Business
Q1 2023 Trading Update
Q1 2023 Trading Update.
About this update from Rhi Magnesita Nv
[{"type":"text","content":"\n\nRHI Magnesita N.V.\n(\"RHI Magnesita\" the \"Company\" or the \"Group\")\nQ1 2023 TRADING UPDATE\n \nRHI Magnesita, the leading global supplier of high‐grade refractory products, systems and solutions, today provides an update on trading for the three months to 31 March 2023 ('Q1').\nQ1 trading\nThe momentum of improving EBITA and EBITA margins established in 2022 continued through the first quarter as lower cost inflation offset an expected reduction in sales volumes.\nRefractory sales volumes in the first quarter were 8% lower than Q1 2022, in line with management expectations and overall market demand. As anticipated, steel and cement demand outside of India and China softened due to a slowdown in construction activity, whilst demand in the Industrial Projects segment remained strong.\nPrices of magnesite-based raw materials remained at relatively low levels throughout Q1, with the Group's vertical integration margin remaining largely unchanged from the low level of H2 2022.\nRefractory margins were resilient due to slower cost escalation, based on lower freight and purchased raw material costs, despite higher energy costs. Profitability was supported by the benefits of the Group's strategic sales and cost reduction initiatives, the contribution from recent acquisitions in Türkiye and India, together with geographic and product diversification. EBITA margins in Q1 were ahead of guidance of approximately 10% for 2023 but pricing pressure is anticipated in the remainder of the year as input costs reduce for refractory producers globally.\nFinancial position\nNet debt to EBITDA reduced to 2.2x after the successful placing on 5 April of 15.7 million new shares in RHI Magnesita India Ltd, to raise €101 million via a Qualified Institutional Placement (\"QIP\") in India. Including a 12-month historic pro forma EBITDA contribution from businesses acquired during the period and the proceeds of the QIP, pro forma leverage was 2.1x EBITDA.\nThe Group was able to reduce gearing due to strong operating cash flows and through the proceeds of the QIP, whilst continuing to execute on its inorganic growth strategy. Total investments in M&A of €155 million were completed during Q1 2023, including the acquisitions of the Indian refractory business of Dalmia Bharat Refractories Limited and Hi-Tech Chemicals Limited, and a €5 million...