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RHI Magnesita N.V.

RHI Magnesita Deliver robust performance in H1 2019

RHI Magnesita plc (LON: RHIM) today announced its results for the six months ended 30th June 2019.

Highlights

(€m unless stated otherwise)

 H1 2019H1 2018Change
 Adjusted1Adjusted2 
Revenue1,5411,508+2.2%
Adjusted EBITA234209+12.3%
Adjusted EBITA margin15.2%13.8%+140bps
Adjusted EPS€3.00€2.55+17.6%
Net debt3669741 
Net debt to adjusted LTM EBITDA1.1x1.6x 
 H1 2019H1 2018
 ReportedReported2
Revenue1,5411,508
EBITA228219
Profit before tax16590
EPS€2.31€1.54
Dividend€0.50

1 Adjusted measures are alternative performance measures which reflect the way in which Management assesses the underlying performance of the business. Full details of the APMs can be found on page 13

2 H1 2018 figures reflect the final purchase price allocation (“PPA”) which was completed in H2 2018

3 Following the introduction of IFRS 16 Leases, H1 2019 net debt includes the impact of IFRS 16 of €58 million.

Operational highlights

· Robust performance in H1 2019, despite difficult end markets

· Strong performance from the Industrial Division

· Uncertainty increasing in steel markets

o Lower volumes and selective market share loss in the Steel Division in Europe and North America

o Partly driven by customer destocking after a strong 2018

· Challenges offset by

o Encouraging market response to price rise programme across the portfolio

o Resilience from geographic and customer diversification

· Growth markets continue to perform strongly

o First major solutions contract won in China alongside revenue growth of 17%

o India revenue growth of 16%

· Good margin performance, despite less supportive raw material backdrop

o Expected additional €20 million synergy benefit for 2019 firmly on track

o Improvement plans to recover €20 million in 2019 of the €40 million operating underperformance during 2018, relating to four plants, progressing in line with expectations

· Some working capital expansion in H1 2019 which is expected to be partly recovered by year end

Financial Highlights

· Revenue of €1,541 million increased by 2.2% against the comparative period (H1 2018 €1,508 million), reflecting the strength of the US dollar and a strong performance from the Industrial Division, alongside a weaker performance in the Steel Division

· Adjusted EBITA increased by 12.3% to €234 million (H1 2018 €209 million) driven by the further realisation of synergies (€10 million in H1 2019) and strength of the Industrial Division

· Continued adjusted EBITA margin progression to 15.2% up 140bps from prior year (H1 2018 13.8%) in line with our strategy

· Operating free cash flow of €129 million (H1 2018 €136 million) resulting from EBITA growth, offset by working capital outflow of €118 million, particularly accounts receivable and accounts payable.

· Strong financial position maintained with net debt at 1.1x EBITDA (FY 2018 1.2x), after making final €45 million payments in respect of the acquisition of Magnesita and the €58 million impact of IFRS 16 lease accounting

· Interim dividend of €0.50 per share announced, in line with the Board’s progressive dividend policy.

Commenting on the results, RHI Magnesita Chief Executive Officer, Stefan Borgas, said:

“I am pleased to announce a robust financial performance in the first half of 2019, which has seen a very strong performance from our Industrial Division, offsetting a slightly softer performance from the Steel Division in more challenging market conditions.

“Against this backdrop we have seen the benefits of both our geographic and market diversification, as well as the strength of our operating platform. As a result, these challenges have so far been offset by our strategic initiatives. These include the benefits generated from our growth strategies, particularly in the Industrial Division and across Asia, as well as our ability to secure price increases. In addition, we have seen further realisation of the synergies which continue to accrue from the merger, alongside operational improvements.

“Our Steel customers’ end markets are experiencing lower volume demand in 2019, particularly in Europe. As a result of the broader macroeconomic uncertainties, we have seen both volumes and visibility deteriorate in several of our markets, together with lower order backlogs and inventory reductions in the entire supply chain.

“In the second half of this year, we expect the current market uncertainty to continue, which with poor visibility, there is the possibility of reduced customer inventories. However, the self-help measures at our disposal, the initial benefits of the price rise programme announced in April and the momentum in our Industrial Division underpin our confidence in further progress. Consequently, management expectations for the full year operating results remain unchanged.”

A presentation for institutional investors and analysts will be held today at Peel Hunt, Moor House, 120 London Wall, London, EC2Y 5ET, starting at 8.30am. The presentation will be webcast live and details can be found on: https://ir.rhimagnesita.com/. A dial-in facility is also available on 020 3936 2999 for the United Kingdom, or +44 20 3936 2999 for all other locations, with participant pin code 979169.