RHI Magnesita Strong organic growth, continued synergy delivery and rapid deleveraging

RHI Magnesita N.V.

RHI Magnesita (LON:RHIM) today announced its 2018 full year results for the year ended 31 December 2018 (“2018” or “the Year”).

Highlights1

(€m unless stated otherwise)

2018

Adjusted2

2017

Adjusted2

pro-forma3 constant currency

Variance

 

Revenue

3,081.4

2,549.6

+21%

Adjusted EBITA

428.1

235.9

+81%

Adjusted EBITA margin

13.9%

9.3%

+460bps

Adjusted EPS

€5.31

n/a

n/a

Net debt

638.9

750.8

-15%

Net debt to adjusted EBITDA

1.2x

1.9x

-0.7x

 

 

2018

Reported

2017

Reported4

Revenue

3,081.4

1,950.1

EBITA

427.2

78.9

Profit before tax

246.0

(5.9)

EPS

€3.52

(€0.43)

1 A full table of reported and pro-forma results is provided on page 18

2 Adjusted measures are alternative performance measures excluding impairments, amortisation of acquisition intangibles and exceptional items to enable an understanding of the underlying performance of the business. Full details of the APMs can be found on page 17

3 Whilst the merger became effective on 27 October 2017, the pro-forma results were prepared as if the Group had existed since 1 January 2017. Full details on page 18

4 As reported in 2018 Annual Report following purchasing price allocation (“PPA”) and other reclassifications

· Strong revenue growth of 21% to €3,081 million reflecting increased volumes and commercial and raw material pricing gains:

o Steel Division revenues up 15%;

o Industrial Division revenues up 33%; and

o Significant growth in China and India, with revenues up 36% and 21% respectively.

· Adjusted EBITA up 81% to €428 million, representing an adjusted EBITA margin of 13.9%, 460bps higher than in 2017:

o Continued successful integration with synergies of €70 million, exceeding the previously increased target;

o Benefits of volume and price increases retained through integrated model; and

o Improved efficiency and network optimisation, partially offset by short term operational issues at certain plants and some supply chain challenges during H2.

· Free cash flow of €220.5 million, underpinned by an improvement in working capital intensity5 of 680bps to 15.4% and supporting robust organic growth, alongside significant expansion potential.

· Leverage reduced significantly, from 1.9x to 1.2x net debt to adjusted EBITDA.

· Financial performance and strong balance sheet underpin capital allocation policy:

o Progressive dividend policy with proposed 2018 dividend of €1.50 per share, representing a 100% increase on 2017 and dividend cover of 3.5×6;

o Incremental efficiency and growth capex programme starting in 2019; and

o Flexibility to pursue acquisition opportunities in growth markets.

5 Working capital as a percentage of last three months annualised revenue

6 Calculated using adjusted earnings per share

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

“This was our first full financial year as a new company and I am delighted by the significant amount that we have achieved. Underpinned by the strength of the markets in which we operate, we have reported very strong financial results, successfully delivered on our integration plans and benefitted from the synergies of the combination.

More broadly, we continue to navigate well the challenges of the integration process and have set the business on the right path to support its ongoing strategic development.

Whilst some uncertainties exist in the macroeconomic outlook for 2019, robust customer markets in the medium term (albeit with some uncertainty in the short term) and positive trends in raw material pricing support our expectation to deliver modest organic revenue growth, with improved operating margins from 2018 levels, driven by continued synergy generation and further optimisation initiatives, in addition to further growth potential from acquisitions.”

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