Wien (OTS) - RHI Magnesita N.V. (LSE: RHIM), the
leading global supplier of refractory products, systems and solutions, today provides an update on
current trading and measures being taken in response to the COVID-19 pandemic, ahead of the publication
of its Half Year Results on 5 August 2020.
Summary The business has responded well to the
challenges presented by COVID-19. Whilst volumes have declined significantly in the second quarter 2020,
in-line with our customers' volumes, the business remains resilient, particularly with regards to
liquidity. In addition, we are continuing to take action to accelerate the delivery of our strategy and
to strengthen the business for the longer term.
Challenging environment in Q2 2020 The
primary focus of the business has been on the health and safety of employees, customers and business
partners. The Company has also continued to supply customers seamlessly and maintained a fully
functioning supply chain.
Consistent with our expectations at the time of the Q1 2020 Trading
Update on 5 May 2020, there has been an unprecedented slowdown in customer activity and a significant
fall in demand in May and June. This effect has caused a material drop in RHI Magnesita's revenues across
both the Steel and Industrial divisions in the second quarter (down almost 20% versus Q1 2020, in line
with our scenario planning). Within our business units, Cement and Steel MEA/Asia have remained
resilient, offset by further weakness in Steel Europe, Steel South America and Steel India. Activity
levels are likely to remain subdued through July and August, with limited visibility beyond this
Raw material prices fell over the first four months of the year, due to over-supply
from China. There has been some stabilisation in prices in May and June and at current raw material
prices the Group continues to derive a positive margin from its backward integration.
cash preservation and cost management Against the challenging backdrop of COVID-19, mitigating
actions continue to be taken to minimise the financial impact, and the business has moved swiftly to
implement cost management and cash preservation measures. These include, the temporary closure of three
plants in Europe and one plant in Mexico, the introduction of short time working arrangements in some
plants, the deferral of €45 million of capital expenditure in 2020, no 2019 final dividend being paid,
and other fixed cost reduction actions. These measures have resulted in the successful delivery of
further short-term cost savings in Q2 2020.
Accelerating strategy implementation The
Group is continuing to progress its longer-term strategic initiatives. Embedding the learnings from
COVID-19 and the potential for a slower recovery in global economies, management believes there is scope
to both accelerate and increase the anticipated benefits. These initiatives build on the strategic themes
previously outlined, of:
increased regionalisation, to match supply with local demand,
supported by greater decentralisation and local decision-making; increased flexibility in the cost
base by reducing the proportion of fixed costs; and increased digitalisation, particularly to
support the solutions business model. In particular, management:
is well advanced in
lowering non-operational costs, reducing the scale of the first three levels of management by 20%,
effective 1 August 2020; and has identified opportunities to extend the Group's Production
Optimisation Plan, which will increase the previously anticipated €40 million of EBITA benefits, due by
2022. Further details of these initiatives will be provided with the Half Year Results in August.
Strong financial position The Group continues to have a strong focus on working capital
management, especially inventories and accounts receivable. Working capital reduced in the second
quarter, although partially offset by lower levels of working capital finance. The Group continues to
have a strong financial position with a resilient balance sheet, liquidity of €1.1 billion, no material
debt maturity before 2023 and significant headroom under its net debt to EBITDA covenant.
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