a complementary addition to its
existing product range, with applications in the desulphurization
and homogenization of molten steel. Material synergies are expected
to be generated through cross-selling within the Group's existing
heat management solutions offering.
The acquisition of Seven Refractories, a specialist supplier of
non-basic monolithic refractory mixes, was completed on 17 July
2023. Non-basic monolithics are expected to become increasingly
important with the development of new low CO(2) emitting
manufacturing technologies within the Group's customer industries.
Significant cross selling synergies are anticipated due to the
complementary nature of Seven's products and service offering with
the Group's existing refractory product range and there is an
opportunity to roll out the business model globally, beyond Seven's
existing markets in Europe, USA and India.
India, West Asia and Africa
Revenue in the India, West Asia and Africa region increased by
25% in the period to EUR365 million (H1 2022: EUR292 million) or by
28% on a constant currency basis (H1 2022: EUR285 million).
Including the contribution from M&A, volumes were broadly flat,
decreasing by 2% in the Period, with an increase in steel volumes
of 2% offsetting lower industrial volumes.
Steel revenue for the region increased by 21% to EUR282 million
(H1 2022: EUR234 million). Steel shipped refractory volumes of 2%
increased at a slightly higher rate than the market, which
according to WSA steel production in the region increased by c.6%.
Steel refractory prices increased by c.22% in the Period as the
Group maintained pricing against slightly softening input costs
including raw materials, sea freight and European energy costs
(which are relevant for imported products). Steel production in
India continues to benefit from government infrastructure stimulus
programmes such as the Production Linked Investment scheme and is
expected to continue to grow at 5-6% on average annually,
offsetting slightly weaker demand in West Asia and Africa largely
due to macroeconomic uncertainty in Egypt.
Industrial revenue recorded for the region was EUR82 million, an
increase of 40% (H1 2022: EUR59 million). Industrial pricing was
considerably higher than the prior period, increasing by over 84%
despite a competitive pricing environment, especially in
Non-Ferrous Metals. Pricing was especially strong in the Industrial
Applications and Cement businesses, which offset weaker demand in
Glass and Industrial Applications. Industrial volumes declined by
21%.
In January 2023, the Group completed the acquisition of the
Indian refractory business of DBRL and Hi-Tech. These acquisitions
were partly financed by the issuance of equity in the Group's
listed Indian subsidiary, RHI Magnesita India Ltd, in a QIP which
raised EUR100 million. The integration of DBRL and Hi-Tech is
progressing well, with strong synergy opportunities identified in
SG&A and procurement of raw materials, as well as
cross-selling. During the Period, slide gate production was
relocated from Rajgangpur to the Jamshedpur plant which was
previously owned by Hi-Tech. Production of lances for South and
East India has now been shifted to Rajgangpur and Bhilai from
Bhiwadi, improving localised production to the customer. Given the
new plant production capacity and the expanded plant network in
India, RHI Magnesita will now be able to supply products more
competitively locally, as well pursue new export opportunities
across West Asia and Africa.
As part of the Group's Production Optimisation Plan, the Group
invested into expanding production at certain plants and Cuttack is
now operating at double its original capacity, at c.30,000 tonnes
per year and around 90% utilisation.
The region is growing its market share in the flow control
market based on successful trials for three new tundish
technologies brought to India in the past year. Tundish
refractories are used in the lining and operation of the tundish,
which is a vessel used to regulate the flow of molten steel during
the continuous casting process. The Group delivered an Automated
Process Optimisation contract to measure the refractory lining wear
rates with one customer for a BOF application in the Period.
South America
Revenue in South America increased by 3% to EUR263 million (H1
2022: EUR255 million) or by 2% on a constant currency basis (H1
2022: EUR258 million). This was due to the maintenance of price
increases implemented in H2 2022, despite weakening demand with
volumes lower by 8%.
Increased revenue was largely driven by significant price
increases in the Industrial segment, increasing by c.30%. Pricing
was especially strong in Cement and Lime and Non-Ferrous Metals.
This led to an increase in revenue in the Industrial segment of 19%
to EUR81 million (H1 2022: EUR68 million).
Steel revenue declined by 3% to EUR182 million (H1 2022: EUR187
million). Volumes were down by 7% which was broadly in line with
the market, with WSA reporting crude steel production c.7%
lower.
Flow control demand was softer in the Period, in particular due
to the reduction in steel production in Brazil where the Group has
a higher market share. The Group has continued to pursue new
business opportunities in flow control at two sites of one of its
largest customers to continue to increase flow control market share
over the near term.
Softness in crude steel production is expected to continue
through H2 2023. High interest rates and inflation in Brazil have
resulted in reduced economic activity and lower export demand,
particularly in the construction and automotive end markets, which
affects mostly the Steel and Cement refractory demand. Industrial
segment volumes were down by 9%, primarily in Cement and Lime and
Industrial Applications.
The region achieved a recycling rate of over 10% in H1 2023,
driven by a combination of sourcing, research and development,
processing, consumption, and sales effects.
As part of the Production Optimisation Plan, the Group will
increase the life of the Brumado mine to c.120 years and further
improve the cost competitiveness of this already low-cost mine. The
expansion project has experienced delays due to supply-chain
related issues, cost inflation and COVID-19 related contractor
availability. Civil and electromechanical works are ongoing, with
project completion and ramp-up now scheduled for H1 2024.
China and East Asia
China and East Asia revenue decreased by 12% to EUR180 million
(H1 2022: EUR205 million), and on a constant currency basis
decreased by 10% (H1 2022: EUR200 million). The revenue decline was
primarily due to lower shipped volumes, which reduced by 22% due to
a production stoppage at a key customer in Vietnam.
Steel revenue was EUR103 million and lower by 14% (H1 2022:
EUR121 million). Steel volumes in the region declined by 24%,
driven by weak demand from East Asia where steel volumes declined
by 40%. Comparatively, steel production for China and East Asia
countries were unchanged in the Period according to WSA.
Steel production was weak in South East Asia, especially in
Vietnam due to lower global exports, reflective of weakening
construction end markets. Overall crude steel production in the
East Asia region, according to WSA, declined by c.6%. The Group's
weaker shipments in East Asia were mostly due to one of its key
customers in Vietnam stopping production, leading to an
underperformance compared to local steel production volumes. The
customer reduced its steel output by c.50% compared to H1 2022. The
plant is expected to restart production in Q3 2023, however steel
market softness is expected to persist in the region throughout H2
2023. There has also been refractory destocking over the Period in
Japan, South Korea and Oceania, leading to lower refractory demand
compared to steel production.
Shipped steel refractory volumes in China remained stable in the
Period. This compares to crude steel production in China increasing
by c.1% in the Period. Pricing became more competitive in the
Period and the Group reduced its prices for finished products by
around 9%.
Industrial revenue in the region reduced by 9% to EUR77 million
(H1 2022: EUR85 million) driven by weaker volumes of c.18%,
although pricing remained strong. Volumes were particularly weak in
the Glass and Cement sectors in China. Cement demand reduced due to
weak real estate investment and lower construction demand. Volumes
reduced in line with the market and the Group retained its market
share. Glass demand reduced due to fewer new solar projects
undertaken in the Period.
The Group acquired a 51% stake in a new joint venture in
Chongqing in December 2021, and is currently developing a
state-of-the-art production hub at this location for refractories
for the Cement market with scope to expand into more industries.
The plant is nearing completion with all equipment installed and
the tunnel kiln firing taking place in June. Production trials will
commence in Q3 2023 and the plant will then ramp up production for
sales in Q4 2023.
The acquisition of a 65% stake in Jinan New Emei was completed
in April 2023 for a cash consideration of EUR23 million plus
assumed net debt and other liabilities of EUR17 million, with the
payment of EUR3 million of cash consideration deferred to 2024
In January 2023, the Group announced the acquisition of a 65%
stake in Jinan New Emei for a consideration of EUR40 million. In
April 2023 the acquisition of Jinan New Emei was completed and cash
consideration of EUR23 million was paid, after deduction of net
debt and other liabilities of EUR17 million, with the payment of
EUR3 million of cash consideration deferred to 2024. Jinan New Emei
is a well-established business producing refractory slide gates,
nozzles and mixes from a recently constructed and modern production
facility in Shandong, China. Integration commenced in May 2023 and
synergies are expected to be realised through cross-selling to
existing steel customers, as well as operations and SG&A
savings.
FINANCE REVIEW
Reporting approach
The Company uses a number of alternative performance measures
("APMs"), in addition to the performance measures reported in
accordance with 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 which 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 H1 2022 figures in this review are
on a reported basis, unless stated otherwise. Figures presented at
constant currency represent H1 2022 translated to average H1 2023
exchange rates of 1 Euro to 1.08 USD, 1 Euro to 7.47 CNY, 1 Euro to
5.53 BRL, 1 Euro to 88.82 INR, 1 Euro to 20.8 TRY.
Group performance
Revenue for the Period amounted to EUR1,734 million (H1 2022:
EUR1,594 million), up by 9%. On a constant currency basis, revenue
increased by 9% over the Period (H1 2022: EUR1,593 million). The
increase in revenue was driven by a stronger industrials business,
where reported revenue (including Minerals) increased by 19% to
EUR531 million (H1 2022: EUR444 million). Steel sector reported
revenue increased by 5% to EUR1,203 million (H1 2022: EUR1,150
million). Revenue on an underlying basis, excluding revenue
contribution from M&A of EUR119 million, increased by 1% to
EUR1,615 million (H1 2022: EUR1,593) million.
The Group cost of goods sold over the Period amounted to
EUR1,320 million (H1 2022: EUR1,221 million), an increase of 8%
compared to the same period last year. On a constant currency
basis, cost of goods sold was 9% higher (H1 2022: EUR1,207
million). Labour costs increased by 19%, raw material costs
increased by 16% given cost of production internally, energy costs
decreased by 3% and freight costs decreased by 15% on a constant
currency basis.
The Group delivered gross margin of 23.9%, an increase of 50bps
compared to the same period last year (H1 2022: 23.4%). Gross
margin over the period for the Steel business decreased by 90bps to
21.6% (H1 2022: 22.5%). The Industrial business gross margin was
significantly stronger at 29.0% inclusive of minerals, increasing
by 310bps (H1 2022: 25.9%).
Selling, General and Administrative ("SG&A") expenses,
excluding R&D expenses, amounted to EUR213 million in H1 2023
(H1 2022: EUR181 million), 18% higher than the comparative period.
SG&A as a percentage of revenue increased to 12.3% (H1 2022:
11.4%). Higher SG&A in the period was mainly due to increased
personnel and personnel-related expenses and M&A.
Other income and expenses amounted to EUR16 million in H1 2023
(H1 2022: EUR11 million), comprising EUR11 million of one-off
restructuring costs, mostly relating to a restructuring programme
to increase decentralization from the head office into the regions.
A further EUR6 million was spent on M&A integration costs in
the Period.
Adjusted EBITDA margin was 15.3%, 10bps lower compared to the
15.4% reported in H1 2022. Adjusted EBITDA increased by 8% to
EUR265 million (H1 2022: EUR245 million). Acquisitions contributed
EUR19 million of EBITDA over the Period, and excluding this
contribution underlying EBITDA was flat at EUR246 million. Adjusted
EBITDA margin combined from the newly acquired businesses was 16.0%
and the base business remained unchanged in its recorded adjusted
EBITDA margin of 15.2%.
(EURm) H1 2023 H1 2022 H1 2022 % Change % Change
Reported at constant
currency
Reported at constant
currency
------- --------- ------------
Revenue 1,734 1,594 1,593 9% 9%
Cost of Sales (1,320) (1,221) (1,207) 8% 9%
Gross Profit 414 373 386 11% 7%
Gross margin 23.9% 23.4% 24.2% 50bps (30)bps
SG&A (213) (181) (180) 18% 18%
R&D expenses (22) (18) (18) 26% 27%
OIE (16) (11) (10) 52% 61%
EBIT 163 164 178 (1)% (9)%
Amortisation 22 13 13 68% 67%
---------------- ------- --------- ------------ ---------- -------------
EBITA 184 177 192 4% (4)%
Adjusted items 16 11 10
---------------- ------- --------- ------------ ---------- -------------
Adjusted EBITA 200 188 201 7% (1)%
---------------- ------- --------- ------------ ---------- -------------
Adjusted EBITA increased by 6% on a reported basis, to EUR200
million (H1 2022: EUR188 million), mainly due to price increases
implemented in H2 2022, currency tailwind and a contribution from
M&A. Adjusted EBITA from acquisitions during the Period
amounted to EUR14 million. Underlying EBITA on a like-for-like
basis and including the impact of currency was broadly flat at
EUR186 million.
The Group recorded an Adjusted EBITA margin of 11.6%, decreasing
by 20bps compared to 11.8% for the same period last year on a
reported basis. The Refractory margin contributed 9.8ppts of Group
EBITA margin (H1 2022: 8.3ppts) whilst the vertical integration
assets contributed 1.8ppts (H1 2022: 3.4ppts). Adjusted EBITA
margin from acquisitions was 12.6% and were therefore overall
margin accretive.
Reported net financial expenses in H1 2023 amounted to EUR51
million (H1 2022: EUR22 million), with net interest expenses of
EUR18 million (H1 2022: EUR10 million). Net interest expenses in H1
2023 benefited from EUR9 million (H1 2022: EUR3 million) of
interest income on cash balances resulting from interest rate rises
on deposits. Interest expenses on borrowings, amounting to EUR27
million (H1 2022: EUR13 million), have increased as expected due to
costs associated with bridge loans in India used to fund M&A
(EUR4 million), higher base rates on variable interest facilities
as well as overall higher debt balances. Other net financial
expenses amounted to EUR18 million (H1 2022: EUR16 million).
The largest impact on net financial expenses has been foreign
exchange and derivative movements leading to a EUR15 million loss
(H1 2022: EUR4 million gain), mainly due to the weakness of the
Argentinian Peso, Turkish Lira, Mexican Peso and US Dollar. The
Balance Sheet Translation loss was EUR23 million, of which EUR10
million is realised. This is partially offset by derivative gains
of EUR8 million, being gains on foreign exchange contracts used by
the Group to manage the volatility arising from Balance Sheet
Translation and embedded derivatives in sales contracts.
(EURm) H1 2023 H1 2022
Net interest expenses (18) (10)
Interest income 9 3
Interest expenses (27) (13)
FX effects (15) 4
Balance sheet translation (23) 7
Derivatives 8 (3)
Other net financial
expenses (18) (16)
Present value adjustment (4) (4)
Factoring costs (5) (3)
Pension charges (5) (3)
Non-controlling
interest expenses (3) (3)
Other (2) (3)
-------------------------- ------- -------
Total (51) (22)
-------------------------- ------- -------
Adjusted net financial expenses amounted to EUR41 million,
following a EUR10 million adjustment mainly due to (i) EUR5 million
cost of bridge loans in India used to fund M&A; and (ii) a
further EUR3 million non-cash present value adjustment of the
provision for the unfavourable contract required to satisfy EU
remedies at the time of the RHI Magnesita merger. Guidance for
finance costs for the full year remains around EUR65 million,
consisting of EUR40 million of net interest cost and EUR25 million
of other net finance expenses.
Reported profit before tax was EUR111 million (H1 2022: EUR142
million). Total tax for H1 2023 in the income statement amounted to
EUR28 million (H1 2022: EUR38 million), representing a 25% reported
effective tax rate (H1 2022: 27%).
On a reported basis, the Group recorded a profit after tax of
EUR83 million (H1 2022: EUR104 million) and earnings per share of
EUR1.71 (H1 2022: EUR2.06).
Adjusted profit before tax was EUR159 million (H1 2022: EUR169
million), and the respective adjusted effective tax rate is 24% (H1
2022: 24%). On an adjusted basis, profit after tax was EUR121
million (H1 2022: EUR129 million) and adjusted earnings per share
for H1 2023 were EUR2.53 per share (H1 2022: EUR2.58 per share),
which is stated after excluding other income and expenses and
restructuring charges (EUR16 million) and other financial income
and expenses (EUR10 million). The full year adjusted effective tax
rate is expected to be between 23-25% in 2023.
(EURm)(3) H1 2023 Items excluded H1 2023 H1 2022 Items excluded H1 2022
reported from adjusted adjusted reported from adjusted adjusted
performance(4) performance
====================== ========= =============== ========= ========= ============== =========
EBITA(1) 184 16 200 177 11 188
Amortisation (22) 22 - (13) 13 -
Net financial
expenses (51) 10 (41) (22) 3 (19)
Profit before
tax 111 48 159 142 27 169
Income tax (28) (10) (38) (38) (2) (40)
====================== ========= =============== ========= ========= ============== =========
Profit after
tax 83 38 121 104 25 129
====================== ========= =============== ========= ========= ============== =========
Non-controlling
interest 2 - 2 7 - 7
Profit attributable
to shareholders 81 38 119 97 25 122
Shares outstanding(2) 47.0 - 47.0 47.0 - 47.0
====================== ========= =============== ========= ========= ============== =========
Earnings per
share
(EUR per share) 1.71 0.82 2.53 2.06 0.52 2.58
====================== ========= =============== ========= ========= ============== =========
(1.) EBITA reconciled to revenue above.
(2.) Total issued and outstanding share capital as at 30 June
2022 was 47,112,047. The Company held 2,365,658 ordinary shares in
treasury. The weighted average number of shares used for
calculating basic earnings per share in H1 2023 is 47,037,581.
(3.) Numbers may not cast due to rounding.
(4.) Excluded items of EUR16 million to reported EBITA include
EUR11 million relating to non-recurring restructuring costs and
EUR5 million M&A integration costs in the Period. For further
details see APM reconciliation for Adjusted EBITA below.
Cash flow and working capital
Adjusted operating cash flow, which is presented to reflect net
cash inflow from operating activities before tax and net finance
expenses, was EUR228 million for H1 2023 (H1 2022: EUR(84)
million), reflecting strong cash generation from increased
profitability, working capital release and low capital expenditure.
Cash flow conversion, calculated as Adjusted operating cash flow as
a percentage of Adjusted EBITA, increased to 114% in the Period (H1
2022: (45)%).
Working capital excluding M&A(1) reduced to EUR834 million
pre-M&A (30 June 2022: EUR996 million; 31 December 2022: EUR892
million) driven by a reduction in inventories and accounts
receivable, offset by a decrease in accounts payable due to lower
raw material costs and purchases. Including working capital
investments related to new M&A, working capital increased to
EUR940 million.
The Group has improved customer service levels and delivered
stronger pricing following its decision to carry higher inventory
levels throughout 2022 and is now seeking to maintain working
capital intensity levels at around 25% during 2023. Working capital
intensity was slightly above this level at the end of the Period,
at 26.0%, due to higher working capital intensity in recently
acquired businesses.
Inclusive of all M&A, working capital intensity, measured as
a percentage of the last three months' annualised revenue,
decreased to 26.0% (H1 2022: 29.3%). Accounts receivable intensity
was 10.7% (H1 2022: 11.8%) and accounts payable intensity was 13.9%
(H1 2022: 16.0%). Inventory intensity stood at 29.1% (H1 2022:
33.5%).
(1) Excludes working capital associated with MIRECO, SÖRMAS,
DGSB, DBRL, Hi-Tech, Chongqing and Jinan New Emei. Comparative
figures for prior year periods have not been adjusted.
The Group decreased its inventory levels excluding M&A to
EUR974 million (30 June 2022: EUR1,138 million; 31 December 2022:
EUR1,030 million). Inventory volumes for the base business
(excluding M&A) decreased to 591kt from 606kt at year-end 2022
and were significantly lower than the 716kt recorded at the end of
H1 2022, as production intentionally lagged shipments to reduce
inventory coverage to targeted ratios. Including the effect of
M&A during the Period, inventory decreased versus the prior
year to EUR1,053 million (30 June 2022: EUR1,143 million).
Accounts receivable excluding M&A decreased to EUR278
million at 30 June 2023 (30 June 2022: EUR402 million; 31 December
2022: EUR364 million), despite higher finished goods prices, as the
Group implemented various initiatives to reduce overdue payments.
Including M&A, Accounts receivable increased to EUR389 million.
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.
Accounts payable excluding M&A was EUR418 million (30 June
2022: EUR544 million; 31 December 2022: EUR501 million) due to
lower volumes and pricing of raw materials purchased, reflect the
subdued demand environment. Including M&A, accounts payable
increased to EUR502 million.
Working capital financing, used to provide low-cost liquidity
and support the Group's commercial offering to customers, stood at
EUR310 million on 30 June 2023 (30 June 2022: EUR320 million; 31
December 2022: EUR314 million), comprising EUR265 million of
accounts receivable financing (factoring) and EUR45 million of
accounts payable financing (forfaiting). Working capital financing
levels vary according to business activity, and the Board has set a
ceiling of EUR320 million.
The increase in working capital of EUR22 million since 31
December 2022 was mainly driven by the first-time consolidation of
newly acquired businesses of EUR67 million, which was offset by a
EUR49m reduction in working capital in the base business prior to
M&A and EUR4m of other items including unfavourable foreign
exchange movements.
The Group incurred EUR63 million of capital expenditure (H1
2022: EUR58 million), of which EUR25 million was maintenance
related, EUR36 million was expansionary capex and a further EUR2
million from M&A related capex. Full year guidance for project
capital expenditure is unchanged at EUR200 million. This comprises
EUR85 million of maintenance capex, EUR95 million of expansionary
capex and a further EUR20 million of maintenance and integration
capex towards new acquisitions.
Net cash interest payments on net debt and further refinancing
costs amounted to EUR23 million in the Period (H1 2022: EUR 12
million).
Cash expenditure on acquisitions (excluding working capital
investments) in the Period amounted to EUR185 million, which was
partly funded by the proceeds of a QIP by RHI Magnesita India Ltd,
raising approximately EUR100 million in April 2023. The QIP is to
be followed by an equity investment of EUR22 million by the Group
in RHI Magnesita India Ltd via a Preferential Issue which is
expected to complete in Q3 2023. Total change in net debt from
M&A in the Period was EUR256 million, inclusive of (i) EUR185
million of cash consideration paid; (ii) EUR23 million of working
capital investments into newly acquired businesses in addition to
opening balances on acquisition, and (iii) EUR48 million of net
debt consolidated on acquisition.
Cash flow EURm(1) H1 2023 H1 2022
Adjusted EBITDA 265 245
Share based payments - gross non-cash 4 4
Working capital changes 41 (267)
Changes in other assets and liabilities for
adjusted cash flow purposes (18) (9)
Investments in PPE, IA (63) (58)
======================================================== ======== ===========
Adjusted operating cash flow 228 (84)
Income taxes paid (24) (36)
Cash effects of other income/expenses and restructuring (14) (12)
Net interest paid/received (23) (12)
Net derivative cash inflow/outflow 3 (4)
Investment in financial assets (5) -
Cash inflows from the sale of PPE, IA 2 -
-------------------------------------------------------- -------- -----------
Free cash flow 167 (146)
======================================================== ======== ===========
Investment in subsidiaries net of cash (DGSB,
Jinan New Emei, Hi-Tech) (173) (18)
Cash in from sales of subsidiaries net of cash - 9
Proceeds from share issue in subsidiaries 100 -
Payment for share issue costs (2) -
Change in financial receivables from JV and 3 -
associates
Dividend payment - (47)
======================================================== ======== ===========
Cash change in net debt 95 (203)
-------------------------------------------------------- -------- -----------
Proceeds from borrowings 205 90
Repayment of borrowings (7) * 9
Change in current borrowings (39) * 19
Repayment of lease obligations (11) (9)
-------------------------------------------------------- -------- -----------
Change in cash and cash equivalents 243
* 149
-------------------------------------------------------- -------- -----------
(1) Further detail on the adjustments can be found in
Alternative Performance Measures section.
Financial position
Net debt at 30 June 2023 was EUR1,124 million, comprising total
debt of EUR1,814 million, leases of EUR70 million and cash and cash
equivalents and marketable securities of EUR760 million.
As at 30 June 2023, total leases amounted to EUR70 million (H1
2022: EUR54 million), which under IFRS 16 is included in the
Company's net debt position.
The Group's pro forma leverage position has decreased to 2.1x
net debt to EBITDA (31 December 2022: 2.3x) and has decreased by
0.6x since H1 2022 (30 June 2022: 2.7x). The Group was able to
reduce gearing despite a cash outflow of EUR173 million on
inorganic investments during the Period, given its strong operating
cash flows and the successful QIP raising EUR100 million in
India.
Including 12 months of historic EBITDA contributions from
businesses acquired during the Period, the Group's leverage
position further decreased to 2.1x.
Available liquidity for the Group at 30 June 2023 was EUR1,360
million, including undrawn committed facilities of EUR600 million
and cash, cash equivalents and marketable securities of EUR760
million .
The Group has debt maturities of EUR88 million scheduled in the
second half of 2023, of which EUR58 million is short-term debt that
can be rolled into 2024, and EUR136 million of maturities in
2024.
In April 2023, the Group issued a EUR170 million ESG-linked
Schuldschein bond with average maturity of five years and
refinanced an existing bilateral Term Loan, increasing the total
loan amount from EUR115 million to EUR150 million and extending the
maturity date to 2026. The refinanced Term Loan is now also
ESG-linked.
Out of the total gross debt of EUR1,814 million, 97% is
denominated in Euro. The floating to fixed ratio of the gross debt
is 34% floating to 66% fixed and the weighted average cost of debt
as at 30 June 2023 was 2.92%, including swaps.
Return on invested capital
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.
Group ROIC in H1 2023 was 10.4% (H1 2022: 10.3%), from a total
of EUR2,973 million of invested capital (H1 2022: EUR2,692 million)
and EUR154 million recorded net operating profit after tax (NOPAT)
(H1 2022: EUR139 million). ROIC for raw materials assets was 9.4%
(H1 2022: 16.9%), from a total of EUR454 million of invested
capital (H1 2022: EUR467 million) and EUR21 million NOPAT (H1 2022:
EUR40 million). ROIC for refractory assets was 10.6% (H1 2022:
9.0%), from a total of EUR2,519 million of invested capital (H1
2022: EUR2,225 million) and EUR133 million NOPAT (H1 2022: EUR100
million).
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has an established risk management process based on a
formally approved framework and regular risk surveys among
functional and operational managers aimed at systematically
identifying, assessing and mitigating risks and uncertainties in
the Group.
Material and major risks with potentially high impacts on the
Group, its results or its ability to achieve its strategic
objectives are reviewed regularly by the Board.
The risks considered by the Board to be the principal risks were
presented in the 2022 Annual Report, which is available on the
Group's website at www.rhimagnesita.com .
The Board has reconsidered the principal risks and uncertainties
of the Group, assessed the broader macro and external risk
environment and have determined that those risks reported in the
2022 Annual Report remain relevant for the remaining half of the
2023 financial year. Emerging risks were considered and evaluated
but were not significant enough to impact the principal risks.
The risk likelihood and/or potential impact of three out of the
ten principal risks have changed during H1 2023, as highlighted in
the summary table below.
The regulatory and compliance risks increased due to an overall
more complex regulatory environment primarily as a result of the
Russia-Ukraine conflict and the post-COVID-19 challenges after a
high number of employees have been working remotely for an extended
period.
Overall, RHIM's risk landscape has improved as a result of an
upgraded organisational capacity to execute strategy.
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 2023 Annual Report.
Principal risk Correlated risk from Change Change description
RHIM Group risk dashboard in risk
level
1 - Macroeconomic Macroeconomic and Unchanged
environment and geopolitical environment
geopolitical
risk
----------------------------- ---------- -------------------------------
2 - Inability Business Transformation Unchanged
to execute key - key projects execution
strategic initiatives risk
Acquisition and integration
benefits/ business
case delivery
Ability to secure
significant market
shares of recycling
business
Ability to realize
benefits of CAPEX
investments
Data availability,
transparency, integrity
and quality
Net debt and constraining
capital allocation
----------------------------- ---------- -------------------------------
3 - Significant Ability to remain Decreased The demonstrated effectiveness
changes in the competitive and retain in the past six months
competitive environment market share of RHIM's strategic
or speed of disruptive management of Sales
innovation activity (including
pricing and initial
implementation of
customer segmentation)
has led to a lower
assessment of this
risk.
----------------------------- ---------- -------------------------------
4 - Reliability Ability to manage Unchanged
of the inventories in a volatile
end-to-end value market demand
chain
----------------------------- ---------- -------------------------------
5 - Sustainability Environment & Climate Unchanged
-
Environmental
and
climate risks
----------------------------- ---------- -------------------------------
6 - Sustainability Health & Safety Unchanged
-
Health and safety
risks
----------------------------- ---------- -------------------------------
7 - Regulatory Compliance (CoC, Fraud, Increased The likelihood of
and compliance Corruption) this risk has increased
risks due to a consistently
more complex regulatory
environment, particularly
ensuring RHIM compliance
with all relevant
sanction packages.
Additionally ensuring
and demonstrating
that acquired entities
have a consistent
approach to Compliance
increases the risk
level until the integration
processes are significantly
progressed.
----------------------------- ---------- -------------------------------
8 - Cyber and IT process interruptions/ Unchanged
information security Cyber & Information
risk Security
----------------------------- ---------- -------------------------------
9 - Ability Ability to keep margin Unchanged
to strategically levels
price and deliver
price increases
----------------------------- ---------- -------------------------------
10 - Organizational People attraction, Decreased The risk has decreased
capacity to execute capabilities/skills, due to improved business
strategy, incl. and retention performance and the
company cultural Organizational capacity demonstrated positive
values to execute strategy outcomes from the
Regionalisation organisation
model supported by
the successful implementation
of other key internal
initiatives to promote
effective strategy
delivery and enhance
the overall capability
levels of RHIM management.
----------------------------- ---------- -------------------------------
RELATED PARTY TRANSACTIONS
RHI Magnesita enters into arrangements with a number of its
subsidiaries and affiliated companies in the course of its
business. These arrangements relate to service transactions and
financing agreements and RHI Magnesita treats these arrangements as
related party transactions. Furthermore, RHI Magnesita includes
transactions with key management personnel as related party
transactions. As of the balance sheet date, 30 June 2023, there
have been no significant changes in the related party transactions
from those described in RHI Magnesita's 2022 Annual Report. More
information can be found in note 20 of the Condensed Consolidated
Interim Financial Statements.
GOING CONCERN
In considering the appropriateness of adopting the going concern
basis in preparing the Condensed Consolidated 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 covenant under a very severe but
plausible potential economic downturn. This assessment considers
the period up to the subsequent financial year end, 31 December
2024, for any indicators that the going concern preparation is not
appropriate.
The reverse stress test determines how much volumes could reduce
before breaching the Group's debt covenants and adjusting for price
deflation. Further examples of mitigating actions within management
control would be taken under this scenario, including fixed cost,
working capital and SG&A reductions or 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 2023, the Group balance
sheet reflects cash and cash equivalents of EUR760 million. In
addition, the Group has access to a EUR600 million Revolving Credit
Facility (RCF), which is currently undrawn and not relied upon for
the purpose of the going concern assessment. The Group is in
compliance with the debt covenant.
On the basis of the assessment performed, the Directors consider
it is appropriate to continue to adopt the going concern basis in
preparing the Condensed Consolidated Interim Financial Statements
for the period ended 30 June 2023.
ALTERNATIVE PERFORMANCE MEASURES (APMs)
Definitions of APMs used by the Group are set out below,
including 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, as well as 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).
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.
It 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.
Adjusted EPS
Adjusted EPS is a key non-IFRS measure and one of the Group's
KPIs (as reflected on pages 26-27 of the 2022 Annual Report). It 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.
It excludes finance income and expenses, including foreign
exchange, that are not directly related to operational performance.
This includes the non-cash present value adjustments for the
unfavourable contract that was required to satisfy EU remedies put
in place at the time of the RHI and Magnesita merger in 2017.
Taxes are adjusted to remove the impacts of items already
excluded as well as certain tax impacts that do not affect the
underlying performance of the business.
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 Statement of Consolidated Profit and 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
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).
It 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:
EURm H1 2023 H1 2022
-------------------------------------------- -------- --------
Adjusted operating cash flow (APM) 228 (84)
-------------------------------------------- -------- --------
Add: Capital expenditure(1) 63 58
Less: Income Taxes paid(1) (24) (36)
Other income/expenses and restructuring
items (14) (12)
-------------------------------------------- -------- --------
Net cash flow from operating activities(1) 252 (74)
-------------------------------------------- -------- --------
(1) As reflected in the Condensed Consolidated Statement of Cash Flows
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.
EURm H1 2023 H1 2022
------------------------------ -------- --------
Cash and cash equivalents(1) 760 443
Add: Revolving credit
facility 600 600
------------------------------ -------- --------
Liquidity 1,360 1,043
------------------------------ -------- --------
(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 purposes
of capital management. A reconciliation of Net Debt is included in
note 11 to the Condensed Consolidated Interim Financial
Statements.
EURm H1 2023 YE 2022 H1 2022
----------------------------------- -------- ------- --------
Cash changes in net
debt 93 (82) (203)
----------------------------------- -------- ------- --------
Proceeds from borrowings(1) 205 344 90
Repayment of borrowings(1) (7) (278) (9)
Change in current borrowings(1) (37) (12) (19)
Repayment of lease obligations(1) (11) (21) (9)
Change in cash and cash
equivalents(1) 243 (50) (149)
----------------------------------- -------- ------- --------
(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.
EURm H1 2023 YE 2022 H1 2022
------------------------- -------- ------- --------
Inventories(1) 1,053 1,049 1,143
------------------------- -------- ------- --------
Trade receivables (Note
10) 460 433 469
Contract assets 4 4 5
Contract liabilities
(Note 14) (76) (62) (71)
------------------------- -------- ------- --------
Accounts receivables 388 375 403
Trade payables (Note
14) (502) (507) (547)
Total working capital 940 918 1,000
------------------------- -------- ------- --------
(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. It is calculated as NOPAT (net operating profit after tax)
divided by total invested capital at the balance sheet date.
EURm H1 2023 H1 2022
---------------------------- -------- --------
Revenue(1) 1,734 1,594
Cost of sales(1) (1,320) (1,221)
Selling and marketing
expenses(1) (73) (67)
General and administrative
expenses(1) (162) (132)
Income taxes paid(2) (24) (36)
NOPAT 154 139
---------------------------- -------- --------
(1) As reflected in the Condensed Consolidated Statement of
Profit and Loss
(2) As reflected in the Condensed Consolidated Statement of Cash
Flows
Current provisions(1) (33) (47)
---------------------------------------- -------- --------
Deferred tax assets(1) 133 179
Deferred tax liabilities(1) (68) (56)
Goodwill(1) 357 126
Income tax liabilities(1) (49) (45)
Income tax receivables(1) 39 46
Inventories(1) 1,053 1,143
Invested capital 2,971 2,692
---------------------------------------- -------- --------
Investments in joint ventures
and associates(1) 5 6
Other intangible assets(1) 438 311
Other non-current assets(1) 35 51
Property, plant and equipment(1) 1,311 1,150
Return on invested capital 10.4% 10.3%
---------------------------------------- -------- --------
Trade and other current liabilities(1) (871) (798)
Trade and other receivables(1) 621 629
EURm H1 2023 H1 2022
(1) As reflected in the Condensed Consolidated Statement of Financial Position
Condensed Consolidated Interim Financial Statements as at 30.06.2023
Condensed Consolidated Statement of Profit or Loss
for the six months ended 30 June 2023
in EUR million for the six months ended 30
June Note 2023 2022
=========================================== ===== ========== ==========
Revenue (3) 1,734.1 1,594.4
Cost of sales (1,320.0) (1,221.0)
=========================================== ===== ========== ==========
Gross profit 414.1 373.4
=========================================== ===== ========== ==========
Selling and marketing expenses (72.9) (66.8)
General and administrative expenses (162.5) (131.8)
Restructuring (11.2) (0.3)
Other income 6.5 2.2
Other expenses (11.3) (12.3)
=========================================== ===== ========== ==========
EBIT 162.7 164.4
=========================================== ===== ========== ==========
Interest income 9.2 3.0
Interest expenses on borrowings (27.0) (13.1)
Net (expense)/income on foreign exchange
effects and related derivatives (4) (14.9) 4.0
Other net financial expenses (5) (18.6) (15.9)
=========================================== ===== ========== ==========
Net finance costs (51.3) (22.0)
=========================================== ===== ========== ==========
Profit before income tax 111.4 142.4
=========================================== ===== ========== ==========
Income tax (6) (28.3) (38.1)
=========================================== ===== ========== ==========
Profit after income tax 83.1 104.3
=========================================== ===== ========== ==========
RHI Magnesita N.V. shareholders 80.6 97.0
Non-controlling interests 2.5 7.3
in EUR
Earnings per share - basic 1.71 2.06
Earnings per share - diluted 1.68 2.03
=========================================== ===== ========== ==========
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2023
in EUR million for the six months ended 30
June Note 2023 2022
=============================================== ====== ====== =======
Profit after income tax 83.1 104.3
======================================================= ====== =======
Currency translation differences
Unrealised results from currency translation 10.0 135.3
Unrealised results from net investment hedge
and foreign operations 8.4 (14.7)
Deferred taxes thereon (5.8) (9.0)
Current taxes thereon 2.6 1.3
Reclassification to profit or loss - Disposal
subsidiaries 0.0 0.6
Cash flow hedges
Unrealised fair value changes (5.3) 21.5
Deferred taxes thereon 1.0 (5.4)
======================================================= ====== =======
Items that will be reclassified subsequently
to profit or loss, if necessary 10.9 129.6
======================================================= ====== =======
Remeasurement of defined benefit plans
Remeasurement of defined benefit plans 0.6 56.3
Deferred taxes thereon 0.2 (15.3)
======================================================= ====== =======
Items that will not be reclassified to profit
or loss 0.8 41.0
======================================================= ====== =======
Other comprehensive income after income tax 11.7 170.6
======================================================= ====== =======
Total comprehensive income 94.8 274.9
======================================================= ====== =======
RHI Magnesita N.V. shareholders 101.0 267.4
Non-controlling interests (6.2) 7.5
======================================================= ====== =======
Condensed Consolidated Statement of Financial Position
as at 30 June 2023
in EUR million Note 30.06.2023 31.12.2022
============================================= ===== =========== ===========
ASSETS
============================================= ===== =========== ===========
Non-current assets
============================================= ===== =========== ===========
Goodwill 357.1 136.9
Other intangible assets 438.4 316.6
Property, plant and equipment (8) 1,310.6 1,203.7
Investments in joint ventures and associates 5.4 5.7
Other non-current financial assets 59.9 55.1
Other non-current assets 35.0 40.0
Deferred tax assets 133.4 128.2
============================================= ===== =========== ===========
2,339.8 1,886.2
============================================= ===== =========== ===========
Current assets
============================================= ===== =========== ===========
Inventories (9) 1,053.4 1,049.1
Trade and other current receivables (10) 620.8 578.9
Income tax receivables 39.3 38.7
Other current financial assets 0.5 1.3
Cash and cash equivalents 759.7 520.7
============================================= ===== =========== ===========
2,473.7 2,188.7
============================================= ===== =========== ===========
4,813.5 4,074.9
============================================= ===== =========== ===========
EQUITY AND LIABILITIES
============================================= ===== =========== ===========
Equity
============================================= ===== =========== ===========
Share capital 49.5 49.5
Group reserves 1,277.9 951.7
----------- -----------
Equity attributable to shareholders of RHI
Magnesita N.V. 1,327.4 1,001.2
Non-controlling interests 125.6 47.4
============================================= ===== =========== ===========
1,453.0 1,048.6
============================================= ===== =========== ===========
Non-current liabilities
==================================================== =========== ===========
Borrowings (11) 1,646.5 1,404.9
Other non-current financial liabilities 132.6 92.8
Deferred tax liabilities 67.6 62.0
Provisions for pensions (12) 210.8 214.7
Other personnel provisions 53.1 51.7
Other non-current provisions 82.4 80.0
Other non-current liabilities 8.0 6.3
============================================= ===== =========== ===========
2,201.0 1,912.4
============================================= ===== =========== ===========
Current liabilities
============================================= ===== =========== ===========
Borrowings (11) 167.6 215.1
Other current financial liabilities 39.4 50.1
Trade payables and other current liabilities (14) 870.5 780.3
Income tax liabilities 49.3 38.3
Current provisions (13) 32.7 30.1
============================================= ===== =========== ===========
1,159.5 1,113.9
============================================= ===== =========== ===========
4,813.5 4,074.9
============================================= ===== =========== ===========
ondensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2023
in EUR million for the six months ended 30
June Note 2023 2022
================================================== ===== ======== ========
Cash generated from/(used in) operations (15) 276.7 (37.5)
================================================== ===== ======== ========
Income tax paid less refunds (24.3) (35.7)
================================================== ===== ======== ========
Net cashflow from operating activities 252.4 (73.2)
================================================== ===== ======== ========
Investments in property, plant and equipment
and intangible assets (62.8) (57.6)
Investments in subsidiaries net of cash acquired (172.8) (18.3)
Cash receipts from the sale of equity instruments
of interests in joint ventures 0.0 8.7
Cash inflows from the sale of property, plant
and equipment 2.5 0.8
Investment in financial assets (4.6) 0.0
Investment subsidies received and cash inflows
from non-current receivables 0.2 0.0
Interest received 9.2 3.2
================================================== ===== ======== ========
Net cash used in investing activities (228.3) (63.2)
================================================== ===== ======== ========
Payment for share issue costs in subsidiary (2.4) 0.0
Proceeds from share issue in subsidiary 100.0 0.0
Dividends paid to RHI Magnesita shareholders 0.0 (47.0)
Proceeds from long-term financing 205.0 90.0
Repayments of long-term financing (7.4) (8.7)
Changes in current borrowings and financial
liabilities to joint ventures and associates (36.8) (19.2)
Interest payments (30.9) (14.4)
Repayment of lease obligations (10.5) (8.8)
Interest payments from lease obligations (1.0) (0.6)
Cash flows from derivatives 2.6 (4.3)
================================================== ===== ======== ========
Net cash generated from/(used in) financing
activities 218.7 (13.0)
================================================== ===== ======== ========
Total cash flow 242.8 (149.4)
================================================== ===== ======== ========
Change in cash and cash equivalents 242.8 (149.4)
================================================== ===== ======== ========
Cash and cash equivalents at beginning of
period 520.7 580.8
Foreign exchange impact (3.8) 12.0
Cash and cash equivalents at end of period 759.7 443.4
================================================== ===== ======== ========
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2023
Group reserves
========= ======================= ==========================================
Accumulated other
comprehensive
income
===============================
Equity
attributable
to
shareholders
Additional Cash Defined of RHI
Share Treasury paid-in Mandatory Retained flow benefit Currency Magnesita Non-controlling Total
in EUR million capital shares capital reserve earnings hedges plans translation N.V. interests equity
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
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/(expense)
after income tax - - - - - (4.3) 0.8 23.9 20.4 (8.7) 11.7
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Total
comprehensive
income/(expense) - - - - 80.6 (4.3) 0.8 23.9 101.0 (6.2) 94.8
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Hedging gains and
losses
and costs of
hedging
transferred to
the carrying
value of
inventory
purchased
during the year 1.2 1.2 1.2
Transactions with
shareholders
Dividends - - - - (51.7) - - - (51.7) - (51.7)
Share
transfer/vested
LTIP - 4.7 - - (4.7) - - - - - -
Additions to
consolidated
companies(1) - - - - 271.6 - - - 271.6 5.9 277.5
Change of
non-controlling
interests
without a change
of control(2) - 100.0 100.0
Change of
non-controlling
interests
without a change
of control(3) 22.5 22.5 (22.5) -
Other Changes(4) - - - - (22.0) - - - (22.0) 1.0 (21.0)
Share-based
payment expenses - - - - 3.6 - - - 3.6 - 3.6
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Transactions with
shareholders - 4.7 - - 219.3 - - - 224.0 84.4 308.4
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
30.06.2023 49.5 (111.4) 361.3 288.7 920.1 28.7 (84.8) (124.7) 1,327.4 125.6 1,453.0
================= ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
1) In January 2023, RHI Magnesita India Ltd. issued 27,000,000
shares which were transferred as consideration in exchange for the
Dalmia OCL acquisition, see Note (19).
2) In April 2023, RHI Magnesita India Ltd. issued 15.715.034
shares through a Qualified Institutional Placement in which only
the non-controlling interests participated. The share issue raised
cash proceeds amounting to EUR100.0 million.
3) In June 2023, RHI Magnesita India Ltd. issued 2.790.061
shares on a preferential basis in which only RHI Magnesita N.V.
participated. The share issue increased the Equity of RHI Magnesita
India Ltd. attributable to shareholders of RHI Magnesita N.V.
4) Mainly relating to the recognition of the financial liability
and derecognition of the non-controlling interests related to the
acquisition of Jinan New Emei and the impacts of the fair value
changes resulting from the completion of purchase price allocation
related to the acquisition of SÖRMAS Group, see Note (19).
Group reserves
======== ========= ======================= ========================================== ============= ================ ========
Accumulated other
comprehensive income
======== ========= =========== ========== ========= =============================== ============= ================ ========
Equity
attributable
to
shareholders
Additional Cash Defined of RHI
Share Treasury paid-in Mandatory Retained flow benefit Currency Magnesita Non-controlling Total
in EUR million capital shares capital reserve earnings hedges plans translation N.V. interests equity
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Note
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
31.12.2021 49.5 (117.0) 361.3 288.7 532.8 (7.1) (125.1) (197.2) 785.9 36.3 822.2
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Profit after
income tax - - - - 97.0 - - - 97.0 7.3 104.3
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Currency
translation
differences - - - - - - - 113.3 113.3 0.2 113.5
Cash flow hedges - - - - - 16.1 - - 16.1 - 16.1
Defined benefit
plans - - - - - - 41.0 - 41.0 - 41.0
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Other
comprehensive
income after
income tax - - - - - 16.1 41.0 113.3 170.4 0.2 170.6
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Total
comprehensive
income - - - - 97.0 16.1 41.0 113.3 267.4 7.5 274.9
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Transactions with
shareholders
Dividends - - - - (47.0) - - - (47.0) - (47.0)
Change in
non-controlling
interests due to
addition to
consolidated
companies - - - - - - - - - 6.1 6.1
Reclassification
of puttable
non-controlling
interests
without a change
of control - - - - (1.9) - - - (1.9) (6.1) (8.0)
Share-based
payment expenses - - - - 4.1 - - - 4.1 - 4.1
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Transactions with
shareholders - - - - (44.8) - - - (44.8) - (44.8)
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
30.06.2022 49.5 (117.0) 361.3 288.7 585.0 9.0 (84.1) (83.9) 1,008.5 43.8 1,052.3
================== ======== ========= =========== ========== ========= ======= ======== ============ ============= ================ ========
Notes to the Condensed Consolidated Interim Financial Statements as at 30.06.2023
Basis of preparation
1. General
RHI Magnesita N.V. (the "Company"), a public company with
limited liability under Dutch law is registered with the Dutch
Trade Register of the Chamber of Commerce under the number 68991665
and has its corporate seat in Arnhem, Netherlands. The
administrative seat and registered office is located at
Kranichberggasse 6, 1120 Vienna, Austria.
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 2023 have been prepared in accordance with IAS 34 Interim
Financial Reporting as issued by the International Accounting
Standards Board ("IASB") and on the basis of the same accounting
principles as those used in the Company's Annual Financial
Statements for the year ended 31 December 2022.
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 2022. The
Interim Financial Statements are presented in Euros and all values
are rounded to the nearest EUR million, except where otherwise
indicated.
The Interim Financial Statements as of 30 June 2023 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 2024, for any indicators that the going
concern preparation is not appropriate.
The reverse stress test determines how much volumes could reduce
before breaching the Group's debt covenants and adjusting for price
deflation. Further examples of mitigating actions within management
control would be taken under this scenario, including fixed cost,
working capital and SG&A reduction or 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 2023, the Condensed
Consolidated Statement of Financial Position reflects cash and cash
equivalents of EUR759.7 million. In addition, the Group has access
to a EUR600 million Revolving Credit Facility (RCF), which is
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 adopt the going concern basis in
preparing the Interim Financial Statements for the period ended 30
June 2023.
2. 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 2022. We performed an impact analysis related to the
amendments on the existing and new standards effective in 2023 and
concluded that no material impacts are expected from these.
Effects of the OECD BEPD Pillar II legislation
In January 2023, the IASB issued the Exposure Draft proposing
amendments to IAS 12. The amendments aim to provide temporary
relief from accounting for deferred taxes arising from the
implementation of the Pillar Two model rules. The point in time
where the Pillar Two requirements may need to be considered despite
the absence of the IAS 12 amendment becoming effective is if the
Pillar Two legislation is enacted or substantively enacted in the
respective jurisdiction and when the effect of the enacted rules
applies to the relevant fiscal year of the taxpayer. This is
currently not the case. The Group is analysing the potential
impacts on the Group's income tax exposure and decided to apply the
accounting policy of not recognising or changing deferred taxes
resulting from the Pillar Two legislation until the amendments to
IAS 12 are endorsed for use in the EU.
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
Notes to the 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 2023 were
identified.
Significant judgement: Recognition of non-controlling interest
of Jinan New Emei
The acquisition of Jinan New Emei Industries Co Ltd. includes a
commitment for the Group to acquire the outstanding shares (35%),
see Note (19). The Group has concluded, based on the terms and
pricing of the commitment, that the risks and rewards of ownership
associated with the outstanding shares have not been transferred to
the Group. Therefore, the financial liability was not considered as
part of the purchase consideration and a non-controlling interest
was recognised on acquisition. The financial liability arising from
the commitment has been recognised in accordance with the Group's
accounting policy related to fixed-term or puttable non-controlling
interests. That is the financial liability was initially recognised
against equity attributable to the Company, while the said
non-controlling interests were derecognised to zero - also against
equity attributable to the Company.
3. Segmental analysis
Segment reporting by operating company division
The following tables show the key financial information for the
operating segments for the first half of 2023 and the first half of
2022:
in EUR million for the six months ended 30
June 2023 Steel Industrial Group
============================================= ======== =========== ========
Revenue 1,203.0 531.1 1,734.1
============================================= ======== =========== ========
Gross profit 259.9 154.2 414.1
============================================= ======== =========== ========
EBIT 162.7
============================================= ======== =========== ========
Net finance costs (51.3)
============================================= ======== =========== ========
Profit before income tax 111.4
============================================= ======== =========== ========
Depreciation and amortisation charges (60.8) (25.1) (85.9)
Segment assets 30.06.2023 2,635.8 988.3 3,624.1
Investments in joint ventures and associates
30.06.2023 5.4
Reconciliation to total assets 1,184.0
Total assets 4,813.5
============================================= ======== =========== ========
in EUR million for the six months ended 30
June 2022 Steel Industrial Group
============================================= ======== =========== ========
Revenue 1,150.1 444.3 1,594.4
============================================= ======== =========== ========
Gross profit 258.1 115.3 373.4
============================================= ======== =========== ========
EBIT 164.4
============================================= ======== =========== ========
Net finance costs (22.0)
============================================= ======== =========== ========
Profit before income tax 142.4
============================================= ======== =========== ========
Depreciation and amortisation charges (50.7) (19.2) (69.9)
Segment assets 31.12.2022 2,231.9 911.3 3,143.2
Investments in joint ventures and associates
31.12.2022 5.7
Reconciliation to total assets 926.0
Total assets 4,074.9
============================================= ======== =========== ========
In the reporting year, revenue is classified by product group as
follows:
in EUR million for the six months ended 30
June 2023 Steel Industrial Group
=========================================== ======== =========== ========
Shaped products 551.3 390.3 941.6
Unshaped products 253.1 105.1 358.2
Management refractory services 362.8 0.9 363.7
Other 35.8 34.8 70.6
=========================================== ======== =========== ========
Revenue(1) 1,203.0 531.1 1,734.1
=========================================== ======== =========== ========
In the comparable period in 2022, revenue was classified by
product group as follows:
in EUR million for the six months ended 30
June 2022 Steel Industrial Group
=========================================== ======== =========== ========
Shaped products 540.0 323.6 863.6
Unshaped products 205.3 92.8 298.1
Management refractory services 372.6 0.0 372.6
Other 32.2 27.9 60.1
=========================================== ======== =========== ========
Revenue(1) 1,150.1 444.3 1,594.4
=========================================== ======== =========== ========
1) Revenue includes EUR509.8 million (30.06.2022: EUR508.3
million) relating to the Solutions Business. Thereof, EUR442.7
million (30.06.2022: EUR454.3 million) are attributable to Segment
Steel and EUR67.1 million (30.06.2022: EUR54.0 million) to Segment
Industrial. Solutions Business is a customer classification that is
characterised by sales of end-to-end solutions covering large parts
of the customer process chain.
Segment reporting by country
Revenue in the first half of 2023 and in the first half of 2022
is classified by customer sites as follows:
in EUR million for the six months ended 30 June 2023 2022
================================================ ======== ========
Netherlands 5.2 5.7
USA 323.9 281.8
India 240.6 168.3
Brazil 191.4 184.6
PR China 108.8 106.7
Other countries 864.2 847.3
================================================ ======== ========
Revenue 1,734.1 1,594.4
================================================ ======== ========
4. Foreign exchange effects and related derivatives
The net gain and expense on foreign exchange effects and related
derivatives consists of the following items:
in EUR million for the six months ended 30 June 2023 2022
======================================================== ======= ======
Foreign exchange (losses)/gains (22.7) 6.6
Foreign exchange gains/(losses) from related derivative
financial instruments 7.8 (2.6)
======================================================== ======= ======
Net (losses)/gains on foreign exchange effects and
related derivatives (14.9) 4.0
======================================================== ======= ======
The net loss on foreign exchange effects in the current
reporting period resulted mainly from the devaluation of the US
Dollar against the Euro, Mexican peso and Brazilian real.
5. Other net financial expenses
Other net financial expenses consist of the following items:
in EUR million for the six months ended 30 June 2023 2022
========================================================= ======= =======
Net interest expense relating to personnel provisions (5.3) (2.6)
Unwinding of discount of provisions and payables (3.7) (3.5)
Interest expense on non-controlling interest liabilities (3.3) (3.3)
Interest expense on lease liabilities (1.0) (0.6)
Income from the revaluation of NCI put options 0.6 0.0
Other interest and similar expenses(1) (5.9) (5.9)
========================================================= ======= =======
Other net financial expenses (18.6) (15.9)
========================================================= ======= =======
1) Includes mainly costs associated with the trade receivables
factoring programme of EUR4.8 million (30.06.2022 EUR2.6
million).
6. Income tax
The tax charge for the period has been calculated by applying
the effective corporate tax rate which is expected to apply to the
Group for the year ended 31 December 2023 using rates substantively
enacted by 30 June 2023, which is 25.4% (30.06.2022: 26.8%).
Total tax for the first half of 2023 in the Condensed
Consolidated Statement of Profit or Loss amounted to EUR28.3
million (30.06.2022: EUR38.1 million), which includes tax expense
for prior years of EUR1.2 million (30.06.2022: tax income for prior
years of EUR3.2 million).
7. Dividend payments and proposed dividend
Based on a resolution adopted by the Annual General Meeting of
RHI Magnesita N.V. on 24 May 2023 the final dividend amounts to
EUR1.10 per share for the shareholders of RHI Magnesita N.V. for
2022.
In line with the Group's dividend policy the Board declared an
interim dividend of EUR0.55 per share for the first half of 2023 to
be paid out in September 2023.
8. Property, plant and equipment
In the first half of 2023 additions to property, plant and
equipment amount to EUR54.0 million (30.06.2022: EUR48.5 million)
and mainly refer to the expansion and production optimisation of
the plants in Brazil.
9. Inventories
Inventories as presented in the Condensed Consolidated Statement
of Financial Position consist of the following items:
in EUR million 30.06.2023 31.12.2022
============================ =========== ===========
Raw materials and supplies 286.9 303.3
Work in progress 215.7 206.7
Finished products and goods 537.5 526.3
Prepayments made 13.3 12.8
============================ =========== ===========
Inventories 1,053.4 1,049.1
============================ =========== ===========
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 EUR million 30.06.2023 31.12.2022
==================================== =========== ===========
Trade receivables 460.3 433.4
Other tax receivables 105.8 106.4
Other current receivables 54.7 39.1
==================================== =========== ===========
Trade and other current receivables 620.8 578.9
==================================== =========== ===========
thereof financial assets 460.7 433.9
thereof non-financial assets 160.1 145.0
==================================== =========== ===========
The Group enters into factoring agreements and sells trade
receivables to financial institutions. Trade receivables sold as of
30 June 2023 was EUR265.3 million (31.12.2022: EUR245.1 million).
These have been derecognised 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 include VAT, receivables from energy tax
refunds, research, education and apprentice subsidies.
Other current receivables mainly relate to advances for
insurance, IT services as well as custom and import-related
services and costs.
11. Borrowings
Borrowings include all interest-bearing liabilities due to
financial institutions and other lenders.
In April 2023, the Group successfully issued a Schuldschein bond
("SSD") in the amount of EUR170.0 million with an average tenor of
5 years and at competitive pricing. Additionally, the Group has
successfully refinanced a bilateral Term Loan, increasing the total
loan amount from EUR115.0 million to EUR150.0 million and extending
the maturity date to 2026.
Both instruments are ESG-linked and the margin payable is
adjusted based on the Group's EcoVadis ESG rating performance. The
proceeds of the new instruments will be used for general corporate
purposes, including refinancing and acquisitions.
In December 2022 and January 2023 respectively, the Group
entered into two bilateral term loans amounting INR 13.25 billion
(around EUR149.1 million), of which only EUR4.9 million remain
outstanding per June 2023, to fund the Group's acquisitions of
Hi-Tech and Dalmia OCL.
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 to
Adjusted EBITDA cannot exceed 3.5x. Breach of covenants leads to an
anticipated maturity of loans. During the first half of 2023, the
Group met all covenant requirements. The calculation of the key
financial covenant is presented in the following table:
in EUR million 30.06.2023 30.06.2022
---------------------------------------------------- ----------- -----------
EBIT 341.8 252.7
Amortisation 37.7 28.7
Restructuring and write-down expenses 4.1 52.3
Other operating income and expenses 12.7 6.8
==================================================== =========== ===========
Adjusted EBITA 396.3 340.5
==================================================== =========== ===========
Depreciation 122.8 114.1
==================================================== =========== ===========
Adjusted EBITDA 519.1 454.6
==================================================== =========== ===========
Total debt(1) 1,814.1 1,619.8
Lease liabilities 69.6 54.4
Less: Cash and cash equivalents 759.7 443.4
==================================================== =========== ===========
Net debt 1,124.0 1,230.8
==================================================== =========== ===========
Net debt excluding IFRS 16 lease liabilities 1,054.4 1,176.4
==================================================== =========== ===========
Net debt to Adjusted EBITDA 2.17x 2.72x
==================================================== =========== ===========
Net debt to Adjusted EBITDA excluding IFRS 16 lease
liabilities 2.03x 2.60x
==================================================== =========== ===========
1) As from January 1, 2023 "Total Debt" excludes "financial
liabilities from accrued interest" which are now presented under
"other current liabilities". Prior period comparatives have been
revised to conform with current year presentation.
The disclosures in this section include certain Alternative
Performance Measures (APMs). For more information, please refer to
APMs section in the RNS. 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 2022 and the
first six months of 2023.
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 2023, there are no significant changes in
actuarial assumptions, compared to 31 December 2022. The actuarial
interest rates are: 9.9% (31.12.2022: 10.5 %) in Brazil, 8.9%
(31.12.2022: 9.5 %) in Mexico, 5.0 % (31.12.2022: 5.0 %) in the US
and 3.7 % (31.12.2022: 3.8 %) in the Euro zone.
13. Other provisions
Provisions for restructuring costs amounting to EUR11.1 million
as of 30 June 2023 (31.12.2022: EUR12.0 million) primarily consist
of benefit obligations to employees due to termination of
employment and dismantling costs. EUR3.5 million (31.12.2022:
EUR0.0 million) relate to rationalisation of SG&A expenses.
EUR6.3 million (31.12.2022: EUR10.5 million) to the severance and
demolition cost relating to the plant closure Trieben, Mainzlar and
Kruft.
Provisions for contract obligations include the current portion
of the Oberhausen contract obligation amounting to EUR12.8 million
as of 30 June 2023 (31.12.2022: EUR12.4 million).
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 EUR million 30.06.2023 31.12.2022
============================================= =========== ===========
Trade payables 502.2 506.5
Liabilities to employees 106.2 97.2
Contract liabilities 75.7 61.8
Taxes other than income tax 37.8 35.0
Capital expenditure payable 31.9 43.1
Payables from commissions 8.2 7.7
Other current liabilities 108.5 29.0
============================================= =========== ===========
Trade payables and other current liabilities 870.5 780.3
============================================= =========== ===========
thereof financial liabilities 624.2 566.4
thereof non-financial liabilities 246.3 213.9
============================================= =========== ===========
Trade payables include an amount of EUR44.9 million (31.12.2022:
EUR68.8 million) for raw material purchases subject to supply chain
finance arrangements.
Other current liabilities include Dividend liabilities in the
amount of EUR52.1 million (31.12.2022: EUR0.1 million) as well as
liabilities to former owners resulting from the acquisition of
Hi-Tech and Jinan New Emei Industries Co Ltd.
15. Cash generated from/(used in) operations
in EUR million for the six months ended 30
June 2023 2022
================================================== ======= ========
Profit after income tax 83.1 104.3
Adjustments for
income tax 28.3 38.1
depreciation 64.1 56.9
amortisation 21.8 13.0
write-up of property, plant and equipment
and intangible assets (0.3) (0.4)
income from the reversal of investment subsidies (0.3) (0.3)
impairment losses/loss from sale/(write-ups)
on securities (0.1) 1.4
losses from the disposal of property, plant
and equipment 0.3 0.8
losses from the disposal of subsidiaries 0.0 0.7
net interest expense and derivatives 31.8 22.0
result from joint ventures and associates (2.5) (0.1)
other non-cash changes 12.2 (7.7)
Changes in working capital
inventories 64.2 (109.2)
trade receivables 58.1 (41.2)
contract assets (0.7) (1.4)
trade payables (93.1) (125.7)
contract liabilities 12.3 10.9
Changes in other assets and liabilities
other receivables and assets 3.6 (1.1)
provisions (16.1) (12.9)
other liabilities 10.0 14.4
=================================================== ======= ========
Cash generated from/(used in) operations 276.7 (37.5)
=================================================== ======= ========
Income tax paid less refunds (24.3) (35.7)
=================================================== ======= ========
Net cashflow from operating activities 252.4 (73.2)
=================================================== ======= ========
The increase in operating cashflow is largely driven by an
improvement in working capital. In prior year inventories increased
due to constrained global logistics supply chain whereas in 2023
inventories (excluding the inventories from acquired companies)
could be reduced. Furthermore a reduction of trade receivables
(excluding the trade receivables from acquired companies) led to an
improved cashflow from working capital, also partially driven by
factoring.
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 accordance
with IFRS 13. In addition, carrying amounts are shown aggregated
according to measurement category.
30.06.2023 31.12.2022
================ ========== ======================================== ======================
Measurement
category Carrying Carrying
in EUR million IFRS 9(1) Level amount Fair value amount Fair value
============================================ ================ ====== ========= =========== ========= ===========
Other non-current financial assets
Marketable securities FVPL 1 9.2 9.2 9.0 9.0
Shares FVPL 3 0.5 0.5 0.5 0.5
Interest derivatives designated
as cash flow hedges - 2 42.9 42.9 42.4 42.4
Other non-current financial assets AC - 2.6 3.2
Trade and other current receivables AC - 460.7 433.9
Other current financial assets
Derivatives FVPL 2 0.4 0.4 1.1 1.1
Other current financial receivables AC - 0.1 0.2
Cash and cash equivalents AC - 759.7 520.7
============================================ ================ ====== ========= =========== ========= ===========
Financial assets 1,276.1 1,011.0
============================================ ================ ====== ========= =========== ========= ===========
Non-current and current borrowings
Liabilities to financial institutions AC 2 1,795.5 1,767.4 1,612.0 1,578.1
Other financial liabilities AC 2 18.6 8.0
Non-current and current other
financial liabilities
Lease liabilities - 2 69.6 63.9
Derivatives FVPL 2 4.2 4.2 10.1 10.1
Commodity swaps designated as
cash flow hedges - 2 5.8 5.8 1.1 1.1
Liabilities to fixed-term or
puttable non-controlling interests AC 2/3 33.4 33.4 38.1 38.1
Liabilities to fixed-term or
puttable non-controlling interests FVPL 3 59.0 59.0 29.7 29.7
Trade payables and other current
liabilities AC - 624.2 566.4
============================================ ================ ====== ========= =========== ========= ===========
Financial liabilities 2,610.3 2,329.3
============================================ ================ ====== ========= =========== ========= ===========
Aggregated according to measurement
category
============================================ ================ ====== ========= =========== ========= ===========
Financial assets measured at
FVPL 10.1 10.6
Financial assets measured at
amortised cost 1,223.1 958.0
Financial liabilities measured
at amortised cost 2,471.7 2,224.5
Financial liabilities measured
at FVPL 63.2 39.8
============================================ ================ ====== ========= =========== ========= ===========
1) FVPL: Financial assets/financial liabilities measured at fair
value through profit or loss.
AC: Financial assets/financial liabilities measured at amortised
cost.
Marketable securities, derivative financial instruments, shares,
and interests in subsidiaries not consolidated are measured at 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.
RHI Magnesita considers 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 Measurement techniques in which all important data used are based
2: on observable market data.
Level Measurement techniques in which at least one significant parameter
3: is based on non-observable market data.
===== =====================================================================
The fair value of marketable securities, shares and interests in
subsidiaries not consolidated 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 amortised 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 other 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).
RHI Magnesita takes into account reclassifications in the
measurement hierarchy at the end of the reporting period in which
the changes occur. There have been no shifts between the different
measurement levels in the two reporting periods.
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. In April 2023, the Group recognised a liability
related to the commitment to acquire the remaining shares in Jinan
New Emei held by other shareholders (see Note 19), amounting to
EUR31.5 million, which will be due in 2026 at the earliest. The
fair value is based on the present value of Jinan New Emei's EBITDA
performance and certain other variables (see Note 19). The
principal valuation parameters are deemed to be non-observable
(Level 3).
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 2023 and 31 December
2022.
17. Contingent liabilities
As of 30 June 2023, warranties, performance guarantees and other
guarantees amount to EUR70.9 million (31.12.2022: EUR61.9 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 2023 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, and 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 EUR 269.1
million (31.12.2022: EUR243.0 million). These tax proceedings are
as follows:
Income Tax relating to historical corporate transactions
There are three ongoing proceedings resulting from tax audits in
which the deduction of goodwill from Corporate Income Tax generated
in two corporate transactions that where undertaken 2007 and 2008
was rejected. The tax authorities argue that the goodwill resulting
from these transactions does not qualify for tax deduction.
Although the Group has been broadly successful in past proceedings,
the tax authorities have appealed the outcome of those. The outcome
of the ongoing proceedings is expected within one and three years.
The potential cash outflow of EUR174.2 million (31.12.2022:
EUR157.0 million) is limited to the fiscal tax years ended 2018
until which all available goodwill tax deductions had been
made.
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, 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 audits. Most of the procedures are ongoing within
the ANM administrative courts. Final decisions of the first cases
are expected within four to five years. The potential cash outflow
amounts to EUR31.0 million (31.12.2022: EUR28.2 million), including
interest and penalties.
Corporate income and other taxes
There are several tax audits in Brazil mainly relating to:
offsetting federal tax payables and receivables, social security
contributions as well as, offsetting certain federal tax debts with
corporate income tax credits. The potential cash outflow resulting
from the outcome of these tax audits amounts to EUR63.9 million
(31.12.2022: EUR57.8 million).
Civil litigation contingencies
Magnesita Refratários S.A., Brazil is party to a public civil
action for damages allegedly caused by overloaded trucks in
contravention to 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 ten years. The potential cash
outflow from this procedure amounts to EUR17.6 million (31.12.2022:
EUR15.5 million).
A class action against a Brazilian subsidiary relates to the
working conditions of existing and former employees based at a
costumer's plant. A technical expertise appointed by the court
indicated the exposure of current and formers employees to
unhealthy conditions. The number of current and former employees
that are entitled to compensation is 826 ('adicional de
insalubridade'). A provision amounting to EUR0.6 million was
recognised. The expected timing of the court rule is unknown, but a
hearing is scheduled for September 2023.
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 2023, the RHI Magnesita Group has commitments for
the purchase of property, plant and equipment in the amount of
EUR47.1 million (31.12.2022: EUR20.4 million).
19. Business combinations
Acquisition of Horn & Co Minerals Recovery Group
(Mireco)
The purchase price allocation was finalised and does not
materially differ from the preliminary purchase price allocation
disclosed in the last year's Consolidated Financial Statements.
Acquisition of SÖRMAS
Last year the Group completed the acquisition of Sörmas group.
The preliminary amounts recognised for the acquired assets and
liabilities at the acquisition date have been adjusted compared to
the Consolidated Financial Statements 2022 during the measurement
period in accordance with IFRS 3. The final amounts recognised for
each major class of assets and liabilities as a result of the
acquisition are the following:
preliminary Fair value
in EUR million value adjustments final value
========================================== ============ ============= ============
Property plant and equipment 3.6 16.7 20.3
Intangible assets: Customer relationships 10.5 (3.0) 7.5
Intangible assets: Order backlogs 5.9 (1.1) 4.8
Inventories 14.1 0.7 14.8
Other assets 16.2 0.0 16.2
========================================== ============ ============= ============
Total assets acquired 50.3 13.3 63.6
========================================== ============ ============= ============
Deferred tax liabilities 3.8 3.0 6.8
Other liabilities 8.9 0.3 9.2
========================================== ============ ============= ============
Total liabilities assumed 12.7 3.3 16.0
========================================== ============ ============= ============
Net identifiable assets acquired 37.6 10.0 47.6
========================================== ============ ============= ============
Less: Non-controlling interests (5.0) (1.7) (6.7)
Goodwill 13.8 (8.4) 5.4
========================================== ============ ============= ============
Consideration paid 46.4 46.4
========================================== ============ ============= ============
Compared to the preliminary valuation a positive fair value
adjustment on property, plant and equipment has been recognised
which mainly results from the reassessment of the useful lives of
machinery & equipment in use with a carrying amount of close to
zero at the acquisition date. The machinery & equipments' fair
value was measured using the replacement cost approach based on
current cost obtained from third parties and internal information.
The negative fair value adjustments related to the order backlog
and the customer relationships result from an increase in
contributory asset charges associated with the fair value
adjustment on property, plant and equipment compared to the
preliminary valuation.
Acquisition of Dalmia OCL
In November 2022, the Group signed a share swap agreement
stipulating its acquisition of 100% of the shares of Dalmia OCL
Ltd, India, through the non-wholly owned subsidiary RHI Magnesita
India Ltd. Dalmia OCL owns 51% of the shares of Dalmia Seven
Refractories Ltd ('DSR'), India, which were also acquired in the
scope of this business combination. The acquisition was closed on 5
January 2023 which is the date on which Dalmia OCL and DSR were
included in the Group's Interim Financial Statements. The remaining
49% of DSR's shares were acquired by the Group between the
reporting date and the date the Interim Financial Statements were
authorised for issue, see Note (21).
The acquired companies are one of the leading refractory
producers in India engaged in the business of manufacturing and
selling alumina bricks as well as basic bricks, non-basic bricks
and flow control products with a focus on customers in the
Industrial and Steel segments. Dalmia OCL and DSR have five
manufacturing facilities.
The acquisition enables the Group to increase its presence in
the high growth Indian refractory market considering a forecast
steel production growth in India of 12% per annum and a compound
annual growth rate of 7-8% until 2030. The production footprint and
product offering of the acquired companies is highly complementary
to the Group's existing plant locations (four plants) and product
range with focus in the Industrial segment, where the Group had
been under-represented. Moreover, significant synergies are
expected through network benefits and additional production
capacities in important industrial locations in the south and west
of India, where the Group had no assets.
The consideration transferred amounting to EUR325.2 million
comprises two elements: issued equity shares and cash. RHI
Magnesita India Ltd. issued 27,000,000 equity shares with a fair
value equivalent of EUR270.0 million based on the quoted share
price (Level 1). The cash consideration amounts to EUR55.2
million.
Until the date the Interim Financial Statements were authorised
for issue, the initial consolidation is incomplete because the
purchase price allocation and the measurement of assets and
liabilities has not been finalised. The outstanding measurement
considerations mainly relate to prepayments on mining rights,
customer relationships, Property, plant and equipment and Trade
receivables. The fair value adjustments of assets and liabilities
based on the preliminary purchase price allocation as a result of
the acquisition are the following:
Fair value (adjusted)
in EUR million book value adjustments value
=============================================== =========== ============= ===========
Property plant and equipment 28.8 17.5 46.3
Intangible assets: Customer relationships 0.0 105.9 105.9
Intangible assets: prepayments on mining
rights 0.0 9.3 9.3
Other intangible assets 1.3 0.0 1.3
Inventories 42.7 0.0 42.7
Trade and other receivables (gross contractual
amounts: 42.2) 38.8 0.0 38.8
Cash and cash equivalents 0.1 0.0 0.1
=============================================== =========== ============= ===========
Total assets acquired 111.7 132.8 244.5
=============================================== =========== ============= ===========
Lease Liabilities 9.9 0.0 9.9
Trade and other liabilities 52.1 0.0 52.1
Other employee obligations 1.2 0.0 1.2
Provisions 1.6 0.0 1.6
Borrowings 19.7 0.0 19.7
Deferred tax liabilities 4.4 0.0 4.4
=============================================== =========== ============= ===========
Total liabilities assumed 88.9 0.0 88.9
=============================================== =========== ============= ===========
Net identifiable assets acquired 22.8 132.8 155.6
=============================================== =========== ============= ===========
Less: Non-controlling interests (5.9)
Goodwill 175.5
=============================================== =========== ============= ===========
Consideration 325.2
=============================================== =========== ============= ===========
Consideration paid, net of cash acquired
for purposes of the Condensed Consolidated
Statement of Cash Flows 55.1
Equity shares issued and transferred 270.0
=============================================== =========== ============= ===========
The amounts recognised for the acquired assets and liabilities
on the closing date and the resulting goodwill are preliminary and
subject to adjustment for a period of one year from the closing
date as allowed under the accounting standards. On finalisation of
the purchase price allocation, adjustments, including tax impacts,
if any, will be reflected against goodwill. The initial accounting
for this acquisition including the purchase price allocation is
expected to be finalised by the end of 2023.
The preliminary fair value of the customer relationships was
measured using the multi-period excess earnings method. Under this
method, the fair value of the customer relationships is calculated
by determining the present value of earnings after tax attributable
to the acquired companies' existing customers. The customer
relationships in the Industrial segment are amortised over the
estimated useful life of 10 years, while the customer relationships
in the Steel segment are amortised over the estimated useful life
of 20 years.
The preliminary goodwill recognised as a result if this
acquisition is attributable to the expected synergies mentioned
above and is allocated to both the Steel Segment and the Industrial
Segment. The goodwill is not tax deductible.
The Group recognises non-controlling interests for this
acquisition measured at the present ownership instruments'
proportionate share in DSR's net assets.
Direct costs relating to this acquisition, expensed in the
Condensed Consolidated Statement of Profit or Loss, amounted to
EUR1.0 million.
Since the date of inclusion of the acquired companies in the
Group's Interim Financial Statements, revenues have increased by
EUR55.3 million, Adjusted EBITA has increased by EUR2.8 million and
net income has decreased by EUR4.4 million.
Acquisition of Hi-Tech
In October 2022, the Group signed an agreement stipulating its
acquisition of the refractory business of HiTech Chemicals Ltd
('Hi-Tech'), India, via an asset deal. The acquisition was closed
on 31 January 2023 which is the date on which the refractory
business was included in the Group's Interim Financial
Statements.
Hi-Tech is a leading specialty refractory producer in India
engaged in the business of manufacturing and selling of premium
flow control products like ISO, slide-gate plates, shrouds, plugs
apart from castables, nozzle opening compound or tundish
monolithics with a focus on customers in the Steel segment. Hi-Tech
operates a state-of-the-art manufacturing facility in the city of
Jamshedpur, India,
This acquisition enables the Group to expand its presence and
participate in the high growth refractory market in India and the
wider region considering a forecast steel production growth in
India of 12% per annum and a compound annual growth rate of 7-8%
until 2030. Through the acquisition the Group can expand its flow
control product offering and enlarge its production capacities
based on a low cost and semi automised production. Moreover,
substantial synergies are expected through economies of scale and
additional production capacities for a strategic market
segment.
The preliminary consideration payable in cash amounts to EUR99.2
million. Thereof an amount of EUR86.2 million was paid upon closing
of the acquisition. The remaining amount of EUR13.0 million is a
liability towards the former owner.
Until the date the Interim Financial Statements were authorised
for issue, the initial consolidation is incomplete because the
purchase price allocation and the measurement of assets and
liabilities has not been finalised. The outstanding measurement
considerations mainly relate to customer relationships and
property, plant and equipment. The fair value adjustments of assets
and liabilities based on the preliminary purchase price allocation
as a result of the acquisition are the following:
Fair value (adjusted)
in EUR million book value adjustments value
============================================ =========== ============= ===========
Property plant and equipment 10.7 11.7 22.4
Intangible assets: Customer relationships 0.0 18.4 18.4
Inventories 7.7 0.0 7.7
Trade and other receivables 13.5 0.0 13.5
============================================ =========== ============= ===========
Total assets acquired 31.9 30.2 62.1
============================================ =========== ============= ===========
Lease liabilities 0.1 0.0 0.1
Trade and other liabilities 0.9 0.0 0.9
Deferred tax liabilities 0.0 3.3 3.3
============================================ =========== ============= ===========
Total liabilities assumed 1.0 3.3 4.3
============================================ =========== ============= ===========
Net identifiable assets acquired 30.9 26.9 57.8
============================================ =========== ============= ===========
Goodwill 41.4
============================================ =========== ============= ===========
Consideration (preliminary) 99.2
============================================ =========== ============= ===========
Consideration paid, net of cash acquired
for purposes of the Condensed Consolidated
Statement of Cash Flows 86.2
Liability towards former owner 13.0
============================================ =========== ============= ===========
The amounts recognised for the acquired assets and liabilities
on the closing date and the resulting goodwill are preliminary and
subject to adjustment for a period of one year from the closing
date as allowed under the accounting standards. On finalisation of
the purchase price allocation, adjustments, including tax impacts,
if any, will be reflected against goodwill. The initial accounting
for this acquisition including the purchase price allocation is
expected to be finalised by the end of 2023.
The preliminary fair value of the customer relationships was
measured using the multi-period excess earnings method. Under this
method, the fair value of the customer relationships is calculated
by determining the present value of earnings after tax attributable
to the acquired refractory business' existing customers. The
customer relationships are amortised over the estimated useful life
of 20 years.
The preliminary goodwill recognised as a result of this
acquisition is attributable to the expected synergies mentioned
above and is allocated to the Steel Segment. The goodwill is not
tax deductible.
Direct costs relating to the acquisition of the refractory
business and expensed in the Condensed Consolidated Statement of
Profit or Loss, amounted to EUR0.6 million.
Since the date of inclusion of the acquired refractory business
in the Group's Interim Financial Statements, revenues have
increased by EUR11.3 million, Adjusted EBITA has increased by
EUR0.9 million and net income has increased by EUR0.5 million.
Acquisition of Jinan New Emei
In January 2023, the Group signed a share purchase agreement
stipulating its acquisition of 65% of the shares of Jinan New Emei
Industries Co Ltd. ('Jinan New Emei'), China. Jinan New Emei owns
100% of the shares of Jinan Emei Metallurgical Materials Co Ltd
('JEMM'), China, which were also acquired in the scope of this
acquisition. The acquisition was closed on 26 April 2023 which is
the date on which Jinan New Emei and JEMM were included in the
Group's Interim Financial Statements.
The acquired companies are a leading manufacturer of refractory
slide gate plates and systems, nozzles and mixes for steel flow
control applications serving customers in the Steel segment. The
recently commissioned state-of-the-art and highly automated plant
in Laiwu, Shandong province, is a major part of the
acquisition.
The acquisition enables the Group to expand its flow control
product range and its solutions contract offering in the Chinese
domestic market, both of which are key strategic priorities.
Moreover, the acquisition gives access to substantial new customer
relationships in China and deliver additional production capacity
for increasing supply of refractories in both China and the wider
East Asia region.
The preliminary consideration payable in cash amounts to EUR22.9
million. Thereof an amount of EUR19.8 million was paid upon closing
of the acquisition. The remaining amount of EUR3.1 million is a
liability towards the former owner which reflects deferred cash
consideration and estimated post-closing adjustments related to
working capital and net debt, payable one year after the closing
date.
Until the date the Interim Financial Statements were authorised
for issue, the initial consolidation is incomplete because the
purchase price allocation and the measurement of the acquired
companies' assets and liabilities is still ongoing. The fair value
adjustments of assets and liabilities based on the preliminary
purchase price allocation as a result of the acquisition are the
following:
Fair value (adjusted)
in EUR million book value adjustments value
============================================ =========== ============= ===========
Property plant and equipment 19.4 0.2 19.5
Intangible assets: Customer relationships 0.0 2.6 2.6
Other intangible assets 4.5 0.3 4.8
Inventories 16.3 (0.2) 16.1
Trade and other receivables 64.3 0.0 64.3
Cash and cash equivalents 5.7 0.0 5.7
============================================ =========== ============= ===========
Total assets acquired 110.2 2.8 113.0
============================================ =========== ============= ===========
Trade and other liabilities 70.7 0.0 70.7
Other employee obligations 5.1 0.0 5.1
Borrowings 3.9 0.0 3.9
Deferred tax liabilities 0.0 0.2 0.2
============================================ =========== ============= ===========
Total liabilities assumed 79.8 0.2 80.0
============================================ =========== ============= ===========
Net identifiable assets acquired 30.4 2.6 33.0
============================================ =========== ============= ===========
Less: Non-controlling interests (11.5)
Goodwill 1.5
============================================ =========== ============= ===========
Consideration (preliminary) 22.9
============================================ =========== ============= ===========
Consideration paid, net of cash acquired
for purposes of the Condensed Consolidated
Statement of Cash Flows 14.1
Liability towards former owner 3.1
============================================ =========== ============= ===========
The amounts recognised for the acquired assets and liabilities
on the closing date and the resulting goodwill are preliminary and
subject to adjustment for a period of one year from the closing
date as allowed under the accounting standards. On finalisation of
the purchase price allocation, adjustments, including tax impacts,
if any, will be reflected against goodwill. The initial accounting
for this acquisition including the purchase price allocation is
expected to be finalised by the end of 2023.
The preliminary fair value of the customer relationships was
measured using the multi-period excess earnings method. Under this
method, the fair value of the customer relationships is calculated
by determining the present value of earnings after tax attributable
to the acquired companies' existing customers. The customer
relationships are amortised over the estimated useful life of
around 8 years.
The preliminary goodwill recognised as a result of this
acquisition is attributable to synergies resulting from the
integration of the acquired companies into the existing
refractories business in China. It is allocated to the Steel
segment and not tax deductible.
Direct costs relating to this acquisition and expensed in the
Condensed Consolidated Statement of Profit or Loss, amounted to
EUR0.4 million.
Since the date of inclusion of the acquired companies in the
Group's Interim Financial Statements, revenues have increased by
EUR13.5 million, Adjusted EBITA has decreased by EUR0.2 million and
net income has decreased by EUR0.6 million. Had the inclusion of
the acquired companies taken place as of 1 January 2023, revenues
would have increased by EUR39.0 million, Adjusted EBITA would have
decreased by EUR1.2 million and net income would have decreased by
EUR1.4 million.
The Group has also signed a commitment to purchase the remaining
shares (35%) of Jinan New Emei in exchange for a contingent
consideration. The purchase may be executed no earlier than three
years after the closing date and no later than four years after the
closing date. The contingent consideration is calculated based on
an agreed multiple of the average annual EBITDA delivered by Jinan
New Emei over the three-year period from 2023 to 2025 (assuming
that the purchase is executed in 2026), its future net debt and its
future working capital compared to a target working capital. Due to
a contractual cap the contingent consideration cannot exceed an
amount equivalent of EUR127 million (CNY 1 billion).
For this contingent consideration on the closing date the Group
recognised a financial liability amounting to EUR31.5 million,
subsequently measured at FVTPL and payable in 2026 at the earliest.
The Group has concluded, based on the terms and pricing of the
commitment, that the risks and rewards of ownership associated with
the outstanding shares have not been transferred to the Group, see
significant judgement section in Note (2).
Acquisition of Dalmia GSB
In March 2023, the Group signed an agreement stipulating its
acquisition of 100% of the shares of Dalmia GSB Refractories GmbH
('Dalmia GSB'), Germany. The acquisition was closed on 28 April
2023. On 1 May 2023 Dalmia GSB was included in the Group's Interim
Financial Statements.
Dalmia GSB is a leading supplier of monolithic lances and other
precast products to European steel customers for use in the
desulphurisation and homogenisation of molten steel, based in
Bochum, Germany.
The acquisition enables the Group to expand its flow control
product range and to gain a market share in the European lances
market. Moreover, attractive potential synergies are expected to be
realised through the inclusion of additional products within the
Group's heat management solutions offering and from cross-selling,
procurement and logistics benefits.
The consideration paid in cash amounts to EUR13.1 million.
Additionally, the Group repaid borrowings on behalf of Dalmia GSB
in the amount of EUR7.2 million upon closing of the acquisition.
The net cash outflow related to the acquisition (after deduction of
the cash acquired) amounts to EUR18.1 million.
The fair value adjustments of assets and liabilities based on
the preliminary purchase price allocation as a result of the
acquisition have decreased the net assets of Dalmia GSB from EUR1.9
million to EUR-1.4 million. The difference between the
consideration paid and the (adjusted) negative net assets is
allocated to goodwill amounting to EUR14.5 million. The goodwill
recognised as a result of this acquisition reflects the acquired
market share and expected synergies mentioned above and is
allocated to the Steel Segment. The goodwill is not tax
deductible.
The amounts recognised for the acquired assets and liabilities
on the closing date and the resulting goodwill are preliminary and
subject to adjustment for a period of one year from the closing
date as allowed under the accounting standards. On finalisation of
the purchase price allocation, adjustments, including tax impacts,
if any, will be reflected against goodwill. The initial accounting
for this acquisition including the purchase price allocation is
expected to be finalised by the end of 2023.
20. Disclosures on related parties
The nature of related party transactions as of 30 June 2023 are
in line with the transactions disclosed in Note (43) of the 2022
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 on the economic and political
framework in countries in which it does not yet have strong
business links.
21. Material events after the reporting date 30.06.2023
Acquisition of Seven Refractories Group
In April 2023, the Group signed a share purchase agreement
stipulating its acquisition of 75.5% of the shares of Seven
Refractories Deutschland GmbH, Germany and 100% of the shares of
Seven Refractories d.o.o, Slovenia. Seven Refractories d.o.o owns
equity investments with non-controlling interests in 6 companies
located in Italy, Cyprus, USA and the United Kingdom which were
also acquired in the scope of this business combination.
The acquisition was closed on 17 July 2023.
Seven Refractories Group is a specialist supplier of non-basic
monolithic refractory mixes serving customers in the Industrial and
Steel segments. Products offered by Seven Refractories Group range
from low temperature fireclay to ultra-high temperature zircon
mixes, high-grade alumina mixes and sustainable taphole clay with a
low CO2 footprint. Seven Refractories Group has three production
sites in Slovenia, India and the US and sales offices and service
centres in Cyprus, Germany, Italy and the United Kingdom.
The acquisition will enable the Group to offer a broader range
of non-basic refractory mixes and is expected to be highly
complementary to the Group's existing non-basic portfolio.
Attractive potential synergies are expected through cross-selling
opportunities, logistics improvements, increased recycling usage,
procurement efficiencies and low capital intensity brownfield
expansion projects. Lastly, the acquisition gives access to
substantial new customer relationships in 45 countries.
The consideration paid in cash amounts to EUR83.9 million.
Until the date the Interim Financial Statements were authorised
for issue, the purchase price was not allocated to the assets
acquired and liabilities assumed since the Financial Statements of
the acquired companies as of the closing date were not available.
Therefore, the amounts recognised as of the closing date for each
major class of assets acquired and liabilities assumed, the
non-controlling shareholder's share in the acquired net assets, the
goodwill related explanations and the acquired companies'
contribution to the Group's Interim Financial Statements measures
cannot be disclosed.
Acquisition of non-controlling interests
Following the acquisition of 51% of the shares of Dalmia Seven
Refractories Ltd (refer to Note (19)) the company was renamed to
RHI Magnesita Seven Refractories Ltd. Within the Seven
Refractories' business combination, the Group acquired the
remaining shares (49%) of RHI Magnesita Seven Refractories Ltd held
by the non-controlling shareholders for a cash consideration of
EUR6.1 million on 24 July 2023. The difference between the carrying
amount of the non-controlling interests' portion of equity acquired
and the consideration paid was recorded in retained earnings within
equity.
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 2023, 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 2023
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, 25 July 2023
Executive Directors
Stefan Borgas Ian Botha
Non-Executive Directors
Herbert Cordt John Ramsay
Janet Ashdown David Schlaff
Stanislaus Prinz zu Sayn-Wittgenstein Janice "Jann" Brown
Berleburg Marie-Hélène Ametsreiter
Karl Sevelda
Wolfgang Ruttenstorfer
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 2023
(the 'interim financial information) of RHI Magnesita N.V., Arnhem,
the Netherlands, which comprise the condensed consolidated
statement of financial position as at 30 June 2023, the condensed
consolidated statement of profit or loss, the condensed
consolidated statement of comprehensive income, the condensed
consolidated statement of cash flows, the condensed consolidated
statement of changes in equity for the period then ended and the
selected explanatory notes. The board of directors is responsible
for the preparation and presentation of this (condensed) 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 2023 are not prepared, in all material respects, in accordance
with IAS 34, 'Interim Financial Reporting' as adopted by the
European Union.
Rotterdam, 25 July 2023
PricewaterhouseCoopers Accountants N.V.
Original has been signed by A. F. Westerman RA
partner
DEFINITIONS
EURm Millions of Euros
APMs Alternative performance measures
DBRL Dalmia Bharat Refractories Limited
DGSB Dalmia GSB Refractories GmbH
FY 2022 Twelve months ended 31 December 2022
H1 2022 Six months ended 30 June 2022
"H1 2023" or the Six months ended 30 June 2023
"Period"
H2 2023 Six months ended 31 December 2023
Hi-Tech Hi-Tech Chemicals Limited
Jinan New Emei Jinan New Emei Industries Co. Ltd.
kt kilotonnes
LTIF Lost Time Injury Frequency
LTM Last twelve months
M&A Mergers and acquisitions
QIP Qualified Institutional Placement
Rhône Capital Rhône Capital L.L.C.. Rhône Capital
published a voluntary partial cash offer for
14,086,156 shares in the Company on 30 May 2023
through I gnite Luxembourg Holdings S.à
r.l., a wholly owned subsidiary of a number
of limited partnerships which are indirectly
managed by Rhône Holdings VI L.L.C.
"RHI Magnesita" RHI Magnesita N.V. or RHI Magnesita N.V. and
or the "Company" its subsidiary undertakings, as appropriate
or the "Group"
"Seven Refractories" A group of companies acquired by the Group on
or "Seven" 17 July 2023, previously owned and controlled
by Seven Refractories GmbH and carrying out
refractory business under the trading name of
Seven Refractories
TRIF Total Recordable Injury Frequency
WSA World Steel Association
CAUTIONARY STATEMENT
All amounts shown throughout this announcement are unaudited.
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.
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
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END
IR EAFXSAADDEAA
(END) Dow Jones Newswires
July 26, 2023 02:00 ET (06:00 GMT)
Rhi Magnesita N.v (LSE:RHIM)
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Rhi Magnesita N.v (LSE:RHIM)
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