Rhi Magnesita Nv · LSE:RHIM
Rhi Magnesita Nv — FY2021 Earnings Presentation
45 slides from Rhi Magnesita Nv's earnings presentation, Feb 28, 2022
Slide 1: Full Year 2021 results
8 RHI MAGNESITA Full Year 2021 results 28 February 2022
Slide 2: FY 2021 update
FY 2021 update Financial review Strategic initiatives 1) 2) © €} summary and outlook @ asa © Appendix 2021 Full Year Results | February 2022 3 RHI MAGNESITA
Slide 3: FY 2021 update
8 RHI MAGNESITA FY 2021 update Stefan Borgas, CEO
Slide 4: Revenue growth offset by higher costs
Revenue growth offset by higher costs 3 RHI MAGNESITA Strong revenue recovery offset by higher costs due to global logistics disruption Revenue and volume recovery € million, kt 2,325 2.357 —® Volume 2,992 2H ll Revenue 2,259 2.551 2019 2020 2021 Price increases offset by higher costs € million 127
Slide 5: Health and safety
3 RHI MAGNESITA Health and safety Health and safety is a core value at RHI Magnesita @ LTIF and TRIF remained low in 2021 Slight increase in injury rates — LTIF 0.18 (2020: 0.13) in FY 2021 — TRIF 0.60 (2020: 0.45) 2.44 * The rate of occupational injuries increased slightly in 2021: — Some staff ret
Slide 6: Financial highlights
Financial highlights 3 RHI MAGNESITA Inventory levels and net debt increased to ensure customer deliveries Revenue! Adjusted EBITA' Adjusted EBITA margin €2.6bn €280m 11.0% 16% Box Borbps Cash returned to shareholders Capex Working Capital intensity* €167m €252m 235.5% P 315% PB oi% BP 740bps 1. Den
Slide 7: Steel division overview
3 Steel division overview Ril MAGNESITA Revenue growth rate ahead of the market, offset by higher costs ; « Steel division revenue +16% driven by growth in new markets Revenue (€m) and Brazil, +20% constant currency 23.1% 23.4% @ RHIMsteel volume growth 16% materially ahead of the market i (WSA glob
Slide 8: Steel division performance by region
Steel division performance by region 3 RHI MAGNESITA Growth in market share in key growth markets due to strategic investments RHIM Steel Division Revenue 2021 Hl Americas HM Europe/ClS/Turkey China and East Asia West Asia/India/Africa BHM North America’ Europe/CIS/Turkey €206m China/East Asia m €47
Slide 9: Industrial division overview
Industrial division overview 3 RHI MAGNESITA Revenue growth of 6% with stable gross margins Revenue (€m)! 27.7% 26.4% 26.1% 344 689 Wek 273 322 S29) 416 407 Hl Cement/Lime Hl Industrial projects 2019 2020 2021 —® Gross margin (%)! 2021 Full Year Results | February 2022 Industrial division revenue in
Slide 10: Sustainability leadership
3 Sustainability leadership Ril MAGNESITA Considerable progress in sustainability initiatives * Increased recycling rate supported by improving customer Use of secondary raw material engagement and sourcing of secondary raw materials % of total raw material used * Ongoing €50 million R&D investment
Slide 11: Untreated refractory containing secondary raw material
Untreated refractory containing Secondary Raw Material reated refractory
Slide 12: R&D leadership
R&D leadership Ri MAGNESIA Nano graphite coated refractories save energy and improve performance * Tested at two customer sites in Brazil as proof of concept in 2021 @ Will be rolled out to seven customers in 2022 in the Americas * ‘Magnano’ process converts carbon black into nano graphite coating o
Slide 13: Financial review
8 RHI MAGNESITA x Financial review lan Botha, CFO
Slide 14: Profit and loss summary
Profit and loss summary Top line growth offset by margin pressures €m 2021 2020! Change Revenue 2,551 2,259 12.9% Gross profit 584 550 6.2% Gross margin (%) 22.9% 24.4% (150)bps Adjusted EBITA 280 260 7.7% Adjusted EBITA margin (%) 11.0% 11.5% (50)bps Finance charges (19) (71) (73)% Adjusted Profit
Slide 15: 2021 revenue bridge
3 2021 revenue bridge Ril MAGNESITA Strong revenue growth driven by recovery from COVID-19 and price increases 291 [Hi 2021 eee =< MB H2 2021 2020 Constant currency 2020 revenue ona Volume growth Product mix Price increase 2021 revenue adjustment constant currency basis programme revenue €m 2021 Ful
Slide 16: EBITA bridge
3 EBITA bridge RHI MAGNESITA Increased volumes, price increases and strategic cost savings offset by significant cost inflation €m _ Sales strategies 13 - Cost strategies 36 Sea freight (68) Air freight (12) Raw materials (69) Energy (34) 257 Fixed cost absorption __31 (152) 2020 FX 2020EBITA Salesv
Slide 17: Refractory margins impacted by higher costs
3 Refractory margins impacted by higher costs RHI MAGNESITA Time delay to pass on price increases to customers : . 2021 RHI standalone : RHI Magnesita 2020 Refractory EBITA (€m) 205 199 13.9% 14.0% Vertical 55 81 integrated EBITA (€m) Increasing market price of raw materials leads to higher raw mate
Slide 18: Freight
Freight » RHI MAGNESITA Largest category of cost inflation with additional adverse effects on inventory, network efficiency and customer order fulfilment Freight Freight as a % of COGS 550 Shanghai shipping exchange 500 Containerized freight index 450 4004 | yynqQor |” @636Y| +209% 350 2021 vs 2020
Slide 19: Energy
Energy 3 RHI MAGNESITA Significant increase across all key energy sources * The key benchmark prices for the Group are European natural gas, European power and global oil prices Energy by type % of total € cost in 2021 Ml Natural gas IM Coal and coke Fuel oil @ 2021 energy costs increased by 25% to
Slide 20: Raw materials
Raw materials Higher raw material price environment benefits vertical integration margin but increases costs for externally purchased raw material Raw material prices 2020-21 Rebased to 100 190 180 170 160 150 140 130 120 110 100 90 80 70 +39% 2021 vs 2020 fe 1- Mar- May- Jul- Sep- Nov- Jan- Mar- Ma
Slide 21: Price increases realised in Q4
3 Price increases realised in Q4 RHI MAGNESITA Margins restored in Q4 due to delayed benefit of price increases Q4 revenue and margin momentum 12.5% 11.2% * 75% of price increases realised in Q4 nee 9.8%! Strong run rate established heading into 2022 700 . oe « Further cost increases expected, price
Slide 22: Working capital intensity above target range
Working capital intensity above target range RHI MAGNESITA Response to supply chain challenges required significant additional inventory Working capital balances Working capital before Hil deducting working capital finance Working capital finance - factoring and forfeiting 2020 2021 2019 Working cap
Slide 23: Gearing increased due to inventory build
3 Gearing increased due to inventory build Ri MAGNESITA Inventory levels to remain elevated for duration of supply chain disruption Net debt and liquidity * Leverage of 2.6x net debt : EBITDA is above targeted range of (€m) et 0.5-1.5x 2.6x tx Gi5x1 —_ @ Inventory levels expected to remain high duri
Slide 24: Strategic initiatives
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Slide 25: Strategic initiatives targets
3 Strategic initiatives targets RI MAGNESITA Benefit of cost and sales initiatives increased and delayed by one year Cumulative EBITA improvement € million’ I Sales strategies Hl Cost initiatives 120 30 84 18 35 90 ak @ 2022 target increased but delayed until 2023 — 90% of original cost target and 6
Slide 26: Rotary kiln complete
Rotary kiln complete February 2022
Slide 27: Tunnel kiln inauguration
== Tunnel kiln inauguration November 2021
Slide 28: Sales strategies update
Sales strategies update Flow Control revenue € million and % of Group revenue 9 9 15.3% 16.9% 16.9% eo —@- % of Group revenue 446 380 430 HM Flow Contol revenue 2019 2020 2021 India € million and % of Group revenue 10.0% 8.6% 8.3% —@- % of Group revenue <——*——_o HB India revenue 187 2019 2020 2021 2
Slide 29: Expansion of capacity & market access in China
Expansion of capacity & market access in China RHI MAGNESITA Chongqing plant joint venture @ RHI Magnesita has agreed to acquire and fund “RHIM Chongqing Ltd” joint venture — €5 million purchase consideration for 51% — c.€12 million capital expenditures to be invested in production growth — IRR >25%
Slide 30: SORMAS, Turkey
3 SORMAS, Tu rkey RHI MAGNESITA Completion in H2 2022, competition clearance ongoing *@ £39 million cash acquisition — Producer of refractories for the cement, steel, glass Ae and other industries in Turkey — FY 2020 underlying EBITDA €6.4 million 0 EAN @ Compelling strategic rationale o “we — Growt
Slide 31: RHI MAGNESITA » ‘
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Slide 32: Summary and investment case
Summary and investment case The leader of the global refractory industry e Weare continuing our strategic transformation — Production Optimisation Plan close to completion — Strong growth in new markets of India and China — M&A progress in Turkey and Chongqing * We are a sustainability leader in the
Slide 33: Q&A
Q&A
Slide 34: Appendix
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Slide 35: 2022 Guidance
3 2022 Guidance RHI MAGNESITA * Total capital expenditure: €190m (includes €12 million investment in Chongqing JV, China) — Maintenance capex: €85m — Project capex: €105m « Depreciation: €125m « Amortisation: €25m @ Net interest expense: €25m (excluding pensions of €6m) « Adjusted effective tax rate
Slide 36: Capital allocation
3 Capital allocation RHI MAGNESITA « RHI Magnesita allocates capital to support its long-term strategy, seeking to deliver attractive shareholder returns over the medium term @ 2.6x leverage currently above targeted range @ Organic investments: — €177 million project capex in 2021 — Shareholder retu
Slide 37: Production Optimisation Plan update
3 Production Optimisation Plan update RHI MAGNESITA Minor delays to Brumado, Contagem and Radenthein - project economics remain attractive Site Completion Delay Payback Goal date period Hochfilzen Consolidate European dolomite production into single low-cost site, Austria Cw OVeES reduce. costs, ext
Slide 38: Capital expenditure returning to lower levels
» Capital expenditure returning to lower levels RI MAGNESITA Capital expenditure (€m) 252 190 1660 157s 77 = 105 130 45 123 46 86 65 11lo - : 2018 2019' 2020? 2021 2022 2023 2024 Project Capex [ll Maintenance Capex 2021 Full Year Results | February 2022 @ Peak capital expenditure in 2021 as we inves
Slide 39: Net debt higher due to capex and inventories
3 Net debt higher due to capex and inventories PI MAGNESITA Peak of internal investment programme coincides with supply chain disruption Change in net debt (€m) 167 77 -389 308 -25, Net debt Adjusted Working Otherassets Temporary Maintenance Netfinance Cashtax Restructuring’. Magnifin Project Capex
Slide 40: Impact of foreign currency movement
3 Impact of foreign currency movement RHI MAGNESITA Impact of foreign currency movement EBITA sensitivity in 2021 2021 exchange rates Appreciation vs EUR Depreciation vs EUR FY 2021 FY2021 FY2021 FY 2020 Increase / Increase / (decrease) (decrease) Opening Closing Average Average Unit in EBITA (€m) U
Slide 41: Reconciliation of adjusted earnings
3 Reconciliation of adjusted earnings RHI MAGNESITA 2021 Adjustment €m Reported items FY Adjusted EBITA 236 44 280 Amortisation (22) 22 - Net finance costs (25) 6 (19) Share of profit of joint ventures 100 (91) 9 Profit before tax 289 (19) 270 Income tax' (10) (49) Profit after tax (28) 222 Ef ‘Prof
Slide 42: Cash flow reconciliation
Cash flow reconciliation €m 2021 Adjusted EBITA 280 Working capital (283) Changes in other assets and liabilities (90) Capex (252) Depreciation 109 Operating cash flow (236) Cash tax (39) Net interest expense (25) Restructuring and transaction costs (56) Magnifin disposal proceeds 100 Dividends (71)
Slide 43: Return on invested capital
Return on invested capital Group ROIC 2020 2021 Invested Capital (€m) 1.754 2.296 Invested Capital (€m) 385 ST Refractory ROIC Invested Capital (€m) 1.369 1.919 NOPAT (€m) 149 158 ROIC (%) 10.9% 8.3% 2021 Full Year Results | February 2022 » RHI MAGNESITA 43
Slide 44: ESG 2025 targets
ESG 2025 targets 3 RHI MAGNESITA CO, emissions Energy efficiency NO, and SOx Recycling Diversity Reduce by 15% CO, per tonne of product! by 2025 and aim for carbon neutrality in the long term Reduce by 5% per tonne of product by 2025 Reduce by 30% by 2027 (vs 2018), starting with China by 2021 Incre
Slide 45: Disclaimer
» Disclaimer RHI WAGNESITA 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 envir