Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — Investor Presentation (September 2023)
48 slides from Rhi Magnesita Nv's investor presentation, September 2023
Slide 1: RHI Magnesita Investor Presentation September 2023
RHI Magnesita Investor Presentation September 2023
Slide 2: Contents
Contents 1 Introduction 2 H1 2023 financial results 3 Appendix Investor Presentation | September 2023 2
Slide 3: 1. Introduction
1. Introduction Investor Presentation | September 2023 3
Slide 4: Refractories are essential for our modern world
Refractories are essential for our modern world Concrete Copper Steel Glass Aluminium 1,500°C 1,350°C 1,760°C 1,650°C 1,250°C 1 tonne of STEEL 1 tonne of CEMENT 1 tonne of GLASS 1 tonne of ALUMINIUM 1 tonne of COPPER demands ~10-15 Kg demands ~1 Kg demands ~4 Kg demands ~6 Kg demands ~3 Kg of refrac
Slide 5: Refractory applications by customer industry
Refractory applications Customer industries Main application Lifetime and costs Refractory characteristics Part of customers’ operational Steel 20 minutes to 2 months expenditure 70% of revenues Basic oxygen furnace, Electric arc furnace, ladles, flow control c.3% of customers’ costs Systems and sol
Slide 6: End markets and customer industries
End markets and customer industries Investor Presentation | September 2023 6
Slide 7: Raw material and refractory process overview
Raw material and refractory process overview Investor Presentation | September 2023 7
Slide 8: Solutions contracts
Solutions contracts RHI Magnesita offers full heat management solutions to its customers Client benefit ü Reduced downtime ü Lower refractory consumption ü Lower energy and other raw materials consumption ü Higher productivity and cost savings RHI Magnesita benefit ü Market share gains ü Higher clie
Slide 9: Vertical integration benefits
Vertical integration benefits Our magnesite raw material assets are amongst the lowest cost globally DBM 98: Indicative cost curve EBITA margin contribution Eskisher Brumado RHIM assets Vertical integration margin Global DBM assets (non RHIM) Refractory margin Investor Presentation | September 2023
Slide 10: Global footprint with local for local strategy
Global footprint with local for local strategy Investor Presentation | September 2023 10
Slide 11: Global leader in a highly fragmented market
Global leader in a highly fragmented market Global market share Regional market share % 1 Total market size: 10.5% Others c.€20bn South America 65 Africa 50 15% North America 40 10% 34% Middle East ex-Iran 40 Medium & small 4% Chinese India 30 companies 4% Europe/CIS/Turkey 20 3% 3% East Asia 10 3%
Slide 12: Green steel technology development
Green steel technology development Transition to EAF, DRI and ESF is a strong positive growth driver for RHI Magnesita Investor Presentation | September 2023 12
Slide 13: 2. H1 2023 results
2. H1 2023 results Investor Presentation | September 2023 13
Slide 14: M&A delivers revenue growth with support from pricing
M&A delivers revenue growth with support from pricing Lower volumes offset by higher pricing and sales initiatives. Acquisitions add 7% to revenue Revenue growth driven by pricing and M&A Underlying organic revenue growth +2%, as market € million 1,734 demand weakness globally was offset by higher p
Slide 15: Health & Safety
Health & Safety A core value at RHI Magnesita Improvement in injury rates since 2018 Safety indicators remained at a low level: ⁃ LTIF1 0.25 (H1 2022: 0.22) LTIF TRIF ⁃ TRIF2 0.58 (H1 2022: 0.62) The rate of lost time injuries increased slightly, mainly due to hand and 1.07 finger injuries in Q1 0.9
Slide 16: Financial highlights
Financial highlights Revenue 1 Adjusted EBITA 1 Adjusted EBITA margin Cash invested in M&A2 €1.7bn €200m 11.6% €208m 9% 7% (20)bps H1 2022: €18m Adjusted operating cash flow3 Cash conversion Working Capital Pro forma Net debt to intensity 4 Adjusted EBITDA5 €228m 114% 26.0% 2.1x H1 2022: €(84)m H1 2
Slide 17: Steel business overview
Steel business overview Resilient gross margin as price increase implementation balances out impact of higher unit costs Revenue (€m)1,2 Steel revenue increased by 5% to €1,203 million and by 5% in constant currency 22.4% 21.5% 21.6% RHIM steel volume excluding recycling and M&A reduced by 8%, broad
Slide 18: Steel division performance by region
Steel division performance by region Volumes in line with market except in East Asia. Higher pricing and M&A drives revenue gains in Europe, US and India RHIM Steel Division Revenue H1 2023 RHIM North America Europe/ Türkiye2 China and East Asia1 North America €349m €287m €103m 28.9% 23.9% Europe 4
Slide 19: Industrial business overview
Industrial business overview High gross margin of 29.0% due to pricing recovery Revenue (€m) Industrial division revenue including minerals sales increased by 20% to €531 million, +21% constant currency ⁃ Gross margin 310bps higher versus H1 2022 29.0% 25.9% Strong performance in Cement and Lime 25.
Slide 20: Sustainability leadership
Sustainability leadership Recycling of reclaimed refractories is making a major contribution to reducing CO2 emissions Use of secondary raw material Proportion of secondary raw materials increased to 13.0% (FY 2022: % of total raw material used 10.5%) 13.0 10.5 Our recycling activities since 2018 ha
Slide 21: M&A update
M&A update
Slide 22: M&A strategy gaining momentum
M&A strategy gaining momentum Eight acquisitions completed over 20 month period in key target geographies and product segments Europe/Türkiye China India Industrial Non-basic Recycling Non-basic Consideration: 27m RHIM Consideration: €90m Consideration: €13m Consideration: €5m India shares Announced
Slide 23: Industry consolidation opportunity
Industry consolidation opportunity RHI Magnesita is building a clear global leadership position in the refractory industry Jinan New Emei M&A consolidation strategy is focused on Dalmia GSB Chongqing geographic and product segments where the SORMAS MIRECO Hi-Tech Group is under-represented Seven DBR
Slide 24: M&A financials
M&A financials Acquisitions fully funded by free cash flow and India equity raise €208 million of cash outflow on M&A in H1 2023: 2023 EBITDA from M&A - guidance increased to €40m1 ⁃ €185 million cash consideration Previous guidance for full. year 2023 was €25-30 million c.20 c.40 ⁃ €23 million work
Slide 25: Financial Review
Sensitivity: Internal Financial Review 2022 Full Year Results | February 2023 25
Slide 26: Profit and loss summary
Sensitivity: Internal Profit and loss summary Higher revenue and EBITA offset at EPS level by increased finance charges, including FX €m H1 2023 H1 20221 Change Revenue 1,734 1,594 9% Gross profit 414 373 11% Gross profit increased to €414 million (H1 2022: €373 million) as price increases and lower
Slide 27: H1 2023 revenue bridge
Sensitivity: Internal H1 2023 revenue bridge Revenue growth of 9% delivered as price increases, strategic initiatives and M&A contribution exceed sales volume reduction €m 1,734 1,594 1,593 119 1 148 293 167 H1 2023 revenue Constant currency H1 2023 revenue Sales volumes Price increase Strategic ini
Slide 28: H1 2023 EBITA bridge
Sensitivity: Internal H1 2023 EBITA bridge EBITA broadly flat adjusted for currency as pricing, M&A and strategic initiatives offset lower volume and higher costs year on year €m 83 201 200 188 14 14 167 25 24 79 18 H1 2023 Constant H1 2023 EBITA Sales volumes Fixed cost Price increase Higher costs
Slide 29: Record refractory margin of 9.8%
Sensitivity: Internal Record refractory margin of 9.8% Vertical integration margin contribution temporary lower at 1.8% due to lower global raw material prices and higher costs of production for RHIM sites RHI standalone RHI Magnesita Consistent margin resilience, minimum 11% since merger 13.9% 14.0
Slide 30: Cost outlook
Sensitivity: Internal Cost outlook Input cost inflation easing but fixed cost absorption impacted by low production volumes Cost of goods sold Raw materials High Energy Absolute COGS +8%, shipped volumes -9% DBM prices softening since Q1 22 grade DBM Gas prices normalised, oil price remains elevated
Slide 31: Working capital
Working capital Disciplined reduction in inventory and receivables drives release of working capital in base business since FY 2022 Working capital balances % of L3M annualised revenue Inventory % of L3M annualised revenue 33.6% 29.0% 30.1% 29.1% 23.3% 25.4% 25.7% 26.0% 1,232 1,144 1,250 997 977 1,0
Slide 32: Capital expenditure
Capital expenditure 2023 capex weighted towards H2 due to timing of payments and completion of Production Optimisation Plan Capital expenditure (€m) 2023 capex of €200 million comprises: 252 ⁃ €85 million maintenance capex (prior guidance) ⁃ €75 million expansionary capex (prior guidance) 200 ⁃ €20
Slide 33: Strong cash flow generation in H1 2023
Strong cash flow generation in H1 2023 H1 2023 adjusted operating cashflow of €228m exceeded full year 2022 Adjusted operating cash flow (€m)1 1,163 48 1,124 438 9 100 24 359 23 290 228 185 228 155 Working capital increase -236 2018 2019 2020 2021 2022 H1 2023 Net debt Adjusted M&A M&A net India equ
Slide 34: Gearing reduced due to higher EBITDA and cash flow
Gearing reduced due to higher EBITDA and cash flow Acquisitions funded by operating cash flow and India equity raise, Group retains €1.4 billion of liquidity Net debt and liquidity (€m) Pro forma leverage of 2.1x4 significantly reduced from H1 2022 2.7x (2.7x) and is within new target gearing range
Slide 35: Summary & outlook
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Slide 36: Trading outlook and 2023 guidance
Trading outlook and 2023 guidance Pricing resilient but outlook uncertain P&L guidance 2023F new H1 2023 actual Continued weak Revenues (i) Volumes 9% lower excl. M&A volumes • Outlook for key end markets remains uncertain, with order Revenues (ii) Pricing Pressure in H2 11% higher due to pricing bo
Slide 37: RHI Magnesita is executing on its strategy
RHI Magnesita is executing on its strategy Production Optimisation Plan substantially complete, M&A consolidation phase now underway RHI Magnesita has: ü Transformed its cost base and production network, achieving the targeted EBITA from strategic sales and cost initiatives cumulative contribution t
Slide 38: 3. Appendix
3 RHI MAGNESITA 3. Appendix
Slide 39: Strategic initiatives
Strategic initiatives Target cumulative run-rate EBITA savings of €125-145 million achieved in H1 2023 Production Optimisation Programme substantially complete outside Brazil Cumulative EBITA improvement ⁃ Final stages of Radenthein, Austria, Manufacturing Enterprise € million1 Sales strategies Syst
Slide 40: Capital allocation framework
Capital allocation framework After maintenance capex and dividend, M&A, organic investments and buybacks compete for capital Leverage target 1.0– 2.0x and up to around 2.5x for compelling M&A opportunities Strong M&A pipeline presents opportunity to accelerate consolidation of the refractory industr
Slide 41: Cash flow reconciliation
Cash flow reconciliation €m H1 2023 H1 2022 Adjusted EBITDA 265 245 Share based payments - gross non-cash 4 4 Working capital changes 41 (267) Changes in other assets and liabilities (18) (9) Investments in PPE (63) (58) Adjusted operating cash flow 228 (84) Income taxes paid (24) (36) Cash effects
Slide 42: Net financial expenses
Net financial expenses €m H1 2023 H1 2022 Net financial expenses (18) (10) Interest income 9 3 Interest expenses (27) (13) FX effects (15) 4 Balance sheet translation (23) 7 Derivatives 8 (3) Other net financial expenses (19) (16) Present value adjustment on provisions (incl. onerous contract) (4) (
Slide 43: Reconciliation of adjusted earnings
Reconciliation of adjusted earnings Items excluded Items excluded Items excluded from adjusted EPS: €m H1 2023 from adjusted H1 2023 H1 2022 from adjusted H1 2022 reported performance adjusted reported performance adjusted EBITA1 184 16 200 177 11 188 ⁃ €11 million non-recurring restructuring (13) 1
Slide 44: Impact of foreign currency movement
Impact of foreign currency movement EBITA sensitivity in H1 2023 H1 2023 exchange rates Appreciation vs EUR Depreciation vs EUR Increase / Increase / HY 2023 HY 2023 HY 2023 HY 2022 (decrease) (decrease) Opening Closing Average Average Unit in EBITA (€m) Unit in EBITA (€m) EUR: Rate Rate Rate Rate U
Slide 45: Return on invested capital
Return on invested capital Group ROIC H1 2023 H1 2022 Invested Capital (€m) 2,973 2,692 NOPAT (€m) 154 139 ROIC (%) 10.4% 10.3% Vertical integration ROIC H1 2023 H1 2022 Invested Capital (€m) 454 467 NOPAT (€m) 21 40 ROIC (%) 9.4% 16.9% Refractory ROIC H1 2023 H1 2022 Invested Capital (€m) 2,519 2,2
Slide 46: 2023 guidance
2023 guidance P&L 2023 guidance (Previous) 2023 guidance (New) H1 2023 (Actual) Revenues (i) Volumes Up to (5)% lower Continued weak volumes 9% revenue decline from volumes Revenues (ii) Pricing Slight softening Competitive pressure in H2 11% revenue growth from pricing Depreciation €130m1 €130m1 €6
Slide 47: Group history
Group history History of RHI Magnesita The history of RHI Magnesita dates back to 1834 and the founding of the Chamottefabrik fireclay factory in Poland (then Prussia) In 1881, the first magnesite deposit was discovered in Veitsch, Austria RHI was formed in 1908 (Austro-American Magnesite Company) f
Slide 48: Disclaimer
Disclaimer Financial information contained herein, as well as other operational information, were not audited by independent auditors and may include forward-looking statements and reflects the current views and perspectives of the management on the evolution of macro-economic environment, condition
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