TIDMRHIM
RNS Number : 4494P
RHI Magnesita N.V.
19 October 2021
RHI Magnesita N.V.
("RHI Magnesita" or the "Company" or "Group")
Q3 2021 TRADING UPDATE
AND
ACQUISITON OF SÖRMA
RHI Magnesita today issues its trading statement in respect of
the three-month period to 30 September 2021.
Trading update
Demand has continued to be strong for both the Steel and
Industrial businesses, with the Group's raw material assets and
refractory plants operating at high capacity utilization and order
book visibility extending into the first quarter of 2022.
Whilst the Group saw improved earnings momentum in September,
benefiting from higher prices, profitability in Q3 was in line with
H1 2021 due to the impact of further increases in costs.
In addition, sales volumes for high margin refractories mainly
for use in non-ferrous metals projects were impacted by lower
output from the Group's Radenthein plant in Austria, where the
temporary closure of one tunnel kiln for unscheduled maintenance
during the quarter will adversely impact H2 2021 EBITA by around
EUR8 million. The plant is now fully operational.
Prices for magnesite-based raw materials in Q3 were in line with
the first half of 2021.
Responding to supply chain challenges
The supply chain position remains challenging in all territories
with the Group seeing further increases in the cost of sea freight
and demurrage, together with rising energy and consumables costs.
Supply chain delays caused by low freight reliability impacted
production schedules and deliveries and there was continued use of
air freight when necessary to ensure customer supply.
Price increases
In response to higher costs, the Group has implemented
significant customer price increases, with a forecast revenue
benefit from agreed increases of EUR 100 million so far in 2021.
Further price increases are being negotiated, with a potential
additional revenue benefit of up to EUR30 million in 2021.
Whilst these increases are being achieved without loss of market
share and will support the Group's profitability in Q4, higher
pricing is mostly applied to new orders and there is a time delay
before margins can be restored to prior levels.
Inventory and logistics management
Inventory levels were increased in Q3 in response to the reduced
reliability of the global logistics industry and potential for
disruption to the supply of raw materials. Additional people and
systems resources have been dedicated to managing logistics and
other areas of increasing cost pressure. Improvements in delivery
reliability and reductions in production backlog have already been
achieved.
Production optimisation plan
Investments to upgrade the production network are progressing
and are on track to significantly improve the Group's cost position
and delivery capabilities as new facilities ramp up in 2022.
A new container rail terminal was commissioned at the European
dolomite hub in Hochfilzen (Austria) in August and an upgraded
tunnel kiln for production of fired dolomite products commenced
operation at Valenciennes (France) in September. Mining of dolomite
raw material at Hochfilzen is expected to begin in Q4 2021 and the
new rotary kiln at the site will ramp up output in 2022.
New capacity for the non-ferrous metal and glass markets was
commissioned in Radenthein in Q3 allowing the closure of another
site in Europe and further capacity for these markets will be
available in Contagem (Brazil) from the second half of 2022.
Capacity expansion at Urmitz (Germany) to supply functional
products to the global market, and high performing mixes to
European customers, is on-track to ramp up in the first half of
2022. The new magnesite raw material plant in Brumado (Brazil) is
scheduled for commissioning by the end of H1 2022.
The planned closure of the Mainzlar plant (Germany), which
serves customers in high-margin markets similar to those supplied
by Radenthein, has been postponed until the end of 2022 to assist
in the fulfilment of customer deliveries during the current period
of high demand and during the ramp up of new capacity at Radenthein
and Contagem (Brazil).
China raw material supplies
In Q4, power shortages in China could increase the cost of
externally purchased magnesite based raw materials and impact their
availability. Production at RHI Magnesita sites and customer demand
in China may also be affected. The Group is examining alternative
supply routes to mitigate this risk.
2021 guidance
Third quarter profitability was weaker than forecast but
momentum improved in September as the benefits of price increases
took effect. Achieving full year guidance for EBITA of EUR310
million requires a strong performance in the fourth quarter, which
is supported by the normal seasonal uplift in cement but is also
subject to the agreement of further price increases which are
currently being negotiated with customers. Full year EBITA could
therefore be between EUR280 and EUR310 million, depending on the
successful realization within the fourth quarter of the latest
round of price increases and any further increases in costs.
Financial position
The Group's liquidity position remains strong. Net Debt : EBITDA
is expected to remain at a temporarily higher level of around 2.0x
at the 2021 year end due to lower profitability in Q3 and increased
inventory levels to mitigate supply chain disruption. This includes
EUR96 million of proceeds from the disposal of the Group's interest
in the Magnifin joint venture, which is expected to complete on 1
December 2021, in line with previous guidance. Gearing is expected
to reduce in 2022 due to the combined effect of higher revenues and
profits following price increases implemented in 2021, lower costs
as benefits from the Production Optimisation Plan ramp up and lower
capex as the projects are completed.
Acquisition of SÖRMA
In line with its stated strategy to grow in geographies where it
is currently under-represented, RHI Magnesita has agreed to acquire
an 85.22% stake in SÖRMA Sö üt Refrakter Malzemeleri Anonim irketi
("SÖRMA "), a producer of refractories for the cement, steel, glass
and other industries in Turkey, for a consideration of EUR38.8
million in cash. The acquisition will significantly expand the
Group's locally manufactured product portfolio and serve as a
production hub and platform for business growth in Turkey and the
wider region. With an enlarged product portfolio, further potential
exists from the opportunity to deliver full-line service solutions
to customers in Turkey.
SÖRMA recorded underlying EBITDA of EUR6.4 million in the year
to 31 December 2020 and had Gross Assets of EUR27.7 million and net
cash of EUR3.7 million at 31 December 2020. The vendors of the
85.22% stake are entities controlled by Dr. Orhan Karabuda and
Prof. Dr. Zihni Cüneyt Karabuda and connected persons, and
employees of SÖRMA . The acquisition is subject to competition
authority clearance and is expected to complete in H1 2022.
Outlook
Stefan Borgas, Chief Executive Officer, said: "Demand remains
strong and we have made good progress on our network optimization
and capital projects in the year to date. During the current period
of supply chain disruption, we are focused on delivering for our
customers, who recognize that pricing needs to be increased to
account for the higher costs affecting refractory producers
worldwide. We have taken action to mitigate these additional costs
and our medium-term prospects are well supported by our structural
cost reduction programme and investments in technology, solutions,
recycling and growth in new markets. Progress against our strategic
plan is demonstrated today by the acquisition of SÖRMA in Turkey
which will provide a new platform for growth in the region."
Conference call
A conference call will be hosted at 8:15am UK time to discuss
the trading update and can be accessed either by the webcast or
through the below conference details:
Dial in +44 20 3936 2999
Access code 061015
Playback facility +44 20 3936 3001
Playback access code 306407
For further enquiries, please contact:
Chris Bucknall, Head of Investor Relations
+43 699 1870 6490
chris.bucknall@rhimagnesita.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 12,000
employees in 28 main production sites 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
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