Continued resilience and improving customer outlook;
Production Optimisation Plan extended; FY guidance and interim dividend re-instated
- RHI Magnesita (LSE: RHIM), the leading global supplier of refractory products, systems and solutions,
today provides an update on trading for the three months to 30 September 2020 (‘Q3’) and the strategic
cost measures being taken to ensure the long-term success of the Group.
Q3 Trading Consistent with expectations at the half year results on 5 August 2020, Q3 trading was similar to Q2
reflecting continued stability in our markets during what is seasonally a quieter period in July and
August. Encouragingly, the order book improved steadily but still slowly through the period. With the
exception of the Industrial Projects business, we now have stronger visibility to the beginning of
Within the Steel Division, North America and South America started to see signs of
recovery in Q3. Europe and India continued to reflect the slower rate of recovery in the steel industry
in both regions. Activity levels improved further in China, although from a low base.
Industrial Division remained subdued. While Q3 is a seasonally quieter period for the Cement/Lime
segment, it was further impacted by customers delaying orders. We continue to expect to see modest
seasonal improvements in Q4. The projects business experienced further postponements, as customers delay
capital projects, and will not see the peak levels experienced in 2019.
Raw material prices
fell slightly in July and August and improved in September. The Group continues to derive a solid margin
from its backward integration, with a 2.3% Adjusted EBITA margin contribution in Q3 2020, unchanged from
the H1 2020 results.
As previously announced, the Group expects to realise €50 million of
short-term fixed cost savings for the full year 2020 as part of its Covid-19 response. €10 million of
these will be maintained into 2021 in the form of lower depreciation.
Strategic initiatives The Group continues to make good progress on its longer-term, strategic cost savings initiatives. These
comprise the Production Optimisation Plan and SG&A Reduction Plan.
Plans to extend the
Production Optimisation Plan have now been finalised and the Group intends to close additional production
facilities with a focus on Europe and South America. The intention is to take the total plant
rationalisation up to 10 sites by H1 2022 and increases the cumulative strategic cost savings (including
the SG&A Reduction Plan) to €100 million by 2022.
The total capital expenditure for the
strategic cost savings initiatives increases to €160 million by 2022, with exceptional restructuring
costs of €100 million and impairments of €110 million. The details of the strategic cost savings
initiatives are included as an appendix.
Strong financial position RHI Magnesita has 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. The Group continues its focus on working capital
management, especially inventories and accounts receivable. Working capital has reduced further in the
third quarter and the Group expects further cash inflows in Q4.
Dividend reinstated Due
to the resilient underlying cash generation, strength of the balance sheet and improving confidence in
the market outlook, the Board is today declaring an interim dividend of €0.50 per share, which is in line
with the 2019 interim dividend. The dividend will be payable to shareholders on 21 December 2020 on the
register at the close of trading on 4 December 2020. The ex-dividend date is 3 December 2020.
While the Group continues to target leverage of between 0.5x and 1.5x net debt to EBITDA, the impact of
COVID-19 on 2020 EBITDA means that leverage is likely to be modestly above this range at the end of 2020
and through 2021 as the Group continues to prioritise investment in projects to improve its competitive
position and shareholder returns. The Board is confident that leverage should reduce thereafter.
Outlook While there remains uncertainty on the continuing impact of the COVID-19 pandemic, we are
confident that the Group will continue to demonstrate its resilience, while remaining well-positioned for
when the recovery takes place. Our confidence is underpinned by the Group’s clear strategy and the
benefit of ongoing business improvement initiatives. This supports the decision to pay an interim
dividend and our expectations for FY 2020 adjusted EBITA to be in line with current market
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