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RHI Magnesita Half Year Results 2019: Robust Performance Despite Difficult End Markets
The uncertainty in the steel markets is increasing. The results show lower volumes and a selective market share loss in steel in Europe and North America, partly driven by customer destocking after a strong 2018. “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 by our growth strategies, particularly in the Industrial Division and across Asia, as well as our ability to secure price increases,” explained St. Borgas.
Growth markets continue to perform strongly. In China, RHI Magnesita won its first major solutions contract alongside revenue growth of 17 %. The Indian revenue grew by 16 %. The company shows good margin performance, despite less supportive raw material backdrop. The expected additional EUR 20 million synergy benefit for 2019 is firmly on track. Improvement plans to recover EUR 20 million in 2019 of the EUR 40 million operating under performance during 2018, relating to four plants, are progressing in line with expectations. Some working capital expansion in H1 2019 is expected to be partly recovered by year end. Revenue of EUR 1541 million increased by 2,2 % against the comparative period (H1 2018 EUR 1508 million), reflecting the strength of the US-dollar and a strong performance from the Industrial Division, alongside a weak EUR 234 million (H1 2018 EUR 209 million), driven by the further realisation of synergies (EUR 10 million in H1 2019) and strength of the Industrial Division.
Continued adjusted EBITA margin progression to 15,2 %, up 140 bps from prior year (H1 2018 13,8 %) is in line with the Group´s strategy. Operating free cash flow of EUR 129 million (H1 2018 EUR 136 million) resulting from EBITA growth, offset by working capital outflow of EUR 118 million, particularly accounts receivable and accounts payable.Strong financial position maintained with net debt at 1,1× EBITDA (FY 2018 1,2×), after making final EUR 45 million payments in respect of the acquisition of Magnesita and the EUR 58 million impact of IFRS 16 lease accounting. Interim dividend of EUR 0,50 per share announced, in line with the Board’s progressive dividend policy.
In the second half of 2019, RHI Magnesita expects 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 program 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,” said St. Borgas. www.rhimagnesita.com
